American New Flights To Viracopos And Seasonal Europe Cuts

American Airlines announced some pretty interesting route adjustments yesterday, including new service to Viracopos International Airport in Campinas, Brazil, as well as seasonal European route cuts.

New flights from Miami/New York to Viracopos

The first announcement is that American will be launching service to Viracopos Airport in Campinas, Brazil, as of December. This will be American’s tenth destination in Brazil. That’s right, American serves twice as many destinations in Brazil as they do in all of Asia, and that doesn’t even account for the frequency they have on many routes to Brazil.

Viracopos-Flights

Specifically, American will launch 3x weekly service between New York JFK and Viracopos International Airport as of December 1, 2014, and daily service between Miami and Viracopos as of December 2, 2014. What’s most interesting is that both routes will be operated by reconfigured 767-300 aircraft, featuring American’s new business class.

American-767-Business-Class-1
American 767-300 new business class cabin

I find it fascinating that American will not only be the only US airline flying to Viracopos, but is also making this among their first destinations with the new 767 business class product. Meanwhile on a highly competitive route, like Chicago to London Heathrow (also served by British Airways, United, and Virgin Atlantic), their seatmaps for December flights continue to show 767 service with the old seatmaps).

In terms of where the planes for these frequencies are coming, from, American will:

  • Cancel one daily Miami to Sao Paulo flight to accommodate the Miami to Viracopos route
  • Cancel select weekly frequencies between New York and Sao Paulo to accommodate the New York to Viracopos route
  • Separately, US Airways will cancel service between Charlotte and Sao Paulo as of October 1, 2014

Given American’s emphasis on Sao Paulo, I’m kind of surprised they’re cutting Charlotte to Sao Paulo. I figured as part of the merger we’d see additional service to Sao Paulo, including from Charlotte, Philadelphia, and maybe even Phoenix.

American will suspend seasonal service to Europe

In addition to the above, American and US Airways will also suspend seasonal service to Europe in the following markets:

  • Chicago to Dusseldorf — October 25 through March 29
  • Chicago to Manchester — January 6 through March 29
  • New York to Dublin — October 25 through March 29
  • Philadelphia to Barcelona — March 5 through March 29
  • Philadelphia to Rome — February 5 through March 5
  • Philadelphia to Zurich — October 25 through April 14

Beyond the above, American will be splitting service to Milan. Between January 6 and March 28, they’ll alternate between New York and Miami, with 4x weekly service to New York and 3x weekly service to Miami. That’s an interesting decision, in my opinion.

What I find so interesting about American’s business model

There’s no denying that American dominates Latin America, and it’s apparently extremely profitable for them. In Latin America they’re sort of like Alaska was in Seattle for years (before Delta saw the opportunity), with virtually no competition, so they can do whatever they want.

But what’s so interesting — and I’m not saying it’s a good or bad decision — is that they not only dominate in those markets, but they also put their best products in them. In this press release they’re talking about how all their flights to Sao Paulo will soon be operated by 777-300ER aircraft, and how they’re launching a brand new route with no competition and putting their best product in that market.

I would think they’d want to put their best products into markets where there’s a lot of competition, and then for markets they dominate due to frequency, that wouldn’t be as much of a priority. But their strategy is the opposite. Which I’m not saying is bad, but rather just interesting.

What do you think — does it make sense for American to put their best products into markets they dominate, or should they put them into less profitable markets where they have a lot more competition, in hopes of increasing yields and market share?

Comments

  1. I agree this makes no sense at all… I would put the best product on the routes where I need to differentiate from conpetition.
    Maybe it’s just temporary?

  2. Yes, it makes sense to put your best product on a new city (route) to show that its not an after thought….plus this is still a Sao Paulo route …think of it as the Newark of Sao Paulo. The “old world” way of doing business is dying away. Keeping capacity to have the highest percentage share, regardless of profit…and only putting your best product on routes to compete with other airlines will be a thing of the past, if not already happening in other parts of the world.

    Unfortunately, Americans tend to be rather backwards in their thinking with regard to service levels. Historically, Asian carriers/hotels have always offered top notch service, and there is a reason for this….whereas American companies just got by with the basic structure.

    BUT, the underlying reason might just be….Azul and its upcoming flights to NYC and Miami.

  3. I found interesting that American will fly from VCP, given it´s brazilian Jetblue (Azul) hub, which has a codeshare with United. Azul will also start to fly from VCP to MIA and JFK and said to have plans to fly to LAS and LAX.
    The expansion to VCP is not a surprise, given GRU´s saturation. This might also be related to VCP´s being operated now by a non-public company. Will someone invest in GIG? It will be operated by the same company that runs Changi.

  4. I’ve heard that part of the reason of starting flights to VCP is to counter Azul’s new flights from VCP to FLL and JFK.

    Also, shame about ORD-DUS, flew that route in April and it was a very convenient route to have.

  5. Put the best equipment where it will earn you the most money. Flying your best planes on routes that at best may only be 60 percent full, is wasting revenue, and alienating your customers who are probably your most reliable.

  6. I find it interesting when people with no data (financial or otherwise) voice strong opinions on the viability of routes (when, in reality, they have nothing to back up those opinions).

  7. Interesting. I just recently booked off-season awards for two relatives to visit next year from GRU-CLT (35k miles RT). I guess they’ll have to be re-booked if no more US service to CLT.

  8. @ JohnB — I’d argue you should put your planes on the route where they’re going to generate the most incremental revenue/profitability, as opposed to the routes where they generate the most total revenue/profit.

  9. I know it’s silly of me but I don’t want to hassle with the Brazil visa issue. I wish they would expand other places and not cut those Euro Winter routes I like. Seems like the US Airways off season PHL routes are going to be hardest hit.

  10. Given the number of frequencies on more competitive routes, it’s possible they may want to wait until they can offer 100% lie flat service to get consistency. This has been important to AA or BA/AA in other markets, so stands to reason it would be here too.

    They can advertise the Viracopos route now as offering lie flat seats on every flight…

  11. I think it makes sense – the issue is, they have a competitive hard product on competitive routes, but not service. Thus, I dont think they are really pulling people away from other carriers, rather they are just spending more to sell the same.

    If they can already run that route with a reasonable load (e.g. ORD-LHR) and an old product, what is the business rationale to invest? With a new route you are starting from 0, and you may get people to consider it.

  12. The marketing strategy deployed by AA is usually featured at highly profitable markets where dominant player intends to keep any all competition away, imposing them higher costs to start up their operations.

    Viracopos, VCP, is the second market in Brazil financially speaking, after Sao Paulo city itself.

    AA’s strategy also intends to keep at large Azul, a so far domestic efficient company that intends to fly to the USA in the near future, has already received their brand new wide bodies, crews are ready while testing them domestically and claiming to offer $600 fares for the USA/Sao Paulo market.

    When new players threaten a highly profitable market smart and swift incumbents show off all their claws to protect revenue and elite customers. Afterwards it would become much more expensive and far less effective. This is the strategy AA is implementing, or, better safe than sorry.

    Cheers

  13. Putting their best product to South America makes some sense to me … after all, someone has to lead these waves of product improvement over the years, and by a weird coincidence once in a while that leader can even be American.

    I’m surprised, though, that they’re cancelling existing services to Sao Paulo to add these Viracopos services. If the Sao Paulo market is strong, then adding additional frequencies to VCP could be a good addition. But if the Sao Paulo market is performing in a way such that some frequencies deserve cancelling, then surely an out-of-the-way airport with no history of supporting premium long-haul flights will not do better. That’s like BA saying, “Some of our JFK flights are just doing kind of okay, so we’re going to move those to Stewart.”

  14. The USAIr award chart is still showing 60K off peak biz awards for off peak CLT to GRU for March/April 2015. Very slim pickings. What do you think will happen once the service is cancelled given that those awards are only good on usair metal? Another sweet spot gone but possibly an opportunity to get rebooked on the AA 777-300ER? I am not surprised.. I have taken both the rio and sao paolo usair flights from CLT and the usair flight attendants always joked that they were the “fare lowering budget” routes to south america and even anticipated AA would hack them first chance they got.

  15. @ worldtraveler303 — That will be interesting, since US Airways doesn’t have the ability to open award space on American. That being said, I suspect somehow that’s what will happen.

  16. I sure WISH American would put one of their “best” products on the MIA to MAO route. In January we will be flying MIA to MAO and return for the third year in a row – last year we were on one of American’s first flights to MAO. Unfortunately so far it looks like this year we will once again be on one of the old and decrepit 737s with recliner seats in business. It’s not just the lack of lie flat seats, but the seats have no padding and are VERY uncomfortable!

  17. Azul Airlines will start their international operations and they will fly to 5 destinations from Viracopos to US. Maybe thats why aa is puting their best product there.

  18. Couple of notes: LAX-GRU will not receive the 777-300ER, so not all routes from GRU will have it. Also, didn’t AA have to give up 7 weekly frequencies to Brazil as part of the merger? You shouldn’t forget that flights between Brazil and US are restricted, and all frequencies on US side are taken, so they can’t simply “add” another flight.
    In my opinion, AA is trying to scare Azul from its flights, but I don’t see them as competing. Azul will focus more on leisure travelers, while AA will focus on business travelers. What is really weird is that TAM will not be able to provide hardly any feed into those flights from VCP. I guess they believe they can cater those flights just to the local demand.

  19. Also, since the pool of reconfigured 767s is still relatively small, putting them in a dominant market while they convert more is smart because if they have to swap to an old configuration one for a turn, it will have a lesser risk of losing a high value customer (On ORD-LHR in Business, a swap could lead to someone considering UA more seriously).

  20. My first thought was … where in hell is vira thing, yeah I know not geek enough I guess , and know that seems like a hell of a load for such a destination, but once again I am no airline exec and have probably no clue on how many people want to go there … or more likely wan to come here from there ….

  21. @Lucky — Just FYI (and some above have already mentioned this), VCP is Sao Paulo. It’s a terrible, piece of crap airport that’s 2 hours away, but it used to be the main Sao Paulo airport decades ago (GRU was built to replace it). I have no idea what AA is smoking, but it must be strong stuff. If you think GRU’s old terminals are bad, take that, make it 10 times worse and out in the middle of bumblefu$# nowhere and you have VCP.

    The way I see it, the ONLY reason to fly to VCP is if your destination ISN’T actually Sao Paulo and you’re going to be transferring domestically on Azul (which flies mainly to/from there). That would be a sensible option. Otherwise, you’re screwed on so many levels.

  22. a) VCP is now a concession, no longer part of the govt corruption; In due time it will become a modern airport.

    b) VCP is not widely used for those doing in business in Sao Paulo, the city; VCP, though, is highly appreciated for those traveling to the state of Sao Paulo, again, a geo area responsible for the second GDP in Brazil, after SP the city.

    c) VCP is the airport for Campinas, the same way GRU/CGH are the airports for Sao Paulo

    d) AA is not leading VCP; TAP has been there before flying to Europe.

  23. What’s missing from the discussion is that many may not remember that VCP was THE international airport for Sao Paulo for many years, up until the mid 1980’s, IIRC. VCP is only a little over a hour in driving time from Sao Paulo, traffic permitting. Since the move to GRU, VCP has continued to serve as both a domestic and international, principally cargo, facility. Also, there has been a great deal of economic and industrial development in the vicinity of VCP, mostly around Jundiai and Campinas, but in other areas in the interior portion of Sao Paulo state. It is not surprising, then, that AA would want to capitalize on that growth.

  24. It makes perfect sense, from a strategy perspective. A great way to create a competitive advantage in a market is to go where you’re competitors aren’t, and then doing what you do very well. By focusing on Latin America and putting their best equipment on those routes, that’s exactly the strategy they’re trying to execute.

  25. 1 – The new terminal at VCP is supposed to be ready by October.

    2 – VCP is much more convenient for the Campinas metro area, that congregates around 4 million people, has one of the highest GDP/person in Brazil and is home to a large number of multinational companies in Brazil.

    3 – Azul will start its operations to FLL and NYC later in the year.

    4 – AA will follow TAP that flyes to Lisbon 3x weekly and Gol that just started MIA flights.

    5 – As I live 25 mins out of VCP makes all the sense in the world !!! 🙂

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