This article is a part of a 5 piece opinion on how American Airlines can regain investor confidence, passenger loyalty and general good public perception. For the index of the articles, see here.
Beyond their investments in the US, American has a lot of room to grow abroad. I agree with Gary Leff that American doesn’t need to expand that aggressively by adding routes abroad, but that there is merit in international investments. This is where I feel American could potentially expand most effectively.
China Connections
American Airlines bought a minority stake in China Southern Airlines. That was about a year ago, and I have yet to see any major synergies from that purchase. I believe American needs to begin codesharing more aggressively with China Southern, especially for flights to/from the US from/to China. China Southern is best set up to connect passengers from their hubs in mainland China, and American could limit their flying to those hubs, and offer passengers connecting opportunities on both sides of the Pacific. Reciprocal benefits for frequent fliers, and through checked bags for everyone would be a great addition. This would be met with fierce resistance by SkyTeam members, but since OneWorld does not have any members in China, the addition of CZ to OneWorld would fill a void in the alliance’s network.
African Investment
This would be a very tricky situation. There are only five major airlines in Africa, two in north Africa, and the others in Ethiopia, Kenya and South Africa. The most likely candidate for investment, in my opinion, could be South African Airways. The airline has been in financial difficulties, and the government will eventually run out of patience. IF this were to happen, it would be a consortium purchase. Through a very convoluted process, I can see ComAir, IAG and American purchasing and restructuring SAA. I put the odds of this happening at around 5% in the next 3 years.
The more likely scenario is American starting a codeshare with Royal Air Maroc. The airline will soon start service to Miami, a major American hub. In order to make the flight more profitable, I can see American and RAM begin to codeshare on routes out of MIA and CMN. Subsequently, I can see the codeshare expanding to flights out of JFK.
Rest of the World
There are two remaining areas that I believe American should be more codeshare-involved with. They should strengthen their ties with EL AL. Since they cut their PHL-TLV flight, American could entice EL AL to begin flying to PHL, and begin a stronger network of codeshare flights out of the hubs EL AL flies to (MIA, JFK, LAX). The codeshare could prove beneficial to both carriers, as they could increase connectivity in major cities, and provide passengers with easier access to each others’ destinations.
The other important area that American needs to improve in is in the Indian Subcontinent. They have 0 partners in India, and no connectivity there (besides BA codeshares from LHR). Since their ridiculous spat with Qatar Airways, American has been outplayed by Delta (with Jet Airways) and United (with Air India). American should partner with Qatar Airways once again, AND search for a partner in India proper. I don’t see many full service airlines in India willing to partner with them, since American has no flights to India, and the only full service carrier is Vistara. This is why the situation becomes very sticky.
Foreign Investment
American was offered a lifeline of foreign investment by Qatar Airways last year. This was, in my opinion, the best possible outcome for the airline. This would provide a high quality airline a minority share in the carrier, and strengthen ties with IAG, LATAM and CX (all of which part owned by QR). This was denied because American’s C Suite is petty and frankly misled. They have been following Delta’s lead, while Delta is already 5 steps ahead in the game. If American wants to become competitive, they need to be willing to cooperate with Qatar Airways, and allow their OneWorld partnership to actually benefit the consumer, not their petty and irrational interests.
No sane executive should even consider SAA. The corruption, aided and abetted by the government, would be a money pit. RAM makes much more sense, and could provide additional routing to Europe that don’t involve the Cluster F*** that is Heathrow. You’re probably right about China Southern, but I’d be hesitant to deal with the Chinese government as they always ask for twice what they’re willing to give.