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Is American Back To Its Old Fortress Hub Tricks? AA Launches Iceland Service, Defends DFW

An American 757 on approach. Photo by Venkat Mangudi (P1160895) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

American Airlines is adding new seasonal routes from DFW to Reykjavik-Keflavik, Iceland (KEF). The new service will commence June 7 and run through October 26 of 2018, and be flown on the Boeing 757-200 with 176 seats. Why is American using such a large plane for what are often only connecting flights from Iceland to Europe? Apparently, American’s VP of Network & Schedule Planning Vasu Raja believes Iceland is attracting more tourists, saying, “Reykjavik has become a very popular leisure destination and we look forward to giving our customers the opportunity to experience Iceland’s unique landscape of geysers, volcanos and hot springs with our new direct service next summer,” and added, “The new destination complements our continued growth from Dallas-Fort Worth, including Rome and Amsterdam.”

Ultra-low cost carrier WOW is launching service from DFW to Iceland this summer.  It will compete with IcelandAir and American Airlines. Photo: WOW Air

American has impeccable timing. Earlier this year, WOW and Iceland Air announced service to DFW. Both have connecting networks to Europe from Iceland…something American lacks. That means travelers have been able to get cheap flights to Europe by flying through Iceland and picking up a connections on WOW and Iceland Air.  They can also stay a day or two in Iceland for free. A win for the consumer and a win for the two airlines, but not so good for American.

It is no surprise then that American is now flying through Iceland. But does this behavior mirror AA’s actions the past? Is the behavior that landed them in court in the 1990s when they took on the now defunct Legend Air?

Legend Air’s Demise at the Hands of American Airlines

Legend Airlines had Dallas Love Field as its hub in the ’90s. It ran routes to New York, Las Vegas, southern California, and Virginia. Legend did not last long, however, since it was forced to file for bankruptcy only five years after it received corporate status. Its initial flights were delayed substantially by court battles with American, who was joined in the fight by the City of Fort Worth.

Legend Airlines Douglas DC-9 at Mojave. Legend offered luxury first class service from Dallas Love but succumb to competition from American after they launched Fokker F100 service. Once Legend was eliminated, American eliminated the service. Photo aeroprints.com [CC BY-SA 3.0)
American Airlines sued under the provisions of the Wright Amendment, effectively trying to prevent Legend from flying out of Love Field. Although the fledgling airlines’ right to fly was upheld every time in court, American immediately appealed each decision to a higher court and exhausted Legend’s financial resources. Meantime, American kept introducing more flights at lower prices out of Dallas, creating a price war with Legend that delivered the final blow. For all outward appearances, American was using DFW as a fortress hub in the ’90s and often, when start-up airlines would attempt to fly from DFW, the more established airline would create barriers to entry by flooding the market with cheap seats. Once the competitor was no longer flying out of DFW, American would then cut service or raise prices.  Legend is a prime example but American also faced similar accusations from Vanguard Airlines and SunJet in the 1990s.

One cannot help but notice a pattern and even compare American Airlines’ behavior in the 90s to its current plans to launch service to KEF. American is coming into the market with larger planes and lower prices, effectively fighting for elbow room with WOW and Icelandic Air.

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Written by Kim Clarke

Kim Clarke is a Freelance Writer and Editor, specializing in the aviation industry and financial markets. She freelances for McGraw-Hill Financial, Avgeekery, Skydiving.com, USAHotAirBalloons and more. Past journalism experience includes Thomson Financial, CNN and Clear Channel Communications.