A good read on the merger:

[FWAAA]

Another thought...merging AA and LCC will not create a competitor to Emirates. Keep in mind that Emirates is a state-owned and state-financed airline. And the state (Dubai) is awash in billions of oil dollars. No one, including BA, LH, DL, UA, or the "new" AA can compete with that kind of financing.

+1

Exactly my point, although like a moth to a flame, 700UW feels compelled to argue the superiority of the US international network whenever someone brings it up.

It's delusional to believe that AA can't compete with Emirates unless AA is combined with the US European network, which consists of two flights to London, a few flights to Germany, Ireland and France, and about a dozen miscellaneous mostly seasonal second-tier cities like Lisbon and Venice. If that's all it takes for AA to succeed, then AA needs to duplicate that huge US European network, none of which are restricted destinations (in other words, they're all open skies destinations to which any airline could fly).

It's similarly delusional to believe that US+AA can successfully compete with Emirates over the long term. When EK is eventually flying more widebodies than UA, DL, AA and US combined, it will probably win.

 

[WorldTraveler]

The simple geography of the Middle East relative to the US is not near as favorable to EK than it is to the EU carriers. EK compares favorably from the US to India and even parts of Africa and S. Asia.

But DXB is a detour for most of the largest US int'l traffic flows and those who continue to harp on the threat of EK to US carriers don't mention that fact.

EK's state funding etc is real and it is a threat for that reason. The real threat is when EU gov'ts start allowing EK to fly 5th freedom routes such as JFK-MXP that put them in markets they could never compete in via their DXB hub.

Also, AA did not quit flying to BRU etc because of the BA JV. AA dropped the route because the increased cost of fuel made a lot of routes unprofitable for all types of airlines.

AA/BA can't compete solely by offering connections via oneworld hubs, esp. because Skyteam and Star both offer a number of routes that are not just to hubs in Europe.

 

[Jacobin777]

And yet US' Transatlantic is profitable.

And US flies to more cities in Europe than AA does.

Do you have any proof and/or links to show US transatlantic is profitable? I'm quite curious to see it.

Also, how much, ie.such as over all profitability, profit margins, etc.

Another thought...merging AA and LCC will not create a competitor to Emirates. Keep in mind that Emirates is a state-owned and state-financed airline. And the state (Dubai) is awash in billions of oil dollars. No one, including BA, LH, DL, UA, or the "new" AA can compete with that kind of financing.

I do think EK has inherant advantages versus the majors and I do agree probably none of the European/US carriers can compete with EK's financing. That being said, Dubai isn't "awash in billions of oil dollars".

The simple geography of the Middle East relative to the US is not near as favorable to EK than it is to the EU carriers. EK compares favorably from the US to India and even parts of Africa and S. Asia.

True.

But DXB is a detour for most of the largest US int'l traffic flows and those who continue to harp on the threat of EK to US carriers don't mention that fact.

True

EK's state funding etc is real and it is a threat for that reason. The real threat is when EU gov'ts start allowing EK to fly 5th freedom routes such as JFK-MXP that put them in markets they could never compete in via their DXB hub.

EK gets "indirect funding" however since the original "seed money" provided to EK in 1985, the carrier has been paying dividends to the state of Dubai for decades. While one shouldn't believe every "legit accounting standards" (after all, we did have Enron, etc.), EK's books are done via a professional firm and are quite credible/reliable.

IIRC, EK really won't take too many 5th freedom routes. 5th freedom routes haven't done too well historically and IIRC, even EK had to end a 5th freedom route.

Also, AA did not quit flying to BRU etc because of the BA JV. AA dropped the route because the increased cost of fuel made a lot of routes unprofitable for all types of airlines.

Probably true.

AA/BA can't compete solely by offering connections via oneworld hubs, esp. because Skyteam and Star both offer a number of routes that are not just to hubs in Europe.

Irrelevant and not true anyways. Oneworld has many non-European hubs-add incoming QR and OneWorld will be the only alliance to have a credible ME carrier (actually 2 with RJ).

 

[WorldTraveler]

Yes, I do know that the notion that EK is given free money is overworked but they do have advantages which US carriers do not. But European carriers also have the benefit of having hubs in airports which aren't big enough to have low fare competition so the low fare carriers are forced to use much less desirable airports -but end up lowering their fares even more because of the need to overcome geography.
All of the outrage that the Europeans seem to have about US BK laws omits the fact that European airlines have a lot of structural advantages that US carriers do not have.

The point with LHR is that it too is at capacity just serving the local market and far less connections that other airports like FRA, CDG, and AMS which are much more connection focused. Even with MAD, oneworld has nowhere near the connecting capacity in Europe than do other alliances and thus it is all the more structurally necessary for AA to fly to other destinations in Europe besides its alliance partner hubs when it can profitably do so.

If DXB is not a significant competitor hub from the US, then other Middle East hubs - smaller ones - aren't any more relevant.

The Middle East is just not a significant connecting location for N. American traffic.

According to published DOT statistics for the 1st quarter of 2013, AA and UA's Atlantic operations had a -4% operating margin while US' was -1% and DL had a +8% operating margin.

 

[Barfbag]

http://finance.yahoo.com/news/growth-emirates-airlines-shows-us-104500553.html

Emirates has deep pockets, they should start lobbying Congress for increasing foreign investments in US carriers to 100%.

 

[wings396]

"Do you have any proof and/or links to show US transatlantic is profitable? I'm quite curious to see it.

Also, how much, ie.such as over all profitability, profit margins, etc."

While I don't have the numbers at my disposal, I can pretty much assure you that if it isn't profitable, US isn't running it.
Parker is all about the numbers, and doesn't mess around by keeping flights operating at a loss.

 

[eolesen]

It's true that Emirates isn't as much of a threat to the US carriers today as they are to the Europeans.

But the points that Jacob made are not to be ignored --- EK isn't getting state subsidies as much as some have made it out to be. They have the advantage of lower fuel prices at their primary hub, but so does every other airline serving DXB.

Where EK makes out like bandits is their labor and distribution costs.

Emirati's don't work. Most if not all of their labor is imported -- the management of EK are largely European ex-pats who are happy to put up with DXB to have a tax-free income, and most of their flight attendants come either from Europe or Asia. US and European airlines scorn the notion of foreign sourced crew.

As for distribution... EK are like Southwest in that they mostly sell via direct connect with agencies and direct sales via the website/call centers. That's one area AA has been outspoken, and where they scored some pretty big victories despite having their current management team.

Before WT starts waxing poetic, DL has also made some huge shifts without wanting/getting the publicity AA managed to attract. But the non-Gulf network carriers have a long way to get where EK, WN, and the real LCC's are in terms of having a majority of their bookings being direct vs. indirect.

--------------------

** They'd have more US citizens working there if it weren't for the bizzare notion the IRS has for taxing US citizens living abroad at the same rate as though they lived inside the US

 

[Jacobin777]

Yes, I do know that the notion that EK is given free money is overworked but they do have advantages which US carriers do not. But European carriers also have the benefit of having hubs in airports which aren't big enough to have low fare competition so the low fare carriers are forced to use much less desirable airports -but end up lowering their fares even more because of the need to overcome geography.
All of the outrage that the Europeans seem to have about US BK laws omits the fact that European airlines have a lot of structural advantages that US carriers do not have.

The point with LHR is that it too is at capacity just serving the local market and far less connections that other airports like FRA, CDG, and AMS which are much more connection focused. Even with MAD, oneworld has nowhere near the connecting capacity in Europe than do other alliances and thus it is all the more structurally necessary for AA to fly to other destinations in Europe besides its alliance partner hubs when it can profitably do so.

If DXB is not a significant competitor hub from the US, then other Middle East hubs - smaller ones - aren't any more relevant.

The Middle East is just not a significant connecting location for N. American traffic.

According to published DOT statistics for the 1st quarter of 2013, AA and UA's Atlantic operations had a -4% operating margin while US' was -1% and DL had a +8% operating margin.

LHR is by far the strongest O&D market compared to the other airports such as CD, FRA, AMS, etc. There is a reason why every carrier and their grandmother wants to fly to LHR. There is also a reason why DL has aggressively tried to expand to LHR in various forms.

Hopefully the UK Govt. will realize the importance of LHR and especially aviation in the context of an economy. Regardless, BA does a great job in connecting pax as well as O&D.

Again, I'm not debating if the ME is a significant connecting location for N. American American traffic-I agree it isn't and probably won't be for a while.

IMHO however, every point counts and one cannot simply dismiss the ever-increasing importance and dominance of the "ME3".

"Do you have any proof and/or links to show US transatlantic is profitable? I'm quite curious to see it.

Also, how much, ie.such as over all profitability, profit margins, etc."

While I don't have the numbers at my disposal, I can pretty much assure you that if it isn't profitable, US isn't running it.
Parker is all about the numbers, and doesn't mess around by keeping flights operating at a loss.

Forgive for being blunt, but I simply don't believe your assurances.

AA is reporting recording earnings and profitability, that is saying something for hte ability of AA management.

 

[700UW]

Unit revenues grew 6% year-over-year for US Airways in its trans-Atlantic markets in 4Q2012, compared nearly 8% growth for Delta and a roughly 4% increase recorded by American. US Airways during 3Q2012 highlighted strong business demand in its European markets as it stole some corporate share from other carriers. The airline also cited strong leisure demand from the US to Europe as the euro’s decline against the dollar made travel to Europe attractive to passengers originating in the US.

http://centreforaviation.com/analysis/us-airways-forecasts-favourable-2013-results-as-it-gains-traction-with-corporate-customers-95197

Mr Kirby cited strong unit revenue growth of 9% for US Airways during 4Q2012 in the corporate segment – a 9% rise in the domestic space and a 13% increase in its corporate international unit revenues. The growth is encouraging after the carrier during 3Q2012 cited some softness in corporate demand compared to Mar-Apr-2012. At that time executives concluded businesses were still engaging in core travel, but were hesitant to attend conferences and conventions amidst economic weakness in Europe and an uncertain outcome in fiscal cliff negotiations in the US. The US averted fiscal crisis with the enactment of the American Tax Relief Act of 2012.

 

[Jacobin777]

http://centreforavia...customers-95197

Old news. Compare how AA is doing now to US. Also, as I have previously mentioned, US still has a number of items (especially the pilots contract situation) which gives US an advantage which IMHO won't last long.

 

[wings396]

LHR is by far the strongest O&D market compared to the other airports such as CD, FRA, AMS, etc. There is a reason why every carrier and their grandmother wants to fly to LHR. There is also a reason why DL has aggressively tried to expand to LHR in various forms.

Hopefully the UK Govt. will realize the importance of LHR and especially aviation in the context of an economy. Regardless, BA does a great job in connecting pax as well as O&D.

Again, I'm not debating if the ME is a significant connecting location for N. American American traffic-I agree it isn't and probably won't be for a while.

IMHO however, every point counts and one cannot simply dismiss the ever-increasing importance and dominance of the "ME3".




Forgive for being blunt, but I simply don't believe your assurances.

AA is reporting recording earnings and profitability, that is saying something for hte ability of AA management.

Forgive me for being blunt, but what does my reply about whether or not US runs a profitable TA operation have to do with a Tom vs Doug debate. I'm saying if a route at US is a loser, it goes away, period.

 

[robbedagain]

jacob the pilots debacle has been going on 8 plus yrs now he has shown no interest in fixin it but then again neither has either pilot group.... it could go on if the merger were to be scuttled in the court... nov be an interesting month with the trial just days before thanksgiving and accrding to an article on aol.com the doj may be hard hit if the govt does shut down tonite......wonder how that will impact the trial and esp the doj etc

 

[Jacobin777]

Forgive me for being blunt, but what does my reply about whether or not US runs a profitable TA operation have to do with a Tom vs Doug debate. I'm saying if a route at US is a loser, it goes away, period.

The majorty part of my comment which you quoted was to WT and my last comment was that I would like to see some sort of proof-nothing more.

Maybe we're getting some signals mixed.

 

[Jacobin777]

jacob the pilots debacle has been going on 8 plus yrs now he has shown no interest in fixin it but then again neither has either pilot group.... it could go on if the merger were to be scuttled in the court... nov be an interesting month with the trial just days before thanksgiving and accrding to an article on aol.com the doj may be hard hit if the govt does shut down tonite......wonder how that will impact the trial and esp the doj etc

It will be indeed interesting to see what happens to the DOJ case if the US Govt shuts down. AFAIK, the DOJ will still have some "critical people" on staff.

 

[robbedagain]

do you think this may play into the favor side for the 2 airlines or the doj