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American Airlines Goes All In on Loyalty Program, Small Cities
05.03.2024 - 23:29 / skift.com / Vasu Raja / Meghna Maharishi
American Airlines is rethinking its strategy.
Rather than emphasizing capacity across long-haul international routes – like Delta Air Lines and United Airlines do — American is looking to small U.S. cities and its loyalty program to boost its bottom line.
Since the pandemic, airline executives have mostly noted booming international travel. United announced orders for a slate of widebody jets in October as part of its ambitions to grow its extensive international network. It also added more routes to Asia. Delta ordered 40 Airbus A350s and expected another record summer for transatlantic travel.
But American is forging its own path.
American chief commercial officer Vasu Raja said the airline has been taking note of changing population trends in the U.S., particularly in the Sun Belt region.
While much of the U.S. travel market is concentrated among major coastal areas like New York, Los Angeles, San Francisco and Boston, the Sun Belt region has seen explosive population growth.
“Increasingly, the Sunbelt states are producing economic growth at a premium to the nation’s average, the other states are at a deficit and those four large coastal markets, even at a further deficit to that,” Raja said at American’s investor day on Monday.
For example, real estate investment firm Clarion Partner forecasted the region’s population to increase 55% by 2030. The region has also accounted for around 75% of U.S. population growth in the past decade, according to U.S. Census data.
The region, comprising the southeastern and southwestern U.S., contains many smaller — but fast-growing — cities like Charlotte, North Carolina and Jacksonville, Florida.
“Customers in those smaller cities pay materially more than what the system average is,” Raja said. “And that probably stands to reason because their demand is growing and there’s an inadequate level of supply for them.”
Raja also pointed to fast-growing regions in places like Texas and Oklahoma.
“There is a large pool of high-growth, high-value customers because air travel needs are simply not being met,” Raja said. “And that’s where American Airlines comes in.”
In particular, Raja used the example of El Paso, Texas. While ultra-low-cost carriers like Frontier Airlines and Allegiant Airlines serve El Paso, Raja said a carrier like American would be more appealing due to its bigger schedule and operational reliability.
“What American Airlines uniquely does is we’re able to get customers from El Paso to Louisiana and El Paso to Montgomery, Alabama, El Paso to Mexico City and El Paso to Madrid, Spain,” he said.
The emphasis on smaller cities also falls in line with American’s latest blockbuster order, which included 90 Embraer E175s, regional jets that have fallen
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