Delta Air Lines Seeks 'Crown Jewel' for New York-JFK Hub: Nonstop Flights to London

[jimntx]

Fact is, No one at any of the other carriers can trust the motives of AA management due to Crandall's cutthroat tactics of years past, and I doubt if anyone at DL,NW,UA,CO or US wants to be their next victim.

Well, all the major oil companies did business with Nazi Germany right up to the minute the U.S. declared war on Germany. Does that mean you will now park your SUV and walk because the oil companies can't be trusted? It's history. Just like Crandall. Get over it.

What Crandall did is called BUSINESS. He did nothing that other CEOs wouldn't have done if they thought they could get away with it. What? Are you a former Braniff employee?

 

[jimntx]

And you do you explain both AA and CO's growth in Asia, neither of which have a true hub west of the Rockies.

The 2000 flight attendants based at LAX-D and LAX-I with AA are going to be so disappointed to learn after all these years that they don't work in a "true" hub. Ditto the 900 at SFO.

Just what constitutes a "true" hub? We have one whole terminal and part of another one. How many more gates do we have to have in order to be a "true" hub? Can I tell the company to go pound sand the next time I work a through flight at LAX and they want me to clean the cabin? We are only supposed to clean on through flights at a hub.

 

[WorldTraveler]

I don’t think I would characterize TW as successful in anything it did. TW discounted very aggressively throughout its NYC and Caribbean markets in its last days which was undoubtedly part of AA’s motivation to buy them.

I don't think AA refers to either LAX or SFO as a hub. Correct me if I'm wrong. AA obviously has very large operations in both city. DL didn't call NYC a hub until this year. I have no idea how many employees DL has had there for years but they didn't call it a hub. DL also has lots of employees in LA (probably not as many as AA) but they don't call it a hub either. DL and AA probably each have more employees in LA than some carriers have in their own hubs so that is probably not an accurate barometer. How many CO employees do you suppose are in CLE or NW in MEM?


ualdriver,
I’ve gone in spurts on this board as well so I guess I find a life too.
You are one of the sharper posters on this board and I appreciate your contributions. Glad you went to the trouble of quantifying it. Actually, though, at the time I made the assertions about UA not having a plan or financing, the statements were correct. News reports indicated that UA was talking but no deal was done or publicly presented. Since companies in bankruptcy live in a fishbowl, talk means nothing since as soon as something substantive has occurred it has to be filed either with the court or the SEC.
I’m not sure I agree with the 40% CASM difference but UA does have about a 40% longer stage length which does affect CASM calculations. I would like to see Artie justify his calculation since it obviously involves taking stage length into consideration.

I would encourage you to look at Aviation Daily in a recent (within the past 2 weeks) article about US vs EU carriers and their costs. It ranked not only the US carriers but also the major EU carriers and showed the advantage that US carriers have. Because it is copyright, I can’t post it here but if you can’t find it, let me know and I can either PM you the relevant info or get you a copy one way or another. Not surprisingly, DL was one of the lowest cost large producers on either side of the Atlantic.

Certainly UA isn’t going to go away tomorrow and I’ve never said that. But I do not think UA is not positioned well enough to make it longterm. While you may not like it, there is widespread belief that UA did not do what it needed to do in its bankruptcy and is now at a competitive disadvantage. And while you can say that UA will continue to cut costs, so can and is everyone else. Making it more challenging is the much higher levels of LFC competition that UA will face in the next year. UA and US alone are bearing the brunt of the LFC growth and apparently the LFCs realize both carriers vulnerabilities because that’s where they keep attacking. Having higher costs than the competition and key routes that remain vulnerable mean UA will find it very hard to continue to maintain the revenue premiums that have allowed UA to go with higher costs.

The NYC transcon markets are good examples of the difficulty UA has had in maintaining a presence in the NE markets. AA also has a premium product but has maintained its total seat share while first CO and more recently DL have pushed their way into the market with enough frequency to be a major player but while using a standard domestic 2 class product. When the economy takes a downturn as it surely will, UA will be the carrier that will find it hardest to keep things going. Having a niche product in the midst of falling market share is a very difficult position to maintain and that is precisely the position I believe UA will be in during the next downturn. Obviously the Asian route system will be the last to feel it but as UA continues to struggle on the east coast, to Europe, and to Latin America, it’s not hard to say that their troubles will spread westward into the heart of UA’s system. It would probably take an external event to make it apparent; the industry’s exposure to fuel price swings and the very regular economic downturns that affect the industry could be all the catalyst that is needed to exacerbate UA’s problems.

I respect Cosmo for his analytical ability and have told him so. I am no less capable of obtaining or displaying that information but often do. The difference is that I pepper my data with interpretation, much of which you do not find liking. I watched CNN coverage regarding the Middle East. Every hour there was a different host than had a slightly different (and in some cases qualitatively stronger) bias regarding the situation. I didn’t like how some of the hosts/reporters presented the situation and I certainly don’t want to hear the news from them. However, they were just as KNOWLEDGEABLE as some of the hosts/reporters than had little bias. In many cases, though, the more biased reporters have much more popular shows. We all view the world through our bias. I have a bias – it’s been well stated – and I use it to attract attention to what I write. I have been able to use my style successfully enough to post my bias in about 3000 postings on 2 aviation websites. I post information so I can interpret it in light of the bias I intend to maintain.

To the rest,

While there is an element of truth to the LGW vs. LHR and to DL’s JFK operation to this point, DL has made dramatic changes in its mgmt. approach and in how it operates its JFK hub. Unlike the DFW hub which DL deemed as strategically not necessary, the NE is still highly competitive and DL has a very strong track record there, making it necessary and very possible to win there. An aweful lot of the rhetoric speculating about DL’s success on JFK-LGW is based on hearsay rather than real evidence. CO and NW both operate flights to LGW opposite BA and VS’ LHR operation so it is possible they could succeed. DL has much lower costs than other NYC-LON carriers so has some room to build the market. VS does have less feed on both ends of the route than any other airline and uses very large airplanes. DL is using the smallest widebody in its fleet and undoubtedly has a bias toward building frequencies rather than putting larger equipment on. DL is the largest transatlantic carrier and in among the top couple carriers in NYC so they have a very strong position from which to build. Let’s wait until the flight begins operating to get some updated info but DL is moving fairly conservatively yet will undoubtedly work like all get out to make it work.

DL has no choice but to make JFKLGW work and I believe they will. Perhaps the greatest reason DL will succeed is because so many people expect them not to.

While not the best technique, fear of failure is a powerful motivator. Perhaps it has worked to keep DL alive thus far and perhaps it worked to keep UA and US alive, carriers that defied the historical death sentence bankruptcy had on the airline industry.

 

[jimntx]

I don't think AA refers to either LAX or SFO as a hub. Correct me if I'm wrong.

Ok, you got it. You're wrong. The company frequently makes reference to our NY, Chicago, Dallas-Ft. Worth, Miami, Los Angeles, and San Francisco hubs. They even designate BOS as a hub in some communications. The fact that the others are smaller hubs than DFW, ORD, and MIA does not mean they are not hubs. By that argument, you would have to quit referring to CVG and SLC as hubs if compared to ATL.

A hub is basically an airport that has a lot of connecting flights and substantial O&D traffic. Now, granted BOS is more in the DL mode--i.e., a lot of lawn darts bringing traffic to the mainline domestic and International flights--but, would you say that CVG is not a hub for that reason?

I would grant you that even I have trouble thinking of SFO as a hub rather than a focus city. With the demise of the SJC-NRT service, the international service out of San Francisco area consists of a daily turn to HNL.

 

[artiefufkin1]

WT

Adjusted CASM is merely a mathamatical forumula that takes into account the stage length and unadjusted CASM. So in the case of UA and DL. DL's June CASM should be 6.5 divided by the 7.64 for UA. That figure, times DL's LOH 1152 divided by 1700 miles. Plotted on a graph this would be a straight line so it's not a real world scenario.

In the real world, adjusted CASM is a curved line that drops steeply in the shorter LOH range and levels out for longer LOHs beyond 900 miles. This is due to fix costs being spread out over more miles at first, but in longer LOHs fixed cost are not a big factor anymore and you still left with fuel, and employee costs.

So DL's 58% adjusted CASM in comparison to UA is just rough guide. In the real world it's not that bad.

 

[flyhigh]

TW was at least sucessful at getting better fares than DL on the transcons.

JFK was considered a hub by DL at least as far back as 2002 when I started there. Technically, a hub is a city where the flights are timed to create connections...however, in a world of increasing point-to-point svc, the definition has become more loose. I would say LAX & SFO for AA are more a focus city due to lack of mass. The company teeters back and forth on it.

DL's DFW hub was closed for financial reasons alone. Strategically, it had a lot of value, but the company didn't have the right aircraft and was bleeding money there. Many back and forths over it, but the fnial judgement was Karnic throwing his stuff on the table saying "the bleeding has to stop". Some analysis followed that, but it was more of a formality. Michelle Burns had a hard time wanting to close it, but knew it needed to be done. With the right aircraft and a couple of different routes, it could have been sucessful.

The growth in JFK is less a change in mgmt and more a way to lower costs. ATL has a per pax cost of less than $10 whereas JFK was somewhere in the range of $30. The facility is a monster. There was a lot of work done to consider closing shop there as well, but nobody could come to terms with leaving NYC. The result was to throw more flights in to lower costs. As the EVP of Route Planning & RM has said, there have been a lot of adds...some will work, some won't. If too many JFK routes fail, that would be a bad sign for DL there. By adding this LGW flight (through a purchase) it appears enough adds are working. Someone said DL is going to play the frequency game because their aircraft are the right size. Not so sure...AA/BA/VS all use large aircraft multiple times a day. DL is adding this because it needs to. They can finally go to the business community and say they serve Chicago & London. Now they have to build the credability by staying in the markets long enough. Criticism typically centered around Delta's in and gone style of the past. A lot of companies simply wouldn't sign on with DL because they couldn't trust them to stay for a while. Time will tell...

 

[TechBoy]

Making it more challenging is the much higher levels of LFC competition that UA will face in the next year. UA and US alone are bearing the brunt of the LFC growth and apparently the LFCs realize both carriers vulnerabilities because that’s where they keep attacking.

"UA and US alone" Gimme a break! The last time I checked there were two growing LFCs other than WN. Where might they operate? Could it possibly be in DL's two largest hubs? The fact of the matter is that the LFCs continue to take domestic market share from all the majors, including DL.

While there is an element of truth to the LGW vs. LHR and to DL’s JFK operation to this point, DL has made dramatic changes in its mgmt. approach and in how it operates its JFK hub. Unlike the DFW hub which DL deemed as strategically not necessary, the NE is still highly competitive and DL has a very strong track record there, making it necessary and very possible to win there. An aweful lot of the rhetoric speculating about DL’s success on JFK-LGW is based on hearsay rather than real evidence. CO and NW both operate flights to LGW opposite BA and VS’ LHR operation so it is possible they could succeed. DL has much lower costs than other NYC-LON carriers so has some room to build the market. VS does have less feed on both ends of the route than any other airline and uses very large airplanes. DL is using the smallest widebody in its fleet and undoubtedly has a bias toward building frequencies rather than putting larger equipment on. DL is the largest transatlantic carrier and in among the top couple carriers in NYC so they have a very strong position from which to build. Let’s wait until the flight begins operating to get some updated info but DL is moving fairly conservatively yet will undoubtedly work like all get out to make it work.

This is where you have a credibility problem, WT. When UA is a close #4 is the overall transatlantic market, you declare that they are failing and can no longer be considered a global airline. However, when DL is a likely distant #5 in the NYC-LON market (and at an inferior airport), you think we should take a wait and see attitude. I tend to agree with you, in part. But I think you would have a bit more credibility if you would apply the same principles to your analysis of other airlines.

 

[Fly]

I would like to see Artie justify his calculation since it obviously involves taking stage length into consideration.

How convienent that you found a little friend to play with WT. Your "friend" Artie sure popped up just in time to help you TRY to justify your rantings. Now when did he show up? Ah yes, this weekend when everyone on the boards were making fun of you.

 

[superG]

DL=30++yrs

 

[ualdriver]

WT

Adjusted CASM is merely a mathamatical forumula that takes into account the stage length and unadjusted CASM. So in the case of UA and DL. DL's June CASM should be 6.5 divided by the 7.64 for UA. That figure, times DL's LOH 1152 divided by 1700 miles. Plotted on a graph this would be a straight line so it's not a real world scenario.

In the real world, adjusted CASM is a curved line that drops steeply in the shorter LOH range and levels out for longer LOHs beyond 900 miles. This is due to fix costs being spread out over more miles at first, but in longer LOHs fixed cost are not a big factor anymore and you still left with fuel, and employee costs.

So DL's 58% adjusted CASM in comparison to UA is just rough guide. In the real world it's not that bad.

Artie-
Actually, I'm going to have to disagree with that analysis. A rough guide of a 42% advanatage isn't even close, especially now that I've finally found some curves I was looking for. I couldn't find them last night when I posted.

These are the numbers I have. As I posted above, UAL's mainline/consolidated CASM (including fuel) was around 11.43/12.11 for 1Q06, the earliest "full quarter" of data I can find for DAL. DAL's CASM (including fuel) was around 11.12/12.15 respective to UAL's for 1Q06. The nearest data I can find concerning stage lengths is that back in 11/05 DAL had an average stage length of around 1020nm. UAL's is around 1350nm. I'll come back to this later.

As an interesting aside, WT you often claim that DAL is making dramatic changes in the bankruptcy process. You write that no other airline used this time to lower their costs better than Delta has. Well, if we're looking at just the raw costs above, I'm not buying it yet. According to each airlines' 2000 annual report, DAL had a CASM of 9.68 and UAL had a CASM of 10.63, for an advantage of around 9.1% in DAL's favor. DAL has historically enjoyed lower costs than UAL, and if one takes into account the longer stage length UAL probably had during that time (that disparity was probably greater back then then it is now), the cost advantage in DAL's favor widens further. So WT, in order for me to believe that DAL is doing a dramatic job cutting its costs, far better than UAL as you claim, I would expect DAL to WIDEN that 9% CASM gap during the current bankruptcy process (compared to the 2000 numbers), especially stage length adjusted. If all DAL can do in the bankruptcy process is "approximate" UAL's costs as it currently is doing according to its latest full quarterly report, I would argue that DAL is not doing a good job cutting its costs at all. In fact, one might even argue that UAL did a better job. I do realize, however, that DAL is incurring costs in the bankruptcy process that it wouldn't otherwise, so I'll admit that using that 1Q06 data might not be a fair comparison.........yet.

Back to stage length adjusted data. Artie is right in describing the stage length adjustment when looking at a curve. If you can imagine a graph of y=1/x^2 - the slope of the curve is very steep on the "left" hand side of the curve and flattens out considerably as one looks toward the "right" side of the curve. If you looked at a curve for stage length adjusted CASM for an airline, the curve would look sort of similar.

That's why the linear interpretation that Artie made concerning UAL's vs. DAL's cost isn't even close. I'm a big fan of "back of the envelope" computations simply because I don't have the accurate data that the professionals of the world have and taking an airline's CASM out to 5 decimal places doesn't make sense. But Artie's rough numbers are way off in my opinion.

When you look at a curve for adjusted stage length curves, the curve is considerably flatter the longer the stage length is. That's because you're spreading the high costs of taking off and landing over more seat miles, so as an airlines' stage length increases, the "adjustment" made becomes smaller. In fact, in the DAL and UAL case I would argue that adjustment using the numbers in the 1st paragraph is in the neighborhood of a few percentage points (i.e. certainly less than 5%). And I imagine with DAL's recent rapid expansion in Europe that the stage length data for DAL has actually increased, further lowering that adjustment when comparing the two airlines.

 

[ualdriver]

I would encourage you to look at Aviation Daily in a recent (within the past 2 weeks) article about US vs EU carriers and their costs............... Not surprisingly, DL was one of the lowest cost large producers on either side of the Atlantic.

I don't think that being a low cost producer necessarily equates to success or domination of a market. If we only looked at an apples-to-apples cost comparison between airline seat producers and said "he with the lowest cost wins" we'd have a country covered with JetBlue, Airtran, Frontier, SWA, etc., aircraft. Obviously that's not the case today (yet!) and the post-deregulartory airline environment is littered with the carcasses of "low cost producers."

Certainly UA isn’t going to go away tomorrow and I’ve never said that. But I do not think UA is not positioned well enough to make it longterm. While you may not like it, there is widespread belief that UA did not do what it needed to do in its bankruptcy and is now at a competitive disadvantage.

I don't care about "widespread belief." There was "widespread belief" that UAL was going to have a net profit of about 50% less than it actual made in 2Q06 until UAL released some prelimiary numbers to the market in front of their July 31 webcast. And the guys that held that "widespread belief" were the guys with offices full of secretaries, analysts, fancy computers and expensive data mining software. It's not that I don't like the "widespread belief." I just don't go by it as it can be often as wrong as it is right.

And while you can say that UA will continue to cut costs, so can and is everyone else. Making it more challenging is the much higher levels of LFC competition that UA will face in the next year. UA and US alone are bearing the brunt of the LFC growth and apparently the LFCs realize both carriers vulnerabilities because that’s where they keep attacking. Having higher costs than the competition and key routes that remain vulnerable mean UA will find it very hard to continue to maintain the revenue premiums that have allowed UA to go with higher costs.
And here's another thing that I just don't get with your posts about DAL. You are a smart guy I'm sure but you act like DAL operates in this "vacuum" in the domestic U.S. According to this month's ATW, Airtran has 74 737's on order (page 107). Seventy Four 737's. Where do you think a bunch of those airplanes are going, WT? Airtran has a pretty large cost advantage over DAL, especially when stage length adjusting their data relative to DAL's. Do you think Airtran realizes DAL's vulnerabilities in DAL's market and is capitalizing on it? I do. Do you think DAL's higher costs will make it hard to continue the revenue premiums that have allowed DAL to go with higher costs? I do. As DAL further retreats into ATL and JFK and some new European markets that may or may not even turn out to be successful, can DAL's niche product be enough to maintain itself during the next market turn? Don't know.

Look, the LCC's are going to continue to expand in everyone's back yard. The question that we at the legacy carriers are going to have to answer in the domestic narrowbody market is this: Can we continue to receive the revenue premiums relative to the LCC's to cover our higher costs as the LCC's expand? If we can't, the legacy domestic narrowbody model is going to have to change, and no one will be immune to that change. Not even DAL.

 

[JAMAKE1]

The 2000 flight attendants based at LAX-D and LAX-I with AA are going to be so disappointed to learn after all these years that they don't work in a "true" hub. Ditto the 900 at SFO.

Just what constitutes a "true" hub? We have one whole terminal and part of another one. How many more gates do we have to have in order to be a "true" hub? Can I tell the company to go pound sand the next time I work a through flight at LAX and they want me to clean the cabin? We are only supposed to clean on through flights at a hub.

Jim: You are not quite correct. Tell your colleagues to quit cleaning cabins at LAX. Neither LAX, nor SFO are American Airlines hubs. They are bases.

For further info, click here:

http://www.aa.com/content/aboutUs/whereWeFly/maps/usa.jhtml

 

[flyhigh]

Legacies will most likely continue to maintain a premium over LCC's for two reasons:
- better overall product for higher yielding customers...I'd take DL's front cabin over AirTran anyday. It's a world of difference from a comfort standpoint alone.

- Destination options, especially to smaller towns/cities will continue to be a driver as well. Until LCC's can serve the Tupelos and Augustas of the world, lagacies will be able to maintain higher fares in those markets.

By artificially shrinking Delta (taking 764 off of Florida, etc.), DL should be able to expand their yield premium. That off course relies on an able Revenue Management group. I'm not convinced Delta has acheived that yet, but we'll see. Hauenstein has a good understanding of how it should work...the proof will be in the pudding though.

That said, back on topic, their cost advantage won't be enough. The market has handles four carriers pretty solidly in the past...five may just simply be too much. Even if it were free for Delta to fly, I'm not certain the demand is there for them to get into the playground...

 

[767jetz]

Actually, though, at the time I made the assertions about UA not having a plan or financing, the statements were correct. News reports indicated that UA was talking but no deal was done or publicly presented.

Um... No. Your statements were incorrect. You just said yourself, there were no PUBLICLY presented plans. That does not mean there was no plan or agreement. At that time you specifically said that the lack of a PUBLICLY presented plan meant that there was no such plan. As always, you stated your opinions as fact. I told you time and time again that there was a POR being finalized, there were several lenders negotiating to provide UA with loans, and that it would become public at the legally appropriate time.

Why don't you simply admit that you were wrong again instead of backpedaling.

Certainly UA isn’t going to go away tomorrow and I’ve never said that. But I do not think UA is not positioned well enough to make it longterm. While you may not like it, there is widespread belief that UA did not do what it needed to do in its bankruptcy and is now at a competitive disadvantage.

More double-talk. You most certainly did say that UA would not emerge.

Additionally you continue to restate the OPIINIONS of others as fact. Who has this widespread belief? The same people who have been consistenly wrong about UA all along? The same ones who were wrong about UA's earnings this quarter?

An aweful lot of the rhetoric speculating about DL’s success on JFK-LGW is based on hearsay rather than real evidence.

Much the same as your rhetoric and speculating about UA's failure and DL's fairytale dominance.

DL has no choice but to make JFKLGW work and I believe they will. Perhaps the greatest reason DL will succeed is because so many people expect them not to.

Does this mean there is widespread belief that DL will fail? Should we now post on every aviation website that DL is insolvent and will fail because there is widespread belief that it will.

After all, DL has been unable to articulate a POR, DL is unable to obtain exit financing (obviously, since there are no public reports indicating it does), DL has continued to shrink the airline, DL has elminated Song since it obviously can't compete with the Low Cost Operators, DL cut and ran from DFW and abandoned an important market (since it couldn't make money where AA could), and most importantly since DL is not a truly global airline and has no presence in Asia.

Your hypocricy is pathetic.

 

[jimntx]

Jim: You are not quite correct. Tell your colleagues to quit cleaning cabins at LAX. Neither LAX, nor SFO are American Airlines hubs. They are bases.

For further info, click here:

http://www.aa.com/content/aboutUs/whereWeFly/maps/usa.jhtml

Well, the fact the name Los Angeles is not in all caps just totally escaped me. How was I to know that is what differentiates a hub from a non-hub? You'd think that having a/c, f/as, pilots and mechanics based there as well as lots of connections and O&D traffic and 1.5 terminals of gates might qualify. Who knew that it was all in the spelling on a website!