American Airlines makes a move to dominate at LAX

[commavia]

Anyone care to speculate as to what new routes we might expect to see out of LAX in the next couple of years?  AA serves only a single destination on its own metal to Mexico, and that's SJD.  What about other destinations in W. Mexico such as HMO, MZT, PVR, ZIH, and GDL?  Mexico City perhaps?  Those markets are currently served out of PHX but not LAX, as are BOI, PDX, SEA, FLG, OMA, DSM, YYC, ANC, and DRO.  I've heard ICN and AUK rumored as possible transpac routes...

 
I think some additional growth to Latin America is quite possible, if not likely - some of the ethnic Central America markets (SJO, SAL, GUA) may make sense to reenter given AA's historically strong ethnic VFR POS position in the region and growing connectivity beyond/behind LAX.  As for Mexico, I'm skeptical about the value of serving these leisure markets given that most seem to be relatively low-yield and more valuable for utilization flying than anything else.  AA already has a strong, leading position in the largest and most important of the Mexico leisure markets from LAX - SJD - with 2-3 daily flights (depending on season) and the only other of these Mexican beach markets that would seem to be a priority would be PVR, but alas all three available authorities for LAX-PVR by U.S. carriers are taken.  Outside that, the single biggest and most important Mexico market is clearly MEX - which I'm sure AA would love to serve, but again, there are no more available authorities for U.S. carriers.
 
Domestically, I think there are a lot more realistic prospects for growth.  I think pretty much any major U.S. markets where the "new AA" already has a relatively strong combined presence are candidates for nonstops to LAX.  Markets like MCI, COS, TUS, MSY, CLE and DTW instantly come to mind, along with shorter-haul markets like SEA and PDX.  The truth is that, on the domestic front, AA already pretty much covers (or soon will cover) just about all the major O&D markets from LAX.  With respect to longhaul international, I think there are multiple opportunities - particularly once the 787 arrives.  Echoing the statements of AA's own VP of Network Planning, I think the obvious choices in East Asia are ICN and PEK - both massive, if competitive, local markets.  Beyond that, depending on the economics and the development of the LAX connecting network, AKL or even lower-yielding TPE could also make sense down the road a few years.
 
It will certainly be interesting to watch just how AA decides to leverage its gate/facility advantage at LAX relative to Delta, Southwest and United.

 

[WorldTraveler]

Domestically, I think there are a lot more realistic prospects for growth.  I think pretty much any major U.S. markets where the "new AA" already has a relatively strong combined presence are candidates for nonstops to LAX.  Markets like MCI, COS, TUS, MSY, CLE and DTW instantly come to mind, along with shorter-haul markets like SEA and PDX.  The truth is that, on the domestic front, AA already pretty much covers (or soon will cover) just about all the major O&D markets from LAX.  With respect to longhaul international, I think there are multiple opportunities - particularly once the 787 arrives.  Echoing the statements of AA's own VP of Network Planning, I think the obvious choices in East Asia are ICN and PEK - both massive, if competitive, local markets.  Beyond that, depending on the economics and the development of the LAX connecting network, AKL or even lower-yielding TPE could also make sense down the road a few years.

again, your view of AA's growth opportunities at LAX are all driven by moving into highly competitive markets both domestically and internationally.

what you can't explain is what the real benefit is in jumping into highly competitive markets which means that AA will get a fairly small share of the market - no matter how large it is - in exchange for having other carriers decide to add service into key AA markets.

growth is great... but at some point, you have to decide if the system ROI is worth it... and I strongly believe that AA will find it is not over time.

The only reason it makes sense for AA to push forward with growth at LAX even if it sets off competitor growth into key AA markets is if AA has already determined that they have lost their advantages in their own advantage markets - predominantly MIA, Latin America, LHR, and DFW - so they now have to go for a strategy to be in as many places as possible, none of which will produce the returns they once got from MIA, Latin America, LHR, and DFW.

perhaps that is indeed the thinking AA has and if so, it speaks to the dramatic change in competitive strengths that have swept across AA's network - and at the same time could leave AA in one of the worst positions in terms of having fortress hubs/market strengths in the US airline industry.

growing LAX for the sake of being largest in a market where they had to get there by taking share from other carriers doesn't make sense any other way.

 

[FWAAA]

Never in my life have I worked for DL, not as an agent and not as a lower-level manager. But it's clear to me that neither UA nor AA is going to challenge Delta's huge recent buildup at SEA. It's fairly obvious that neither DL nor AA is going to challenge UA at SFO.

Now that AA is temporarily the world's largest airline (at least until the inevitable rationalizations occur), it's fairly obvious that AA intends to stake out a position at LAX that's larger than the footprint of either Delta or United. With the current number of gates (not to mention the additional gates that are extremely likely to come AA's way in the future), it's clear that AA intends to grow at LAX.

Will it be financially successful? Again, WT, WGAF? You've written 10,000 words in dozens of posts to convince everyone that it won't pay off in the long run. Trust me on this one: Very few readers here GAF besides yourself. Lecture us to your heart's content if you must, but the fact is - AA probably intends to grow at LAX and in a few years, will probably be significantly larger at LAX than either UA or DL.

 

[FrugalFlyerv2.0]

again, your view of AA's growth opportunities at LAX are all driven by moving into highly competitive markets both domestically and internationally.

what you can't explain is what the real benefit is in jumping into highly competitive markets which means that AA will get a fairly small share of the market - no matter how large it is - in exchange for having other carriers decide to add service into key AA markets.
 

I don't know why it is hard for you to understand that for a company - any company - in order to maximize ROI/profits it has to enter the most competitive markets.  It's a simple business concept.
 
In your diatribes you make it sound as if AA's plans are LAX are akin to Joe's hot dog stand challenging McDonalds.  It just isn't that way .... well maybe only in your mind.  The AA product is good enough to enter any market(s) it wants from LAX.  If I wanted to be snide, I could say something like:  AA is good enough to compete from the best markets like LAX and doesn't have to retreat to a secondary market like SEA ......

 

[WorldTraveler]

it isn't a question of whether AA's product is good enough.

the issue is that all of the markets that AA needs to grow in are already "taken" by other carriers. After not defending its own markets, AA is driven to grow at LAX by going after other carriers' markets when those carriers are not going to stand by and allow AA to grow.

I made the point before the merger regarding what AA lacked when the US merger was added and the point is still the same.

It is highly simplistic and flawed thinking to believe that AA should be entitled to grow at LAX without expecting other carriers to do the same elsewhere.

Any company can grow into someone else's markets but unless the competitors are weaker, you have a battle on your hands.

By deciding to grow in LAX which is central to every carrier's network to their top hubs/markets, AA is opening up a competitive confrontation that will likely end up with AA coming up short in terms of their total network.

BTW, if you think this is all new stuff... it is the same thing that Parker has done at HP and US - think he could push his way into key competitor markets. Eventually, competitors sat on HP hard enough that HP needed thë "protection" of US' east coast markets. After the HP/US merger, he did it again, only to pull back from a lot of the initiatives and then to later argue that US needed a merger partner because it couldn't stand up to larger competitors.

If AA was picking on one competitor at LAX, he might win because the big 3 are fairly equally sized. But because AA is trying to grow its network in multiple markets by both DL and UA, the chances are somewhere between slim to none that DL and UA can't push back enough on AA at the same time that WN and B6 are picking off key parts of AA's network as well.

feel free to track this as a follow-up item for 3 to 5 years down the road, but I strongly believe AA will either not grow into other carrier markets near as much as some people think or AA will have a whole lot fewer markets where they have market dominance.

 

[MAH4546]

it isn't a question of whether AA's product is good enough.

the issue is that all of the markets that AA needs to grow in are already "taken" by other carriers. After not defending its own markets, AA is driven to grow at LAX by going after other carriers' markets when those carriers are not going to stand by and allow AA to grow.
 

 
Tell that to UA. Since 2010, UA has either exited or reduced to 1-2x daily flights from LA to PIT, PHX, TUS, ABQ, SMF, OKC and ELP, all markets AA has entered in the past three years. Not to mention it is seasonally suspending LAXBOS (who does that?!?). 
 
AA has a very easy way of winning in LA - it enters new markets, it's the preferred airline from LA, people fly it more and others less. 

 

[FrugalFlyerv2.0]

it isn't a question of whether AA's product is good enough.

the issue is that all of the markets that AA needs to grow in are already "taken" by other carriers. After not defending its own markets, AA is driven to grow at LAX by going after other carriers' markets when those carriers are not going to stand by and allow AA to grow.
 

I'm not even a business major but I can pretty much tell you that what you just wrote above is nonsense. 

 

[FWAAA]

From the tens of thousands of words posted by WT on this subject (in this thread and dozens of others) it appears that he believes that only Delta is able to add large numbers of flights and succeed.

For example, thanks to the LGA slot giveaway by the Brilliant Genius Doug Parker, Delta added flights such as LGA-MIA, a market that was already "taken" by AA, and by offering frequency, a decent product and low fares, DL was able to attract at least a third of the local market. DL does not now and probably will never "dominate" LGA-MIA, but no doubt that route helps DL in its quest to "win" in NYC.

I didn't do all that well in business school, but it seems to me that if DL can leverage its significant advantage in resources (LGA slots) to enter and do at least OK in AA's stronghold markets, then it stands to reason that AA should be able to do something similar on the opposite coast.

Only real difference is that LAX isn't slot constrained - the only scarce resource would be gates, and AA has lined up more of them than any other airline. So far, the gate advantage hasn't resulted in dramatic differences in revenue or market share, but AA hasn't added much to LAX post-merger. Give it time. In several years, AA might have 30% of LAX compared to ~15% for UA and DL with WN, VX, B6 and the foreign airlines holding the other 40%. I don't see AA ever having as big a share at LAX as UA has at SFO, but I don't think that spells doom for AA.

 

[commavia]

I'm not even a business major but I can pretty much tell you that what you just wrote above is nonsense. 

 
Not to mention that of the three U.S. network carriers, the one that has to worry the most - not just at LAX, but in general - about entering markets already allegedly "taken" by competitors is Delta, not AA or United.  This has been oft-discussed and debated to death here and elsewhere.  With the exception of ATL and LGA/JFK, Delta's hubs tend to be in smaller and/or less dynamic markets than AA or United, and therefore it has been Delta, time and again, that has had to come into AA, United or Southwest territory in order to expand their network and keep it relevant/competitive - thus Delta pushing into AA/United territory flying RJs LGA-ORD, LAX-SFO, LAX-DFW, buying into Virgin to break into AA/BA-dominated LHR, etc.
 
But of course, that's Delta, so when they do it, it's sheer brilliance, but when AA (or any other airline) does it, it's a sign of desperation and/or impending doom.
 
Fear, fear, fear.

 

[WorldTraveler]

ignorance, ignorance, ignorance.

You do wax on and on about the inferiority of DL's hubs and yet what you can't explain is how DL manages to get a higher yield on its network than any other US airline.

You somehow think that the world's largest markets are the best places to have hubs - because that is what Crandall believed - and many before him that built AA's network.

problem is that AA and UA both face WAY more competition in their top markets than DL does.

and that increased competition comes at the cost of yields.

that's not my opinion. it's based on real market facts that you don't want to hear because it blow up your theories that AA and UA have superior hubs - when in fact DL gets a higher percentage of revenue from its hubs than either AA or UA and DL's hubs and DL's hubs also generate higher fares.

feel free to argue your "DL's hubs are inferior and AA's are superior" nonsense because every bit of data argues against it.

IGNORANCE, IGNORANCE, IGNORANCE.

as for the LGA slot swap, FWAAA, you managed to skip the part about carriers being willing to fight back for their markets.

DL pulled off the slot swap when every other carrier was either consumed with their own survival or in the mdist of a merger.

DL could not pull off the slot swap today because timing is everything. DL had a window in time because of the competitive environment and pulled off what it did when other carriers could not respond.

no one is willing to allow AA in LAX to pull off another DL style NYC market restructuring.

and, to be fair, I'm not sure many people appreciated how quickly or deeply DL would move to insert itself into early every one of the top NYC markets.

history will be the judge whether AA or anyone other carrier can do in LAX what DL did in NYC.

I say it won't happen again.

 

[DL2WN]

.

 

[WorldTraveler]

you said you have been a user for quite some time but you only 7 posts and most of them are .

are you using multiple IDs?

you do realize that is a violation of the TOS and you could have all of them cancelled?

back to the discussion, it isn't a surprise that the one major competitive advance that it taking place now is DL's growth of its SEA hub in AS' backyard. And it isn't a surprise that DL is succeeding because it is multiples larger than AS even though both carriers are very well run and respected by Wall Street.

Size matters. DL had a size advantage at the time of the LGA slot swap along with being well along the path in the merger process.

AA, DL, and UA are all roughly the same size now and AA is just starting on its merger.

the voting results from this weekend and the response from the pilots to their opener shows how long the integration process could be for AA.

 

[DL2WN]

.

 

[robbedagain]

Wrong wrong wrong dl ua and aa are roughly not the same size AA LARGEST THEN UA THEN DL

 

[WorldTraveler]

wrong, robbed.

in the 3rd quarter, the most recent available, DL reported higher total revenues - the standard measure for company size - than AA or UA.

the difference between DL and UA, number 3 based on revenue, was less than 6%.

even if that changes for the 4th quarter and the year as a whole, the big 3 are very similar in size.

The big 3 have never been as closely matched in size as they are now.