American's Miami Hub Is Reborn

MIAMI ( TheStreet) -- Miami International Airport has always been vastly important in commercial aviation. Now, it's even more so.

Two key trends -- the continuing emergence of global alliances and the 2010 regulatory rush to approval global partnerships with anti-trust immunity -- are playing out just as work is nearing completion on a 15-year, $6.4 billion airport improvement project.

Once a rattrap -- we mean this literally -- the airport is now a sprawling, modernistic facility distinguished by its vast array of airlines, a newly opened sky train in the mile-long American Airlines ( AMR) terminal and groupings in three separate terminals for each of the three global alliances -- Oneworld, Skyteam and Star. MIA is served by 80 airlines: 13 domestics, 33 foreign and 40 cargo carriers.
American Airlines carries the majority of Miami International's passengers.

The airport's rebirth underpins a core strength for American, which along with regional partner American Eagle, carries about 70% of all of its passengers, an unusually high share for one of the three principal U.S. international gateway airports. At Los Angeles International and New York's Kennedy International, the biggest carriers engage in far closer battles for market share.

Today, American and American Eagle fly 317 daily departures to 108 cities, of which 62 are foreign cities and 48 are domestic. The number of departures has doubled over the past five years.

By contrast, American's two primary competitors have limited Miami service. Delta ( DAL) is the airport's No. 2 carrier, but its spring schedule includes just 39 peak day departures to 11 destinations, including 10 flights to Atlanta. Delta will also fly to London's Heathrow Airport, starting in March.

United ( UAL), which in 1992 paid $135 million to buy Pan Am's Latin routes from Miami, has just seven daily departures, all domestic, while partner Continental has ten.

Dominance at MIA makes American the principal airline for all of South America and the Caribbean. Arguably, American's decision to buy bankrupt Eastern's Latin American routes in 1991 enhanced economies throughout the region by enabling reliable, well-capitalized air service. Certainly, with a price tag around $320 million, the deal was among the best in the history of U.S. commercial aviation.

On the regulatory front, American won approval for transatlantic anti-trust immunity with partners British Airways and Iberia in July. Already, American has added a second daily flight to Iberia's Madrid hub, while Iberia has added Miami-Barcelona. Anti-trust immunity enables the two carriers to discuss pricing and spilt revenues.

In October, regulators approved transpacific antitrust immunity for American and Japan Air Lines. The arrangement enables the carriers to discuss pricing and split revenues on trans-Pacific flights.

Moreover, American recently said it will purchase two new Boeing ( BA) extended range 777s, although executives would not say where the planes will be deployed. But clearly, a Miami-Tokyo route is at least a possibility.

Men In Charge

Two men preside over the rebirth of Miami International.

One is Peter Dolara, an American senior vice president known for his imperial flourish. A native of Uruguay and a veteran of 40 years at the carrier, Dolara moved to Miami in 1992, after running American's operations here from New York for three years.

In an interview with TheStreet, Dolara extolled the virtues of the city and insisted it is ready for non-stop service to Japan. Dolara even plans a business trip to Japan in April. He won't specify the reason, except to say, "I want to see it."

The airport is headed by Jose Abreu, 56, previously secretary of the Florida Department of Transportation. A Cuban immigrant who grew up and attended college in Miami, Abreu became director in 2005, weeks after the airport took over management of American's long-stalled terminal construction project from the carrier. "Since they took it over, we have not lost a step," said Dolara, who calls Abreu "the best airport director we've had, without a doubt."

For his part, Abreu said Dolara has been a strong airport backer, even participating in its presentations to bond rating agencies. "I recruited him," Abreu said. "His passion associated with that is part of our great success with our bond ratings." The airport has an A rating from Fitch, an A minus form Standard & Poor's and an A2 from Moody's.

Dolara maintains that Miami is a unique hub because Latin American passengers vastly prefer to connect here, spending a few days in town before flying onward. "Miami is a hub but it is also a destination, the only hub in America that is also a place to stop and enjoy," he said.

"Miami has everything a Latin person wants," he added. "If you're traveling abroad and not stopping in Miami, they think you're crazy. Miami has restaurants, service, sports, cruises. Also, everybody has friends or relatives here."

Miami has always been an aviation city. At various times, Eastern, Pan Am and cargo carriers Arrow and Challenge were based here. Aviation pioneer Glenn Curtiss developed Miami Springs, Opa-Locka and Opa-Locka Airport in the 1920s, and Amelia Earhart began her last flight here in 1937. "Miami is at the end of a peninsula that is attached to the U.S.," Dolara said. "Flying is what it's all about. This is a very wealthy group of people and they love to fly."

Still, like regional directors at every airline, Dolara must battle counterparts for new service. "We would like to see a Miami-Tokyo flight," he said. "There is a lot of competition but I remind my boss every time I see him."

Growth in Asia Coming?

One tenet in aviation is that passenger routes often follow cargo routes, and Miami already has cargo flights to three Asian destinations on Cathay Pacific, China Airlines and Korean Airlines. (The flights all stop in Anchorage for refueling.)

A March 1996 article in The Miami Herald posed this question: "Shouldn't Latin America's most important airport have a nonstop flight to Asia's most important airport, especially when both are major connecting points for international travelers?"

Aviation consultants do not uniformly agree that "yes" is the correct answer to the question. Consultant Mike Boyd said that while Miami is a strong international hub, it is also a weak domestic hub, connecting to just 46 cities. In Dallas, American has 770 daily departures to 160 cities (123 domestic). "Miami doesn't have enough connecting horsepower," said Boyd, who has consulted for the Dallas airport. "DFW could be a global portal because of its huge local connectivity, plus it is geographically in the right spot."

Despite the differential in flight totals, however, more cargo flows through Miami than through Dallas, Dolara noted. Cargo could enhance the revenue base for a Miami-Tokyo flight.

Consultant Robert Mann said Miami-Tokyo "makes a lot of sense because of huge Japanese interest in Brazil and Peru. Peter Dolara has always been a very discerning market analyst: I wouldn't bet against Peter."

-- Written by Ted Reed in Miami.

>To contact the writer of this article, click here: Ted Reed

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