Oops: The Funny Reason American Airlines Lost JFK Slots

Oops: The Funny Reason American Airlines Lost JFK Slots

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American Airlines and JetBlue Airways are currently in court, as their Northeast Alliance is being challenged by the Department of Justice. On Friday, American executives made a pretty surprising revelation about why the airline lost some slots at JFK.

American forgot it had JFK slots, had them taken away

In the United States, New York John F. Kennedy Airport (JFK) is one of the most slot restricted airports. In order to fly to the airport, airlines have to acquire takeoff and landing slots, and that’s intended to control capacity at the airport.

This has been one of the arguments that has been made in favor of the American and JetBlue alliance — American has claimed it can’t compete in New York without the JetBlue tie-up, because the airline can’t acquire more slots. That lead to a fascinating revelation — a while back American lost slots at JFK because it simply forgot it had them.

In 2019, the United Stated Federal Aviation Administration (FAA) conducted an audit, and found that American was underutilizing its slots at JFK. As a result, American had seven slots taken away. Essentially slots operate under a “use it or lose it” policy, meaning if you don’t use your slots, they will be taken away.

American had them taken away because it forgot it had them, in the aftermath of the merger with US Airways. As Vasu Raja, American Airlines Chief Commercial Officer, described this:

“Accounting and combining slots after the merger was a manual process. There’s no good reason, and I’m a little beside myself that it happened. It was for the worst of reasons, it makes us sound completely ridiculous.”

Interestingly at the time, both American and the FAA didn’t even seem to be in agreement about how many JFK slots American had. After losing the seven slots, American thought it had 216 slots, while the FAA thought American had 200 slots. The two organizations ended up agreeing on allowing American to hold onto 210 slots.

JFK is a slot controlled airport

My thoughts on American losing JFK slots

A few thoughts on American losing JFK slots because executives forgot they had them…

First of all, you have to love the irony of this happening in court the same day it was announced that United Airlines will pull out of JFK, as the airline can’t get permanent slots. Here you have United desperately trying to expand at the airport, while American can’t even keep track of how many slots it has at the airport.

Second of all, I didn’t realize just how manual of a process it is for airlines to keep track of slots. Is this really how it works at most airports? Like, you’d think there would be some online portal that both the FAA and airlines can access, which shows exact number of slots, etc., rather than American having to manually add up slots post-merger. This sounds like a scavenger hunt for airplane paper tickets, rather than anything you’d expect in 2019 and beyond.

Lastly, how can American in good conscience have an expiration policy for American AAdvantage miles, when the airline can’t even keep track of its slots? People are supposed to keep track of their balance of a few thousand miles, when American can’t even keep track of a slot worth a lot more money than that?

American forgot it had slots at JFK

Bottom line

While airport slots often change hands, it’s typically not because an airline simply forgot it had them, and as a result didn’t use them. But that’s exactly what happened post-merger at American Airlines and US Airways, as the “manual process” of accounting for slots was apparently too complicated.

What do you make of this revelation about American’s JFK slots?

(Tip of the hat to David Slotnick)

Conversations (25)
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  1. iamhere Guest

    amazing for such a controlled airport how manual the process is and how nobody is really checking in reality.

  2. DCharlie Guest

    207 - 7 = 210 (?)

    Genius I say!

    Wish banks operated in this way.

  3. Les W. Sparks Guest

    I'm just glad the "bean counters" at American are not the ones with a yoke in their hands!

  4. Tim Guest

    More importantly, who at American was responsible for this and was anyone held accountable? The airline has received billions of dollars in direct and indirect support in recent years and they still cannot run an airline for the benefit of customers. Staff have been laid off despite huge subsidies and now they cancel flights due to lack of staff - really! Mistakes continue to happen - and yet bonuses still get paid. Why and where is the accountability?

    1. iamhere Guest

      American executives probably don't even know who is responsible.

  5. Warren Barnett Guest

    If slots have economic value, it is incumbent upon the airline to keep track of them. They are assets of the corporation.

    As an investor it sounds to me like someone at American needs to be fired. The level of difficulty in accounting for and maintaining the slots is offset by their monetary value (I believe to be several million dollars each.) At a minimum they could have leased the slots to Jet Blue had...

    If slots have economic value, it is incumbent upon the airline to keep track of them. They are assets of the corporation.

    As an investor it sounds to me like someone at American needs to be fired. The level of difficulty in accounting for and maintaining the slots is offset by their monetary value (I believe to be several million dollars each.) At a minimum they could have leased the slots to Jet Blue had they but been aware of them.,

    I feel badly for current investors in American, and hope they launch a thorough review.

    Personally, I bailed out of my American investment years ago when they decided to buy back stock instead of paying down debt. They bought over 200 million shares of stock at around $47 a share, when it is now less than $12. Debt is around $35 Billion. Aside from the executives who exercised their stock options at this price, how smart was that?

    You can say they did not see covid, etc., but who did? Getting your financial house in order should the the first priority of management of any company. They took the blandishments of their investment bankers and supported the stock price to the benefit of the banker's clients (who sold) and stock options exercised by executives (ditto) and left everyone else holding the bag. Alaska and Delta are in far better shape financially. One day soon that may mean something.

  6. Brian Gasser Guest

    More valuable than a slot, is the time the slot can be used. A 3am slot doesn't have much value compared to a 5pm slot. JetBlue built out its business at JFK with airlines not using mid-day slots. Although AA looks foolish, it looks significantly worse for the stock buybacks when the airline was in a fragile economic state and not building in some resiliency.

  7. W R J Guest

    I don't see even losing all slots at that airport as a loss. Simple as that. It would be akin to Midway in Chicago closing. Totally not necessary except for tax dollars which are already over taxed. Especially true in some politically controlled cities. It's a pathetic joke.

  8. Steven E Guest

    I find the funniest thing about this is you referring to these people working in allocations as “executives”

  9. aaway New Member

    With regard to this matter, in the greater scheme of things seven slots isn’t going to make or break AA’s relative position at JFK.

    But to the specific issue, a few things:
    First – There is a reconciliation process (slot coordination) for the IATA defined slot-controlled airports whereby the local airport authority essentially confers with the slot-holding carrier regarding future slot usage. This process occurs at least twice a year – in advance of,...

    With regard to this matter, in the greater scheme of things seven slots isn’t going to make or break AA’s relative position at JFK.

    But to the specific issue, a few things:
    First – There is a reconciliation process (slot coordination) for the IATA defined slot-controlled airports whereby the local airport authority essentially confers with the slot-holding carrier regarding future slot usage. This process occurs at least twice a year – in advance of, and in conjunction with the start of IATA Summer and IATA Winter scheduling period.

    Second – As part of FAA’s oversight of the U.S. slottage process, carriers at JFK hold, at the least, monthly meetings where – once again – a review of individual holdings (among other things) is performed. That information is shared between the FAA, individual carriers, and the Port Authority.

    Third – The Port Authority has/had a website that detailed individual carrier slot holdings. The holdings were shown in monthly increments, detailed to the number of holdings by day of the week, and by the hour for both arrivals and departures.

    Commenter Exit Row made a somewhat salient point in that, yes, "turnover" could be a factor. The current incarnation of American Airlines suffered a major blood letting of many L-AA staffers. Individuals in roles possessing valuable institutional knowledge. Individuals that were shown the door because….well….they performed in the L-AA manner.

    The loss of such institutional knowledge can have a profound affect for a fairly significant period. However, six years!?!?!? Considering the protocols in place, I'm having a hard time taking Raja at face value.

  10. Crosscourt Guest

    Nothing funny about this as indicated in the headline, it's total incompetency and poor running of a business.

  11. Santos Guest

    the beauty of the h/t to David Slotnick is not lost on me

  12. Scott Guest

    Interestingly, the FAA claimed American had 207 slots and took away seven. Yet when all the dust settled, American ended up with 210. Maybe they're not as dumb as we think.

    1. Eskimo Guest

      So basically no one was keeping track of the slots.
      And when things go wrong FAA settle a number.

      Seems to me like the whole slot system is rigged somehow.

      And if Vasu is going to blame the merger, for being a manual process. Well it's all arithmetic and it happened back in 2015. If you can't even reconcile summer and winter slots for 4 years, AA and FAA is a complete mess. (actually...

      So basically no one was keeping track of the slots.
      And when things go wrong FAA settle a number.

      Seems to me like the whole slot system is rigged somehow.

      And if Vasu is going to blame the merger, for being a manual process. Well it's all arithmetic and it happened back in 2015. If you can't even reconcile summer and winter slots for 4 years, AA and FAA is a complete mess. (actually after the 737 fiasco, we know FAA is a mess)

      Or was it Scott Kirby and co who left a time bomb. I know he took a bunch of people with him to UA. Maybe those were the people who knew where JFK_slots.xls is.

  13. JOJO Guest

    It displays Incompetence of the highest order

  14. Exit Row Guest

    Not surprised. When an experienced analysis or accountant is let go during mergers, the working knowledge goes with him or her. The most raw kid off the street is assigned the duty of tracking, maintaining, and recording key transactions with little or no coaching.
    I have experienced it from both ends: New kid on the block with zero support to knowing where the bodies are the buried, but brushed aside. Got a panicked call...

    Not surprised. When an experienced analysis or accountant is let go during mergers, the working knowledge goes with him or her. The most raw kid off the street is assigned the duty of tracking, maintaining, and recording key transactions with little or no coaching.
    I have experienced it from both ends: New kid on the block with zero support to knowing where the bodies are the buried, but brushed aside. Got a panicked call 5 years later from the ones who gave me the boot. I pulled a Ronald Reagan, "I don't remember".

  15. Tim Dunn Diamond

    yes, Ben.
    there is a publicly accessible website that anyone can access slot holdings.
    most airlines have a person or team responsible for managing slots at airports around the world. Slot-controlled airports - which includes most European and Asian airports - have slot coordinators that work w/ airlines.

    The AA-US merger was years before the DOT said that AA was underutilizing its slot portfolio and not just at JFK.

    And given that AA...

    yes, Ben.
    there is a publicly accessible website that anyone can access slot holdings.
    most airlines have a person or team responsible for managing slots at airports around the world. Slot-controlled airports - which includes most European and Asian airports - have slot coordinators that work w/ airlines.

    The AA-US merger was years before the DOT said that AA was underutilizing its slot portfolio and not just at JFK.

    And given that AA used this excuse which is so full of holes argues even more why it should not be allowed to have a joint venture relationship with another US airline - because AA can't even properly manage its business under the rules that apply just to itself - let alone working with another airline which has even more restrictions.

    1. Laffy Taffy Guest

      Go back to your dark hole, troll.

    2. EC Guest

      You would be surprised at how many aspects of the airline industry are run from spreadsheets.

  16. AMT Guest

    As someone who has spent the better part of the last 15 years managing the slot portfolio at three pretty well know global airlines, no it’s not as simple or easy as you many folks think.

    Losing slots like this is the biggest fear for me and my team. Slots are some of the most valuable assets airlines have and you have to be on top of your game to make sure they are maintained....

    As someone who has spent the better part of the last 15 years managing the slot portfolio at three pretty well know global airlines, no it’s not as simple or easy as you many folks think.

    Losing slots like this is the biggest fear for me and my team. Slots are some of the most valuable assets airlines have and you have to be on top of your game to make sure they are maintained. There are numerous processes and programs that help monitor and check the status. IATA has guidelines in place and even a conference (every 6 months) for everyone to meet face to face.

    Things can slip through the cracks, I mean we are all human but it is something we as schedulers monitor and try to pick up.

  17. 77-223 Guest

    There should be consequences for this. Why hasn’t someone like Raja lose their job over this carelessness?

    1. Robert bielawski Guest

      They promoted him.

  18. Monopoly Money Guest

    I’m sure Congress can give the airlines $30 billion in more funding so they can keep track of their assets.

    Congress doesn’t care about you or your tax dollars. Those old fools will all be dead when the time to pay for all their giveaways comes.

  19. wavedriver New Member

    Im not suprised about this on Americans side, mergers with old legacy companies are always tricky. Suprised it took so long for JFK to realise that nobody was taking off/landing at a certain time.

  20. Will Walton Guest

    Since Covid Everything about travel is harder difficult less enjoyable & lacks easy technology solutions

    As an Australian consumer booking AA pre covid for a trip to attend a wedding in US that ended up being scheduled during our countries lock down & border closures so unfortunately we couldn’t fly

    Ironically we’re a platinum one world member of Qantas an AA one world partner

    AA somehow expected us to fly within 12...

    Since Covid Everything about travel is harder difficult less enjoyable & lacks easy technology solutions

    As an Australian consumer booking AA pre covid for a trip to attend a wedding in US that ended up being scheduled during our countries lock down & border closures so unfortunately we couldn’t fly

    Ironically we’re a platinum one world member of Qantas an AA one world partner

    AA somehow expected us to fly within 12 months of the tick issue dafe LAX to NYC return

    As an Australian resident not allowed to travel to the US this was a ridiculous condition

    We were eventually able to convince them to give us a paper credit that was posted to Australia to call reservations when booking
    Thus still has 12 months restrictions that aren’t really easy to make use of

    Reservations had no record of the paper ticket after 3 hours on hold I was asked to post the paper ticket to the Sydney AA office
    I wrote a note saying please call me to discuss how I wanted to potentially book & /use the credit

    5 calls latter the issue was semi resolved

    I now have used half the crest & will probably forfeit the $1300 balance of the remaining credit

    Disappointing as I’ve regularly used AA as I’m a loyal one world member & loosing $1350 is a bitter pill to swallow as it was no fault of mine I couldn’t use the product I purchased

    It’s a shame after covid airlines have lost so much loyalty from regular customers Would of just been easier to not travel from Australian

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Exit Row Guest

Not surprised. When an experienced analysis or accountant is let go during mergers, the working knowledge goes with him or her. The most raw kid off the street is assigned the duty of tracking, maintaining, and recording key transactions with little or no coaching. I have experienced it from both ends: New kid on the block with zero support to knowing where the bodies are the buried, but brushed aside. Got a panicked call 5 years later from the ones who gave me the boot. I pulled a Ronald Reagan, "I don't remember".

4
Scott Guest

Interestingly, the FAA claimed American had 207 slots and took away seven. Yet when all the dust settled, American ended up with 210. Maybe they're not as dumb as we think.

2
Eskimo Guest

So basically no one was keeping track of the slots. And when things go wrong FAA settle a number. Seems to me like the whole slot system is rigged somehow. And if Vasu is going to blame the merger, for being a manual process. Well it's all arithmetic and it happened back in 2015. If you can't even reconcile summer and winter slots for 4 years, AA and FAA is a complete mess. (actually after the 737 fiasco, we know FAA is a mess) Or was it Scott Kirby and co who left a time bomb. I know he took a bunch of people with him to UA. Maybe those were the people who knew where JFK_slots.xls is.

1
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