American bulks up to defend Chicago hub against United

Bloomberg

Less than two weeks after United Continental Holdings Inc. said it was done being a “docile competitor,” American Airlines Group Inc. signaled it’s no pushover, either.
American is adding seven new routes from Chicago to midsize US cities starting July 5, President Robert Isom said in a letter to employees late. Chicago also got the most new service in moves announced by United President Scott Kirby on Feb. 27.
The stepped-up activity sharpens a clash between the two airlines since Kirby resigned as president at American and took the same post at United six months ago. Both carriers, which have major operations in Chicago, are adding flights to secondary destinations where there’s less competition and more ability to control prices.
“What you’re seeing out of both of these players, and you see it out of any of these airlines, is they feel they need to defend market share at their hubs,” said Jack Atkins, an analyst at Stephens Inc.
The fight over Chicago probably will probably stay limited to a local tussle between American and United, without bleeding into the broader industry, he said. The new service won’t change a plan to limit the total capacity increase of flights and seats to 1 percent this year, American said.
“Obviously, you don’t want to see a fare war,” Atkins said. “And all these management teams know it’s in their best interest to be disciplined on price.”
United Offensive
In adding United’s 47 domestic round-trips last month, Kirby pledged to regain ground lost to rivals. He said the Chicago-based airline was going on the offensive following years of docility.
“Now it sounds like they want to fortify” their competitive response after previously tending to shy away, said Savanthi Syth, an analyst at Raymond James Financial Inc.
United passed American this year in market value, an indication of investors’ confidence in the efforts of Kirby and Chief Executive Officer Oscar Munoz to turn around the former laggard of the U.S. industry. American remains the world’s largest carrier in terms of miles flown by paying passengers.
American said it would also add a flight between Dallas-Fort Worth International to Spokane, Washington, and one between Miami and Omaha, Nebraska. The new routes follow 15 domestic and international flights that have been added over the past year from six of American’s hubs.
“The greatest strength of our network is our ability to connect small cities with large ones through service to or through our hubs,” Isom said in his letter.