Earlier this week, American Airlines announced its intention to launch “new” service between Boston Logan (BOS) and London Heathrow (LHR) in Spring 2020 with Boeing 777-200ER aircraft. Yet while “American metal” (that’s informal aviation speak for “planes with American Airlines branding”) has not been on BOS-LHR since 2013, American has been making money on the route this whole time. How does this work?
The answer is that American has a joint venture with its oneworld partner, British Airways, along with fellow oneworld airlines Finnair and Iberia. There’s a lot to unpack, here, but it’s important for travelers to know what joint ventures are and what it means for the traveling experience.
What is a joint venture?
A joint venture is an agreement where two or more businesses share resources and profits while maintaining their unique brand identities. It should not be confused with a “codeshare” agreement often found between airlines in a given alliance (such as oneworld, SkyTeam, and Star) which enables passengers to book a single trip itinerary on multiple airlines. This article from One Mile at a Time humorously compares codeshares to dating and joint ventures to marriage.
From 2014 to 2019, BA has carried out all oneworld flying on BOS-LHR, using a combination of Boeing 747s, 777s, and 787s, as well as the Airbus A380. Delta Air Lines and Virgin Atlantic Airways also operate one flight per day each on that route, and they, too, have a joint venture (which has been expanded to include Air France and KLM).
The shift from flying combined AA and BA metal to flying solely BA metal was multi-faceted, but likely came down to American’s decision to consolidate its 777 aircraft to major hubs including Chicago O’Hare, Dallas-Fort Worth, Los Angeles, Miami, and New York JFK. As such, BA started flying larger aircraft — switching from mostly 777s with a few 747s mixed in to more 747s and A380s with 777s and 787s plugging the gaps — on BOS-LHR. To underline this point, while I flew on the BA 777 back in 2004 — when AA metal was also on the route — all of my travels with them since have been on the 747 and A380.
Why do airlines enter into joint ventures?
Joint ventures are not unique to the airline world, of course, but there are a number of reasons that airlines find it beneficial.
For one, airlines — at least BA — state that it allows them to offer better fares (although, as One Mile at a Time points out, it can, at least in theory, reduce competition and raise fares over time).
Second, it provides travelers with more options. While not the case in Boston, people flying from places like New York or Los Angeles to London can make a single reservation flying over on BA and back on AA, or vice-versa. If each airline operates three flights per day between a given destination, and there’s a joint venture in effect, then customers of both AA and BA have twice the options that they did before.
Third, joint ventures enable airlines to better utilize their resources while providing more profit opportunity. For example, if American needs to send its 777s to operate flights from its hubs (such as New York or LA) and BA has to pick up the slack, American can still make some money on the route. The inverse is also true — if BA needs to move a 777 from, say, JFK-LHR to add an additional flight between LHR and Beijing, then American can pick up the slack and BA can still earn money.
Why has American retained its metal on BOS-LHR
It’s impossible to know exactly why, but it appears that there are a number of reasons.
First, though, I have to explain what “slots” are. Major airports which are often operating near capacity — such as London Heathrow — often allocate “slots” to airlines. A slot is simply the authorization that an airline can operate into or out of an airport at a given time. This is done mainly to ensure that the airport has a lid on the number of planes that are flying in to and out of an airport during a given time. They are finite, and, thus, cost the carrier a lot of money. You can learn more about slots in this great article from The Points Guy.
With that in mind, American didn’t just take one of the existing slots that itself and British Airways owned. Instead of swapping out AA “metal” for a BA plane on one of its four existing slots, it went and procured an entirely new slot. Frivolous business decisions are nothing new, but I have a hard time believing that American would have spent the money if it didn’t see legitimate opportunity.
Now, why did American do so? One hypothesis is that American has seriously let itself go in Boston, as jetBlue and Delta are by far the dominant carriers at the airport. This is a far cry from a decade ago, when AA was alive and kicking in BOS, so to speak.
Moreover, with jetBlue set to launch transatlantic service in 2021 and Delta beefing up its existing transatlantic efforts to the UK from Boston — the carrier will retain Heathrow service while adding new routes to London Gatwick and Manchester — American may feel the need to respond in kind. In other words, even if it knows that adding one flight won’t make a significant difference in its overall Boston market share, putting a 777 back on Boston’s flagship European route is a good way to make a statement. And, at this point, it needs to make a statement.
What does this all mean for me?
In all honestly, probably not much.
There is always the chance that fares increase with joint ventures, as implementation of profit sharing mechanism reduces competition. However, this joint venture has existed for almost a decade, so it’s unlikely that flying an AA plane on the route is going to have a material impact on fares. If anything, the increase in supply (in this case, the number of flights) is likely to drive down prices — although given airline dependence on things like fuel prices, there’s always the chance that prices increase.
In general, there’s not much reason to think that this is going to materially impact fares on BOS-LHR. Still, it’s interesting to see American announcing this service like a “new” route — even though it has been making money on it all the while.