WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,662
- Banned
- #46
Every airline has strategic routes that they operate even at a loss…. Just like supermarkets sell some products at cost or below as loss leaders. Yes, I am certain that DL has some just as UA and others do.
The difference is that AA has lost money in Asia for years and really hasn’t made any changes to its network to fix it during BK. I can’t think of another US airline that entered into BK and came out without cutting its loss-making routes….
AA still has a mindset that they have to have their own metal in key global markets despite the fact that they are losing money doing it. Telling me how big a carrier is in a market – including LAX – doesn’t mean much if they have to lose money to maintain that presence.
I’ll recap what I have said about what AA needs to do in Asia:
- Stop trying to maintain a presence in the largest and most competitive markets unless the can make money. There are markets where AA has a much higher chance of making money, including from DFW to places in Asia that have no competition. AA’s DFW-NRT route is its best performing. Where did AA add its second destination from DFW? ICN- home of KE – who has been in the DFW market for a number of years. DFW isn’t the ideal hub for serving Asia but is it worth continuing to lose money – while asking for employee concessions – in order to have a strategic presence in markets where competitors have been stronger than AA and AA shows no sign of improving its position relative to them.
- Jack Welch of GE said that GE would not be in markets where they are not number one or two because the chances of being profitable as #3 in a market are very small. There is truth to that statement in the airline industry; there are no successful 3 hub airports. As much as some would like to believe otherwise, LAX and NYC are heavily divided and competitive airports where AA has no clear advantage in either but yet competes in markets against carriers that have a much stronger presence to Asia. At ORD, UA outperforms AA to every Asian city the two serve – which isn’t surprising given that UA bought PA’s Pacific routes 30 years ago and has been refining and strengthening its position ever since.
- Rely on joint venture and other partners to serve some markets and then admit you can’t be as strong. AA pulled its own metal from BOS-LHR to allow BA to operate there but AA wants to keep its own metal in LAX-NRT despite being a distant third and by having to sell seats to the US government for well below cost. AA has no alliance partners in China – and more significantly no flights beyond PVG with the AA code – while DL has its code on dozens of flights operated by two Skyteam carriers and UA has its code on several flights as well. AA simply cannot be in China what AA and UA are, no matter how strategic the market is. Would AA be that much worse – and maybe a whole lot better – operating flights to HKG where partner CX at the least would welcome codeshare passengers and might even consider a joint venture if AA was willing to put some of its own skin in the game?
Interesting observation but since it is second hard, I’m not sure we can take it as fully accurate just yet.
But even if it does happen, are you telling me that every other airline only uses licensed mechanics to do every bit of the job and even if they do that one mechanic doesn’t take a certain risk in putting his name next to work that has been done by someone else?
Every industry/trade has some sort of process where experienced workers have to help out novices and less-fully trained employees and take responsibility and oversee and trust their work.
To be accurate, “DL has DGS' Mechanics working at the ATL TC, contractors, not alongside DL employees.”
The vast majority of personnel in the TOC are DL employees and the vast majority of those are licensed mechanics.
The fact that you and others dislike about DL’s maintenance operation is the same thing you dislike about their airport operations – that they have staffing flexibility based on their non-union status that allows them to bring in DGS or Ready Reserve or Part-time (whatever category you want to call it or that applies to that situation) that unions don’t typically allow at other airlines. That is why DL can increase its flight activity during the summer because they can work RR employees hard – and then not use them to any significant degree for months. DL gains extra revenue during the peak season without taking on costs that are only justified for a short period.
Maintenance has peaks and valleys in its level of activity. DL uses contractors to help with increased demand, including providing staffing to allow DL to procure insourcing work, while keeping a core group of DL employees with full-time employment and benefits.
E,
As you well know, there are several Chinese carriers that also fly to the US, so DL and UA could not have a duopoly if they wanted to.
The US also does not allow US carriers to have joint ventures or ATI with carriers from a country that does not have Open Skies with the US. China has not done that.
The only difference between your argument with DL and UA in Asia and AA at LHR or GRU is that the UK granted open skies to the US even though slots are still so rare or too hard to get to effectively make market entry impossible. At GRU, AA has won the vast majority of US-Brazil slots over the past 20 years either thru its purchase of EA's assets or route cases. Now, AA is codesharing with JJ despite JJ being the only nonstop Brazilian carrier to the US.
How is it not a near monopoly for AA and JJ to be able to codeshare - leaving UA with no real presence outside of GRU or GIG while DL has 1/3 the size of AA but is trying to overcome AA's advantage by buying a stake in Gol? DL is doing the same thing with Virgin in the UK.
Sounds to me that the market in Brazil and the UK is a whole lot more lopsided in AA's favor than in China.
DL bought its equity stakes in Gol and Virgin just as AA did with its TW and EA asset purchases yet AA still - so far - has significant advantages.
More significantly to the question about what AA should do in Asia, DL doesn't try to fly MIA-S. America (at least yet) despite having equity ownerships in two major carriers in the region plus a codeshare with a sort-of airline (they fly planes anyway) in another S. American country.
The DOJ's case against AA/US is because there isn't even room for a duopoly in the markets they cite - esp. at DCA and in the SE to Texas regions.
