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

[FWAAA]

So AA has the rock-bottom lowest yields to Asia, and LAX is one of the reasons for those industry-lagging yields (cite to WT for this data).
 
Accepting that as true, then it appears that AA needs to capture more nonstop local traffic away from UA, DL and the foreign carriers serving LAX.   Combine that with more corporate contracts (which shouldn't be impossible for the world's largest airline to attract) and AA's Asian yields should increase.   Local traffic should pay higher fares than connecting traffic, no?   
 
Against that backdrop, here's Parker and Kirby sowing their usual "we're going to have to pull a rabbit out of our hat to make LAX successful" nonsense.   Sure,  AA at LAX doesn't have the connecting feed that AA has at DFW or ORD or CLT or PHL, but as I opined a couple of days ago, you don't need 350-500 tiny regional jet flights at JFK or LAX to feed international flights like you might at those other hubs.   With gobs of local traffic, the flight should be half or 75% filled with that local traffic and topping it off with connections should be a breeze with the current LAX schedule and a few more strategic adds.  LAX doesn't have lots of spare gate capacity for AA to commandeer but the good news is that AA won't need dozens more gates to make those long-haul flights work.
 
The best AA example to illiustrate what I'm talking about is Miami, where AA does not have hundreds and hundreds of connecting flights yet it fills multiple 777s, 763s, 757s and 738s every day to dozens of international destinations, some of them with multiple widebody departures each day. 
 
AA's 14 gates at T4 have at times been crowded and sometimes, underutilized.   AA is getting preferential use of four widebody gates in the new TBIT which rumours say will be used for all widebody departures, including the domestics (MIA, DFW, HNL, etc).   AA gets to keep exclusive use of one T3 gate and although there's some disagreement, it looks like AA can use the other gates in T3 on a common-use basis.
 
Ideally, VX will eventually implode and allow AA to capture more of T3, converting some of the gates for use by 76-seaters, the same as UA gets to do at T8 and like DL gets to do at T5/6.   Eventually, the airside connector from T3 to TBIT will be built, and the T4 to TBIT connector is presently under construction.   Until the T3 connector is built, buses can run between TBIT and T3 (a short bus ride, but a way to remain inside the sterile area).   
 
Once the TBIT gates are finished, gates 41 and 43 at T4 will be used for single-aisle departures.  
 
As 50-seaters give way to 76-seaters, and perhaps as E190/195s replace some 63-76 seaters, the number of flights should drop slightly, freeing up a little more gate space.   As it is, T4 could currently support 40-50 more daily departures, given that the LAX day begins at 0515 or so and doesn't end until 0130 or 0200.   Running 10 departures per gate per day might be aggressive where the effective day is shorter, but where the day runs about 20 hours, a departure every two hours isn't overly optimistic.   
 
Most international traffic doesn't originate or terminate in Stumblebum Gulch.   It is centered in larger cities.   AA already covers most of the key larger cities with nonstops from LAX.   Obviously, many of them are duplicative and overfly other hubs.   As I posted the other day, if additional connecting traffic threatens to crowd out the local traffic, then AA can upgauge the flights to ensure plenty of seats for both.   Larger single aisle planes don't require more gates than smaller planes.     

It's a given that Houston, Atlanta and the DFW Metroplex will not be the key gateways to Asia in the future.   All are big fortress hubs with numerous connections to all the big cities and all the Stumblebum Gulches out there.   But with fuel over $3/gal and their geographic disadvantage with respect to Asia, they'll be limited to serving the biggest key cities in Asia, and even then, some of the recent adds at DFW don't instill much confidence in me.   HKG and PVG are just very long, costly flights to operate from DFW.   Only if DFW produces an outsized share of high-yield local traffic will those flights be successful.   Australia?   IMO, AA and QF will eventually come to their senses.   
 
So which Asian cities aren't currently served by AA from LAX that make any sense?   There's HND, KIX, NGO, ICN, TPE, PEK and HKG.  Which of those has any chance?   Maybe PEK, TPE and ICN.   Which of those would make any money?  WT will probably say "none."   That's fine, as he doesn't need to keep posting that in every thread.   We heard it before.  This isn't a discussion of which will be profitable, merely which might get added.   I realize they're doomed to financial failure.   
 
Kirby and Parker hint that LAX doesn't have a large enough swarm of tiny airplanes to make LAX a viable Asian gateway.   That big Atlanta-based airline isn't planning a 500-flight hub for SEA - wonder if the SEA gateway has a chance of success?   About AA's MIA hub:   it's just way too far to ever support large numbers of Asian flights but AA has long connected LAX and MIA with daily 3-class 777s for the local market and for MIA connections to S America.   That strategy can work in reverse:  MIA passengers can be flown to LAX on their way to Asia.    

If not LAX, then from where does AA add flights to Asia?   PHX?   Nope.   Try again at San Jose?   Nope.   Sacramento?   Nope.   Las Vegas?   Nope.   Other airlines already have staked out large positions in SFO, PDX and SEA, so those are no.   
About the comment in the article that fortress hubs generally produce higher fares - that's true, but again, US Airways has produced the industry's lowest TATL yields since at least 1995 despite it fortress hubs at PIT, PHL and CLT.   The 2013 US yields and PRASM to Latin America were three cents lower than AA's nearly 18 cents per mile.   Apparently, fortress hubs in smaller markets aren't always the winner.
  
Bottom line:   LAX to Asia can work without adding 100-200 new connecting flights to feed the new flights to Asia.    No airline will ever dominate LAX, but if AA cuts and runs, then UA and DL will share the honors.   As it is,  new AA has the largest market share at LAX and should be able to grow that share.   
 
Here's the article mentioned by WT:   http://www.insidesocal.com/aviation/2014/04/11/american-is-evaluating-lax-as-possible-asian-hub-the-airlines-president-said/

 

[WorldTraveler]

thanks for your response - and your passion.

I am simply interested in talking thru valid business aspects... and I appreciate your participation in the discussion.

The issue with LAX connecting feed is that AA already has full flights serving its existing schedule. Sure, they can add a few more flights here and there and create some seats via equipment upgrades - but they run the risk of allowing competitors to grow into the domestic market which they walk away from in order to pursue int'l connections. The real risk is that LAX simply doesn't have the infrastructure to create the feed necessary to support int'l flights and still allow AA to protect its position in the local market.

AA doesn't even carry 75% local traffic on its flights from MIA to Latin America which it is by far the big dog in the market.... the vast majority of int'l traffic on US carriers even from west coast and NYC hubs is connecting. You don't just need a few connecting passengers; you need 100 or more to support every int'l flight and probably more like 150.

And again the LAX domestic market is getting more and more competitive.

as for T3, AS would love to not have to look across the tarmac at its codeshare partner - who also controls said ramp movement. Life for them looked good on the north side of LAX and they would undoubtedly move mountains to get back over there. DL would probably provide the moving van at no charge. It's one of those "screw your partner" routines that DL does to get what it wants, you know.

There is probably a whole lot larger chance that UA will be getting rid of a bunch of gates at LAX.... maybe AA could have the remote regional terminal busses stop at T8 as well.

Further, the big difference between AA in MIA and any US carrier at LAX to Asia is that AA has enormous marketing clout to Latin America and is far stronger than any 3 of their foreign competitors. At LAX, the Asian carriers will always beat the US carriers in cost and service.

Do you really think Korean or China Airlines is going to sit back and allow a US airline add service? Both are Skyteam airlines and DL isn't willing to touch either market with a 10 foot pole from LAX; DL hasn't even shown interest in TPE from SEA yet.
Given that both Korean and Taiwanese airlines are parts of other alliances, the power that AA could have to connect passengers on the other end is gone.

Why is Cathay so resistant to cooperating with AA? If CX, a oneworld carrier, dissed AA and AA has to work with JL to fly to HKG, what does that say about AA's ability to find a partner on other routes to Asia?

Despite DL and KE's spat, KE still puts DL's code on a couple dozen KE flights from ICN. I doubt very seriously that DL would be trying to start SEA-ICN without the ability to codeshare on KE.

Your response ends up right back at the same question that has always been there.... where should AA build a west coast - Asia hub or even gateway, as if it is a given that one can be found. The whole reason DL is moving as quickly as it can is to make sure it has one - plus to prey upon UA's financial and operational weakness. It wasn't even a given a few years ago that UA would ever have a viable US carrier competitive hub on the west coast... is it a given that still another one can be created?

and then you have the evidence of LAX-PVG where UA, despite its own financial woes was willing to throw a plane into a market that AA decided to start. What cities in Asia do you think UA will be willing to write off?

as for the fortress hub comment, it is precisely true that US got lower yields to Europe because it undercut fares and allowed double connects that other carriers weren't willing to take at those prices. But that doesn't mean the principle of hub pricing is flawed or that AA can do just the opposite at LAX to Asia. AA still is the underdog to Asia against much larger carriers to the region on both sides of the Pacific.

As for MIA to Asia, AA already carries about 40% of the traffic that is carried by US carriers - even with AA's relatively weak position to Asia, it does fine from its own strong hubs. PHL, CLT, DCA, and PHX do generate Asia traffic and right now, UA is the dominant carrier to Asia from those cities. That is AA's opportunity to get that traffic - but it might not best flow over LAX.

UA is also the dominant airline from key AA cities like AUS, SAT, and STL and AA should be able to carry that traffic.

My opinion is that if AA wants to build Asia on its own it is going to have to grow a presence from markets which it can dominate and where it can connect plenty of traffic. LAX fits neither of those descriptions. ORD has the connections, is well-located, but UA sits on top of AA. You note the issues with DFW.

But I'm not sure that it is any more likely for AA to make Asia work from LAX than it was when they started ORD service or when they flew JFK-Tokyo or how they do now relative to UA and DL to NRT and UA to PVG from LAX.

tidbit: AA carries more LOCAL passengers and revenue LAX to CDG which it doesn't serve nonstop (right?) than it does to NRT which it does.

I just don't see that any of the ingredients that have allowed AA or any other carrier to succeed in int'l markets is there for AA in LAX to Asia.

maybe they are and if AA goes forward, we'll see sooner or later.

 

[robbedagain]

I believe that phl and lax to asia can and will be profitable   after all  delta is profitable across the pacific   and with dp being a nbrs type guy  he will make it work

 

[Kellerguy]

I doubt Kirby is unaware of the challenges WT and others seem to think might be so insurmountable.  It does make one wonder though what his strategies might be though since US carriers face very stiff competition as it is with some of these Pacific Rim carriers.  Maybe something along the lines of one part UA disintegrating, two parts strong partners with some new to be added, and one or two parts AA picking up new routes.   That...or could it be a head fake...

 

[eolesen]

I suspect Kirby et al are banking more on UAL continuing to spiral downward. The guidance coming out right now for 1Q earnings (due next week) seems to be that UAL will continue to disappoint, and DAL and AAL will meet expectations.

Lots of discussion in PlaneBusiness this week on that. Well worth the price of a subscription, and much better insight (and sources) than most of what you'll read here. It's certainly less partisan.

 

[WorldTraveler]

I have said for years that the up and down between AA and UA over the past several decades means that AA's ability to establish itself in key markets against UA might well give them success coming out of BK.

But remember that AA execs said the same thing - counting on the demise of a competitor - to avoid making more difficult cuts in 2003 - and AA spent years with far more people on the payroll than they needed for the size of the airline - and ended up in BK anyway where AA employees gave a 2nd set of concesssions.

UA's continued problems might well help AA but so far, UA has not given up any revenue to AA at ORD, a far more likely barometer of whether UA can hold onto premium revenue.

In LAX and to Asia, not only does AA have to get past UA and DL but they also have to get past a number of much more healthy Asian airlines, any of which have far more capacity from LAX to Asia than AA could put into the market with one flight.

Further, as much as some want to tout AA's ability to add gates at LAX via the TBIT, AA has a significant number of gates at LAX that are and always will be regional jet gates which limits the ability to grow. DL and UA have large RJs at gates which can accommodate mainline aircraft; the 717 isn't that much larger in physical size than the E175 but can carry more people and is a mainline aircraft.

Let's also not forget that Kirby never said AA was definitely moving forward with an LAX-Asia expansion.

 

[eolesen]

Kirby also never said he was definitely going to eat lunch last Tuesday...

Perhaps, just perhaps, they're holding off on announcing anything significant until the pieces are in place to execute it.

That's how they just handled the changes to AAdvantage -- no warning, just action. What a refreshing idea.

 

[WorldTraveler]

except he specifically said they have issues regarding LAX-Asia expansion that they have to address including feed.

Regardless of warning or not, AA's position in the west coast to Asia market is 3 out of 3 among US carriers as well as backseat to a number of foreign airlines.

BTW, Kirby didn't come out and say that US' summer seasonal expansion from CLT to Europe wasn't generating the revenue they expected but they are pulling back both BRU and LIS anyway.

http://airlineroute.net/2014/04/15/us-cltbru-s14/

AA and US both have too many planes and too many employees for the size of the network and no clear places where they can profitably grow.

AA's traffic even to Europe and Latin America has not kept up with the capacity that is being added - and those are AA's stronger int'l regions.

if AA can pull off a west coast to Asia expansion I will be the first to cheer their success (and be sure and save this post so you can show it to me if it happens) but the leap between might expand and become profitable is an enormously long distance from today.

 

[700UW]

The combined US and AA are the largest carrier at LAX in terms of passengers carried by around 2,000,000 more than UA which is second.

 

[WorldTraveler]

no one is debating that... but given that AA also has the lowest average fare of the big 3, it is quite likely that they aren't the most profitable.

And it still doesn't change that whatever size AA does have doesn't give them much size to grow. A few additional gates in the TBIT aren't going to change that AA has a remote RJ operation that limits the size of the mainline operation well below what DL, UA, and WN can do.

and specific to feed for new Asia flights, Kirby according to the article specifically said that is an issue that has to be addressed. With little room for mainline growth and AA's current flights already running full, diverting current capacity in order to feed int'l flights is not a viable for success. AA ahs to figure out how to add capacity ABOVE the growth rate of the local market (they are hard-pressed to even do that) PLUS figure out how to be able to compete against DL and UA plus a number of foreign carriers who are much stronger from the west coast to Asia. And then you have the situation that oneworld has the weakest alliance presence in China and CX for some reason doesn't want to work with AA.

 

[eolesen]

How exactly does the remote RJ operation limit mainline?... LAX isn't slot controlled, and the transfer to/from the remote terminal is already built into the connection times. They just opened an Admirals Club at the remote terminal.

It might not be optimal, but it's not limiting. If anything, it's opening up gates at the main terminal *for* mainline, which is something DL, UA, and WN can't do.

Oh, and the "CX doesn't want to work with AA" crap is just that -- crap. The Chinese won't approve a JV with any carrier they can control, so it has nothing to do with what CX or AA may want to do.

And make no mistake -- HKG might have special status, but the Chinese are in control, and an even stronger JV for CX would present an economic threat to the mainland carriers. There's no way MOT or CAAC would allow CX to threaten MU, CA, or CZ.

 

[diamondcutter]

no, AA doesn't have to give up. But as much as some people want to try to argue otherwise, DL does have a very solid position on the Pacific and at LAX precisely because it inherited a solid Japan presence - of which LAX is absolutely part of it - and DL has not only defended what NW built but has also grown it.China and other markets are growing - but Japan is not dead and DL still generates very strong profits from Japan.It is also hard to understand how anyone can think AA can succeed in other markets when they struggle so badly in Japan. It is no different than DL's conclusion that it had to deal with its shortcomings at LHR if it is going to be seen as a credible player in ALL of Europe. It is no more possible to "win" in Europe without having a solid, profitable presence at LHR and the same is just as true with Tokyo - which for now means NRT.AA not only has a poor track record of sustaining service in the most competitive markets to Tokyo but its overall Pacific revenues are below other carriers - and since DOT data shows that AA underperforms UA in every one of the direct routes that AA and UA compete in, you can't argue that the problem is just Japan.Profit-motivated companies don't keep throwing money at something that loses money without fixing it.People here have tried to pretend for years that AA doesn't have problems on the Pacific despite the fact that it is very clear they do.Parker and Kirby are committed to and have been charged with turning AA's Pacific network around. I have yet to hear a credible plan by anyone on here with how AA is going to turn around their money losing Asian operations other than to just keep throwing more money at the problem - something well-run companies just don't do.

Why in the hell would Parker and Kirby tell you their plan?

 

[WorldTraveler]

I don't expect them to... but whether they tell me or not doesn't change the facts they have to work with including that AA is at a significant revenue and strategic disadvantage to Asia and there are virtually no options that will allow them to escape that reality.

As for LAX and the RJ terminal, it is specifically because that terminal is an RJ terminal that limits AA's ability to grow using those gates while DL and UA have the ability to park RJs or mainline jets at many of its gates.

 

[eolesen]

So, AA having RJ's away from the main terminal, making room at the main terminal for big jets is a disadvantage.

And DL & UA having RJ's taking up ramp space at the main terminal which could be used to gate another big jet is an advantage?

You've got some weird notions of what is and isn't an advantage. Running a pad operation or the separate RJ terminal makes sense when gates are scarce. It's done worldwide.

Certainly, the satellite guarantees a better experience than a pad, allows more throughput per hour in terms of departures, and they aren't wasting valuable real estate with RJs.

But hey, you're entitled to your own views. They're whack, but they're all yours.

 

[hp-csr-phx]

How many gates does each airline have at LAX?