AA president Scott Kirby says the carrier seeks to make LAX its "primary Asia-Pacific gateway".

[WorldTraveler]

E posted that article and it was discussed to great length. It isn't worth reopening that discussion and you can find a locked thread that discussed it.

That said, every region of the world has political risks... the same could be said about Latin America.

AA's problem, IMHO which a lot of people won't agree with, is that AA believes it has to be in the top markets of the US TO all of the top markets of the world. That is fine if you are strong in that region but AA's best chances to Asia are not to compete from the biggest markets in the US where other competitors are already stronger.

The issue that AA has to ask is how long they are willing to continue to pour money into developing a presence to Asia from the top markets or are they willing to focus on smaller but more protected markets like PHL and DFW where AA does have a chance of competing... but not necessarily able to cover every market in the US.

 

[blue collar]

I've come to the conclusion that the forums might be just so much nicer if everyone put WT on their ignore lists for a week or three...

What the hell, I'll give it a shot. At least I won't have DELTA DELTA DELTA repeated in every thread that I read.

 

[eolesen]

E posted that article and it was discussed to great length. It isn't worth reopening that discussion and you can find a locked thread that discussed it.

No, it was deflected at great length, and subsequently locked due to your inability to actually discuss a topic vs. telling everyone what they don't grasp.

 

[WorldTraveler]

No, the discussion is not about Delta, Delta, Delta.

It is about discussing the claims that AA has made and some in the media such as Cranky – and cited here – as well as members of this forum have tried to make about AA and their network.

It was AA and US mgmt. who both sang from the same hymnbook about how much AA and US needed to merge in order to provide a network capable of competing against DL and UA. They made the comparison of AA/US to DL and UA and it is absolutely worth validating if that comparison is valid.

Specific to LAX and the west coast, it seems to be common internet knowledge to believe that UA is the dominant force from LAX to Asia among US carriers and yet DOT data shows that DL carries the most amount of revenue and is within a percent of UA in terms of passengers carried. Further, if you look at both California and the west coast as a whole, DL is the fastest growing of the 3 US airlines to Asia and it is largely coming at UA’s cost and is not that much further behind UA as people want to think – and well ahead of AA. Granted, AA is also growing relative to UA but at a slower rate and from a smaller base.

And yet from ORD it is just the opposite.

And even if you celebrate the growth that AA has made, they still are half the size of UA and DL in passengers just from LAX and has the lowest average fares.

Thus, it is absolutely appropriate to ask how AA believes they can grow into a credible position in the west coast to Asia market from their current position not only in California but also considering their Asia performance elsewhere on their network.

Add in that DL and UA both have multiple gateways to Asia from the western US and it absolutely raises the question of how even a couple new flights from AA can succeed as long as DL and UA are both determined to protect and grow their own markets.

No, the discussion is not about Delta, Delta, Delta. UA is just as much a part of the discussion and they have been absolutely not been neglected by me.

It is about validating the competitive environment that AA operates in and which it says it intends to compete in including AA and its fan base’s claim that AA can be a viable force not just in the markets to Asia AA presently serves, let alone the growth that some here seem to think will happen.

The AA/US merger was based on the idea that AA and US would provide a more competitive network than either could do on their own. The question of Asia has been and will continue to be the biggest question because US added nothing to what AA already had and AA’s presence to Asia has been problematic for years. For all of the talk about what DL has done at LAX in general, people here seem to be happy to forget that AA has tried to build a west coast-Asia present before and folded nearly all of it up, not unlike what DL did at PDX – only to realize it had to have a merger partner with an Asian presence.

Unless AA can grind UA down to a size such that they can buy them, there is no other large US carrier presence to Asia to buy, esp. from the top US markets.

The AA/US merger added a great deal of domestic mass but US was the least international of the big 4 legacy carriers and its focus even to Europe involves many strong Star cities.

Much of that domestic mass and advantage might not turn out to be there after the slot and asset divestitures and after AA/US has to close and restructure hubs – which is absolutely certain to happen.

Many here are happy to jump on the hub closures that other airlines including DL have done but it is clear that DL has done the cutting that was necessary to provide a solid platform for growth going forward.

Note that March traffic statistics show that DL added the most capacity among the big 4 (including WN) and also filled those additional seats better. DL’s profitability now is precisely because they have gotten rid of what wasn’t performing on their network and is able to add new routes that will be profitable while continuing to reap t
he benefits from the merger.

Despite the dislike some have for hearing what DL has accomplished, that is the advantage DL had as the first mover in the megamerger process and the reward they have for relatively quickly and successfully finishing the merger.

AA might get to the same place but it is going to require a lot of work and gaining a lot competitively. As I have noted and the whole west coast discussion validates, AA’s best opportunities for growth will come if they can win against UA.

But as DL’s own west coast strategy proves and as DL has done in NYC, DL is just as interested in taking what is of value from UA as well.

When you compare how well DL has executed its merger relative to UA, how much better DL’s operations run, and how effective DL has been in implementing major strategic initiatives in UA’s key markets, it is not only no surprise why DL is doing as well as it is but also should provide a clue as to what AA needs to do if they want to get a piece of UA’s pie too.

Add in that DL and UA’s own current traffic reports show that DL has a 15 cent/gallon advantage in fuel price relative to UA and the growth that WN did a decade ago at the legacy carriers’ expense might well be a feat DL can be successful repeating today even if DL’s focus is just UA in NYC and the west coast. AA has not had the gap with DL in fuel prices that UA has had… not sure why that is happening but perhaps DL really has managed to move the price of jet fuel in the NYC market and AA’s smaller size exposes them to less risk.
Discussing these issues should provide insight into the opportunities and challenges for the industry as well as how AA can do what it strategically needs to do.


To deny the realities of the industry just because they contain unpleasant facts to hear isn't going to come close to solving the problems and challenges that face AA or provide any insight into how AA or any other airline can move forward.

 

[eolesen]

Irony... in a post that isn't Delta, Delta, Delta:

32 mentions of DL
30 mentions of AA
21 mentions of UA

6,002 characters
22 paragraphs
Zero substance

 

[WorldTraveler]

but you bothered to count words and apparently read it - or you got a machine to do it without thinking.

the only reason you don't see anything of substance is because you can't answer the basic questions of how the #3 US airline is going to become a viable competitor in a market where they are #3 out of 3 in both passengers and average fare and also up against a host of foreign competitors.

And people seem to think that any of those other competitors are just going to roll out the welcome mat to AA's plans to expand its presence there... not unlike what UA did with AA's LAX-PVG service. Can you go back and tell us how many hours it took after AA's announcement of the LAX-PVG route before UA announced that they too wanted to serve the same market?


any time you or anyone else can come up with some reasons that would describe how AA is going to "win" in the LAX-Asia market based on where they are now would be nice.

 

[FWAAA]

Anyone else wonder whether Richard Anderson is as concerned about Delta "winning" as the resident retired employee/cheerleader?

 

[robbedagain]

I highly and seriously doubt Anderson is worried about winning  but rather more focused on running a darn good airline with as best of an on time performance etc rather than winning    only the cheerleader says delta is the sole winner and no one else

 

[WorldTraveler]

duh... how else would you define winning but stuffing money in DL's bank accounts... and if it comes from competitors, all the better.

do you really think execs at any company in a competitive industry don't figure out how to gain relative to their competitors?

Too many of you still have a mindset of the airline industry that would have been hard to defend in the deregulated era... even more so today.

 

[Beancounter]

that is correct. The only reason why the US and China don't have Open Skies is because the Chinese aren't willing to submit to the same level of accountability in reporting that the US demands for countries that have Open Skies and joint ventures.As for the issue of LAX being AA's primary gateway to Asia, the obvious question is what this means for ORD where I have noted that AA has consistently underperformed UA in every market the two serve side by side and where AA currently has more flights to Asia than it does from LAX.Sounds to me like Kirby is priming the pump for a pulldown of ORD-Asia service.While AA's DFW-Asia buildup has been more recent, it seriously raises the question of how much of that will remain. To somehow think that AA will deploy more capacity from LAX than it has from DFW and ORD is a bit of a stretch.AA has the advantage of a large hub at DFW but there is still little ability to meaningfully serve large parts of the US via DFW and the cost of connecting from most of Asia via DFW is very high given that several of AA's DFW to Asia flights are some of the longest among US carriers.It also raises the question of why AA thinks they can do better from LAX in a market that is divided between 3 US carriers, not just the 2 at ORD, as well as a host of foreign carriers, many of which deploy huge amounts of capacity to LAX. Add in that oneworld is the smallest carrier from LAX to Asia and it becomes even harder to understand how AA thinks it is going to win at LAX when it hasn't done so at ORD or JFK.DOT statistics show that AA carries half the volume in the local LAX to Asia market that DL and UA carry - and those two are within a couple percent of each other in terms of volume.However, the more telling statistic is that AA's average fare from LAX to Asia is 16% lower than the industry average and 30% lower than DL's which has the highest average fare from LAX to Asia among US carriers.Further, DL and UA both have west coast hubs sitting above LAX which will be able to pull any amount of traffic they want out of LAX and make it virtually impossible for AA to gain a revenue share.The analogy is expecting to be a competitive carrier to Europe by using MIA instead of IAD or JFK as a gateway.As for the question of why AA doesn't add more PEK service, the answer probably lies in the fact that AA's ORD-PEK flight still arrives at 2145, better than it has been but still too late to provide many connections.I have a feeling that Kirby's message really means that what is at ORD will be shifted to LAX and AA's net size to Asia will be shrinking.Given that AA has been losing double digit percent of revenues for quarter after quarter, it is hard for anyone to believe that AA will actually be growing to Asia before it stops the bleeding it currently has.

Pretty good post, I don't agree with all of it, wish I had more time to respond. How do you have so much time? You're not like the one CEO I used to know are you? The VP and I ran the company while he sat in his office doing who knows what. We just knew some of it involved alcohol and secretarys.

Bean

 

[eolesen]

The most successful people I've encountered in business don't worry about what the competition is doing.

They worry about doing what's right for their shareholders, customers, and employees (not in any particular order of importance).

Winning while betraying the trust of your partners isn't winning. Just ask Jonathan Ornstein.

 

[robbedagain]

BINGO E

 

[WorldTraveler]

The most successful people I've encountered in business don't worry about what the competition is doing.

They worry about doing what's right for their shareholders, customers, and employees (not in any particular order of importance).

Winning while betraying the trust of your partners isn't winning. Just ask Jonathan Ornstein.

AA and UA aren't DL's partners. They are DL's competitors.

again, if you don't understand the competitive nature of business, you don't understand business.

No one says that successful companies don't do the right thing for all of one's stakeholders (which does not mean stockholders, robbed) but to think they don't compete aggressively and don't develop strategies to win against the competition is simply naïve. Winning against competitors is often precisely what allows providing benefits to those other entities.

BTW, what do you think AA was doing when it added a 2nd JFK-EZE flight shortly after DL decided to enter the market, only to remove it after DL left?

Who were AA's energies focused on and what was that act about but competition?

specific to this topic, how about some concrete suggestions about how AA is going to make this LAX Asia expansion work.

Feel free to PM each other to come up with a cogent answer.

as to the question of time spent responding, it is about knowing the business, thinking fast and accurately, and using a free moment here and there to do what needs to be done between other tasks.

Others apparently seem to do it or else spend a lot more time than I do based on their higher post counts.

 

[dfw gen]

Irony... in a post that isn't Delta, Delta, Delta:

32 mentions of DL
30 mentions of AA
21 mentions of UA

6,002 characters
22 paragraphs
Zero substance

lol. Thats good!

 

[WorldTraveler]

according to a reporter at the conference where Kirby made the remarks about LAX and Asia, there is not the certainty that AA will make LAX the primary gateway to Asia that some seem to think.

“Figuring out how to make Los Angeles successful and a gateway to Asia is a strategic issue for us,” American Airlines Group president Scott Kirby said on April 4 at the Phoenix International Aviation Symposium.

Los Angeles has the local traffic. The connecting traffic issue is more complicated. Yes, American has flights from throughout country to Los Angeles. But compared to say, Dallas and Chicago, Los Angeles is a small hub. So there are far fewer connecting passengers to feed the international flights. And it’s hard for American to add more domestic flights to feed the international ones, because the airline is gate constrained in L.A. Russell says American has access to 24 gates at LAX, though 10 of them are in a remote terminal and can only handle regional jets. It is to receive access to a few more gates in the airport’s new international terminal, but that’s no panacea.