ANALYSIS: An alternative for the American-US Airways west

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Much has been made about the future of US Airways' Phoenix hub in the new American Airlines, once their proposed merger is complete.

The metropolitan area of 4.3 million people in 2012, according to the US census, is a mere 596km (370 miles) from the much larger Los Angeles metro area - 13.1 million in 2012 according to the census - where American has a small hub.

Comparatively, Delta Air Lines has dramatically downsized its Cincinnati and Memphis hubs, which are proximate to its larger Detroit (369km apart) and Atlanta (530km) hubs, respectively, following its merger with Northwest Airlines in 2008.

"The Phoenix hub is a critical piece of US [Airways] profitability and it will be a critical piece of American profitability," says Doug Parker, current chairman and chief executive of US Airways and the future chief executive of American following the merger, during a Senate hearing on 19 March. He describes Phoenix as the airline's western "connecting hub" and Los Angeles as its "gateway to Asia".

This could mean changes for Los Angeles and Phoenix that, as a whole, could make a lot of network sense.

Combined American-US Airways route map from Los Angeles, April 2013

Innovata FlightMaps Analytics

American could focus its operations in Los Angeles on high yield origin and destination (O&D) passengers to international destinations and its hubs, while scaling back connecting services from the airport. Possible routes that could be cut under such a strategy include regional operations to Fresno, Monterey, San Diego and Santa Barbara, and mainline flights to Boston, Fort Lauderdale and Toronto.

These routes have some of the lowest load factors of American's operation out of the airport. Flights to Boston were 63.1% full, Fort Lauderdale 44.8%, Fresno 75.1%, San Diego 72.3%, Santa Barbara 71.6% and Toronto 79.8% in August 2012 - the last month for which data is available - according to Flightglobal/Innovata capacity data and US Department of Transportation (DOT) enplaned passenger statistics.

Flights to major business and international destinations performed much better based on load factor. London Heathrow was 94.3% full, New York John F. Kennedy (JFK) 94% and Washington National was 94.7% in August, according to Flightglobal/Innovata and the DOT.

American load factor on routes from Los Angeles, August 2012

Flightglobal/Innovata and US DOT

The industry generally considers an 81% load factor to be breakeven, however, as Robert Mann, an airline industry analyst with RW Mann & Company, points out the profitability of a route is "entirely depending on pricing, aircraft [and] market" and not how full an aircraft is.

Capacity to regional destinations cut from Los Angeles could shift to Phoenix, which is considered a better connecting hub, while the larger cities would continue to be served via connections through its other hubs around the country.

Combined American-US Airways route network from Phoenix, April 2013

Innovata FlightMaps Analytics

The freed up gate space at Los Angeles would allow American to boost service to international destinations as well as accommodate US Airways' existing operations in terminal four if it chooses to do so.

American has 13 gates in terminal four and an additional 10 in a remote terminal for its regional operations at Los Angeles. US Airways has preferential use of four gates in terminal one, though it shares some facilities with Southwest Airlines.

American operates 92 peak day mainline departures, or about 7.1 turns per gate, and 67 peak day regional departures, or 6.7 turns per gate, while US Airways has 17 peak day departures. Combined the airlines would have 109 peak day departures under their current schedules that, if operations were consolidated in terminal four, equals 8.4 turns per day.

The US National Transportation Research Board recommends a maximum gate usage of six to eight turns per day.

American will also have access to the common use gates in the Tom Bradley International terminal once the Bradley West modernisation project is complete in 2014.

"There is a lot of opportunity for American to streamline its operations at Los Angeles," says Henry Harteveldt, a travel industry analyst for Hudson Crossing. "It's simply a matter of logistics. There is only so much ramp space and there are only so many gates."

The carrier faces the likelihood of an operation that is spread across at least three terminals at Los Angeles immediately following the merger. This will create significant logistical issues for connecting passengers and crew, while also increasing congestion on the ramp with the additional shuttle bus traffic.

American already connects its regional facility to terminal 4 via an airside bus. These operations can be delayed due to aircraft movements on the ramp as the bus must pass terminals five, six and seven to access the facility.

Los Angeles and Phoenix could ultimately look like a west coast version of what is expected for New York and Philadelphia, with the former being an international O&D gateway and the latter a domestic connecting hub. While this is not necessarily ideal, in both Los Angeles and New York American faces either constrained airport facilities - there are no near- or medium-term plans to expand the domestic terminals at Los Angeles - or slot restrictions or both, it is a reality of American and US Airways' combined airport facilities and networks.

"I think that we may actually be entering a phase in the next couple of years that Los Angeles [airport] will emerge into a 21st century gateway," says Mann.