Why American Airlines has only 1 West Coast hub

The most lucrative air travel markets in the United States are undeniably transcontinental flights, especially those that serve major economic hubs heavily saturated with business travelers.

When flying from major East Coast cities like New York, Boston, and Philadelphia, to West Coast cities like San Francisco, Los Angeles, and Seattle, airlines will often operate services during the day.

In the reverse direction, these flights will often follow a red-eye schedule, something which allows carriers to charge business travelers for lie-flat seats, as they will often pay for the convenience of a flatbed seat.

As a result, maintaining a strong presence on the West Coast is essential for any legacy airline, the type of carrier that is looking to primarily target business travelers and derive a significant amount of their profits from this sector.

Three airlines exist in the US aviation industry today that operate this kind of business model, and they are American Airlines , Delta Air Lines, and United Airlines. As one would expect, all of these carriers have a hub on the West Coast.

For starters, United Airlines undoubtedly has the strongest presence in the state of California. The carrier has a major hub at San Francisco International Airport (SFO), and a secondary hub at Los Angeles International Airport (LAX), through which a smaller but not insignificant portion of its transpacific flights depart.

Delta Air Lines also has two separate hubs on the West Coast, with the airline maintaining a strong presence at LAX and Seattle/Tacoma International Airport (SEA).

While at SEA, the airline faces heavy domestic competition from Alaska Airlines, which is the most important and most prominent international carrier at the airport.

American Airlines, interestingly, does not have a second major West Coast hub. The airline only operates one hub along the West Coast, at Los Angeles International Airport (LAX), something which makes it stand out from its competitors.

This restricts the carrier from operating likely as many transcontinental flights as it would like and also limits the airline's ability to have a large transpacific network.

In this article, we will take a deeper look at why American does not have a second hub on the West Coast, and why this might be a problem for the airline in the long run.

The airline has a secondary hub in the Western United States, but not a secondary Pacific hub

It is important to note that American Airlines does have a second hub in the Western United States at Phoenix-Sky Harbor International Airport (PHX).

However, this airport is located far from the Pacific Coast, and it acts more as a regional hub for American's operations in the Mountain West than as a true transpacific gateway.

This emerges as a key point of differentiation between American's route strategy and that of Delta and United.

Both United and Delta have two separate West Coast hubs and a regional hub for the Mountain West region. United operates a major hub at Denver International Airport (DEN) and Delta operates a hub at Salt Lake City International Airport (SLC), both of which serve high-demand ski and summer leisure destinations.

American Airlines' Phoenix and Los Angeles hubs create a slightly different network, one which leaves the airline in a more difficult position to attract skiers (a high-spending travel demographic), transpacific travelers, and transcontinental business travelers.

As a result, American's hub system in the Western United States is both confusing and holds the airline back significantly.

Many industry analysts have attributed American's weaker performance in comparison to Delta and United to underperformance in these key regions. The bigger question that remains, however, is why exactly did the airline let this happen.

A deeper look at American's one West Coast hub

To understand the set of circumstances that resulted in American Airlines having a single West Coast hub, it is important to look at LAX and examine the competitive dynamics there.

For starters, here is the current breakdown of market shares at LAX among the three major legacy carriers, according to data from the facility:

Due to the lucrative nature of transcontinental and transpacific routes to and from Pacific coast hubs, these airports are among the most fiercely competed by American's major competitors.

Despite being American's only Pacific hub, where it has been expending a large amount of resources on marketing and building a presence in the Los Angeles area, it has still not been able to capture as much market share as Delta Air Lines.

Moreover, American's market share is roughly the same as United's, and LAX is not even United's primary hub on the West Coast. As we can see, it is very difficult for American to compete with its two largest competitors on the West Coast.

The carrier's route strategy mostly focuses on hubs in the Sun Belt region, with Phoenix, Dallas/Fort Worth International Airport (DFW), and Miami International Airport (MIA) emerging as some of the airline's most valuable assets.

The airline did have a second West Coast hub in the past

In 1988, following the acquisition of AirCal, American Airlines decided to establish a hub at San Jose Airport (SJC) and attempted to compete with other airlines for high-spending business travelers flying into nearby Silicon Valley.

In the early 1990s, American Airlines drastically expanded its operations and introduced the airline's first transpacific services from its San Jose hub.

In 1991, the airline launched routes to Tokyo, and in 2001 it launched flights across the Atlantic to Paris. American aimed to establish a second West Coast foothold with its San Jose hub, but the facility would not live up to its potential.

The airport's infrastructure soon created some barriers to the growth of American's newest hub. Due to a short runway, American was forced to use McDonnell Douglas MD-11s instead of DC-10s for its Tokyo route, which prevented the carrier from adding more capacity to this high-demand route, according to San Jose Mercury News.

The dot-com bubble bursting significantly weakened travel demand to and from Silicon Valley, the market which formed the backbone of American's customer base at its San Jose hub.

The airline was quickly forced to close down unprofitable routes, making San Francisco International a far more appealing gateway for passengers headed across the Pacific.

American Airlines again faced financial challenges in the 2000s, amid the rapid rise of oil prices. The airline was forced to concentrate its resources on more profitable hubs like Dallas-Fort Worth and Chicago-O'Hare.

As a result, the carrier was forced to shut down its San Jose hub, ceding the Bay Area market to United Airlines.

So what's the bottom line?

At the end of the day, American Airlines does not have a second hub due to the competitive dynamics that exist in the West Coast air travel markets.

Both Delta and United have strong footholds in Seattle and San Francisco, respectively, and both fiercely compete with American for market share at LAX.

Furthermore, American Airlines had already attempted to have a second major hub on the West Coast, but it failed. The carrier was beaten out of the market due to its inability to build a stable, profitable hub.

While factors related to the September 11th Attacks and the rise of oil prices may have influenced American's decision to shut down its San Jose hub, the carrier does not look interested in building a new second West Coast hub any time soon, especially given its previous failure when it attempted to create one.