The American Airlines Pilot Contract Is Helping Delta Win Austin—How Job Protection Backfired

I covered how the head of the American Airlines pilot union wants a new CEO, and how the union wants a seat on the board to help fix the airline. But in Austin, their own contract is making it harder for American to fight Delta for customers and grow the credit card spending that makes those customers so valuable. American will eventually grow again in Austin. They’ve committed to 9 gates under the airport’s new use and lease agreement. That’s not until the 2030s, though, once the new concourse is complete. The new lease gives Delta and Southwest 15 and 18 gates, and Delta is building its customer base now, while American has pulled back to mostly serving its hubs. On this week’s Airlines Confidential podcast, former Wall Street Journal airline writer Scott McCartney pointed to a reason American has struggled to compete: its pilot contract limits the regional jets it can use to develop the market. I outlined the issue three years ago as American pulled back from its big growth play in Austin. Austin Was American’s “Love Language” Delta had internally planned for Austin to become a focus city a decade ago, and I broke that news originally. Then the pandemic hit. American made a real play to grow in the city in 2021 and 2022, and they already had corporate contracts and loyal customers. Former Chief Commercial Officer Vasu Raja called Austin his “love language.” As they pulled back, Delta began squatting gates until they were ready to use them productively, flying short hops on regional jets out of Mexico border cities (picking up business flying migrants when that was a thing during the Biden administration). I covered American’s 10-route expansion in March 2021, followed by another 14 destinations announced that June. They’d served just 8 hubs before the pandemic and were growing service across the country and into Mexico and the Caribbean. Small jets let them try routes that couldn’t yet support mainline flying. Their Alaska and JetBlue partnerships filled in more of the map. This gave an Austin customer more reasons to stay with AAdvantage instead of spreading their flying across several airlines. (Both have since pulled back in Austin as well.) And that was a major commercial purpose of those partnerships: growing AAdvantage, signing up credit card customers and getting them to spend. In October 2021, I wrote about Raja telling investors that American’s fastest-growing markets for AAdvantage enrollment were its Alaska and JetBlue partnership cities. Delta understands this. Last October I flagged CEO Ed Bastian telling investors that the credit card opportunity was a big part of their Austin strategy, along with Raleigh: “these are places we acquire a lot of cards.” American is now giving Delta more room to compete for that business. The Pilot Contract Makes It Harder To Build The Market McCartney described the problem this way: “One of the reasons is that American’s handcuffed in the use of small regional jets by its pilot union contract. My understanding is the contract says a large portion of small RJ flying is limited to legacy AA hubs. “So that means American can’t use a lot of small planes to develop new routes in places like Austin…” I explained this in November 2023 as American dismantled its Austin focus city: At least 85% of American’s regional flying has to operate to or from qualifying hubs. The definition includes legacy American hubs and airports with at least 100 daily flights. Austin didn’t meet that threshold. Regional flights between Austin and other non-hub cities therefore used up part of the 15% allowance, shared across American’s network. Pilots grieved the flying. American can fly mainline aircraft from Austin, but that’s expensive, Austin is a developing market especially for new routes that don’t touch a hub. It’s a lot of seats to fill. It’s even harder to do more than one flight on mainline compared to two or more flights with smaller planes. And if they’re willing to lose money for awhile as they build the route, they’d be losing even more money. The pilots union contract is designed to keep regional airlines feeding the flights American’s own pilots operate, rather than replacing them. But it also makes it harder to use those regional airlines to build a market that could eventually support more American pilot jobs. American has more generous regional fleet allowances than Delta and United in important ways but this is a restriction on where those planes can fly rather than how many. Management agreed to the contract and had the responsibility to build an operation that complied with it. And American was probably losing money on many of these Austin routes, including some mainline flights it cut. McCartney says he understands that the pilots recognize the problem and that changes will probably come in a new contract. “It’s to the pilots’ benefit to build new markets and ultimately have those become mainline pilot jobs. But waiting for a new contract, that means at least a couple years. Frankly, by then the battle for Austin and other fast-growing markets will likely be won or lost.” American Will Grow To 9 Gates But That’ll Take Years I’m less fatalistic about American’s future in Austin than Scott is. In February, I was first to reveal the future gate allocation from the new airport use and lease agreement I obtained through a public records request. American will grow to 9 gates. Delta gets 15, and Southwest gets 18. American’s space remains on the existing concourse, with Alaska’s gate adjacent. Southwest moves to the new midfield concourse. That gives American room to grow when the new concourse comes online in the 2030s and minimum gate usage requirements will basically force them to grow to avoid losing those gates. In the meantime, gate availability limits how much they can rebuild before then. Delta squatted gates until they were ready to start growing for a reason. McCartney’s guest co-host, former American Airlines AAdvantage head and Chief Information Officer Maya Leibman, pointing to American’s remaining flights and planned new lounge, said, “I wouldn’t say that American is retreating from Austin in any way.” Not anymore! They’ve already retreated! And the lounge was first announced in November 2021 when they were expanding aggressively. The location and plans have changed since then. American’s original November 2021 lounge rendering The Pilots Have Already Opened The Negotiations There’s an opening to deal with this sooner than McCartney’s timeline suggests. As I reported last month, American’s pilots have opened contract negotiations early. Their current agreement becomes amendable August 1, 2027. The union invoked an early-opening provision tied to implementation of the existing deal. At the same time, union president Nick Silva is criticizing management’s financial performance and looking for different leadership. He acknowledges that American is finally making customer investments the union wanted. “They’re really trying to focus on the customer,” but his complaint is that it should have happened years ago. Pilots who want American to invest for the long term should want a contract that lets it develop promising markets. Preserving a restriction that makes it harder to compete means risking lower future profits, less profit sharing and fewer opportunities for American’s own pilots as Delta grows instead. They’re going to ‘want something’ in exchange for more flexibility in regional flying even though it’s good for them too. Austin growth wasn’t coming at the expense of mainline in any meaningful way – it was supporting growth in a city that will be able to support more mainline over time. Scope is generally sacrosanct. Pilots have good reason to resist management replacing their jobs with cheaper outsourced flying. But sometimes it makes sense to open this up. In their improved second contract deal, United’s flight attendants accepted an exception allowing United to own a regional airline staffed by that airline’s flight attendants. American and its pilots could negotiate Austin-specific flexibility with enforceable commitments to grow mainline flying as the market develops. I’d argue they should be focusing on San Jose this way, too. Topics on this page