2 min read
Posted on 09.17.09
  • 2 min read
  • Posted on 09.17.09

Do giant companies ever make big mistakes? If you read the newspaper, you know the answer to that question.

I think American Airlines is making a mistake today. It is announcing a drastic overhaul of its business model that will result in far fewer flights from more cities, including ours. By the summer of next year, American Airlines says that it will have reduced its schedule at Lambert Airport to 36 flights a day, from 83. Most American flights from St. Louis will be to American's hub cities, plus a few others.

I think this is a bad business decision for the airline. American is cutting service in a good market and walking away from loyal customers. Lambert has a service area of more than four million people. St. Louis passengers have been filling American's planes; load factors, an important metric in their business, are very good. (For example, American will eliminate a direct flight to San Diego that on average was 87% full. Why?) By eliminating what was left of the St. Louis hub it took over from TWA, American will be walking away from more than a 620-thousand passengers a year. And they will walk away from approximately $108 million in system revenue.

American argues that it has no choice: it's the costs, not the market. It is a financially crippled company with a high overhead that is trying to remain solvent and stay out of bankruptcy in tough economic times.

This is not exactly a surprise. Dick Hrabko, the airport director, was in Washington last month to meet with American Airlines executives. He showed them hard numbers and hard facts about St. Louis. He came home convinced they would cut here anyway.

So...

The changes to the American schedule will mean changes at Lambert, none drastic. Lambert has already been reducing its costs and filling jobs only when they are urgent. The airport's budget this fiscal year actually went down for the first time in six years. A cutback in service was part of the financial model the airport used when it borrowed money for capital improvements.

Generally, the same thing will be true for passengers out of Lambert. Director Dick Hrabko expects other carriers that don't carry American's high overhead will provide us with good service.

The airport staff has already convinced other carriers to back-fill previous cutbacks made by American. Lambert's four newest airlines, including Frontier and AirTran, now account for 26 flights a day. Southwest Airlines has shown continued confidence in the St. Louis market by maintaining or increasing its schedule. And, yesterday, Midwest Airlines announced it will launch nonstop service between Milwaukee and St. Louis, beginning March 1, 2010.

Bottom line? People will keep flying to and from St. Louis. Fewer of them, though, will be flying American.