American Airlines Letter

To Congressman McGovern on February 19, 2002 in the March 5, 2002 minutes of the City Council:



I have read today's editorial in the Telegram and Gazette concerning the cancellation of one of American Eagles's daily flights to Chicago from Worcester. Although the editorial correctly notes that American Eagle is restricted by the collective bargaining agreement between American Airline and its pilots, the story of the Worcester service is far more complicated.

In fact, our service to Worcester has simply not had the support from the community to make it profitable. We are in the process of developing a more detailed history of the market, but let me share some important points in advance.

The fundamental problem with the service has been a lack of business traffic. As you know from the numerous hearings that you have attended over the years on aviation issues, the economics of a successful aviation route depend upon the "mix" of traffic on the route. We need both business and leisure traffic to be successful. We have been reasonably successful at attracting the low-fare leisure traffic on this route. But this is not so for business travel. As a result, although the flights may look full, they are actually full of passengers, who together are not paying for the cost of the flight.

Basically, at the fares that we are able to charge at Worcester, our "break-even" load factor is 126%. In other words even if every seat was full on every flight, we would need 26% more passengers to break-even!

Unfortunately, the market was already suffering prior to September 11th. The actual load factors and losses on this route for the past several months are as follows:

Month Load Factor Losses

July 64% 199,000
August 52% 247,000
September 44% 295,000
October 61% 260,000
November 59% 228,000
December 45%

As you can, although the events of September 11th were damaging, we were already losing a great deal of money before then. The August numbers are particularly distressing. That should be a much stronger month and the trend was clearly on the decline.

At your urging and that of MassPort's, we decided to keep one flight per day in the market to see if we could operate more profitably. If we were able to make it profitable, we would certainly consider adding back the second flight and building up the market. We recognize that this is a real challenge because the service pattern is so limited with just one flight per day. But under the circumstances outlined above, the only alternative was to pull the flights altogether.

You have been immensely supportive of this service and we would really like to make it work. As I have noted, I have requested American Eagle prepare a more detailed analysis of the situation for your use. They are more then willing to send a senior marketing person to Worcester to meet with you and whomever you recommend to discuss ways the community may be able to support the service. In turn, we are happy to listen to your suggestions for any possible way to turn the situation around.

Sincerely,

Will Ris
Senior Vice-President of Government Affairs