AA enters LAX -ATL

[MAH4546]

AA has a hub in Los Angeles.
 
Atlanta is a logical market to serve from it's hub.
 
With long-term access to 34 gates at LAX, 14 more than United and 18 more than Delta, American Airlines is in place to build a 300 daily flight operation at LAX, and will build that over the 4-5 years.
 
American is simply expanding it's growing LA hub to logical points in the network. With AA dominating the studio traffic, it was probably losing a lot of revenue to Delta, and now it's working to grab it back (and it'll do it overnight as the preferred carrier of every studio sans Disney). Nothing more, nothing less. 
 
AA's LAX hub today is larger than MIA was in 2002. 

 

[silverbird007]

Now we need to put that new 777-300 that was delivered today on ATL-LHR, LHR is a hub so why not?

 

[WorldTraveler]

AA has a hub in Los Angeles.
 
Atlanta is a logical market to serve from it's hub.
 
With long-term access to 34 gates at LAX, 14 more than United and 18 more than Delta, American Airlines is in place to build a 300 daily flight operation at LAX, and will build that over the 4-5 years.
 
American is simply expanding it's growing LA hub to logical points in the network. With AA dominating the studio traffic, it was probably losing a lot of revenue to Delta, and now it's working to grab it back (and it'll do it overnight as the preferred carrier of every studio sans Disney). Nothing more, nothing less. 
 
AA's LAX hub today is larger than MIA was in 2002.

that's fine but it doesn't explain why AA gave up ATL-LGA and is now trying again to make it work.

The only logical explanation is that AA sat on its duff for 10 years while DL expanded into key markets that WEREW ALSO DL markets and AA now decides that they have to start adding service?

LAX can equally be considered DL's hub. AA was the one just last year that decided they had to add a bunch of service into markets which DL had flown - including IND, CMH, RDU etc.

LAX is NOT a hub in the same sense as ATL or DFW is. The reason LAX is different is because no carrier has or can have a full fledged hub at LAX. Every carrier's LAX presence is based on their strength markets as well as service to their hubs.

And if AA wants to act like it is entitled to add service into DL's top two markets in the space of a little over a week then you shouldn't be surprised when DL decides to take bigger and bigger chunks of AA's route system.

You are free to try to justify AA's growth plans any way you want but I can absolutely assure you that AA's reckless growth into an endless number of industry markets where they are not strong will not only result in dramatically reduced financial performance for them but also increase the number of competitive assaults on their own markets.

For years, I have talked about the coming competitive environment that AA faces because of the fall of Wright, the growth of new competition in Latin America, and DCA.

Perhaps AA has basically come to the point of saying 'oh screw it, everyone is coming after us so we will just go into kamikaze mode and maybe we will somehow stay alive.'

Let me remind you once again that AAL stock has performed worse than any other airline's for months now.

Wall Street is no longer impressed with AA's approach to managing its business.

 

[MAH4546]

American Airlines will have 34 gates at LAX by 2019, and it's working to grab more (and given that LAX needs AA's maintenance hanger to be demolished, it'll get more). That's a 300+ daily operation. But sure, let's make pretend that, because Delta will never be able to catch up, it's not a full-fledged hub. 
 
Exiting ATL-LGA was something that should never have been done in the first place, and AA corrected its short-sighted mistake. It was likely US Airways management simply not realizing the importance of the route to the AA network. 

 

[jcw]

I guess DL never exited a route and reentered it.  I'm sure this is how the LGA reduction went down.  Someone pulled data on profitability of routes they stack ranked them and they knew they needed to cut X # of flights.  Therefore, ATL fell below the line - I bet AA did not want to cut the route but was trying to meet the DOJ order (which once again was crazy)
 
If there is a perception that an airline can't change a decision or adjust routes over time - that is an unrealistic expectation - the expectation that one route one decision makes the entire AA mgmt team in competent is just crazy - I give them credit for adjusting their route networks

 

[WorldTraveler]

first you continue MAH to believe that AA is going to have a massive hub at LAX and all of these ïf this, then that scenarios will work. Maybe they will but there is a real good chance they won't.

Further, it is far from clear that other carriers won't figure out how to grow their own operations at LAX.

You continue to act as if AA holds all the cards and can do what you want. They don't.

AA still has to make money flying whatever it flies. The whole reason you and AA have said LAX is so essential is to fly to Asia and yet AA has the lowest average fares from LAX to Asia. We have been thru the reasons why LAX is a very bad reason for a hub to Asia regardless of what AA succeeds in gaining in gates.

and finally, AA's competitors could care less about AA's strategic needs. AA has announced and is selling ATL-LAX now. DL and any other carrier that AA decides to enter is focused on what AA is doing in their markets now.

As for ATL-LGA, the reason why they cut it was because it made no sense financially to operate a route that underperformed not just one but two competitors - one of them an LCC - both at least by double digit percent.

AA might well think it needs to serve key markets whether it be to Asia or anywhere else but its competitors - just as I said years ago when I pointed out that AA's network would not lack the size in key markets such as to Asia - are not going to lie down and roll out the red carpet just because AA now realizes that the merger doesn't provide all AA needs to compete with DL and UA.

 

[silverbird007]

As the worlds largest airline AA can do whatever it wants. It needs to add more flights if anything. No airline makes money on every route every flight. But 1.5 billion profit in one quarter as 2 separate airlines is good enough for me. Obviously someone is doing something right. Once the operations are combined DL will never keep up with AA.

 

[WorldTraveler]

uh, first, based on the latest monthly traffic release, AA was not the world's largest airline.

DL was.

we'll see how closely the revenue comes in the next quarter but the difference in size between the big 3 has narrowed dramatically since the merger.

second, quite frankly, you are delusional if you think that AA can do whatever it wants. AA still has to use public facilities. We are seeing play out at DAL a nearly identical situation to what MAH thinks will happen at LAX which is that AA can get free access to whatever assets it wants at the expense of other carriers.

And yes AA is doing a lot of things right... but they aren't performing in the top ranks of airlines in terms of profitability. DL and WN have both said they expect operating margins significantly higher than what AA will report.

perhaps AA's new mgmt. is content to be just mediocre in a field of others that will deliver far better financial results.

but then you shouldn't be surprised if the rest of AA's financials - including what they can spend for labor - isn't industry leading either but rather just mediocre.

 

[jcw]

what ever - DL rules the world - we get it - I know WT has never made a decision in his life then changed his mind - DL and WT are perfect - everyone on the board should realize this board is the DL rules the world - DL can do no wrong board - DL is better than any other airline in the world board - DL is the most profitable airline board - DL only makes strategic decisions board - DL has better labor board, DL is perfect in everything it does board, etc

 

[WorldTraveler]

it's not a question of AA or anyone changing their mind.

It is that, for whatever reason, AA decided within the space of a couple weeks that they would enter or re-enter DL's two largest markets.

There are competitive implications to making such a bold incursion into other carriers' markets, regardless of who does it.

By MAH's logic, DL acquired the slots and facilities at LGA 2 years ago sufficient to build a hub which anyone knew would be enough for DL to build a major hub at LGA.

and unlike LGA, LAX is not any more of a hub for one carrier or another. The difference in the number of seats between AA and DL is less than 20% and between DL and UA is 5%.

If you want to argue that LAX is a hub for AA but not DL, then you might not want to look at either LGA or JFK where DL has twice the number of seats that AA has.

Thus, to argue that AA should be allowed to add ATL-LAX service because LAX is a hub and DL should just accept it melts beside the reality has more than twice the number of seats from LGA and JFK that AA has - which should give DL carte blanche to do what it wants.

the point, once again, is that the AA/US merger did not give AA the size it needed in a number of key markets and so they are now trying to make up for it by throwing capacity into the market including in key competitor markets.

finally, it is worth noting that ATL to LAX is the top non-local O&D for AA on both ATL-DFW and DFW-LAX BUT AA's ATL-LAX revenue is significantly lower (more than 25%) than DL's nonstops.

AA might very well think that they have a built in market which they can tap into and grow their presence in ATL-LAX but it also has a high chance of coming at the expense of both ATL-DFW - where Dl will be the only carrier that will serve both airports - and DFW-LAX where DL will be pushing into the market as well.

So, AA might well pick up some ATL-LAX traffic but they stand a chance of losing far more ATL traffic and of making it harder to compete against DL to LAX at the very time when they most need it.

I said years ago and the principle is still the same now that AA cannot add whatever it wants without encountering competitive responses. In most cases, competitors have far more to gain from AA than the other way around in large part because AA's DFW and MIA hubs currently have far less competition than DL's hubs do which makes it a whole lot easier for competitors to take a proportionately bigger piece of AA's revenue.

AA is free to do anything it wants with its assets but there will be a cost to AA's financials as well as those of its employees if AA chooses to push its way into key industry markets with little regard to what those carriers can also choose to do.

 

[silverbird007]

I think someone is in dire need of medication! I think there are medications for being delusional. But you have to take them to work!

 

[diamondcutter]

I think someone is in dire need of medication! I think there are medications for being delusional. But you have to take them to work!

You are correct!!! He has an unhealthy obsession with DL . Frankly he should be careful his obsession doesn't take a turn for the worst!!! We have all heard the stories of how this could play out! Scary, on top of the fact he has to comb over all the post to defend , twist and spin everything! This is textbook obsessive compulsive at its best! Again , this is very unhealthy and down right scary! This kind of obsession usually leads to...... Well like iv said we have all read the stories!!

 

[WorldTraveler]

nice try but it doesn't change the fact that AA, not me, made the decision to merge with an airline that didn't have the presence in key markets that it needed so it has had to throw capacity into markets in competition with other carriers that not only is not performing near as well as those other carriers are doing but also will result in a competitive response from those carriers.

If you find it obsessive to tell you the truth you don't want to hear, feel free to call it what you want.

Doesn't change that the difference in size between what AA is at LAX compared to other carriers than what DL is relative to AA at LGA and JFK.

The argument that AA should be entitled to enter a key market for another competitor just because LAX is a hub for them doesn't fly/

 

[Glenn Quagmire]

AA to LAX-ATL.

Here is a number:

-4031 Bad

Last word.

 

[WorldTraveler]

because I have made an internet career of telling people esp. at AA what they don't want to hear.

And yet I have been deadly accurate with what I have said.

AA's continual slide toward BK, their share losses in NYC, the merger that isn't delivering a presence in the markets that AA needs, AA's willingness to sacrifice profitability in order to gain market share, the competitive changes that will come at the expense of AA's finances, the price that AA people will pay for their company's willingness to pursue a scorched earth share strategy instead of focusing on profits...