AA adds second daily LAX-LHR

[LDVAviation]

 

he doesn't have to attribute it to anything because the data clearly shows that AA has reduced capacity.

[...] whether you want to admit it or not, AA continues to shrink in NYC and does not get the same amount of revenue per mile in many markets that DL and UA do.

neither what you quoted Kirby as saying or what I am saying is in conflict with that reality.

 
Two can play this game.  
 
Whether you want to admit it or not AA's domestic and transatlantic yield from NY is increasing as a result of combining the NY assets of AA and US.  (You declared this to be impossible.)
 
As to the capacity reductions, just how much of it can be attributed to the LGA slots AA divested?  Did you even take that into account?  Obviously not.
 
As to the rest, it is still early in the game.  Delta's lead is by no means insurmountable.  Indeed, until most recently and despite the higher RPM in many markets from NY, Delta was NOT profitable in NY. 
 
In general, I think Delta has underestimated the resolve of its competitors to defend what has historically been theirs, from AS in Seattle to AA in LAX.  Understandably, Delta has had to pick those fights because its prospects were limited historically by having most of its hubs in second-tier US markets.  And, while it has succeeded to some extent, Delta has no structural advantages at LAX, SEA, or even in the transpacific market as a whole to remain unchallenged.  DTW and ATL have no structural advantage over DFW as a transpacific hub.  Dallas is the 4th largest MSA and growing; Detroit is 14th and Atlanta is barely in the top 10.  At LAX, Delta has 15 to 16 preferential gates and no leverage to get more; AA has current and future rights to 33 - 34, plus the leverage to get more.  At Seattle, Delta is not even the hub carrier and Seattle is a much, much smaller O&D market to Asia than LAX or SFO.  With AA's intent to build a transpacific hub at LAX, one has to wonder how much of Delta's SEA network is viable without the traffic flows that AA can better commandeer out of LAX.  Even in NY, Delta's only structural advantage is more slots at LGA and JFK and it is not clear that having those slots has made its NYC hub profitable long term.
 
Every airline face strategic challenges.  Delta is no different.

 

[jcw]

your wrong - DL has no strategic threats - it's perfect in one persons world as they travel

 

[WorldTraveler]

yes, two can play this game.

AA's local NYC yields did go up. so did everyone else's.

the difference is that everyone else also increased passengers - except AA.

If AA has been as profitable in NYC as you want to believe they are, why do they keep shrinking in the face of other competitors?

they are shrinking because they can't compete with carriers that are growing and doing it from a lower cost base.

Yes, every airline faces strategic challenges.

but in the case of NYC, DL took advantage of AA's lethargy and 10 year long restructuring in order to focus on becoming larger.

nothing is set in stone but since DL has slots and facilities on the NY side and UA has it on the NJ side, it is impossible for AA to grow to a size equal to DL or UA unless AA manages to get ahold of DL or UA's assets.

as for LAX, it is highly unlikely as much as you want to believe it that AA will gain gates and no one else will. if it makes you feel better thinking that will happen', don't let me pop your balloon.

And it still doesn't change that AA has a revenue disadvantage in both of the Asian markets it serves now. it is more than a stretch to think they are going to keep adding more when they can't make the ones they have work. At least they have realized that DFW makes more sense to Asia than trying to push their way into the LAX-Asia market

yes, DL faces strategic threats. DL simply has been capable of take advantage of AA's failures in NYC in order to increase its size and its average fares relative to AA.

and AA is dealing with its NYC issue on top of N. Texas, MIA, and Latin America. No other airline faces as many strategic challenges in its core markets - with the possible exception of AS.

 

[LDVAviation]

AA's local NYC yields did go up. so did everyone else's.

the difference is that everyone else also increased passengers - except AA.

If AA has been as profitable in NYC as you want to believe they are, why do they keep shrinking in the face of other competitors?

they are shrinking because they can't compete with carriers that are growing and doing it from a lower cost base.
 
[...] as for LAX, it is highly unlikely as much as you want to believe it that AA will gain gates and no one else will. if it makes you feel better thinking that will happen', don't let me pop your balloon.

[...] and AA is dealing with its NYC issue on top of N. Texas, MIA, and Latin America. No other airline faces as many strategic challenges in its core markets - with the possible exception of AS.

 
I know you keep harping on AA's troubles in N. Texas, MIA, and Latin America.  But they are only extreme problems in your own head.
 
From the Q3 2014 Earnings Call, Scott Kirby on competition in North Texas post-WA:
 
And while it is early, from October 13 when the Wright Amendment went away through the end of October, we expect PRASM in the markets that have new nonstop competition from Love Field to be up 3%. So even though it is early we are off to a good start in that competition.
 
How can this be true?  You declared it to be impossible.
 
Here's Scott Kirby on Latin America:
 
Excluding Venezuela, Latin RASM was down 5% as South America continued, in the near-term at least, to be challenged with both supply and demand issues.
 
... Not nearly as dire a situation as you are making it out to be.  He excludes Venezuela because AA has already made moves to make the Venezuela situation a non-recurring event.  In Q3, AA took a RASM hit of 1.5%; it will be slightly more in Q4 (2%) before it becomes a non-factor next year.  During the Q2 Earnings Call, Kirby explained how such a small fraction of system capacity in Venezuela resulted in such a significant fractional decrease in system RASM.  It is not due to a structural problem with the Latin American network as a whole.
 
Still, AA plans to address the 5% reduction in Latin RASM (excluding Venezuela) by reducing Latin capacity year over year in Q4 by 2%.  By no means does that represent a threat to the franchise.  Moreover, AA's strategy here is no different than what UA and DL did to cope with the the ongoing yen devaluation in Japan.  (But, of course, only in your head does the same strategy portend AA's tragic failure.)
 
As to the NY issues, from the Q3 Earnings Call, here is Kirby again on the subject:  
 
We also continue to be excited about our progress with important corporate accounts. We have seen particular strength in New York from combining the two networks and that helped us generate double-digit PRASM increases in New York during the third quarter.
 
This echoes what he said in Q2 about the NY network.  Again, he assigns the cause to "progress with important corporate accounts," not capacity reductions.  Perhaps, Kirby could answer the question, how much of AA's apparent reduction in NY capacity is due to the slots divested at LGA? You certainly can't.  
 
(Kirby is a smart guy.  I know smart when I read it.  I went to very good schools that would never have admitted you.  I am going to take his word over yours any day.  You never achieved what he did.  That much is obvious.)
 
As for LAX, I also know how it works.  So, I am going to pop your balloon.  Delta may be able to get a few gates here and there to allow for modest expansion, but it does not have the leverage AA has to get entire terminals with enough gates to run a hub as big as Miami.  In the past, I've tried to explain how I think things will work.  Unlike you, I do not make things up.  One of my relatives works at LAX.  

 

[FrugalFlyerv2.0]

and AA is dealing with its NYC issue on top of N. Texas, MIA, and Latin America. No other airline faces as many sstrategic challenge in its core markets - with the possible exception of AS.

 
Speaking of N. Texas, what is that name of the airline that's getting booted from DAL in January 2015?
Talk about strategic challenges ... ... ...

 

[WorldTraveler]

LDV,
first, I appreciate that you are using real data including executive quote and refraining from personal attacks in order to make your point.

I would prefer to debate you all day long when you present your point the way you do.

first, the earnings call took place just weeks after Wright fell which is why AA's statements about being preliminary are completely accurate.
WN didn't expect it would they would succeed in moving half of the AA's business over to DAL on day 1 or even month 1.
but history is very much on WN's side - that in every market which WN served from DAL competitive with AA from AA from DFW, WN had half or more of the market at average fares equal to or higher than AA's.
Gary Kelly made a point that they would push DAL as hard as they could with using as many 738s, focusing as much on local traffic at the cost of connections, and would push LF above the rest of WN's system in order to maximize their ability to put the most amount of seats in the local market.

You and Kirby can say that AA won't be affected but there is simply no way that WN can put enough seats into DAL into AA's top domestic markets from DFW to take half or more of its capacity.

and when you look at the effect that WN at MDW has on pricing at ORD, it is perfectly obvious that a hub operation at an airport a lot further away than DAL is from DFW absolutely effects ORD pricing.

the best part of the airline industry is that data will become public but it took less than a year after WN entered DAL-MCI and STL before it was getting half of the share AA had from DFW at average fares comparable to AA.

further, RASM is not calculated on local markets over which multiple connections also flow. yield is. Kirby's statement does not say that AA hasn't been or won't be affected by WN's actions in the local markets.

as for Latin America, DL specifically noted that Venezuela and Argentina were half of the reason for DL's ~5.5% RASM decline in Latin America. AA has said nothing about Argentina although they put sales restrictions in place.

for 3rd quarter, not 2nd quarter, AA's RASM decline in Latin America was over 11% - double DL's decline and 7X larger than the 1.5% you cited for Venezuela. Venezuela is nowhere close to even 10% of AA's Latin capacity. and it was a lower percentage of the total capacity in Q3 because AA had already reduced Venezuela capacity fairly early in the 3rd quarter. Further, the big 3 are all about the same size overall and yet AA's exposure to Latin America is far larger in dollar amounts and as a percentage of their total revenues. AA's guidance just this week shows that Venezuela will take 2% off their RASM for the 3rd quarter, which amounts to about $700M. the chances are real high that AA will impair revenue because 2% of their RASM comes nowhere close to the size of what they fly to CCS now or they did in the 3rd quarter.
The size of AA's impaired currency is larger than what other carriers will take in fuel hedge losses in the 4th quarter.

and again, AA hasn't stated a financial impact from Argentina although their own actions show it is a problem.

and no, Japan is not analogous to Latin America. there was no impairment of currency in Japan AND DL and UA still have retained their share of the LOCAL market while moving connections off of NRT flights. IN fact, DL and UA have increased their yield to Japan after several quarters of declines while AA's yield in Japan continues to go down. It is precisely the effect of the 3rd largest player being worse off in a declining market than the two larger players.

and regarding Latin America, I can't know the motivations behind DL or UA's actions but it might very well be possible that DL and UA have decided to add capacity into Latin America precisely because AA is doing the same to Asia. DL and UA's RASM to Asia isn't going down anywhere near close to what AA is experiencing in Latin America. It just might turn out that AA's need to have a presence in Asia will come at the cost of a huge amount of profitability in Latin America which AA has long enjoyed. AA may still be a lot larger but when they have to fight off low fare carriers from S. Florida on domestic and int'l routes, the certain arrival of new competition at MIA itself as well as from Texas, and the growth of legacies in the Latin America market, Latin America might quickly move from being a cash cow for AA to being no different from any other region - including Asia or Europe - which might be profitable during some parts of the year but not a consistent basis.

cutting a few percent of capacity isn't going to stop the rapidly changing market dynamics that are only accelerating in Latin America.

BTW, the dollar is now at 9 year highs against the Brazil Real, the largest market for AA in Latin America, and he currency exchange keeps moving contrary to what is best for Latin America - US travel. fares will fall or capacity has to come out. DL and UA aren't fighting off Azul with two new flights either.

and to NYC, all of what you said doesn't change that AA is still shrinking its capacity and being marginalized as a smaller player in markets that not only DL and UA serve but they serve a whole lot more as well.

AA's RASM is going up and corporate travel is increasing; but it is for other players. AA is increasing its performance per seat from a smaller and shrinking base but every other carrier is improving revenue as well - but often at a faster rate.

and while we haven't talked about DCA as much, most of WN and B6's new competitive capacity there is just coming into the market.

AA/US simply face more new competition in their key markets than any other carrier. it is naïve to believe they will not be affected when all of that new capacity ramps up.

you almost fell off your "nice guy" wagon with the LAX comment. be a man and jump back on the horse and let's keep going.

you and MAH and others are counting on AA being able to dominate an airport where multiple carriers want to grow; fulfilling your goal of AA dominating the market requires that you also believe that AA can do the same with facilities.
without US, ÁA and DL's flown local passengers and revenue is nearly identical. It has taken the merger for AA to regain even a 5% lead. UA has not given up much of the local market at LAX despite cutting capacity because they are shifting connections elsewhere - or walking away from them.

the simple fact is that DL and UA are not allowing AA to walk away from the local market now and it won't happen in the future either. DL and UA can grow, including by upgauging aircraft. DL has a number of markets that could easily be converted from large RJs to mainline but they are hindered by the lack of narrowbody pilots on the west coast. DL also still has growth potential in the number of flights it can operate as well - and there is still a possibility that DL could obtain gates elsewhere and run a split operation just like AA. Given that AA, DL, and UA are closer in size at LAX now than they have ever been and DL manages to keep putting capacity into key industry markets, your dreams of AA racing out in front simply don't square with reality

and let's not forget that AA is still working thru a merger and cannot get a lot of revenue benefits because they are and will be operating in separate res systems for another year.

 

[jcw]

Just like DL faces lots of competition as well - you are truly amazing how things that you point out are impacting AA are not impacting DL - amazing how biased you are

 

[WorldTraveler]

sorry but neither DL or any other airline faces the GROWTH in the level of competition in their key markets as AA faces - DCA, DFW/DAL, MIA/Latin América, and LHR.

 

[AirLUVer]

sorry but neither DL or any other airline faces the GROWTH in the level of competition in their key markets as AA faces - DCA, DFW/DAL, MIA/Latin América, and LHR.

DCA is a given, since that was due to the DOJ and the divestiture.

Spirit and JetBlue have been growing to Latin america for years, that is nothing recent.

Likewise, WN competition DAL has also grown since the allowance of through ticketing eight years ago. Nonstop flights at this time are actually helping drive down competition on many of the intra-wright airports. WN is having to drop down capacity to many markets, partially due to the fact that without the through passengers there was not really as much demand as capacity. As well as flying out of a constrained airport.

LHR has been open for competition for over six years now. The only thing new at LHR is the JV now with DL. Virgin does not have a true hub in comparison to BA. The impact will be marginal for AA, just better for DL by becoming metal neutral and revenue sharing with a former competitor.

 

[WorldTraveler]

DAL was also because of the merger.

no, DAL has not been a viable alternative to DFW with one stop service. It is now.

WN and B6 are redoubling their focus on Latin America. boht have chosen FLL as their S. Florida gateway.

if you don't believe the effect that low fare competition will have on AA at MIA, check out fares from MIA to GRU and VCP (Campinas).... AA is selling seats for $1000, far less than what they have sold them for in the recent past and available on far more days. Not only is AA facing a weakened Brazilian Real but they are fighting Azul. the same thing will play out in one market after another as WN and B6 expand their presence in Latin America, esp. from S. Florida. NK has not had enough capacity to matter. B6 has generated a lot of connections. both WN and B6 will add more than enough capacity to start requiring that AA open a lot more of its own seats to low fares or lose share - and ultimately pricing power - to low fare carriers.

low fare carrier widebodies are now flying S. Florida to Latin America; B6 and WN can easily serve all of Latin America north of the equator.

The LHR results speak for themselves; DL is now pulling down average fares that are within a couple percent of AA's and are increasing far faster than AA's are.
DL is attracting the same quality of revenue as AA and UA have.

and remember that DL's service at LHR is all on 763s and 764s. DL has enormous growth potential just by upgrading flights once it is comfortable with its average fare growth.

again, not another US carrier is facing as much new competitive capacity in its core markets as AA is.

the fact htat it is not showing up in AA's results yet is due only to the fact that most of it has just started.



if there is any consoldation

 

[jcw]

we see - DL faces no competition in Asia or anything other market
 
Only AA faces competition in LA and NY - DL doesn't

 

[WorldTraveler]

once again, you missed the point.

it is not that DL or any other carrier doesn't face competition.

it is that the amount of competition that AA is facing is growing faster than at other carriers and a large portion of that growth is coming from low fare carriers - esp. in AA's MIA/Latin America and N. Texas markets.

 

[AirLUVer]

The amount of competition is the same, YOUR focus is on what is coming for AA via your skewed view.  Southern Florida to Latin America from LCC's will not only affect AA, but will also affect DL at ATL.  
 
Opening up DAL for nonstop flights will cause DL to dilute their base between two airports.  It also opens DL up to competition that they did not have before on a nonstop basis to three of their biggest markets out of DFW.
 
AA at DFW MAY lose some or a lot of market share, but so can DL, UA, B6 and NK.  There is only so much demand there for all those carriers to fill.
 
Since AA had no concrete plans for their gate space at DAL, there is no telling what was intended to do with those gate leases.  There may have been the intent to sublease them out all along and make some extra money, for zero additional costs.

 

[WorldTraveler]

no, the amount of competitive capacity being added in AA markets is far higher than in DL or UA markets. that is very obvious.

DL carries a very small percentage of S. Florida to Latin America. DL does compete in more of the central Florida to Latin America market but AA is still larger in every Latin America market outside of DL's hubs.

so, no, all those years that people have (correctly) argued about how much AA has dominated the Florida to Latin America market (more than 20% of AA's Latin America revenues) means that this is AA and AA's problem to deal with.

the good news for AA (or consolation) is that UA will be feeling the pressure as WN adds HOU-Latin America service since their Latin network is more heavily focused on central America than DL or AA's and more so from Houston.

average fares are already going down in Florida to Latin America markets and yields will decrease more as new competitors enter the market, compounded with a stronger dollar.


as for DFW, AA has already lost market share to NK in the markets that NK has entered. I completely agree with your statement about limited demand. N. Texas is not a leisure market; increased cmopeittion will mean share shifts and lower fares for AA.

ATL is the only interior DL hub market that will have service from DAL (DL also wanted to serve LGA and LAX from DAL but pulled that back; DL serves LGA from DFW and just added LAX) and DL will be serving ATL from both DAL and DFW. DL also serves ORD and MDW from ATL and DL has more than half of the ATL-Chicago market and more than 4X what any other airline has in the local market.

so, no, DAL/DFW is more about AA than any other airline.

AA would have far preferred to fly from DAL to its own hub markets but agreed to not do that, regardless of what any other carrier chooses to do.

BTW, ATL-DAL/DFW is a good

The cost of

 

[FrugalFlyerv2.0]

For a picture-perfect example of hyperbole and a half (and OCD too?) see post #141 by WT.
(text is deleted here for obvious reasons)