Sunday, 11 June 2017

USA: American Airlines Flying To Cancun

American Airlines is making more inroads south of the border. On Thursday, the airline announced four new routes to Cancun International Airport (CUN), set to debut on March 5, 2016 from Pittsburgh (PIT), Nashville (BNA), Kansas City (MCI), and Raleigh-Durham (RDU).

The carrier will operate once weekly, Saturday-only service from the four cities, USA Today reports. The flight from Kansas City will feature a Boeing 737, while the other three will sport Airbus 319’s.

All of the flights are scheduled to depart the United States at approximately 7:00 am, spend about an hour on the ground in Cancun, and then make the return trip. American anticipates beginning to sell tickets in mid-November, with the new routes still facing formal approval from regulators.

Art Torno, senior vice president for American Airlines, trumpeted the carrier’s strength in Cancun and in the Latin American region: “The addition of these four new routes gives our customers 12 locations to fly non-stop to Cancun,” he said in a statement. “As the premier carrier to Mexico, the Caribbean and Latin America with flights to 85 destinations, these additions highlight our commitment to providing our customers with a network that is second to none.”

The move represents an interesting advance for American, which, jointly with now-integrated US Airways, previously housed large operations at each of the four facilities set to acquire service. Today, however, the airline offers few non-stop options from the airports and primarily feeds its other hubs. As a result, American will rely on purely local traffic to support these new flights, without the flow of connecting passengers from elsewhere across the country contributing to fill the flights.

American must believe that enough local origin-and-destination (O&D) demand remains to at least break even routinely. The airline may envision that its prior history at each of the four cities resonates with its customers, even after dehubbing, and that its former presence and the familiarity it affords could help drive some traffic.

Assuredly, American possesses internal data to show the number of passengers who currently connect at its other hubs to reach Cancun from these cities. It probably counts on many of those customers rolling over to the new flights, and potentially figures it can swipe a few more from other airlines as well with the lure of convenient, non-stop flights.

Cancun represents one of the most popular vacation hotspots in Mexico. It signifies a historically leisure-oriented travel destination, with most of its traffic resulting from personal rather than business trips. This generally bodes poorly for airlines looking to churn the revenue wheel, as leisure passengers typically expect lower fares. But the non-stop routes might actually spark some additional revenue for American assuming it can fill them sufficiently, given that most travelers will pay somewhat of a premium for the conveniences of direct travel.

In its statement, American points out the expected delivery of over 100 new aircraft within the span of a year. It would appear American plans, in part, to deploy some of that capacity to bolsters its current strengths in Mexico, in addition to ventures elsewhere and replacing older aircraft.

Reinforcing its position in Cancun could function as a play to the fluctuating value of the dollar. With a strong dollar, traveling abroad appears more attractive for domestic consumers. Other expenses associated with an international trip, such as hotels and meals abroad, become cheaper for Americans as the dollar appreciates, bringing down the total cost of traveling.

With an eye to currency valuations, the new flights seem targeted to travelers originating in the United States, rather than those beginning their journeys in Cancun. In this case, Cancun, which mostly experiences inbound leisure travel from abroad, probably represents a better investment opportunity than do some of its other Latin American dots.

The airline may rely less on an inflow of passengers moving in the opposite direction where the currency mismatch could create negative effects.

The new routes also interestingly place American in direct competition with rival Delta Air Lines, which maintains a sizable footprint in Cancun. Delta similarly runs Saturday-only non-stop flights on three of the four new routes introduced by American, also serving Nashville, Pittsburgh, and Raleigh-Durham.

Therefore, American’s new offerings represent aggressive head-on competition with Delta, dialing up the competitive heat in these three cities at least. Certainly, American must speculate that a relatively strong market exists for travel to Cancun if it’s willing to take on Delta directly.

A wave of consolidation across the airline industry has generally punished smaller communities over the past several years, bulking up hubs that survive the cut as carriers merge. But American’s new routes actually replenish a small bit of lost service in its former strongholds. Broadly, it seems that routes which perhaps would not fly under tight financial times are gaining some altitude as airlines reel in record profits.

Vacationers thinking of a spring getaway now have a few more options on their pallets. As a result of American’s new additions, travelers in Kansas City, Pittsburgh, Nashville, and Raleigh-Durham may now say can-do to Cancun.