A321T
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WorldTraveler
Corn Field
- Dec 5, 2003
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speaking of the LAX end of the transcon routes, at the DFW-PVG and HKG inaugural:
"Our current Asia routes have not been profitable over time as of yet, we hope they will be over time," Parker said.
Read more here: http://startelegram.typepad.com/sky_talk/#storylink=cpy
"Our current Asia routes have not been profitable over time as of yet, we hope they will be over time," Parker said.
Read more here: http://startelegram.typepad.com/sky_talk/#storylink=cpy
Exactly. That's why DFW-ORD had (and still has today) about 18 daily MD-80s instead of a dozen 757s or 8-10 767s.boston said:
Of course, some markets will see reduced frequency as fuel prices have escalated compared to most other expenses (and compared to fares). In 1994, flying half-empty MD-80s with cheap fuel wasn't the expensive waste it would be today.
eolesen
Veteran
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It's the been the same strategy on ORD-DFW, ORD-LGA, and DFW-LGA for much of the last 15 years -- quasi-hourly service with same-type narrowbodies, often isolated in those markets so that schedule recovery is easier during IROPs. There used to be the odd widebody on each of those, but that went away in the mid-90's when the DC10-10s were being retired.FWAAA said:
Those flights are also 35% or higher with top tiers, so they need the upgrade space, powerports and MCE. RJ's won't cut it.
Hey, Captain Obvious!WorldTraveler said:
Parker, not you. With a 2013 Pacific yield of about 12 cents per mile, it's obvious that AA isn't making money across the Pacific.
Given the very low yields and unit revenues on transatlantic flights from PHL and CLT since at least 1995, the profits from US TATL flights have to be few and far between. Now, with the significantly higher flight crew pay rates, TATL profits from CLT and PHL will be highly unlikely.
Parker hasn't given up on the low-yield/low unit revenue TATL flights from CLT and PHL since he acquired those hubs in 2005, so I'd guess that AA's money-losing Asian flights are safe for quite a while.
Good thing that AA prints money on its Latin America operations (2013 yields of about 18 cents per mile) so that it can afford its Asian hobby flying. If that ever changes, Parker had better hope that AA's Pacific ops start making money.
Worldtraveler and FWAAA - Subject at hand here is A321T product, not Asia. If you want to crow about AA's strength in Latin America or weakness in Asia, or Delta's strength above and beyond everyone else - START ANOTHER THREAD OR ADD TO AN EXISTING ONE ABOUT THE APPROPRIATE TOPIC.
WorldTraveler
Corn Field
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- #158
the connection is that both involve LAX and both involve Parker's statements about both.
Parker has questioned the viability of the 321T strategy and has now acknowledged that the Asia operation loses money.
It isn't rocket science that AA has lost money; the point of his statement is to acknowledge to the investment community what anyone who has done research in the airline industry knows because there is so much public data.
The fact that AA is launching two more Asia routes just weeks after AA reported its largest loss to Asia based on DOT data is precisely what investors will begin to question given that Parker was given responsibility for AA based on his ability to do what AA could not.
Given that native AA mgmt. made the decisions both regarding the transcon product and Asia, Parker couldn't change the decisions right away. but he has been successful with Wall Street investors by dealing with the money-losing parts of US and he will do the same with AA.
To be fair, I don't doubt that AA can make money with the transcon 321 product. My concern is and has been that AA will walk away from share in the NYC market in the name of finding a profitable transcon operation and that will have implications for AA's largest NYC and LAX operation.
My question has been regarding evidence that a niche carrier can survive in someone's hubs and beyond that operate on a niche basis on the transcons in markets where other carriers are operating by serving the entire market.
The transcon and Asia strategy are indeed connected and my expectation is that AA can fix the transcon losses of the past due to the 762s far easier than it can fix the Asia problem.
and the broader question that Parker has to answer is whether it is possible to have 3 gateways to Asia, all of which lose money or whether AA has to pick among DFW, LAX, and ORD and focus attention on one of them to the exclusion of the others. How AA succeeds in the transcon markets could say a lot about the answer to managing Asia.
Parker has questioned the viability of the 321T strategy and has now acknowledged that the Asia operation loses money.
It isn't rocket science that AA has lost money; the point of his statement is to acknowledge to the investment community what anyone who has done research in the airline industry knows because there is so much public data.
The fact that AA is launching two more Asia routes just weeks after AA reported its largest loss to Asia based on DOT data is precisely what investors will begin to question given that Parker was given responsibility for AA based on his ability to do what AA could not.
Given that native AA mgmt. made the decisions both regarding the transcon product and Asia, Parker couldn't change the decisions right away. but he has been successful with Wall Street investors by dealing with the money-losing parts of US and he will do the same with AA.
To be fair, I don't doubt that AA can make money with the transcon 321 product. My concern is and has been that AA will walk away from share in the NYC market in the name of finding a profitable transcon operation and that will have implications for AA's largest NYC and LAX operation.
My question has been regarding evidence that a niche carrier can survive in someone's hubs and beyond that operate on a niche basis on the transcons in markets where other carriers are operating by serving the entire market.
The transcon and Asia strategy are indeed connected and my expectation is that AA can fix the transcon losses of the past due to the 762s far easier than it can fix the Asia problem.
and the broader question that Parker has to answer is whether it is possible to have 3 gateways to Asia, all of which lose money or whether AA has to pick among DFW, LAX, and ORD and focus attention on one of them to the exclusion of the others. How AA succeeds in the transcon markets could say a lot about the answer to managing Asia.
That is an apples and oranges comparison. AA has an established presence on the transcon market for over 50 years. AA just started flying to China within the last 10 years. Trying to drag AA's performance in Asia into the mix is a complete red-herring and continues to spur on thread drift.
WorldTraveler
Corn Field
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You have obviously missed that the reasons AA's transcon strategy is raising questions involve:
the 321T strategy reduces costs dramatically over the 762 but it also dramatically reduces total revenues, including about 40% of the coach capacity and a large chunk of the cargo market. If AA was getting the premium revenue already, then cutting the other revenue in order to bring down costs means AA has ensure that the CASM falls faster than the lost of revenue - and that is not a given.
Based on UA's experience with a very similar strategy, the chances are really high that AA will find that they need those coach passengers which they are now saying they don't want.... given that aside from AA and UA's transcon strategies, there is no evidence of a successful niche strategy, it is a real concern.
While AA walked away from a big chunk of the coach and cargo market, other competitors have added capacity in those markets which means that AA gets no additional pricing power as a result of reducing its own capacity. Further, there is new and expanded premium cabin capacity which may make it a lot harder for AA to focus on its premium cabin advantage.
Finally, there is no evidence of a successful niche hub as AA currently has at NYC compared to DL and UA which are much larger and serve markets which AA has so far not only chosen to not enter but some of which new AA has cancelled. Add in that AA is operating the transcons on a niche within a niche strategy (they are carrying only part of the transcon market because they are cutting coach capa city while also not serving many of the same markets that DL and UA serve) an there is every reason to ask if AA's strategy is viable on a long-term basis.
And, there are indeed both similarities and connections between what AA is doing in the transcons and to/from Asia.
the 321T strategy reduces costs dramatically over the 762 but it also dramatically reduces total revenues, including about 40% of the coach capacity and a large chunk of the cargo market. If AA was getting the premium revenue already, then cutting the other revenue in order to bring down costs means AA has ensure that the CASM falls faster than the lost of revenue - and that is not a given.
Based on UA's experience with a very similar strategy, the chances are really high that AA will find that they need those coach passengers which they are now saying they don't want.... given that aside from AA and UA's transcon strategies, there is no evidence of a successful niche strategy, it is a real concern.
While AA walked away from a big chunk of the coach and cargo market, other competitors have added capacity in those markets which means that AA gets no additional pricing power as a result of reducing its own capacity. Further, there is new and expanded premium cabin capacity which may make it a lot harder for AA to focus on its premium cabin advantage.
Finally, there is no evidence of a successful niche hub as AA currently has at NYC compared to DL and UA which are much larger and serve markets which AA has so far not only chosen to not enter but some of which new AA has cancelled. Add in that AA is operating the transcons on a niche within a niche strategy (they are carrying only part of the transcon market because they are cutting coach capa city while also not serving many of the same markets that DL and UA serve) an there is every reason to ask if AA's strategy is viable on a long-term basis.
And, there are indeed both similarities and connections between what AA is doing in the transcons and to/from Asia.
You're making things up again. Since your error has been pointed out to you repeatedly, I have to assume that the error wasn't accidental.WorldTraveler said:
AA's nine daily 762s between LAX and JFK featured 1152 economy seats each way. AA has run nine daily 762s for the last several years. Before B6 and VX came along, AA sometimes ran as many as 11 daily 762s. Now, the 13 daily A321Ts feature 936 economy seats each way. That's a reduction of 216 seats, or 19%. 40%? Nope.
"Big chunk" of the economy passenger market? Nope, just 19% of them.
WorldTraveler
Corn Field
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per aircraft, AA has 40% less coach seats on the 321T than they had on the 762s.
The fact that AA has added more premium seats to the market raises concerns about the viability of AA's strategy given that other carriers are also adding premium seats or, in B6' case, adding a premium cabin for the first time.
Having two discount carriers with premium cabins at the same time that AA is adding more flights - with all of the capacity increase coming from premium seats esp. during the summer when business travel diminishes - is indeed reason for concern.
and, again, the overall market capacity is not changed. DL and UA have both added coach seats to the market that AA is giving up so any pricing power that AA was hoping to get by reducing coach capacity won't happen.
the good news is that AA's 321T service will have operated for one full quarter before the domestic 321s are added so it will be very easy to know AA's 321T costs as well as their revenues which will continue to be reported as usual.
The fact that AA has added more premium seats to the market raises concerns about the viability of AA's strategy given that other carriers are also adding premium seats or, in B6' case, adding a premium cabin for the first time.
Having two discount carriers with premium cabins at the same time that AA is adding more flights - with all of the capacity increase coming from premium seats esp. during the summer when business travel diminishes - is indeed reason for concern.
and, again, the overall market capacity is not changed. DL and UA have both added coach seats to the market that AA is giving up so any pricing power that AA was hoping to get by reducing coach capacity won't happen.
the good news is that AA's 321T service will have operated for one full quarter before the domestic 321s are added so it will be very easy to know AA's 321T costs as well as their revenues which will continue to be reported as usual.
AA added a whopping 30 premium seats to the 360 that were previously flown daily on the 762s, or an increase of 8%.WorldTraveler said:
Raises concerns? Uh-huh.
AA cut 19% of the economy seats and added 8% more premium seats. And added four daily frequencies to cement its position as the frequency leader. Isn't the general rule that the airline offering frequencies tends to win?
You keep grasping at straws to construct straw-man arguments and "concerns" about the "viability" of AA's plans. Why not build another golden idol to Ma Delta instead?
WorldTraveler
Corn Field
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except that AA is ADDING FC seats, the most expensive to produce and supposedly the least price sensitive, to the market via increased flights.
Even though the business class cabin is smaller, the number of seats is marginally increasing via the increased number of flights.
Add in that there are increased numbers of business class seats in the market because of competitive actions as well, and the premium price which AA is relying on to get more revenue will be eroded by increased capacity. Unless AA plans to match B6 and VX' lower fares, then the demand should not need to be increased.
And if AA is more aggressively matching the fares of competitors in the premium cabins, then the economics of the whole 321T strategy are even more suspect.
Hey, the configuration of the 321Ts has apparently got Parker's eye.
Like the Asia issue, I raised the issue long before people on here would acknowledge it was an issue and yet the concerns I raised have turned out to be true.
Overall, AA's financial performance is strengthening; the fact that UA is pulling back even if only a seasonal basis in some markets which AA serves will help but there are strategies such as the transcon strategy that absolutely have risks which you don't seem to want to acknowledge and which are beyond just normal capacity increases in other markets.
Even though the business class cabin is smaller, the number of seats is marginally increasing via the increased number of flights.
Add in that there are increased numbers of business class seats in the market because of competitive actions as well, and the premium price which AA is relying on to get more revenue will be eroded by increased capacity. Unless AA plans to match B6 and VX' lower fares, then the demand should not need to be increased.
And if AA is more aggressively matching the fares of competitors in the premium cabins, then the economics of the whole 321T strategy are even more suspect.
Hey, the configuration of the 321Ts has apparently got Parker's eye.
Like the Asia issue, I raised the issue long before people on here would acknowledge it was an issue and yet the concerns I raised have turned out to be true.
Overall, AA's financial performance is strengthening; the fact that UA is pulling back even if only a seasonal basis in some markets which AA serves will help but there are strategies such as the transcon strategy that absolutely have risks which you don't seem to want to acknowledge and which are beyond just normal capacity increases in other markets.
