Etihad Airways suspends Dallas link after American Airlines codeshare termination makes it ‘commercially unsustainable’

The rivalry between the US majors and the Gulf hub carriers has taken another notable turn after United Arab Emirates (UAE) national airline Etihad Airways revealed it will suspend its flights between Abu Dhabi and Dallas from spring 2018 following the termination of its codeshare agreement with American Airlines. It says the route has “become commercially unsustainable following American Airlines’ unilateral decision to terminate its codeshare agreement” and will cease from 25-Mar-2018.

Etihad launched flights between its Abu Dhabi International Airport hub and Dallas/Fort Worth International Airport in Dec-2014. The route commenced with three flights a week and was upgraded to a daily service in Feb-2017, underpinned by transfer traffic via the American Airlines network into its primary hub and onward from Abu Dhabi via Etihad’s own network. It is flown using a Boeing 777-200LR.

The airline says that more than 235,000 travellers have flown on the route since its launch with almost half of Etihad’s own customers connecting on to other destinations on codeshare flights operated by American Airlines beyond Dallas. Etihad’s CEO, Peter Baumgartner, says the value of this feed left it with “no choice” but to the suspend the route. He has called on the US carrier to re-think its decision and reverse what he describes as an “unfortunate decision,” as he says the agreement clearly “benefited” both carriers.

Our own The Blue Swan Daily analysis of OAG traffic data confirms the strength of the American Airlines feed, but also highlights that the route may not have been performing to the UAE carrier’s expectations with the estimated 94,000 bookings within the Aug-2016 to Jul-2017 window delivering around a 72% load factor, not  great by any means especially for a long-haul carrier and even more so when a lot of that traffic is connecting onwards.

US Department of Transportation (DOT) load factor information through early 2017 (latest data available) suggests Etihad has secured slightly higher load factors at or above 80%, but American’s feed into this has been notable.

Around one fifth of the estimated passengers on the city pair during the 12 month analysis period were being directly fed into the network at Dallas/Fort Worth International by American Airlines own mainline operation and regional partners, a significant 19,500+ annual passengers with the strongest flows being from Kansas City, Minneapolis/St Paul, Memphis and St Louis.

Etihad will now hope to channel some of its lost passengers via another point in its US network such as Chicago O’Hare International. Ultimately shaving some capacity, dropping a destination but being able to redirect some of the traffic could at bottom line level be financially better for the airline.

CHART – Etihad Airways significantly grew its network capacity in and out of the United States of America between 2013 and 2016, but has already been retrenching capacity since last summerSource: The Blue Swan Daily and OAG

The cancellation of the Dallas route is one of several adjustments that Etihad is making to its US network in 2018 in order to “improve system profitability,” according to the airline. It currently operates 42 non-stop flights a week to five US gateways – Chicago, Dallas, Los Angeles, New York and Washington, while its freight business, Etihad Cargo, operates twice weekly services to and from Rickenbacker International Airport in Columbus, Ohio, and Tucson, Arizona.

Etihad has already switched its daily Abu Dhabi – Los Angeles route from a 777-200LR to a larger 777-300ER from 15-Jan-2018, albeit the route will initially operate at a reduced four times weekly schedule through to 01-May-2018. Its Abu Dhabi – New York double daily link will also see the use of 777-300ERs one or two weekly rotations through the first half of 2018 rather than being exclusively served by the Airbus A380.

Further changes are also expected as the airline monitors the full impact of the American Airlines codeshare cancellation on its summer 2018 bookings. The confirmed changes could lead to the removal of the long-range 777-200LR sub-fleet from Etihad operation or perhaps their deployment in additional longer-range markets. The airline currently operates five of the type, according to the CAPA Fleet Database, but schedule data shows these are presently only timetabled to be used on ten weekly flights during summer 2018, serving Mumbai, Delhi and Lahore.

When American disclosed in Jul-2017 that it would end codeshares with both Etihad and Qatar Airways, CAPA – Centre for Aviation surveyed the extent of Gulf airline codeshares with US airlines (see ‘American Airlines: left hand ends Etihad, Qatar codeshares. Right hand interlines, hopes for deal’). The findings showed Etihad had the highest  number of domestic codeshares on American flights as well as the number of city pairs covered. This was despite Qatar being American’s alliance member and the larger operator into the US.

CHART – Etihad Airways had a significantly higher number of domestic US codeshares than its Gulf rivals according to a CAPA Jul-2017 analysisSource: CAPA – Centre for Aviation and OAG

According to independent research by Oxford Economics, in 2016 Etihad contributed US$3.8 billion to the US economy, supported more than 30,000 American jobs, and brought 280,000 additional visitors to the US. It says these visitors, who travelled “from growing markets historically ignored by US carriers and partners,” contributed US$1.9 billion to the US economy and supported an additional 22,000 American jobs.

However, the US majors continue to claim that unfair subsidies and non-commercial practices by the likes of Emirates Airline, Etihad and Qatar are giving them an unfair advantage. In a recent earnings call, Doug Parker, CEO, American Airlines described the biggest threat to the long-term viability of its business as being the US government failing to step up against Qatar and the UAE and so-called “subsidised flying”.

He said: “We can compete against anybody as long as the playing field is close to fair. What we can’t do is compete against oil-rich countries that don’t care about making profits and that seem to have a different objective of trying to help their countries through having an aviation practice that doesn’t make any money but brings people in and out of their countries.”