CF: AA Isn't as Weak in Asia As You Might Think

[WorldTraveler]

It's gonna be 777s to Asia... the 772 has the legs to do most of it.

DL doesn't serve ATL-ICN... it is from DTW now.

LAX Asia is possible but AA continues to have to run into UA in order to develop a presence on the west coast and so far UA has managed to get better average fares than AA in every market AA serves to Asia except for DFW-NRT which UA obviously doesn't fly.

MAH thinks MIA-NRT is a given.... maybe, maybe not... but MIA is in the corner of the country.... it's only real value other than the local market is to serve Latin America. AA carries a lot of traffic from NRT to Latin America via DFW....you add a lot of flying time to add NRT-MIA in order to connect passengers to Latin America when you can carry them over DFW. We'll see but I wouldn't hold my breath for MIA-NRT.

As for PHL, NRT would be the first choice. PHL is a strong enough local market and a big enough hub that it can pull from the entire east coast. You can then attract passengers from the entire east coast and the chances are decent that they could work.... but it takes a lot of time and money to develop routes - and AA/US has only so much bandwidth for developmental flying... you can only add so much new Asia flying at a time... regardless of the carrier.

CLT potentially has ability to add service to Asia but it makes more sense to develop PHL first - you can get more logical connections and it is a shorter flight which means less cost.

I think US said they would use the 332 for both CLT and PHL to GRU.

DL has now also filed for GRU with 2nd dailies to ATL and JFK-GRU and next year for DTW-GRU to replace the slot that DL is giving to US as part of the slot deal.

You can play with where the slots come from but essentially there are four new slots being asked for.... 2nd dailies for DL ATL and JFK-GRU and AA's proposed new service LAX and ORD to GRU.

Not surprisingly, DL already said in its DOT filing that AA is the holder of nearly half of all GRU frequencies by US carriers and already has double dailies in JFK and quadruple daily in MIA - more than enough frequencies to fund its own LAX and ORD flights if they really believed there was a market.
DL also mentioned the AA/US merger which further concentrates Brazil service in the hands of AA....

UA didn't ask for any new slots and will actually get its frequencies from US back if US gets what it is asking for. If they don't, US still gets frequencies from DL.

It is rather certain that DL will get some new frequencies and PHL and CLT will get GRU service.

UA will have to either come up for a new GRU route or the frequencies will go back in the pool.

If I had to bet, DL will get at least two new flights but since one of which will be given to US, US really only gets one new frequency.

Since UA hasn't applied for a slot, the 7 UA frequencies will probably become available in 2015 which will mean that nearly all of the requests for new flights can be granted - and if Open Skies with Brazil happens in 2015 as scheduled, it won't really matter anyway.

The bigger issue w/ the Brazil slots is how AA's size at GRU sets them up for a joint venture with a Brazilian airline. The US has been very protective of not granting antitrust immunity to US carriers or carving out markets unless it can be shown that competitors have a very good chance of competing.

AA will likely not have ATI on large portions of MIA-Latin America because of its size and lack of competitors which may explain why DL did not choose to apply for MIA-Brazil in this round of applications.

 

[FWAAA]

I agree that it would seem likely that PHL would get flights to Tokyo before CLT. CLT features connections to lots of one-horse towns, but several of them are served exclusively by US (no other airline service) and it's possible that some of those people will have to double connect. Such is life when you live in a small town with three daily Dash8 flights to CLT. DFW, JFK and PHL all feature much more O&D to Asia than does CLT.

I don't agree with MAH4546 that MIA-NRT is a given. That flight, due to geography, would have to subsist solely on MIA O&D plus international connecting traffic from Caribbean, Central and South America. There aren't any domestic connections that would make sense. It would look like SEA-GRU/GIG. Great if there's enough local traffic, Alaskan connections and Asian connections. And for Asia-South America connections, there's already JFK and DFW (plus the potential LAX-GRU that I don't predict will be successful). The Great Circle route from NRT to GRU flies almost directly over JFK, so JFK is as good a point as any, plus NYC has huge O&D to/from both Asia and South America. JFK would appear to be the best.

 

[WorldTraveler]

Interesting your statement about LAX-GRU. Given how low the LFs have been on KE who also uses a 772 and who also carries thru traffic, I think the DOT will recognize the market is not as big as AA believes.

ORD might make more sense but AA could have started ORD-GRU years ago if they wanted to move slots from elsewhere.

Obviously the DOT gets to decide but given that UA seems to have no interest in applying for more service and will have to figure out how to use the daily flight frequencies it will eventually get back from US, DL is the "disadvantaged" carrier in these proceedings even if it has shown no creativity in adding 2nd daily flights.

US' proposals at least adds flights to PHL.

DL will hit hard at AA's currently large number of flights that will be further compounded by the addition of new US' flights to CLT (which hasn't even started service which means it will be hard to argue US should get a 2nd flight 6 months after the first one).

Not sure I want to be at the DOT trying to make this decision.

 

[eolesen]

DOT will certainly have some debate regarding DL.... Less than a year ago, DL gave up slots they'd been allocated for ATL-MAO, and negotiated away a pair of slots at GRU as part of the NYC/DCA swap. Seems they've had ample opportunity to serve Brasil, so why suddenly the compelling case to get additional slots now? They already had the partnership going with G3 at the time...

DOT seems to think it's OK for DL and UA to have a super-majority of slots to China and Japan, so it shouldn't come as a shock when the situation gets reversed with regard to Brasil.

I also wouldn't put it past LATAM to hold back on announcing their alliance decision until after the slot awards are made. They've delayed this long, and ANAC doesn't seem to be pressuring them.


LAX might not sound like a big market from the US to BR, but if its marketed right, they could see a reverse flow. Brasilians seem to love our amusement parks and resorts.

As for KE on LAX-GRU... Don't overlook culture here. There's been a lot of racism in the past between the Japanese and Koreans. That may work against KE's performance in the market. More importantly is the size of the Korean population in GRU... it's tiny in comparison to the Japanese expats and first/second gen Japanese-Brasilians. Throw a carrier in with a JV and FF reciprocity to JAL, and you're going to grab a slightly higher percentage of wallet share than you would otherwise as just a US carrier against an Asian carrier.

 

[WorldTraveler]

The route case is only about GRU, not any other markets. DL has used all of their allocations for GRU and actually created DTW-GRU by finding dormant UA slots and converting unrestricted frequencies that had been used for ATL-GIG to restricted frequencies to allow the restricted frequencies to increase DTW-GRU.

Japan has open skies... you'll recall that is what was required in order for AA and UA to gain ATI w/ Japanese carriers.

China has de facto Open Skies... there are more frequencies available than there are carriers requesting them.
When Brazil gets to that point, no one will care what routes AA decides to start.

AA is proposing new service in two carriers which it does not serve, but despite what they say they both have service - just not by US carriers.
AA also has half of all US carrier GRU service.
The DOT will not ignore the pending merger application of AA/US in deciding how to allocate frequencies even if the merger is not approved.

It is true that DL traded away DTW-GRU frequencies as part of the slot deal - but I said then that it was fairly meaningless because there would be open skies by the time the slots have to be given back.

US has not even started CLT-GRU service; there is no compelling reason to argue they should be given a 2nd set of slots this year for PHL this year when they already have contractual obligations to lease the UA slot for CLT.

Given that DL will give them one slot pair, US will get one of the four frequencies - probably next year.

DL is likely to get at least two - one of which will be used to backfill DTW-GRU which is being swapped away as part of the slot deal. Like it or not, AA operates more than single frequencies in all of their markets- it is very hard to argue that other carriers can't have what AA has done when DL data clearly shows that all of DL's GRU flights generate strong value. The DTW-GRU flight is carrying lots of cargo based on DOT data.

DL can also rightfully argue that it has tried to increase capacity at GRU using its 744s but the request has been denied by Infraero, the Brazilian airport operator; DL's 744 configuration has more seats than any other US carrier fleet type. GRU is expanding immigrations and customs areas but so far they have yet to tell DL they can use the 744.

The historic Korean-Japanese racial issue may be real but it doesn't necessarily address the California-Brazil market. If you have racial data for US-Brazil traffic by reason, by all means share it but I have never seen it.

AA has a chance of getting one slot but certainly not both.

If they want to start LAX which they say is their first choice, let them go for it. It doesn't change that there are very few connections and they will pull a lot of traffic off of their own flights at other hubs because they are already the largest airline to Brazil. Perhaps they will worry about backfilling that traffic some other way.

Brazil-US is very close to being saturated w/ the maximum amount of capacity the market can support- which has happened in other markets just as Open Skies is announced.

AA's size in Latin America and esp. Brazil will be problematic with the Brazilian regulators if they choose to apply for an alliance than involves TAM which is the only real Brazilian foreign airline. Brazil is much more protectionistic of its markets than other Latin America countries; Chile is by far the most market-oriented country in Latin America. What LAN was allowed to do with AA in Chile is not at all representative of what will occur in other Latin America countries.

Even if AA receives ATI/JV, it is highly unlikely they will be allowed to include MIA-Latin America... which is probably also why DL is not making a decision to start MIA-Latin America now.

It is also still possible that UA could be chosen as the partner for the alliance - which would have virtually no problems getting an ATI/JV.

BTW, airlineroute says AA is reducing JFK-DUB and ORD-DUS to less than daily outside of the summer season which shows how hard it is to add profitable year round int'l fllying.

 

[eolesen]

If you have racial data for US-Brazil traffic by reason, by all means share it but I have never seen it.

I'm surprised you don't have racial data at your fingertips, but it's fairly easy to obtain from PNR data between the passport data and some good name recognition software. Our engagements for this type of work are probably out of your price range, and IBM's license for their name recognition software starts at $250K per CPU.

BTW, airlineroute says AA is reducing JFK-DUB and ORD-DUS to less than daily outside of the summer season which shows how hard it is to add profitable year round int'l fllying.

Shocking that people would only go to Ireland during the summer... but what does this have to do with AA being weak in Asia, or far to strong in Brasil?... Another random deflection?...

I'm sure that LATAM could decide to stay in Star, but I'd put it at less than 10%. Avianca/TACA (soon to be just Avianca) and Copa are already strong players in the alliance, and Avianca Brasil is growing. The competition authorities already had enough grief with the overlaps between LA and JJ, so I don't think they're going to sit back and watch that get exacerbated with codesharing & FF reciprocity over the remaining half of the South and Central American markets...

Then there's the growing reality that LAN may be following DL's lead by pursuing a "Project Visine" of their own, where everything associated to JJ gets purged as soon as it is politically convenient to do so.

10% chance. Likely less.

 

[WorldTraveler]

maybe I don't really care about what races fly between what countries - and I'm not sure AA or any airline would really present a document to the DOT showing the racial profile of the passengers they are seeking?

This topic wasn't about Latin America but somehow we wound up on that topic.

Doesn't change the fact that AA is way out in front in Latin America and that likely won't change... they just will face some competition they have not faced before, in part because market barriers that have protected them will fall.

As much as some would like to make this route case out to be the feeding of the 5000, it isn't going to substantially change anything.
DL's equity partnership with Gol and whether it opens MIA-Latin America - or UA if they choose to do so - will have more effect to the US-Brazil market than adding a few more routes. If US was going to remain independent, then the story would be different...but since they are not, there is no real change.

Topic wasn't about user names and the post voting system but we wound up there as well. Oh well.

It doesn't change that AA is going to find it very hard to grow out of its core market strengths... and it's not just AA. The global airline industry is maturing which makes strategic moves like mergers and equity plays all the more important to move the needle.

Markets like Ireland and the rest of Europe have been seasonal for like, as long as they have had a foreign tourist industry. DUS is still in LH's backyard.

the only reason why there is still opportunity for alliances in Latin America is because the number of carriers in Latin America does not match the number of US carriers - so someone(s) will lose in order for someone else to win an alliance partner.

I too would be surprised if LAN/TAM chooses UA but you surely realize that Avianca Brasil is so far behind JJ and G3 that they aren't anywhere close to being viable competitors.

It still doesn't change that AA has or will have service from the US to the vast majority of the market in Brazil on its own aircraft. An alliance choice becomes little more than an effort to lock out competitors, something that won't be lost on competition authorities in Brazil and the US. The chances are slim that AA will ever gain a full-fledged ATI with a Brazilian carrier w/o significant restrictions on the JV that could last for years. JJ and AA have managed to compete by themselves for years so they might consider that acceptable - but let's remember they went their separate ways precisely because JJ wasn't thrilled with the "my way or the highway" mindset that AA brought to the partnership before.

If we called DL-NW "project visine" would we call AA/TW and AA/QQ and AA/.... "project firing squad?"

Also notice that AA has finally killed off SJU as a hub. RIP

 

[robbedagain]

DID AA do any latin america runs from its sju hub when they had sju as a hub? also does aa still run 57 from mia to latin america or did they up grade the planes

 

[eolesen]

DID AA do any latin america runs from its sju hub when they had sju as a hub? also does aa still run 57 from mia to latin america or did they up grade the planes

Nothing of any significance. Places like CCS and POS were about as far south as service went, and they probably don't count much since they're coastal cities on the Caribbean.

SJU was really just a regional hub, funneling folks from the east coast to the various islands. 25-30 years ago, it wasn't as practical to fly out of a lot of those smaller airports with a decent payload and fuel to make the mainland due to a combination of aircraft performance and runway length. Getting to SJU? No problem...

Fast forward to 2000.. Between upgrades in aircraft performance & pavement expansion, flights to MIA became feasible, and SJU got sidelined much the same way that ANC and FAI have become for flights to/from Asia.

 

[robbedagain]

THANKS E

 

[MAH4546]

MIANRT is a given. Miami-Asia is 2x the local market that PHL-Asia is and I
believe now the largest U.S.-Asia service without non-stop. ~400 PDEW and growing fast. Combine ~250 PDEW from MCO, and you don't need to worry about LatAm connections filling the plane, but cities like PTY, BSB, CNF and CCS will be good for feed, nonetheless.

And while obviously the biggest Florida-Asia markets - MIAMNL and MCOTYO - aren't exactly going to rake in high fare customers, there are other markets like MIAHKG (which is a larger local market than IAHHKG, ATLHKG or DFWHKG) and MIATPE that do bring in high fare customers.

 

[WorldTraveler]

You could be right in time, but it is a significant use of resources for a route that is very vulnerable to competitive attacks because it is in the opposite corner of the country from Asia - and will be a costly route to support. AA would also have to lock up a huge part of the market, something it does not do.

Obviously, SAN-LHR works and it is about the same type of situation... but the risks are still there. In contrast to LHR, AA/JL is much smaller than its rivals to/from Japan.

BTW, it is good to see you around here, Mark.

 

[FWAAA]

You may be right. If AA starts flying MIA-NRT, and it's profitable, that's one of the times I'll be happy to have been wrong.

Anyway, I'm still hoping to hear about JFK-China and LAX-PEK. Although Chinese carriers serve both, it's still a fact that USA-originating passengers overwhelmingly prefer USA carriers over mainland Chinese airlines.

 

[WorldTraveler]

PHL to Asia is far more likely than any of this, IMHO.

 

[robbedagain]

were any 787 ordered by aa? and if so if the new aa with dp as ceo would the 787 come on line would be used or could be used for a phl mia to asia nonstop? i know jal does or did bos nrt?? nonstop with it