This thread is about AA’s performance on LAX-PVG, a route which was started two years ago – a year longer ago than I thought.
It is responsible and appropriate to discuss the financial performance of a route which was the topic of discussion on this forum and which was started with great expectation. It is also appropriate to determine if there are any common themes that can be found between LAX-PVG and any other routes which AA operates now or has announced that it will start. As much as some people would not like to do it unless the results are what they want, it is also appropriate to compare financial performance between carriers at whatever level is known.
Delta Air Lines does not operate LAX-PVG on its own metal or in a joint venture so they are mentioned only with respect to regional (transpacific) performance or regarding routes that directly compete with AA. United does operate LAX-PVG the route as well as competes directly against AA on most of AA’s transpac routes.
There are people who never go to the doctor or get a physical exam because they do not want to face the prospect of being told they have a disease. Others, when told they have a disease, do all possible to ignore the results or call the doctor a liar or fraud. But the vast majority of people responsibly realize they have to process the grief and every other emotion involved and then wake up determined to do what is necessary to live with or succumb to the disease. The same process works in a whole lot of arenas in life. AA people have made enormous investments in their airline as a result of two rounds of painful concessions. They need to understand the decisions that are being made and the performance of their company.
This is not an “American is bad and UA and DL are good thread.” As was noted UA lost far more money per ASM on their Atlantic system than AA did on their much smaller Pacific system because UA was very reluctant to pull out capacity to Europe – where UA and CO had a lot of duplicate capacity – because of labor integration issues and despite the precarious position of the European economy.
We can debate data types and display the data where that is permitted but multiple data sources would reveal the same issue… and it is precisely because the issues can be confirmed in multiple ways that the reality is there.
This type of analysis is not personal and not about any particular person; it is about a company. It is driven by facts that are not subject to popularity.
This thread does note that AA’s performance on LAX-PVG has underperformed UA which started the route about the same time and uses a very similar aircraft. It has also been noted that UA outperforms AA on every route the two directly compete on to/from Asia by double digits based on several metrics More significantly, the fact is that UA has not only a strong historical presence throughout Asia which was greatly aided by their 1985 purchase of Pan Am’s Pacific division and from that purchase UA has particularly focused its network on China and HKG while NW and later DL focused on Japan.
This thread has also noted that AA’s Latin American system, even in the 4th quarter of 2012, was nicely profitable. AA has successfully added significant amounts of capacity and opened new cities in Latin America and has a better track record of doing that than other carriers, primarily because of AA is the largest carrier in the region – regardless of the airline’s nationality – and AA is the only US airline that has a hub at MIA, the largest gateway to Latin America.
It has also been noted repeatedly that AA has had little trouble making money on its routes to/from LHR as long as they have used industry-competitive products. So, the issue is clearly one of certain regions and strategies in each region and not a general assessment of AA.
It is clear based on AA’s addition of LAX-PVG, DFW-ICN, and their European route additions for 2013 that AA perceives they must be present in certain key markets including some of the largest markets in Asia. Given that there are both US and foreign direct competitors on many of these routes, many of which are much larger in those particular regions and countries, the question has to be asked if AA’s expectations of being able to compete in some of the industry’s largest markets is realistic. The issue clearly does not apply to markets where AA is itself large such as to LHR or Latin America. But AA has a poor track record of sustaining service on many continental European routes and underperforms its US carrier routes on other routes from Asia and Europe. In addition, AA has few alliance partners in the countries in Asia and Europe where it most underperforms its peers. In contrast, merger partner US has built its route system around hubs where it is the dominant airline and where US faces little to no competition from other US airlines.
Thus, the question is whether AA in time will have to accept that it cannot expect to compete in the largest and most competitive markets to Asia or whether, like US, AA must choose a network strategy that requires that its presence in those regions be from those hubs where it is most capable of competing and where it is free from direct competitors.
