Jim Butler: A bigger, better American
19 / 06 / 2017
Jim Butler took over as president of American Airlines Cargo on December 9, 2013, the day that the merger of the US giant with US Airways was legally finalised. So a lot of his first year or so in post was spent integrating the two carriers’ cargo businesses.
That was completed on October 1, 2014, but as Butler points out, there was still more to do in the wider airline.
It was only in mid-October this year that the US Airways livery was finally consigned to history on the passenger side of the business, with the whole operation now under the single American Airlines brand.
The merger put American back on top as the world’s largest airline group, though from a cargo perspective it only boosted it from 29th to 25th, making it almost exactly the same size as Delta Airlines and United Airlines. While on the passenger side the pre-merger American was twice as big as US Airways, on the cargo side it was 4.5 times the size.
US Airways still added some useful capability, however. As Butler points out, American’s transatlantic capacity was previously heavily focused on Heathrow, and it served only 11 places in Europe.
With the US Airways network out of Philadelphia and Charlotte added in, it now serves 21.
US Airways also boosted American’s domestic capacity on the east coast. Perhaps not surprisingly, Butler reckons it now has the best US network of all the US majors.
One might not think that the US domestic market was such an exciting prospect for cargo these days, what with competition from trucking, the requirement to screen all belly cargo and competition from the integrators, but Butler insists there are still plenty of interesting opportunities.
“The biggest growth from the merger was in the domestic market,” he says. “We now have nine different hubs and a lot of service between them. It is an area of our business that I think will continue to grow.”
Cargoes include seafood, fruit and vegetables, herbs and cut flowers, and US Airways also had a strong presence in human remains, which the merged cargo operation has been building on.
But the fastest growing segment of all is mail. Legacy American was not in this business, but inherited from the US Airways side a contract with the US Postal Service.
Butler sees more growth to come from this in 2016, as well as from e-commerce.
“If you look at expectations here, previously people were excited about two day delivery service: now Amazon is changing expectations to an hour. So we have to step back and look at how our industry-leading network can deliver.”
Domestic capacity also enables American to connect between international flights, for example from Asia to Latin America. The latter region has always been a great strength for the carrier, with American boasting an impressive network out of Miami. Lately, however, the Latin American economy has not been doing so well.
“I wish the global economy was in better shape,” Butler sighs when asked about this, admitting that traffic to the “deep south” (Brazil and Argentina) has been hit “significantly” this year, but declining to put a figure on it.
“I am encouraged by what I have seen in the past four to six weeks in Argentina, but Brazil will take longer to recover,” he says. “Their currency has weakened against the US dollar so that has hit their ability to trade.”
In this context it might be good or bad news that Latin America is one region benefiting from the roll-out of Boeing 787-8s at American.
The carrier deployed its first one from Dallas to Chicago in May, and will have 13 by the end of the year, with one a month coming thereafter. In total, 42 of the aircraft are on order, half of them the higher capacity B787-9, which will arrive from late next year.
Dallas to Buenos Aires was an early beneficiary, and Los Angeles to Sao Paulo followed this month (November). On both routes the B787 replaces B767-300s, with a big boost to cargo capacity.
Despite the depressed South American market, Butler is upbeat about this, particularly for the Los Angeles route: “It is great for cargo and a much better product for our customers,” he says. “It will allow us to grow much more than we could with the 767.”
Other B787s are replacing B777-200ERs on transpacific routes, leading to a loss of capacity per flight. But even here Butler sees an upside.
“Prior to the merger, our widebodies were only 777s or 767-300s, and the 767s could not do the Asian routes,” he says.
“So, for example, we had to fly five times a week with the 777-200ER, as that was all the market could support.
“Now we have daily 787s from Dallas to Shanghai, Dallas to Beijing and Chicago to Narita, with Los Angeles to Shanghai due to start soon.
“In positions, the two aircraft are similar, but there are rather more weight restrictions on the 787. But from a cargo perspective I would rather have seven days a week with slightly less capacity than five times a week with more.”
From US Airways, American also inherited some Airbus 330-200s and -300s, which are used for transatlantic flights out of Philadelphia, while legacy American transatlantic routes are 777-200ERs. But as integration continues Butler says the A330s will start to move around to other routes.
In addition the carrier is getting 22 A350-900s from 2017, around the time that 787 deliveries will be complete.
One route the B777 is ideal for is Los Angeles to Sydney, a service that will start in December in cooperation with Qantas, using B777-300ERs. American has 17 of these aircraft in its fleet and Butler praises them as “mini freighters”.
“We have one flying from Hong Kong to Dallas daily, which is the eighth longest route in the world, and we still get 15 tonnes of freight out of Hong Kong with a full passenger load,” he says.
“Los Angeles to Sydney is not as long as that, so we are expecting even better cargo uplift.”
The B777-300ERs also fly transatlantic, and Los Angeles and JFK have been in competition to see who could load the most. LAX currently holds the record with 106,000lbs (48 tonnes) on a flight to Heathrow, despite what Butler describes as “a really big” passenger load.
Other developments at American include “a new simplified pricing structure” announced on October 1 in a letter to customers, and to be phased in by region over the next six months.
This promised “a single net rate price that reflects the combined line haul and surcharge structure you are familiar with today” but goes on to say that “future circumstances may require a mechanism to address rapid and unforeseen changes to the cost of transportation” — such as “large swings in the price of fuel or currency exchange, as well as any new regulatory burden”.
So is this a true all-in rate or just a tidying up of surcharges? Butler is somewhat gnomic on the topic.
“We have been working diligently to make sure we have a compatible way to work with our customers from a pricing perspective,” he says. “We have been talking to them about this and we believe that is what we are producing.
“We are always trying to work with our customers to give them a rate structure that works for them. We saw an opportunity to make it easier”.