Austin: A Unique Glimpse At The Future For American Airlines

  • Airlines

One city that has received outsized attention from American Airlines in 2021 is Austin. The capital of Texas and one of the fastest-growing metro areas in the United States, the city is becoming a hub for business, education, and culture. While much of American’s growth is concentrated around its hubs, Austin is a bit of an outlier, given that the airline serves numerous destinations nonstop from the city. Speaking on an exclusive webinar interview with Simple Flying, Vasu Raja, Chief Revenue Officer of American Airlines, discussed the airline’s presence in the city.

American Airlines has done some eye-popping growth in Austin, and it could be a glimpse into the future. Photo: Vincenzo Pace | Simple Flying

Austin is a unique point for American Airlines

Austin has seen growth unlike any other non-hub city in American’s network. One of the primary reasons American can grow out of the city is because of its customer base, as Mr. Raja explained:

“The very obvious thing is that Austin is a massive customer base for us…Our level of AAdvantage penetration in Austin is is pretty eye-popping really. And what we found through these partnerships is it’s such a massive and growing local market, that there’s a lot of opportunity to be able to serve our customer base.”

Short of Southwest, American Airlines has the largest market share of any of the big three US airlines when it comes to the city. While there were times when Delta and United had been biting on American’s heels in Austin, American has essentially started blowing those two out of the water with new routes this year.

American Airlines launches new routes

Growth in Austin first started in earnest in March. While the airline had some action pre-crisis on routes, the carrier came in with ten new routes from Austin-Bergstrom International Airport (AUS) to some top business and leisure destinations, including Orlando, Las Vegas, Nashville, Raleigh, and Washington D.C., among others.

Then, in June, American announced a second expansion out of Austin with 14 new destinations. This mainly included secondary cities in the United States like Kansas City, Indianapolis, Reno, and Tulsa. Abroad, American added flights to Mexico, Costa Rica, and the Caribbean. Since then, American has also quietly added some new destinations from Austin, like Denver.

Partners have also been key for American in Austin

Something that may be overlooked is that American Airlines is receiving support from its partners in Austin, especially Alaska Airlines. As Mr. Raja explained, this created some of the impetus for American to look at adding new flying on its own metal:

“We’ve been pleasantly surprised that [Alaska] has been hugely beneficial for us in places like Austin. In Austin, where we have a massive customer base, but we’ve never been able to take them to the West Coast. Now, they can get there on all of those Alaska Airlines services. And, indeed, through that, it kind of got us thinking that actually we need to go fly more nonstop services out of Austin as well.”

Looking at American’s route network, save for Reno and Los Angeles, American Airlines does not give customers in Austin nonstop access to the West Coast, including in lucrative business markets like Seattle and San Francisco.

Alaska adds Seattle, Portland, San Francisco, San Jose, San Diego, and Boise to destinations out of Austin. Another route that Alaska thinks will be one of its most interesting is a flight between Austin and Palm Springs, which will be a kind of test for the Alaska-American partnership.

Through British Airways, American can also market transatlantic service. British Airways is coming back to Austin on October 13th with nonstop flights to London-Heathrow (LHR). With a single stop in London, customers can make it to destinations in Africa, the Middle East, Asia, and Europe from Austin.

A model for the future?

Mr. Raja concluded his discussion on Austin with the following:

“And so look, I’m not saying that we will go do that in 50 cities or anything else like that. But Austin is is certainly a unique place in which that works. I don’t know that we have a name for it, but I know that we probably wouldn’t name it because we don’t see ourselves doing it all over, the place in some serial kind of way. I think that the long strange history of this business [is] whenever anybody names something a focus city, usually it’s a matter of time before they’re unwinding a focus city. But for us, we see Austin as the start of something which can be really promising, really unique to Austin, but there’s probably a handful of cities that could do with something similar in our system.”

The key part of this statement is the end: American could see something unique to Austin expand as a model for other cities. The unique aspect of Austin right now is that American Airlines has a lot of customers in Austin, its hub just an hour as the crow flies north in Dallas is already quite saturated, and some destinations like El Paso, Nashville, or New Orleans would require a more circuitous routing via a connection.

To an extent, American can relieve some pressure from Austin. However, the biggest relief comes in the form of being able to facilitate new connections. Where American’s planes to Dallas would be too full to facilitate enough connections to a destination like Omaha or Colorado Springs or even a long-haul international flying to a city like Tokyo or Frankfurt, those connections are now more easily accessible because American’s customers are being redirected to its nonstops.

Using Austin as a template, there could be some cities where American can do something similar. Think about a place like Raleigh, close enough to another large hub – Charlotte – and a growing population center with a thriving business, education, and cultural scene. Like Austin, it also does not have an established, dominant carrier that would inhibit American’s entry into the market.

There are limits to how far American could push this model. Doing it too much would weaken its hubs, given that there comes the point when connections to or from other secondary destinations cannot fill the gap from passengers moving to other nonstop options. Nevertheless, Austin is proving to be a case study for the future of American’s network, and so far, it seems to be a success that could be replicated.