American Eagle�s exit from San Juan leaves gap in small intra-
CAPA > Aviation Analysis > American Eagle�s exit from San Juan leaves
gap in small intra-Caribbean markets
5th April, 2012
American Eagle appears closer to ending a 41-year era with the planned
phase-out of its base in San Juan as part of a network overhaul in the
Chapter 11 restructuring of its parent American Airlines. Closing San
Juan was becoming more apparent as the fleet supporting its operations
in the Caribbean � the ATR 72 � is being phased out at the end of next
year. But other carriers could capitalise on American�s exit either
through backfilling the flights or forging partnerships to feed the
The carrier has sent out a announcement to employees in San Juan
explaining the base would be closing during a phase-out period ending
in March 2013, CAPA has learned.
The cuts are only being applied to American Eagle�s operations in San
Juan, not American�s mainline operations.
It is not surprising the intra-Caribbean flights performed by American
Eagle subsidiary Executive Airlines would be phased out since American
intends to return all of its ATR 72 turboprops by the end of 2013. At
the end of February the carrier had returned 21 of the aircraft, and
said the remaining 18 would be phased out commencing this year and
continuing through 2013. Executive operates nine ATRs from San Juan to
approximately 15 destinations, based on current schedules from CAPA
The wind-down of San Juan began nearly four years ago in Sep-2008 when
American opted to cut daily departures by 45% from 93 to 51. Mainline
departures fell from 38 to 18 while Executive�s departures dropped
from 55 to 33. The moves in San Juan allowed American to move some of
the 66-seat ATR turboprops to its Dallas hub as the 30-seat Saab 340
turboprops were being phased out and American embarked on its
�cornerstone� strategy to centre its flying in Chicago, Dallas, Los
Angeles, Miami and New York. Now ATRs operating from Dallas and Miami
are being replaced with regional jets. In the early 2000s, American
and American Eagle operated more than 100 daily flights from San Juan.
Most of the reductions in daily departures offered by Executive from
San Juan in 2008 were frequency reductions with the exception of
flights being cut to Aruba and Samana in the Dominican Republic. In
2010 American instituted more cuts, with American Eagle�s departures
falling to 23 in part through the elimination of flights to Anguilla,
Port of Spain Trinidad; Port-au-Prince, Haiti; and Puerto Plata,
Dominican Republic. Other destinations that have been eliminated
include Bonaire, Canouan, Cuarcao, Nevis and St Maarten.
Since 2008 American has cut flights mainline flights from San Juan to
Baltimore-Washington, Fort Lauderdale, Newark, Boston, Los Angeles,
Washington Dulles, Tampa and Philadelphia.
The remaining destinations served by Executive from San Juan include
Antigua, Beef Island (British Virgin Islands), Barbados, Martinique,
Grenada, Guadalupe, Dominica, St. Croix, St. Thomas, St. Kitts, St.
Lucia and La Romana, Punta Cana, Santiago and Santo Domingo, Dominican
Republic. Most of those destinations are operated daily by Executive
from San Juan.
Some of the obvious candidates to lose service in the first phases of
the San Juan pull-down are St. Croix, St. Thomas and Santo Domingo.
Those cities are served by JetBlue from San Juan with Embraer 190s,
and some flights to St. Thomas and St. Croix are offered in
conjunction with its partner Cape Air, which also offers its own
service to Beef Island. Cape Air has also moved into fill the void
vacated by Executive on flights to Nevis and Anguilla, operating those
routes with 9-seat Cessna 402 piston aircraft.
Cape Air Caribbean route map: Apr-2012
Source: Cape Air
JetBlue and Cape Air could possibly replicate their relationship in
Cape Air and JetBlue have had a codeshare since 2007 largely covering
flights from Boston operated by Cape Air to Provincetown and Hyannis
on Cape Cod and the islands of Martha�s Vineyard and Nantucket. They
could easily replicate and deepen their relationship in the Caribbean
now that JetBlue is making San Juan a base city after inaugurating
flights from Luis Munoz International airport in 2002.
JetBlue has solidified its commitment to San Juan by applying to serve
the city from Washington National airport as a result of slots the
government recently made available. The carrier is also moving from
terminal A to the larger terminal C in May of this year as it launches
flights from West Palm Beach, Florida to San Juan. JetBlue also
serves markets from San Juan formerly operated by American including
Fort Lauderdale, Tampa, Orlando, Boston and Newark.
While larger in scale, Boston is a major focus city for JetBlue so it
could easily work with Cape Air to feed into markets that are too
small for the 100-seat Embraer 190s it is currently operating on its
intra-Caribbean service, including Anguilla, Nevis and Beef Island.
The two carriers could even jointly manage their capacity on some
flights to optimise scheduling for a specific time of day on flights
to St. Thomas and St. Croix
Countries with airports that will eventually lose service from San
Juan by American through its affiliates will also likely offer some
incentive to carriers to step in an fill the void in order to sustain
their tourists volumes even if it means stretching their budgets to
ensure air service remains intact.
JetBlue and American could extend codeshare to the Caribbean
American offers mainline flights from Miami and John F Kennedy
International Airport to Antigua, Bridgetown, St. Kitts, St. Lucia
Hewanorra International airport, and St. Thomas. It also operates
mainline service from its Dallas hub to Bridgetown, and from Miami to
Punta Cana, while American Eagle operates Embraer ERJ-145s from Miami
to La Romana.
While San Juan accounts for a large seat share on flights from Beef
Island, Santo Domingo and St. Croix, JetBlue represents some of the
capacity to Santo Domingo and St. Croix, while Cape Air shares some of
the capacity from Beef Island. For most of the rest of the
destinations there is little feed to San Juan based on the number of
seats offered in the markets.
Number of seats from Executive�s intra-Caribbean markets into San Juan
2 Apr - 8 Apr
Dominica Melville Hall
St. Lucia (Vigie Field)
Source: CAPA � Centre for Aviation & Innovata
As American moves through its restructuring to focus on its core
markets with an emphasis on the business traveller, it is likely
willing to give-up the low margin leisure traffic that Executive is
feeding into its mainline flights. American also serves San Juan with
mainline flights from its Chicago, Dallas, Miami and New York hubs. It
also offers service from Hartford, Connecticut to San Juan, which is
also served by JetBlue. American also operates a mainline flight from
San Juan to Caracas, Venezuela.
American has publicly stated its desire to have more freedom to forge
US domestic codeshares as it reworks its labour contracts in
bankruptcy protection. But it could press for some leniency in its
international network to expand its codeshare with JetBlue as that
carrier continues its push into the Caribbean.
See related article: American Airlines defends USD1 Billion revenue
American has sought bankruptcy court approval to void its labour
contracts, but has said it would also continue working toward
negotiated settlements with its employee groups. If American gains
concessions by force or through negotiations it could broker a similar
deal to an interline pact it reached with JetBlue in 2010 covering
JetBlue flights out of JFK and Boston where the carriers do not
overlap, while JetBlue passengers have the ability to connect to 12 of
American�s international destinations from JFK. Similar to San Juan,
JetBlue has significantly built up Boston after American initiated a
significant pull-down during the last decade. American and JetBlue
could set-up a similar agreement covering flights to and from San Juan
once Executive ceases operations at the airport in order for American
to offer flights to the larger markets in the Caribbean.
A codeshare would also be beneficial if American opts to cut some of
its mainline flights to San Juan during its restructuring, which could
be likely as American has stressed it intends to achieve revenue
generation of USD1 billion by 2017 through bolstering its
international offerings and targeting premium passengers.
It remains to be seen if all of Executive�s flights from San Juan will
eventually be replaced as its operations come to an end in roughly a
year. But for now American remains the top carrier at the airport in
terms of seat offerings, and airport and tourism executives are likely
growing more concerned about the eventual loss of feed from the
San Juan Luis Munoz Marin International Airport (seats per week): 02
Apr-2010 to 08-Apr-2012
Source: CAPA � Centre for Aviation & Innovata
You may also be interested in the following articles...
China Eastern approved for Boston service amid increase in North
Asia-North America traffic flows
After many years of waiting for Asian service, Boston Logan
International Airport may see two Asian services this year after China
Eastern Airlines received CAAC approval to launch Beijing-Boston
service as early as 01-Jun-2012, according to CAAC news reports,
although fleet limitations make a 2012 launch optimistic. While Japan
Airlines (JAL) will be the first Asian carrier to serve Boston, with a
Boeing 787 service to commence on 22-Apr-2012, it is worth
contemplating the speed with which China Eastern can launch its route
compared to JAL. While JAL has had open access to Boston for many
years, the Beijing-Boston route authority had been sitting idle since
being granted to Hainan Airlines/Grand China Air in 2006. China
Eastern�s approval for the route indicates Hainan has lost the route
China Eastern is expected to take up the capacity in the short-term,
reflecting the underlying strong potential of the China-US market, as
well as the increased agility Chinese carriers have compared to fellow
North Asian carriers in Japan, Korea and Taiwan.
US airlines to report increasing revenue and strong demand
The distressing economic news this summer made September important in
signaling how the US airline industry is performance. Judging from the
early operational reports and 3Q2011 guidance issued, traffic and
demand are defying the gloom offered by Wall Street and Washington.
Indeed, air travel demand is expected to remain strong, which bodes
well for the industry's bottom line given the fact capacity continues
Still, US airlines are not sanguine about the state of the industry,
with most not only pulling capacity in the fourth quarter but
signaling the same for 2012 when a number of carriers will be taking
delivery of new aircraft but keeping capacity flat. That capacity
discipline, in evidence since early Spring when fuel continued its
climb, meant the USD6-10 fare hike imposed in mid-September stuck and
will likely segue into future hikes as demand remains strong on
increasingly tight capacity. For now the hike applies to last minute
[Non-text portions of this message have been removed]