American discontinues its only flight to India, what is next?

American Airlines post at Chicago's Navy Pier

 

I woke up pretty bummed this morning, reading it first on Lucky’s blog, that American Airlines is discontinuing their ORD-DEL-ORD flight AA292/293 with effect from March 1, 2012.  The airline is perhaps using its time under the Chap 11 to take some hard calls, and killing their longest flight seems to be one of them. American has been offering this route on a Boeing 777-200 since November 2005, and till so far, it was their only route serving India. I was on this flight hardly 20 days back on my EXP qualification spree, but it looks like a no-brainer that those SWUs I earned will not be useful much longer.

According to an article on The Street which quotes a veteran airline analyst ,

On Chicago-Delhi route, for instance, MaAdoo estimated the loss at $40 million annually, noting that “American should not be ashamed if it were to eliminate service to India.”

Next up, the article goes on to say,

For any airline, showcase international routes — typically implemented only after great fanfare and arduous preparation — are a source of pride and importance. Discontinuing them represents an emotional and psychological challenge that strikes at the airline’s heart.

Did AI beat them to it?

Air India, frequently criticised for its quality of service, is actually giving out good service on its ultra-long haul routes like ORD-DEL and JFK-DEL. I have heard only good things about their service and quality of products on this route (ORD-DEL) as compared to some of what I received from AA in the back (Y) this past December. And a couple of times while trying to price the AI service v/s AA, I saw that AI was offering more service for lesser price (about 100-150$ easily). So, I don’t know if AI was undercutting here, just like it was in the local market, but they clearly have a better product than the AA one.

American’s internal memo in this regard states:

ORD-DEL
The historical financial performance of the route and its future outlook given the global economic climate and high oil prices has
resulted in a decision by American to cancel its New Delhi (DEL) – Chicago (ORD) service.

The last flight to leave for India from Chicago will be on February 28, 2012, while the last return flight from India to Chicago will
operate on March 1, 2012.

AA will continue to offer travel choices between the US and India in conjunction with oneworld partners British Airways,
Kingfisher Airlines and Finnair, via either London Heathrow or Helsinki (summer only), and through its codeshare partner Jet Airways via Brussels.

Most American airlines do operate flights to India, and American’s strategy with respect to this route will be ‘out of whack’ going forward. UA/CO have an EWR-DEL and EWR-BOM daily on their B777’s. Delta used to do a non-stop ATL-BOM (I think inherited from NWA) but made it a one-stop with ATL-AMS-BOM. Air India and Jet Airways have daily services to the USA.  I am not too sure if everything can be blamed on the economy or the kind of traffic they are attracting. They are all running full planes almost all the time. I’d imagine there are enough people to fill more than a 1000 direct seats from India to the USA. And still pay a premium for it, at least on Jet Airways they do.

With the large number of Indians living in the USA, and the continuous increase in business ties between the two countries, it would have only made sense that the route almost always went full. On most international flights, the bread comes from the back of the plane and the butter comes from the front where the premium travellers are. The Load Factors on this flight were almost always 85%, and according to some discussions going on quoting various ‘internal sources’ at AA, most of this was Visiting Friends and Relatives (VFR) traffic coming to India. I am not tooo sure if AA counts American tourists in the VFR segment also.

As for service via partners, it is not the same as your own plane since you don’t dictate the product. Kingfisher’s London flights are going downhill and will soon be the same quality as American’s. Moreover, I’d do anything not to transit via London LHR! Plus, as an Indian, you need a visa to transit via LHR. So, you’ve lost most of the VFR traffic there anyways! They will now transit via the Middle-East perhaps.

Flaw in American Airline’s strategy?

In one line, Lucky, goes on to summarise it:

As of March 1 they won’t have any flights to the Middle East, India, Africa, or Australia

Great. Now so much for being an international airline. I agree with his view that people choose airlines for networks. In this case, they are progressively withdrawing from international routes in more places than you can imagine. My work primarily takes me to the Mid-East, Western Europe, UK, S.E. Asia and my primary airline covers that footprint very well. With USA being added on, I was hoping to have AA as my preferred carrier there, but Poof!

What more in store?

American may be solving the problem, yes.  But it created another one, a bigger one. Their international flyers will perhaps disown them for a smaller network. And if American Airlines has started to solve the problem, here is the big bomb according to the analyst I quoted above, which will force them to shrink further….

Other losers, McAdoo wrote, include many of the carrier’s highest-visibility, most prestigious routes: New York-London, New York-California, Chicago to Delhi, Beijing and Shanghai and Miami to Buenos Aires. The 10 worst markets lose $450 million a year, he said.

Great choice. So if all this is true, and American is serious about the change it wants to make, forget crossing the pond on AA. And travelling to Asia with them, or even an east coast to west coast mileage run. While the world thinks that AA is deeply entrenched in South America, Buenos Aires could just be scratching the surface of loss making markets.

 

And yes, AA, if you’re reading this, please redo your kiosks at Chicago at the earliest. This last one is no longer needed to Delhi!

 

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Photo courtesy Hapagirl on Flickr.

Pingbacks

  1. […] Traveling to India from the US takes about 24 hours, including the 12 and half hour time zone difference. Leaving SFO on a Thursday morning, we connected through Chicago O’Hare and finally arrived in New Delhi Friday evening local time. After arriving to the flat where many of the guests would stay for the first two nights, we were immediately greeted by boisterous dancing family members and friends. There was spontaneous dancing, drumming, and more dancing. The celebration would even spill out on the street, causing curious neighbors to take in the festivities. Unbeknownst to us, we were isolated from the bride’s family and many of the rituals over the next two days were preparing the groom for the wedding ceremony. To be honest, we sometimes had trouble understanding what was going on or what a particular ritual symbolized. Nevertheless one thing was very clear: it was a grand celebration that not only brought two people together in matrimony but also two families as well. […]

Comments

  1. I left my eyeglasses on a South American flight…contacted AA…they told me to CALL the airport lost and found….WERE RUDE AND UNCARING!! International calls are expensive so I asked if they could contact THEIR station personell…they could NOT be bothered! (I never recovered my glasses…THANKS AMERICAN)
    This lack of customer service was appalling! I will NEVER fly AA again….

  2. And to think that I was upset over my US connecting flight being changed to 3 hours earlier (now have a six hour layover at ORD). I booked a tour of India, almost a year ago and reserved my flight on AA. It looks like I’ll just squeeze in, returning less than two weeks before American discontinues this route. I agree that much of the quality & Service on AA has gone down over the years; but with tons of accumulated miles, I always save them for international flights. American’s 777 international First Class is tough to beat (compared to other US Domestic Airlines). … At least until Boeing starts filling sufficient orders of the 787 … Then who knows?

  3. @AJ, I agree, however they do have an exemption in the More Information Section (unless I am reading it wrong), it states:-

    If you are a national of a country covered by the DATV system, you may be able to transit the UK airside without a visa. To qualify for this exemption:

    Please do correct me if I am wrong.

    • @Savneet, it states:

      You can transit the UK airside without a visa if:

      you are a national of a country that is not in the list below; or

      and India is listed in that list where you need a DATV.

  4. Prat from Chicago here.

    You are / maybe correct on great service on AI from ORD.

    As an NRI, have tried AI several times. Good pricing around $ 3500 in J R/T Ord BOM.

    My experience and decision to drop them is that when something goes wrong, be it weather, mechanical, Prime Minister “borrowed” a plane, etc, they just fall flat on their faces. No sense of Customer Service or organization !

    Boy, what a bummer on AA discontinuing ORD DEL.

    After reading re the quick ride to EX Plat by doing ORD LAX or SFO earn it in a few days for about $ 2200….

    Spent more than six hours yesterday to buy and pay for 9 R/T in 9 days…I am pretty disappointed that they shut down ORD DEL, my main reason to get EXP.

    You are correct on the 85% load factor on INDIA USA traffic. Someone at AA did not do their homework in that the Indian middle class has exploded and is at the forefront os spenders with a hunger for travel and luxury. Heck my old street corner “bhelwala” / hawker has a son in US and he visits !!!!
    Prat

  5. Not really a case where “most” US-based airlines offer service to India. Indeed, with the stop in Amsterdam on the DL/NW side, only Continental (now United) will offer non-stop service. And one-stop service is really no different than connecting service via any of the other European, Asian or Middle Eastern hubs out there.

    Yes, this is a bit of a retreat from a “high profile” market but the suggestion that the other markets will see retreat is silly. The point is to retreat from markets where it is not possible to make money, not from markets where you’re not currently making money. Big difference.

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