Analysis of De-peaking Strategies Implemented by American Airlines: Causes and Effects

The airline industry in the United States has been one of the hardest-hit (economic victims of the terrorist attacks on September 11, 2001. In an effort to reduce operating cost to better adapt to the decreasing demand, American Airlines (AA) has introduced de-peaking strategies at two of its major hubs: Chicago O’Hare and Dallas/Fort Worth International Airports. In this paper, American Airlines’ market performance before de-peaking implementation is investigated. The results suggest that the differences between the market performance of the whole company and those services going through hubs might have triggered the implementation of de-peaking. Moreover, traffic directionality at ORD and DFW allowed American Airlines to implement de-peaking strategies without drastically increasing the transfer times. However, as it is shown here, even these small increases in transfer time affected AA’s market share. In the second part of this paper, market share ratios of American Airlines to its strongest competitor, United Airlines, are studied by using a logit market share model and weighted least squares method. The results revealed a decrease in American Airlines’ market share. These findings emphasize the importance of banked scheduling strategies at the hub to keep low transfer times, and encourage the use of utility models of airline service in the planning and design of new policies. Zhang, Menendez, Hansen 3