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American Eagle Closure: Impact Analysis

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  • Bruce Potter at IRF
    from http://www.centreforaviation.com/analysis/american-eagles-exit-from-san-juan-leaves-gap-in-small-intra-caribbean-markets-71302 American Eagle’s exit
    Message 1 of 1 , Apr 6, 2012
      from http://www.centreforaviation.com/analysis/american-eagles-exit-from-san-juan-leaves-gap-in-small-intra-caribbean-markets-71302

      American Eagle�s exit from San Juan leaves gap in small intra-
      Caribbean markets

      CAPA > Aviation Analysis > American Eagle�s exit from San Juan leaves
      gap in small intra-Caribbean markets
      5th April, 2012

      � CAPA

      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
      and Innovata.

      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
      the Caribbean

      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





      Beef Island


      Dominica Melville Hall






      La Romana




      Punta Cana




      Santo Domingo


      St. Croix


      St. Kitts


      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
      growth plan

      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
      smaller islands.

      San Juan Luis Munoz Marin International Airport (seats per week): 02
      Apr-2010 to 08-Apr-2012

      Source: CAPA � Centre for Aviation & Innovata

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