From Florida to Casablanca, a look at American Airlines’ Philly strategy

This summer, American Airlines launched several new direct flights from Philadelphia to European cities, Dubrovnik, Croatia, and Bologna, Italy, among them.

The Dubrovnik route proved so popular that it will return in summer 2020 with a more frequent schedule. Bologna, not so much.

But both are examples of how Philadelphia International Airport’s low-cost operating environment serves as an “optimal” testing ground for American, says vice president of network planning Vasu Raja, as the airline continues to grow Philly as its trans-Atlantic hub. Earlier this month, American announced new routes from Philly to Casablanca, Morocco, and Reykjavik, Iceland, along with more-frequent service to Dubrovnik and Berlin.

“We were trying to see what worked, where was there demand,” said Raja, during an interview in American’s offices in Terminal B. "And sure enough, Dubrovnik took off. We saw a lot of connections on it, and it did really well. Bologna did not. So we quickly made the decision, after about seven or eight weeks into flying them both, that we would make Dubrovnik a daily flight — and Berlin a daily flight — and we would cut Bologna.”

“That’s how we go and fail fast," he said. "Philadelphia enables us to do that kind of thing.”

American is Philadelphia’s dominant airline, with about 70% of the traffic, and Raja was in town to speak at one of the company’s regular town-hall sessions for employees. His job, he joked, does not involve "a gigantic map at which we throw darts, and hope it all works out.” Rather, his team sets long-term strategy for American’s network, chooses markets, and organizes the fleet accordingly.

“Then we set the schedule so we can fly it in a way that we can make the most money, and make it as reliable as we possibly can,” Raja said.

The airline has faced a challenging summer, fraught with cancellations and delays, and a court battle with its mechanics’ unions over an alleged work slowdown. This week, the company’s senior vice president of customer experience acknowledged that American has “disappointed people,” CNBC reported, and said it was calling customers to apologize for disruptions.

Jim Moses, who leads American’s hub operations at PHL, said the Philly team has “improved our operation in all of the key metrics we look at year over year.” But, he said, the company has also tried to be “more proactive” in rebooking customers “if we know that we’re going to struggle through an operation.”

“We are creating, hopefully, less disruption at the airport, and giving customers options before they would even arrive at the airport,” Moses said.

Philadelphia has emerged as an important international hub for American, which funnels travelers from all across the country through PHL.

“Philly is really an optimally situated geographic place,” Raja said. "For most people who want to go to Europe, regardless of where you are in the U.S., your path, geographically, will just take you over Philadelphia.”

It’s also less expensive to operate out of Philadelphia than New York. “Our costs to operate in Philly are about 80 percent of what our competitors have to operate in the New York area,” he said.

And the airline has more room to experiment with new flights here: It doesn’t have to cancel an existing route in order to add a new one. “In Philly, we can just go and try things."

Next June, American will launch its first-ever flight to Africa, with a route from Philadelphia to Casablanca. It’s part of a larger plan to build out flights across the continent, aided by the fact that Royal Air Maroc is joining American’s Oneworld Alliance in January.

That will enable American to start selling flights into Accra, Ghana, and Lagos, Nigeria, as well as North Africa, according to Raja, and eventually to sell connections to South Africa and East Africa as Royal Air Maroc’s network grows.

“We’ve seen that in all of our other partnerships, that once we start seeing connecting demand — for examples to places like Dubrovnik or Prague or Budapest — the next logical thing for us to do is to go fly there nonstop,” Raja said.

“This is really the start of trying to develop the African continent over the next several years,” he added.

For Raja, thinking about the PHL hub means thinking about two types of customers: the ones who connect through Philadelphia, and the ones who are in Philadelphia. “They’re similar,” he said, “but not always the same.”

“There is a huge business community here that really values the schedule consistency, [and] the major business markets that American Airlines offers," Raja said. Over time, he said, the company wants to fly those customers “with the very best equipment that we have."

“We’re doing a huge upgrade of all of our 737s and our 321s, so everyone in Philadelphia will have gate-to-gate Wi-Fi, the biggest overhead bins in the business, and more seats going back and forth to the major business centers," he explained. “We’re even doing things like flying wide-body airplanes to places like Los Angeles, San Francisco, Las Vegas, because there’s a huge business community.”

Those same Philadelphia-based business travelers “also value doing leisure trips, and so increasingly you’re seeing us grow Philadelphia to Florida,” Raja said. “We can’t add that fast enough.”

American has seen 5% growth, year over year, in seats between PHL and Florida destinations, according to the company. This year, the airline added new seasonal service to Key West, Sarasota, and Melbourne. It also increased the number of flights to Fort Lauderdale, West Palm Beach, and Tampa.

Raja said the company continues to monitor the grounding of the Boeing 737 Max and hasn’t yet made any scheduling decisions regarding the aircraft. "We’re literally in daily conversations with the FAA and Boeing, so that as we know information, we can provide clarity to our customers.”