"Bigbusboy,
Your arguments still attempt to focus on the east coast – and your perspective of looking at total number of hubs doesn’t factor in the revenue that those hubs produce.
First, any US/AA combination still does nothing w/ the west coast or Asia, areas that DL and/or UA have advantages. UA has the west coast taken care of – but that is precisely where DL could focus its next strategic moves – but UA doesn’t have a SE presence. The SE which does include MIA is still the largest revenue region in the US and DL is the dominant network carrier in the region and in every key city except for MIA as AA’s hub and CLT as US’…. But DL is a solid #2 even in those regions.
However, you say that DL and UA will have NYC plus one other hub – IAD for UA plus ATL for DL… yet the simple fact remains that the NYC markets remains much larger than any other market and as hubs – DL and UA both have enormous power to concentrate the east coast market using the strength of the local market – hubs are built on strong local markets and the strongest hubs have the strongest local markets. The difference is that EWR is slot restricted so UA/CO cannot grow anymore in the NYC area; DL’s addition of flights will allow it to match if not exceed UA/CO’s total NYC size but will do it from LGA and JFK which is where the largest markets from NYC are to just about any city in the US… IAH is about the only market from NYC where the largest market is from EWR and not LGA or JFK but that could change if DL decides to start LGA-IAH service. Given that LGA is by far the preferred airport compared to both EWR and JFK in markets that are within the perimeter rule, DL has a revenue advantage that could add billions in dollars in revenue that others cannot match.
The revenue that you obtain in your strongest local markets is what you use to “fund” the hub you build to support the entire region.
And you still can’t overlook the fact that DL carries more revenue to/from/through ATL than ANY OTHER TWO HUBS in the US combined; ie DL carries more revenue to/from/through ATL than UA carries through EWR/IAD, AA through MIA/DFW, AA/US carries through MIA/CLT etc.
When you combine the strength of DL’s ATL hub with what it will have in NYC, there is no conceivable combination that can surpass DL’s strength on the east coast." Worldtraveler
WT,
Your passionate defense of DL was probably triggered by my comments about DL having a "real run for their money" should an AA/US merger take place. It was never my intention to suggest the demise of DL. That's not going to happen anytime soon, if at all. Your defense of DL is spot on and ATL has the competitive advantage over any other hub east of the Mississippi; however, I'm a bit confused about your statement "but DL is a solid #2 even in those regions." Second to whom? Or, did you mean to type AA? Either way, the question remains the same. Second to whom? DL by far is the number one on the east coast bar none. AA is either number one or two with DL to the Caribbean and number one to South America. I'm referring to the market of upstate New Yorkers and New Englanders who travel to/from the South East. Much of this market is travelers doing this once, twice, even three times per month for business; high-yielding corporate contracts and walk-up fares. DL is clearly number one through ATL, but US is clearly number two through PHL/CLT. AA is not a major competitor in this market.
As to your comments about the West Coast, you're absolutely right. A potential AA/US merger adds very little to this market. Fares on the West Coast are low yielding compared to the East Coast and by your own admission "UA has the West Coast taken care of." In order to enter this market, AA would have to horizontally merge their way into the market. AS is the only viable suitor to accomplish that. But why would AA purchase their way into a low-yielding market that is "already taken care of by UA" and still be left at a competitive disadvantage to UA and DL because of AA's overall market share. Should AA choose to merge, and they may not, they would be faced with at least two choices. Merge with AS into low-yielding markets with high levels of competition only to still be left behind in market share, or merge with US into higher-yielding markets with high levels of competition but now on par with market share with the other two major competitors. AA's third choice might be to merge with B6. Ok, that brings feeder for JFK, but does nothing for market share. Market share means everything in a mature industry. It's the only way for growth; however, Boeingboy is correct by saying market share means nothing if it isn't accomplished profitably. Profitability is a function of all three: revenue, costs, and market share in mature industries.
Now, a previous AA poster asked me to "be honest" about the reasons for my "passionate" writings. Ok, here it goes. Like you WT, I have a passion for this industry. It began as a flight attendant 29 years ago with US Air in Pittsburgh. I loved life in Pittsburgh and loved working for US Air. Never once did I ever have the desire to work for UA, AA, DL, NW, EA, CO; although, I can't say the same for PA. I speak German and interviewed with them in '82. Thank God that didn't pan out. I coulddn't give two hoots about a merger between AA and US. Now, let me explain why. Several years ago my compensation package was recalculated during bankruptcy and I didn't like the results. I made a personal decision then to complete a Masters degree and move on. By this time next year that goal will be complete. My second goal is to pass the CPA exam and will focus on that during the winter of 2013. God willing and the creek don't rise I will be gone/retired form US in another year or so. AA's banruptcy filing last week is timed so very well for the graduate finance class I'm taking currently. The text I use for class and a source for my postings is Financial Management: Theory & Practice, 13th Edition. Michael Ehrhardt & Eugene Brigham. 2011, Cengage Learning. The core objectives for this course focus on corporate-valuation models for M&A activity, LBOs, divestitures, debt and equity offerings, and bankruptcies. I'm just sick and tired of so many people saying US brings nothing to the table because it demonstrates a complete misunderstanding of reasons for a merger, specifically in this industry. And, I'm using this class to validate my opinions. Who knows what will happen. AA has some tough decisions to make, but was very smart to avoid DIP financing. Every scenario I, you, boeingboy, and all of the AAers have opined on have validity. The only "rock solid" thing about all of this is the AA brand will survive and prosper. In what form, size, and ownership remains to be determined.
