AA Down Under and Trans Pac?

[LD3]

So where is your proof stating the FAA is capping LAX??

 

[MAH4546]

uh, did you read that the FAA is planning to cap operations at LAX.

so much for all of that growth.

the fear that AA might not ever be able to build its presence to Asia is palpable.

 
Still so jealous of AA's superiority at LAX that you start making up facts?

 

[700UW]

Stemming from the initiation of the LAX RSA project, FAA intends to implement schedule coordination at LAX effective 28Jun2015 (Level 2 IATA schedule coordination).

According to the FAA notice, the FAA anticipates operational constraints possibly leading to significant all-day delays during the duration of the runway project - slated for completion in mid-2018.

Further, due to anticipated capacity impacts, the program would be in effect daily from 06:00 - 23:59. FAA's modeling of advance schedules coupled with the capacity constraint indicates an expected 25% reduction in capacity - during VFR conditions - from 138 hourly movements to 104 hourly movements.

As of this time, the Level 2 designation is proposed for the Summer scheduling season, but Winter 2015-2016 scheduling season is being discussed. Nonetheless, FAA expects to continue the designation through the duration of the project.

In the Federal Register - 03/20/2015 - Notice of Submission Deadline for Schedule Information for Los Angeles International Airport for the Summer 2015 Scheduling Season
 

 

[WorldTraveler]

wow... just think that AA will have to put its growth plans on hold because of LAX construction.
 

Seriously.  Where is that awesome "unhinged" graphic when you need it?  In the face of facts and/or logic-based opinion (most normal people call it "reality"), the reply is this mindless babbling about how AA is a publicly-traded company and "Parker's little pet production."  Huh?  I constantly find myself asking why the rest of us must be subjected to this endless stupidity but then I remember - the comic relief.

unhinged would be the appropriate word to describe those who think that AA can make five routes work when they haven't been able to make two work for, what, at least five years.

what kind of delusion does it take to think AA can make money where it hasn't for years?
 

Still so jealous of AA's superiority at LAX that you start making up facts?

you mean where they get the lowest average fares of the big 3?

what an honor!


thanks, 700.

 

[Platinum Steve]

For those who don't remember my last post in 2003, I am not a current or past employee of an airline.  I am a passenger, and because AA killed the BUR-DFW route, I have to fly out of LAX.  Alot.  So, while I don't know all of the inner workings of airlines and airports, I do have a keen eye for observation about these things. 

In other posts, WT has gone to great pains to explain why AA will not be given a free pass to develop a Pacific hub/gateway at LAX because DL (and UA to a smaller degree) will meet them route for route to keep AA from gaining the upper hand in this market.  (One of his exact quotes from the LAX-MEX thread was: "the other 2 of the big 3 will be stepping all over AA's every move to expand into key markets."(#247))  Rumors are circulating that AA could add upwards of 5 new Pacific routes from LAX in the coming months/years (AKL, HKG, PEK, TPE, and ICN) on top of the two that they already operate.  That's 7 T-Pac routes (plus 2 to LHR and one to GRU) on aircraft that take up significant time on the gate and can also cause neighboring gates to close until those planes depart. 

Here's my question to WT: Assuming that all of those AA flights come to fruition, how is Delta specifically (and United to a lesser degree) going to match AA flight for flight given the finite number of gates to which it has access in T-5 and T-6?  Assuming that a dozen 777/787s appeared magically at LAX to operate those flights, where do those planes go when they land?  This is an honest question.  To me, it looks like there are only 4 gates that can operationally handle these planes, but those gates are already spoken for by other flights.  So, if the new T-Pac flights are going to go into those gates, which flights are going to get cut to accomodate them?  Doesn't something have to give in the way or destinations or frequencies - or both?

And, to follow along those lines, if other flights have to be cut to accomodate the T-Pac flights that are necessary to counter AA's growth, doesn't that potentially undermine DL's ability to offer destinations and frequencies that are competitive with AA's offering across the alleyway, thereby setting up AA into a stronger position that will be able to exert market power and revenues that are significantly higher than DL will be able to generate?

Again, these are honest questions.  I'm not an expert on DL's operations and facilities, and I don't pretend to be.  You've asserted that DL won't let AA build a T-Pac operation at LAX that will alter the relatively equal status quo we see now.  But based on the finite number of gates that DL has to use to keep AA in check, I don't see how that can be done.  What am I missing?

 

[WorldTraveler]

you don't get it... but don't feel alone because half of everyone else on here doesn't get it either.

all of the real estate in the world isn't going to change a thing if AA can't make the routes it has flown for years work.

AA is a FOR-PROFIT company that cannot sustain losses just to build an "image" or market presence

perhaps you can explain how AA is going to make Tokyo work when their average fare is only 62% of what DL gets in the local LAX-NRT market and less than 75% of the average fare for the market (and btw, UA has a below average fare in the market as well but not as low as AA.

in the LAX-PVG market, AA's average fare is just 76% of UA's.

how long has AA been operating LAX-NRT and LAX-PVG?

when is AA going to turn those markets around?

how many more domestic flights do you think it will take for AA to add in order to get to market PARITY in the local LAX-Asia market?

why can't people who think AA is going to be so great in the LAX-Asia market not answer why they have done so poorly for so many years not just in LAX to Asia but also in ORD-Asia and JFK-Asia?

the reality is that AA just can't admit that LAX could well be the third of 3 major markets where it will fail in the LAX-Asia market.

and for those who want to compare DL's SEA expansion with AA's in LAX, there simply is no comparison when it comes to revenue.

DL carried more revenue on SEA-PVG on a 332 last summer than AA did on LAX-PVG with a 777. given the shorter flying time and lower costs to operate a 332 compared to a 777, anyone can see that DL's flight is far more profitable than AA's or UA's from LAX. and UA's routes from SFO all show similarly high average fares and total revenue.

 

[commavia]

Just for those keeping track at home, three additional names to add to the list of those who don't "get it" (and by "it" I of course mean the delusional fantasies of a Delta fanboy):
 
Doug Parker, Chairman & Chief Executive Officer, American Airlines
Scott Kirby, President, American Airlines
Chuck Schubert, Vice President-Network & Schedule Planning, American Airlines
 
Sincerely,
"The Clown"

 

[WorldTraveler]

don't care whose name is on it.

if they 'get it" then they should be able to make money.

when you get only 2/3 in revenue what other carriers get on the same route, they aren't even in the same league of profitability.

Perhaps you can tell us why AA underperforms on LAX-NRT and LAX-PVG after ALL these years? when will it finally turn around? how many new routes does AA have to add before the ones they do operate will become profitable?

 

[Platinum Steve]

Thanks for completely ignoring my question in favor of insulting my intelligence, WT.  I asked an honest question looking for an honest answer, but instead I got ... whatever that was.
 
WT: I'm not interested in any of the stats that you've been quoting.  I'm not interested in market share or yield or even profit.  I don't care if these flights all make or lose $20 billion a day.  That's not my question.  My question is about facilities and operations.  I think it's very simple.  But maybe it's not.  To me it seems basic, but - again - I'm not an airline professional.

Let me try this one more time:  If Delta is going to go flight for flight with AA to keep the current competitve balance at LAX, where are those DL planes coming in from PEK and AKL and TPE and HKG and etc... going to go?  And when they get there, what flights will have to be kicked out to accomodate them?

 

[commavia]

Perhaps you haven't gotten the memo.  AA is making money - lots of it.  Indeed, this year they're projected - by some estimates - to make more of it than any other airline in the U.S., including precious Delta.  They just may not be making much of it, on a standalone segment basis, on all their routes to Asia.  Nonetheless, they obviously feel that is a worthwhile investment in operations that may lose money on a standalone basis but contribute an overall positive halo effect to both the top and bottom lines.  You know, sort of like all the money that Delta has lost for years in NYC, and on their little oil refinery expedition - loss making in isolation, but overall worth the investment.
 
But back to the actual topic - AA's growth in Asia, particularly from LAX, and the reality that Delta fighting AA for (supposedly) money-losing market share LAX-Asia would be a disastrous waste of Delta shareholder capital, which is precisely why I suspect that it won't happen, and if it does, it won't last long.
 
There is strategic logic to AA investing in losses in order to build a gateway at LAX.  AA, as we are ever-so-constantly reminded, lacks a west coast gateway to compete with SFO or SEA, but does have a very strong local presence in LAX, including a very strong if not dominant position among corporate traffic in key sectors, dense coverage of major O&D markets, and alliances with some of the airport's largest foreign operators.  Again - logic.
 
Now let's look at Delta.  Is there any major legal, regulatory or operational roadblock stopping Delta from adding another five flights per day from LAX to Asia?  No, not really.  Delta is running out of gate space because it's hemmed in by competitors, but could probably manage that.  The larger question though, is why?  Why on earth would Delta do such a thing?  There is absolutely no strategic logic to it - Delta would be wasting, not investing, money on something that would be virtually guaranteed not to pay off.  Unlike for AA, LAX serves no network role for Delta that isn't already handled by SEA.
 
So here's where the multi-step thinking comes in.  Say AA adds flights to ICN, PEK, HKG and AKL, and Delta adds a flight to each right on top of AA.  Then what?  If the markets were going to lose money for AA, then they sure will for AA and Delta once even more capacity is dumped into them.  And to what end?  That type of behavior would typically be designed to force AA to retreat from these markets, but for the reasons already mentioned, I doubt that would happen here.  Again, AA is in a better position at LAX (larger local presence, more gates, etc.) than Delta, is in pretty much as good or better a position than Delta in most of those foreign markets, and - perhaps most importantly - AA has more cash to burn and needs LAX more.
 
Following through on this little game theory, Delta would destroy shareholder value to punish a cash-rich competitor, and at the end of it I think a good case could be made that Delta would have accomplished nothing in terms of forcing AA out of those markets, and burned through cash in the process.  I would absolutely love to hear Richard Anderson - who is typically a fairly reasonable, sensible guy (recent horribly chosen words about the ME3 notwithstanding) - explain this brilliant plan to shareholders.  But I don't think I'd get the chance.  Because again - it makes absolutely no sense whatsoever, and if it ever did happen, I suspect it would quickly end.

 

[LD3]

That's what he does Steve, when he is challenged to come up with an honest answer and he can't, he insults you.... Join the club, he has taken to call everyone on this board idiots.... But your lucky, if you work for an airline, he threatens to make a phone call to get you fired....

 

[FWAAA]

Perhaps you haven't gotten the memo.  AA is making money - lots of it.  Indeed, this year they're projected - by some estimates - to make more of it than any other airline in the U.S., including precious Delta.  They just may not be making much of it, on a standalone segment basis, on all their routes to Asia.  Nonetheless, they obviously feel that is a worthwhile investment in operations that may lose money on a standalone basis but contribute an overall positive halo effect to both the top and bottom lines.  You know, sort of like all the money that Delta has lost for years in NYC, and on their little oil refinery expedition - loss making in isolation, but overall worth the investment.

Exactly. In 2014, AA earned $4.164 billion, excl special items, etc. Delta earned $4.536 billion, excl special items, etc, or exactly 9% more profit that AA. And that's before any AA merger-related synergies occur (if they occur at all).

Source for the data above: http://ir.delta.com/files/Conferences/2015/03.03%20JPM/JPM-Transportation-Conference-20150303_v001_e572u5.pdf

Both DL and AA earned more than twice as much as United, which has lagged the industry in yield, unit revenue and net income since its merger-integration related missteps exactly 3 years ago.

This year, AA will likely earn more than Delta - perhaps a billion dollars (or more) more than Delta. All we hear from WT over and over and over again is how much AA is losing in the Pacific and in Latin America and how much valuable passenger and cargo revenue AA sacrificed in winning the JFK-LAX/SFO average fare competition (highest of any airline, even UA and DL).

But the bottom line is a profitable AA, almost as profitable last year as Delta. And AA's profit in 2014 (almost as much as DL's profit) resulted even though AA has the industry's worst business class seating, which is currently being replaced with industry-leaading. DL's very nice business class seating is already baked into its 2014 profits.

It's reasonable to assume (and very likely) that AA's international business class fares will rise as it improves its J class seating on its long-haul fleet. What is DL going to do to realize higher J class fares? It's already got very nice lie-flat seats and no announcement that they'll be improved.

As much as I don't like Parker and Kirby, they look to have a very impressive 2015 and beyond.

 

[FWAAA]

Further, due to anticipated capacity impacts, the program would be in effect daily from 06:00 - 23:59. FAA's modeling of advance schedules coupled with the capacity constraint indicates an expected 25% reduction in capacity - during VFR conditions - from 138 hourly movements to 104 hourly movements.

In 2014, total revenue operations at LAX numbered 603,280, or an average of 1,652 daily. Some of those 1,652 operations took place between midnight and 6 am, but for simplicity, let's assume they all fell in the 6 am to midnight time frame. That 1,652 daily operations would equal an average of 92 per hour during that 18 hour period. So if operations are capped at 104 hourly movements, that still leaves some slack. And quite a few of the LAX operations occur between midnight and 6 am, so the average at LAX in 2014 was actually fewer than 92 per hour.

During peak periods, there will be delays. During this construction, LAX might resemble JFK or ORD instead of its usual delay-free self. But this construction won't impede AA's growth at LAX.

 

[dariencc]

you don't get it... but don't feel alone because half of everyone else on here doesn't get it either.

 

 
Yes, unlike you who get's everything, including such arcane areas as clear air turbulance, winds aloft and turbulence forecasts, optimal altitudes, comtaminated runways, landing performance calculations, dispatch release and enroute monitoring, threat/error management, special approach comsiderations, antiskid system function (and malfunctions), spoiler deployment on wet/contaminated runways, normal/alternate braking systems, auto brakes, etc..
 
(edited by moderator)

 

[WorldTraveler]

let's be clear.

US airline performance data becomes public data. If you don't like that, go talk about another industry.

All of the US airlines are publicly owned. They publish enormous amounts of their own data that can be compared from one carrier to another.

AA's financial results from LAX to Asia are so far below the rest of the US industry it absolutely draws all kinds of attention and it should.

the questions which those who can't stand to see raised is why AA is still generating average fares that are so far below other airlines years after operating from LAX to NRT and PVG. when will AA generate industry average results? and how many more new routes does it take for AA to launch before it will begin to generate industry average revenues?

You can suck up to Parker and his clan all you want but those are valid questions that will be asked.

It doesn't matter how much AA or any other airline earns in bottom line profits.

if it is generating losses for particular operations that number in the tens of millions of dollars and can be identified as such using public data, then that information will be highlighted.

and, no, AA does not operate any significant portion of its schedule between midnight and 6 a.m. at LAX. the vast majority of its schedule operates during the precise times of the day when the FAA is very likely to limit growth at the minimum and perhaps cut operations if delays materialize as they expect they will.