Could AA buy AS?

[topDawg]

Under different adminstrations it's very possible - today's adminstration hates business - the companies that employee people

I'm not so sure. 
 

http://blogs.barrons.com/stockstowatchtoday/2015/03/06/could-american-airlines-buy-alaska-air/

"Fact: American Airlines and Delta Air Lines both have Asian growth ambitions

Fact: American Airlines is now doing more business with two key Delta Air Lines partners

Fact: Both American Airlines and Delta Air Lines plan on growing a lot out of LAX

Opinion: The Korean Air and Delta Air Lines relationship is worsening

Opinion: The Alaska Air and Delta Air Lines relationship is not great these days

Opinion: We see Korean Air potentially leaving SkyTeam

Opinion: American Airlines might pursue a three-way JV with JAL and Korean Air …which would be a potential ‘check mate’ for oneworld in Asia

Opinion: We see Alaska Air and Delta Air Lines terminating their codeshare in time

Opinion: Alaska Air could join oneworld soon thereafter

Result: American Airlines fortifies its grip on Asia & west coast U.S. by buying Alaska Air"

Jeesh KE and AA literately have a 1 route codeshare
 
And some how they are leaving their US ATI partner in Delta but also very close partners in SkyTeam including a minority stake in CSA? 
 
Okay, which one of you AA fan boys wrote this?

 

[WorldTraveler]

thank you.

and that one codeshare has no beyond ICN codesharing for AA and no beyond DFW codesharing for KE.

and the AS and KE issues still involve contractual requirements that undoubtedly prohibit either AS or KE from terminating their relationship with DL without paying a termination free or providing something else in return.

DL has known for years that DL's actions to grow SEA would undoubtedly lead AS to want to terminate the DL relationship and yet DL has forced AS to continue to provide the minimum amount of codeshare traffic that the contract specifies in routes which DL does not serve from SEA and in return give AS access to DL's network which is the only way that AS' flights to DL's hubs continue to work.. and the same can be said for KE.

KE's performance in other carrier US hubs is weak but ATL is the strongest of those - still weaker than LAX or NYC or large coastal markets. KE's presence in ATL is possible only because they can codeshare on DL's routes into ATL... which is also why DL will win in any expansion into ICN or China vs. AA because DL has so many routes on which it codeshares from the gateway cities to the rest of Asia.

 

[LD3]

sorry but SEA makes no sense as a domestic hub for AA. The only thing "north" of SEA is Alaska and DL seems hellbent in throwing as much capacity as possible into the market++

If any other airline were to saturate a market like your saying DL would do, you would be having a stroke. Just to be sure,  this is SEA you are talking about, the DL intl only hub?

 

[dfw gen]

before american brought anything we would naturally have to ask deltas permission. or the resident expert on all things aviation.

 

[WorldTraveler]

they didn't ask my permission for US..... I said it was a bad idea even without being asked and now that we are seeing the effects of all of the asset divestitures on AA's performance, it is becoming clear I was a whole lot more right than a lot of people want to admit.

specific to SEA, the issue is that SEA makes sense as a domestic hub for no one. it exists as one because AS has only one hub and built it from being a north-south hub that primarily fed Alaska into a national hub solely because there were no other options.

regardless of whether you see it or not, SEA will not exist as a hub in its present form if AA is acquired by any other airline.

DL is building SEA as a hub to feed its int'l operations and by the summer will be the largest revenue carrier from SEA on a local market basis despite having 1/3 of the capacity in seats that AS has.

DL's hub is a high revenue hub that is focused on the western US. AS' hub is high volume that continues to expand throughout the entire US.

 

[commavia]

On a semi-related note (or two) ...
 
Did anyone else hear what Alaska's CFO said at an investor conference last week about its partnerships with Delta and AA?
 
"Revenue that we get from our codeshare partners has been important to the company ... although certainly less so ... the relationship that we have with one of our two big domestic codeshare partners has been shrinking, but the growth in the other, American, the other partnership, has been offsetting a bunch of that, as has revenue from just simple interline partners ... we feel actually really good about our ability to continue to replace that revenue with revenue from our partnership with American and revenue that's sourced by us ..."
 
Hmmm ...
 
And just today, Alaska announced that it's launching a daily SEA-JFK flight - scheduled, interestingly, perfectly complimentary to AA's daily SEA-JFK flight.  I'm curious to find out which terminal they'll be using at JFK.

 

[WorldTraveler]

yes, I did see the news regarding SEA-JFK.

AS and AA cannot share revenues or coordinate schedules so they are simply helping each other where both don't serve... the new SEA-JFK flight is at a time where DL has a flight but AA does not.

but it highlights exactly what I have said all along.

DL decided a long time ago that it no longer made sense for DL to expect AS to work with them, so they are now strongly growing and competing where DL thought that AS would provide codeshare feed.

AS and AA only help each other because they stay out of each others' ways and because both are weak in the markets where each other can help.

AA gives up its own internal growth in order to be loyal to AS. DL is up to 9 mainline flights/day from SEA to LAX, mainline on LAX to PDX, and 6X SEA to ANC.... DL is far better off growing on its own.

the AS/DL relationship will end as soon as the contract allows, which I suspect could be within a year. by that point, DL will have built a SEA schedule large enough to support its own int'l flights and along with LAX growth, become the 2nd largest of the big 3 on the west coast.

 

[LD3]

A hub is a hub is a hub, SEA will not be an pure intl hub as your trying so hard to make people think. You stated that capacity constraint will be thrown out the window concerning cities in Alaska, and I can't see SEA supporting all those long hauls without help. DL will not ignore any domestic traffic that they can squeeze on transfer flights...

 

[WorldTraveler]

I didn't say it was a pure int'l hub. No such hub exists for a US carrier other than DL's NRT hub. DL's SEA hub is designed to connect far more traffic to int'l flights with the second focus on the domestic local SEA market and very little for domestic to domestic connections.

I did not say that DL would throw capacity constraint out the window; I have said that DL will add the capacity to gain a viable long term position in the major SEA markets. And Alaska is a major destination for Asians during the summer.

And since the NW merger, DL has been the 2nd largest carrier to/from Alaska. DL generally has avoided the PMNW to Alaska market in favor of SLC which was their closest gateway and MSP.

as the AS-DL relationship continues to deteriorate, it is a given that there will be more markets where AS and DL step into each other's markets.

AS' decision to add a JFK-SEA flight that complements AA's single flight but overlaps a DL flight is one example and will not be the last from either side.

 

[texflyer]

Short answer no, I do not believe the DOJ would allow it with the concentration there is now. Alaska is doing a well enough job holding off Delta.

 

[WorldTraveler]

I'm not sure you define "holding off" but DL's actual share of the SEA domestic market (the part in which DL and AS directly compete since DL also has an int'l operation which AS doesn't compete with) in the most recent DOT quarter (last summer) rose faster than any other carrier at SEA.

remember that DL's domestic growth at SEA really just started last summer, increased last winter, and will hit another phase this summer.

DL's domestic capacity for this summer will be up 40%, a rate more than 4X higher than AS' rate of growth. DL will have 40% of the domestic seats that AS will have by this summer.

So, the notion that AS has held off DL is not realistic.

AS is still doing well in large part because of improved efficiency with newer aircraft and lower cost jet fuel.

but there will be no merger between AS and any of big 4 and AS execs seem to realize that with their statements that if they see a merger in their future it will be with a smaller LCC

 

[LD3]

remember that DL's domestic growth at SEA really just started last summer, increased last winter, and will hit another phase this summer.

DL's domestic capacity for this summer will be up 40%, a rate more than 4X higher than AS' rate of growth. DL will have 40% of the domestic seats that AS will have by this summer.

 

So much for the intl hub you stated....

 

[WorldTraveler]

I mentioned DL's domestic operation because that is what competes with AS.

DL's international operation is about 75% of the size of its domestic operation by this summer. in contrast, DL's international operation at JFK is about 1.35 times the size of its peak summer domestic operation.

DL's domestic operation at JFK is only 40% larger than it is at SEA but DL's JFK int'l operation is 2.5x larger than its SEA operation.

thus, you can see that the smaller local market at SEA requires more feed.

And DL's international operation at SEA is between 45-49% of the size of the total SEA international operation for all carriers based on seats, flights, and ASMs.

since this is an AA forum, it is worth noting that DL's domestic SEA operation has more seats than AA's entire JFK operation based on summer 2015 schedules.

 

[FrugalFlyerv2.0]

it is worth noting that DL's domestic SEA operation has more seats than AA's entire JFK operation based on summer 2015 schedules.

 
Is SEA profitable? 
 
Oh, and for all that amazing operation DL has at SEA, they still can't fill a B767 over 50% to make the 'seasonal' HND flights work, but yeah, we hear ya, DL rules!

 

[WorldTraveler]

SEA like NYC aren't reported as DOT regions for profitability.

the Pacific is. and DL has been the most consistently profitable US airline across the Pacific.

and given AS' market cap, it is doubtful that any financial analysis would show it was worth buying AS compared to building SEA internally which is what DL has and is doing.

further, your preoccupation with SEA-HND belies the fact that AA clearly couldn't make JFK-HND work and the DOT seems to have tossed AA's request to take over the route from DL into the trash can.

further, the same low fuel prices that will help AA's profitability on its TPAC operation will do the same for DL and its SEA-HND route.

finally, DL's SEA to Asia hub has about as many seats as DTW to Asia which makes DL's two TPAC hubs right under SFO as the top US carrier gateways from the US behind UA at SFO.

you should be happy to know that AA at DFW will offer about as many seats to Asia as DL's two hubs... the difference being that the number of AA ASMs is much higher because of the longer distance on every one of the routes compared to what DL or UA flies to get there.

SEA is a very viable int'l hub for DL, it is the shortest distance from the US to Asia which allows DL to use smaller planes and gives DL a cost advantage (just as CO's use of the 757 allowed CO to build EWR to Europe), and DL has built a domestic operation which is more than capable of filling DL's TPAC flights from SEA.


so, the question about acquiring AS is water under the bridge. DL has already built SEA to a size where a merger with either AA or DL is out of the question for antitrust and competitive reasons not just at SEA but all along the west coast.

and DL still has room to grow its SEA int'l operation while AA appears to have tapped out what it can fly from DFW.

factor in that DL will be the largest US TPAC carrier at LAX by this summer and it sure appears that DL out-strategized AA over the Pacific just as it did in NYC.

if that in your mind translates into "DL rules the world" then we'll let you believe it but I didn't say it.