AA adds second daily LAX-LHR

[WorldTraveler]

except you see it only as hyperbole because it contains truths that you don't want to admit.


here's the definition of hyperbole.


noun, Rhetoric

1.

obvious and intentional exaggeration.

2.

an extravagant statement or figure of speech not intended to be taken literally, as “to wait an eternity.”.

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I can absolutely assure you that the post here is absolutely intended to be taken seriously and contains verifiable data that is no exaggeration.

feel free to debate the data points and facts if you'd like to determine whether it is hyperbole or not.

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.

 

[IORFA]

Those of us that have WT on ignore, thank you for not using his posts in your quote!

 

[WorldTraveler]

except you really don't.

you are absolutely preoccupied with what I say which is why you post what you do.

What you can't ignore are the market and economic realities that I bring here.

btw, just curious how AA's finances will be effected if fuel prices really do stay down for an extended period of time.
AA is spending more on fleet renewal than perhaps any airline in the world other than perhaps a few Asian/ME airlines... and AA's justification has largely been lower cost.

at what point do the economics of that shiny new fleet begin to unravel when AA has a whole lot more debt that its peers but a lot less cost advantage - and perhaps higher cost when you factor in higher debt payments that exceed fuel cost savings?