American Airlines Sees A Recovery And Bets On Florida In July

American Airlines said Thursday that it sees strong summer travel demand and will boost its July schedule, with the increase focused on flights to Florida and other leisure destinations from its hubs in Charlotte and Dallas.

Starting on July 7th, the carrier intends to provide about 55% of its July 2019 domestic capacity. The numbers of departures from Charlotte and Dallas are both scheduled to increase to about 70% of the 2019 level. System departures will reach 4,100, down from about 6,500 a year earlier.

In Charlotte, starting July 7, American will have 489 daily departures, down from 700 daily departures a year earlier. The number is up from 321 daily departures in June. In Dallas in July, American will have 669 daily departures, down from about 900.

 “We are seeing a lot of demand,” said Brian Znotins, American vice president of network and schedule planning, in an interview. “Bookings are coming in at a good pace. We are seeing demand especially to leisure points and (from) visiting friends and relatives.”

In both Charlotte and Dallas, American will continue its focus on maintaining hub connections despite the steep travel decline caused by the coronavirus crisis. Other carriers have followed different paths.

“Across the country, in many cases, the only way to get from A to B has been via Charlotte or Dallas,” Znotins said. “It’s because we built schedules that focus more on connectivity.”

That strategy has resulted in oddities such as an absence of service between Calgary and San Francisco, so that the only semi-logical way to fly between the two destinations has been Calgary-Dallas-San Francisco, Znotins said.

Similarly, on June 18, American will be the only airline offering flights such as Hilton Head-to Kansas City with a single connection and less than six hours travel time; Fort Wayne-Greensboro with a single connection and Harrisburg-Pensacola with a single connection. All connect through the Charlotte hub.

“The secret is not only maintaining service, but also maintaining the bank it came into, so people can still connect,” Znotins said. Banks are the periods of about an hour where airlines operate dozens of inbound and outbound flights at a hub, enabling timely connections.

In Charlotte, American will go to seven daily banks in July, up from four in June.

The strategy of maintaining flight banks enabled an American May load factor that was 17 points higher than the industry average, Znotins said. American carried an average of 110,330 daily passengers in May, up from 32,154 in April.

Charlotte-Florida service has a particular emphasis in American’s service. Because of its Miami hub, American has long been the biggest airline in Florida, while Charlotte is the second biggest Southeast hub, after Atlanta.

Moving to its June schedule this week, American has already added flights from Charlotte to Panama Beach, Fort Walton Beach and Pensacola. Its July schedule will include increase frequencies to those and similar destinations.

The carrier said passengers are booking or at least looking online at flights to major cities in Florida as well as to Gulf Coast destinations in Florida and other states and to mountain destinations in Montana, Colorado, Utah and Wyoming.

The schedule was prompted by the impending opening of theme parks in Florida and national parks in the West. Walt Disney World in Orlando has said it plans a phased reopening of four key attractions between July 11 and July 15.

Besides its Charlotte/Dallas strategy, American is benefitting from having a lower international presence than peers, because international travel is recovering far more slowly than domestic.

The carrier now says it will delay the startup for Charlotte trans-Atlantic service. Flights to London Heathrow and Munich, which had been scheduled to restart in July, have been delayed until August 5th.

However, in July American will restart Dallas to Amsterdam, Paris and Frankfurt and Miami to Guayaquil and Quito, while boosting Chicago-London Heathrow and JFK-London Heathrow.

In the fourth quarter of 2019, American derived just 25% of its passenger revenue from international operations, while Delta was at 26% and United was at 36%.

Znotins, an airline industry veteran who joined American in January, said he has been newly impressed by American’s domestic strength through Charlotte and Dallas hubs. “I have always envied how successful Charlotte is, given the size of the city,” he said. “It has the most air service, for the size of the city, of any city in the world.”

Even as American was scheduling new flights, S&P Global Ratings was cutting its credit rating to a peer-group low of B minus from B.  The rating is deep into junk bond territory. The credit rating agency said, “We expect American to generate a substantial cash flow deficit in 2020 due to the impact of the coronavirus, but to return to positive cash flow generation in 2021.”

Nevertheless, stock market investors – like the airline – are betting on a summer recovery. American shares rose 5.6% on Wednesday and were up 9% in pre-market trading on Thursday. At Wednesday’s close, American traded at $11.85, down 59% year-to-date.

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