Delta negotiating major SEA gate expansion

[WorldTraveler]

Were making good progress on our discussion to upgrade the facility and to turn Seattle into a huge international gateway for Delta, Chief Executive Officer Richard Anderson said on a recorded message to employees.

The worlds third-largest carrier is seeking 30 gates at Seattle-Tacoma International Airport in the long term, Anderson said yesterday on the call. The airline currently has 11 gates, an airport spokesman said.

http://mobile.bloomberg.com/news/2014-11-14/delta-seeks-to-nearly-triple-seattle-gates-in-alaska-challenge.html

so much for the notion that DL would be unable to compete against AS in its hometown.

“Seattle’s domestic performance has significantly exceeded our expectations as unit revenues increased 6 percent on a 25 percent increase in capacity, driving margin improvements year-over-year,” Bastian said.

 

[eolesen]

Having gates is but one small aspect of being able to compete. Where are the airplanes coming from?

 

[WorldTraveler]

DL has several dozen 321s on order, 717s that have yet to be delivered, and is apparently looking for used 757s which could help reduce the number that will be retired.

and since DL doesn't mind buying used - like WN - they can find plenty of aircraft to use.

You do realize that DL has bought a number of AA's M80s so that DL can part them out and keep DL's M80s flying, don't you?

btw, oil closed near $75/bbl which makes a whole lot of older aircraft economical.

 

[commavia]

So glad Delta (and its acolytes) are keeping this industry honest on maintaining capacity discipline! 
 
Anyway, back in reality, I can see both sides to this.
 
I completely recognize why Delta is doing what it is doing in SEA.  NRT as a gateway to Asia is basically dead for Delta - it is no longer competitive and Delta is in a perpetually and progressively weaker and weaker competitive position there, as many of us knew it would be and predicted years ago.  That obviously provides the impetus to beef up SEA which, on paper, should be a fairly viable alternative gateway to Asia given its not-insignificant market size (nothing compared to LAX or SFO, but still not small) and its excellent geographic location.  That is what is driving Delta to aggressively replace Alaska feed in SEA, as building a huge longhaul gateway that is reliant on another, non-controlled, "partner" for domestic feed is like prey having its skeleton or circulatory system on the outside of its body - it exposes the company to unacceptable financial and strategic risk.
 
On the flip side, I also completely subscribe to the skeptics who question how, and whether, Delta is going to be able to make this work without diluting earnings.  They're clearly making an investment - not at all unlike the one AA is making at LAX, or the one Delta continues to make in NYC and with Trainer - that they expect to pay off down the road.  But, that being said, dumping tons and tons of new capacity - in large part on RJs - into what is already a relatively well-served market with a dominant domestic competitor is, if nothing else, "risky."  While Delta apparently has Alaska locked into some form of "partnership" right now, I would not be surprised to see Alaska break away the instant it can, thus freeing it - arguably - to respond even more aggressively to the competitive weapons Delta is using.
 
In the long-run, Delta is betting it can either force Alaska to submit (i.e., force Alaska to dump AA and go exclusive) or else basically marginalize Alaska.  Alaska has at this point apparently refused to dump AA and go exclusive, and while Alaska itself is obviously not going to be buying A330s and flying to TYO or LON itself, Alaska integrating into some form of ATI if not JV with some other partners - say AA, BA, JAL, etc. - could go a long way in neutralizing some of the competitive threat Delta poses in SEA.
 
Should be interesting to watch.

 

[Hope777]

DL has several dozen 321s on order, 717s that have yet to be delivered, and is apparently looking for used 757s which could help reduce the number that will be retired.

and since DL doesn't mind buying used - like WN - they can find plenty of aircraft to use.

You do realize that DL has bought a number of AA's M80s so that DL can part them out and keep DL's M80s flying, don't you?

btw, oil closed near $75/bbl which makes a whole lot of older aircraft economical.

And who is going to fly them?

 

[metopower]

Probably the 900 or so pilots DL is hiring per year.

 

[WorldTraveler]

precisely. You can tell us, Meto, but I can't help but believe that DL's rate of hiring is at the high end if not the top of the US industry. It isn't hard to see why DL is having no trouble getting new hire pilots to come to work for DL and is able to grow the mainline system at 5% or more per year, offset by regional carrier cutbacks.

commavia,
the part that you continue to refuse to acknowledge is that NRT doesn't make sense as a hub. DL hasn't lost an ounce of competitiveness in Tokyo and your continued babbling doesn't make it any more so.

NRT doesn't work as a hub because average fares in the local market have fallen due to the downsizing of the hub. Even Baby Einstein can understand that the Japanese government didn't devalue the Yen for Delta Air Lines; they devalued it for the entire Japanese economy which makes Japanese originating travel less profitable for ALL airlines, including Japanese carriers who pay for major parts of their operations including fuel and aircraft in dollars.
DL hasn't lost competitiveness in the local market; the local market is worth a whole lot less which is why EVERY carrier is cutting capacity out of Japan - which affects the value of Japan as a hub. AA's JV partner JL is in just as much if not a worse position because JL ONLY has Tokyo as a connecting hub between the US and Asia.

and the best counter argument to your notion views about DL in Asia come from DOT profitability data which shows that DL has the best track record of profitability over the past several years including since the yen devaluation. In contrast, AA hasn't been profitable in the Pacific for 4 years, UA is profitable only 6 months a year, and HA hasn't been profitable in multiple quarters.

so, no, DL is restructuring its Pacific network from a position of strength and profitability which is unmatched in the US industry.

as for capacity restraint, let me remind you that DL cut capacity for years while AA in BK and in the years before and months after exiting added capacity to the market well above industry levels.

And AS had the chance to provide feed to DL but didn't deliver so DL did what any company would do which is to change the arrangement to ensure DL's larger goals across the Pacific could be attained. the best part is that DL employees gain more by AS' decision to work against DL's objectives - so you will find very few DL employees who find a thing wrong with what DL is doing.

And since DL has also repeatedly said that its SEA growth is exceeding its own internal goals and DL's RASM is growing despite adding capacity at virtually unheard of levels says DL is able to and willing to grow again from a position of strength rather than from being beholden to AS.



finally, it should be obvious to Baby Einstein that DL is a far larger airline than AS and can do what it needs to in SEA; that is hardly the situation that exists as AA decides it wants to grow from LAX to key markets of other carriers that are very similar in size to AA.

even Baby Einstein can see who has the advantage.

 

[LDVAviation]

commavia, the part that you continue to refuse to acknowledge is that NRT doesn't make sense as a hub. DL hasn't lost an ounce of competitiveness in Tokyo and your continued babbling doesn't make it any more so.

[...] Even Baby Einstein can understand that the Japanese government didn't devalue the Yen for Delta Air Lines; they devalued it for the entire Japanese economy which makes Japanese originating travel less profitable for ALL airlines, including Japanese carriers who pay for major parts of their operations including fuel and aircraft in dollars.  DL hasn't lost competitiveness in the local market; the local market is worth a whole lot less which is why EVERY carrier is cutting capacity out of Japan - which affects the value of Japan as a hub.

[...] so, no, DL is restructuring its Pacific network from a position of strength and profitability which is unmatched in the US industry.

as for capacity restraint, let me remind you that DL cut capacity for years while AA in BK and in the years before and months after exiting added capacity to the market well above industry levels.

[...] finally, it should be obvious to Baby Einstein that DL is a far larger airline than AS and can do what it needs to in SEA; that is hardly the situation that exists as AA decides it wants to grow from LAX to key markets of other carriers that are very similar in size to AA.

 
First of all, commavia doesn't babble.
 
... On that note, before you and your babbling were banned from airliners, you spared no opportunity to tell us that Delta's Tokyo hub gave Delta a structural advantage.  Back then, it was Commavia among others who tempered your delusions.  (Personally, I still remember how he schooled you on certain accounting principles.)
 
As to Delta's unmatched position of strength, that's funny.  Delta is building a transpacific hub at Seattle, not LAX or SFO.  Of the three, Seattle is the smallest O&D market to Asia.  If Delta were so strong, it would have taken on all the competition at LAX.  Instead, it is picking a fight with AS and so far it is a draw.  
 
As to the future, here is how I see it.  In the context of the battle for JAL, William Swelbar of MIT opined in a blog post that AA (as a standalone carrier) did not get its proportionate share of connecting traffic from the US to Asia.  He reasoned that this was a point of sale problem, not being able to offer a single fare and ticket to many city-pairs beyond Tokyo.   In his mind, the solution to that was ATI with JAL.  In his account, that is what made sense of Delta's play for JAL because Delta had the most to lose from United/ANA and AA/JAL being able to do what Delta (i.e., Northwest) had being doing almost exclusively for years.  It was never just about the Yen as you are arguing now.  (http://www.swelblog.com/articles/a-battle-for-jal-or-the-threat-of-competition.html0
 
Of course, for AA, it wasn't just about ATI.  (Swelbar knew that.)  At the time it was battling Delta for JAL, AA had an uncompetitive cost structure and its domestic network was not as widespread as those of United and Delta after their mergers.  Even with ATI, AA was in no position to expand or even recapture its proportionate share of traffic.  But today, thanks to the US merger, AA has a larger domestic footprint with a greater position in the East and Midwest than Delta.  And, due to reorganization, it now has a cost structure that supports expansion and the development of certain assets, such as DFW and LAX.
 
So, while the past in Asia belonged to Delta (i.e., Northwest), the future might belong to AA because as a connecting point the Dallas metroplex trumps the Detroit and Atlanta MSA's.  On Delta, the latter can barely support one destination to Asia.  But that's not the only threat to Delta's unmatched position of strength.  While Delta does not have 30 gates at Seattle, AA already has current and future rights to 30+ gates at LAX.  Up to now, AA hasn't done much with those assets.  But if it follows through with its plans to build a transpacific hub at LAX, the competition for all the traffic flows that make Seattle viable will become even more intense.  And, remember those traffic flows are more critical to Delta's viability in Seattle than they are to AA's viability in LAX.
 
On the subject of LAX, it was always been the biggest prize of the three.  But Delta had very little leverage there after it tried to stiff LAWA.  Consequently, Delta wasn't in a good position to get more gates.  LAWA even took back the leaseholds (master leases) to its hangar complex.  LOL.  What is even funnier is that today Delta has as many gates at LAX as it does at Seattle.
 
Of course, when this point has been made in the past, you have countered that AA fanboys are delusional if they think that AA will end up with the majority of gates in any planned expansion of LAX.  So, are you equally delusional now to think that Delta will acquire 19 more gates at Seattle while the other airlines, specifically Alaska, just stand by and watch it happen?  By the way, AA already has the current and future rights at LAX to 30+ gates, the same number that Delta wants at Seattle.  And, while I know I am repeating myself here, it is worth saying again because it puts in perspective just how much better positioned from a facility standpoint AA is at LAX than Delta is at Seattle.
 
... (As to your comment about AA's capacity increases before bankruptcy, you are wrong.  But I'm not going to take the time to prove it to you.)

 

[topDawg]

And who is going to fly them?

Delta is hiring people like crazy. I think they are basically at the max for FAs and Pilots. 
 
Just saw a memo that they are going to slow down transfers with-in TechOps so they can add much needed bodies. (Line needs people, MSP needs people for the extra c-checks they are getting etc. etc.) 
 

So glad Delta (and its acolytes) are keeping this industry honest on maintaining capacity discipline! 
 
Anyway, back in reality, I can see both sides to this.
 
I completely recognize why Delta is doing what it is doing in SEA.  NRT as a gateway to Asia is basically dead for Delta - it is no longer competitive and Delta is in a perpetually and progressively weaker and weaker competitive position there, as many of us knew it would be and predicted years ago.  That obviously provides the impetus to beef up SEA which, on paper, should be a fairly viable alternative gateway to Asia given its not-insignificant market size (nothing compared to LAX or SFO, but still not small) and its excellent geographic location.  That is what is driving Delta to aggressively replace Alaska feed in SEA, as building a huge longhaul gateway that is reliant on another, non-controlled, "partner" for domestic feed is like prey having its skeleton or circulatory system on the outside of its body - it exposes the company to unacceptable financial and strategic risk.
 
On the flip side, I also completely subscribe to the skeptics who question how, and whether, Delta is going to be able to make this work without diluting earnings.  They're clearly making an investment - not at all unlike the one AA is making at LAX, or the one Delta continues to make in NYC and with Trainer - that they expect to pay off down the road.  But, that being said, dumping tons and tons of new capacity - in large part on RJs - into what is already a relatively well-served market with a dominant domestic competitor is, if nothing else, "risky."  While Delta apparently has Alaska locked into some form of "partnership" right now, I would not be surprised to see Alaska break away the instant it can, thus freeing it - arguably - to respond even more aggressively to the competitive weapons Delta is using.
 
In the long-run, Delta is betting it can either force Alaska to submit (i.e., force Alaska to dump AA and go exclusive) or else basically marginalize Alaska.  Alaska has at this point apparently refused to dump AA and go exclusive, and while Alaska itself is obviously not going to be buying A330s and flying to TYO or LON itself, Alaska integrating into some form of ATI if not JV with some other partners - say AA, BA, JAL, etc. - could go a long way in neutralizing some of the competitive threat Delta poses in SEA.
 
Should be interesting to watch.

funny coming from an AA fan.  
 
and I don't see anyone getting into a JV with AS. It brings nothing to the table. Why would JL/AA add AS to the JV when AS isn't going to bring and revenue to the party?
 
now ATI wouldn't shock me. Makes AS a little bit more flexable with being able to move flights around to better connect to partners in a way that you have to be careful with when you just codeshare.  
 

DL has several dozen 321s on order, 717s that have yet to be delivered, and is apparently looking for used 757s which could help reduce the number that will be retired.

and since DL doesn't mind buying used - like WN - they can find plenty of aircraft to use.

You do realize that DL has bought a number of AA's M80s so that DL can part them out and keep DL's M80s flying, don't you?

btw, oil closed near $75/bbl which makes a whole lot of older aircraft economical.

FWIW the used market is going to be a little tight on 320/737 sized aircraft. I would expect Delta will flex with the 757 (buying used as well as doing HMV-4 checks to the 232 fleet that need them) 
 
Anything needing the 5th HMV is gone though. Cost way to much money. 
 
 
however, even the 757 market will be tight. FX is buying them like a kid in a candy store. Even buy the wingleted birds for part. I am curious if Delta were to find a large batch of RB211 powered 757s if they would add the engine to the fleet or try and stay with nothing but 2000s. 
 

Having gates is but one small aspect of being able to compete. Where are the airplanes coming from?

Delta is very flexible with the future order book.  Not only can they flex with the 321/739s but they also have the ability to add 30 more large RJs. (and the 30 CR9 options can get here quickly, Also OO has E75s on order that don't have a home yet.....so for UA but I don't think they all are. 

 

[topDawg]

 
On the subject of LAX, it was always been the biggest prize of the three.  But Delta had very little leverage there after it tried to stiff LAWA.  Consequently, Delta wasn't in a good position to get more gates.  LAWA even took back the leaseholds (master leases) to its hangar complex.  LOL.  What is even funnier is that today Delta has as many gates at LAX as it does at Seattle.
 

 
what a bunch a horse crap. Your on drugs, good drugs, if you think AA or Delta wouldn't be falling all over themselves to get to that SFO hub United has.
 
LAX isn't the prize, its a market where every single route is covered, and geographically its completely out of the way for basically the whole country. Its a market that is fragmented between 4 domestic carriers and no real way for anyone to get a sizable advantage (I know AA has  5857453490583458458903458903535803 gates and is planning world domination blah blah. ) 
 
It has huge O&D, but its also a place where every move AA makes is going to cause a reaction, and then we end up with LAX-PVG where AA would be better off lighting money on fire. 
 
 
SFO is by far the winner market on the west coast. It offers some connecting ability, limited competition and a large O&D base.   

 

[WorldTraveler]

high fives all around for dawg.

and, yes, dawg, 737/320 availability will be tight but there are so few older generation aircraft left while A and B continue to crank out new narrow bodies at such high rates that there will be a bubble in the market very soon and prices will fall for good quality aircraft in the not too distant future.

the only thing to add is that, if the AA-JL is so great, why is AA's share of the US-Japan market less than 4% while DL's share is 10 TIME higher?

The sole reason why JL decided against a partnership with DL is because DL is so large in the US -Japan market that it would never pass any antitrust regulations.

AA and JL signed a joint venture because there was no other alternative... and the fact that AA has continued to shrink its US-Japan network and carries less than 4% of US-Japan local traffic is proof positive that DL, not AA won against AA-JL.

as for ATL, feel free to tout its size to Asia all you want. DL just happens to understand that a city in the southern US is not an ideal place as a major gateway to Asia.

DFW Is only marginally better than ATL but make no mistake that AA carries passengers 3-4 hours longer on the majority of the O&Ds that flow over DFW to Asia than for other hubs including DTW, ORD, SFO, and SEA.

DFW is the only option that has even closely begun to work for AA but the costs of using DFW as a gateway to Asia are obvious to anyone that wants to see anything close to the truth.

SEA may be a smaller market than LAX or SFO but it is the closest US mainland gateway to Asia which cuts costs substantially while compromising nothing in terms of revenue. Note once again that DL carries more revenue in several markets from SEA using 767s than other carriers put on 777s from other parts of the country.

Once again, DL makes money flying to Asia; DL runs a business, not a hobby.

the best part of aviation is that there will be abundant data to verify who made the right call - DL to build SEA or AA to build LAX and DFW.

 

[commavia]

Hahaha wow - the delusion continues, and interestingly, it's the same delusion from years ago.  Incredible.
 
Back here in reality, not only do I happily "acknowledge" that "NRT doesn't make sense as a hub" for Delta, but indeed I have been continually acknowledging that fact for going on a decade, even back when we were being treated to equally-hysterical diatribes about how Delta not only was doing so great at NRT, but also how Delta was going to "depress yields over the Pacific and in Japan as long as it takes to finish Japan Airlines off once and for all."  We see how that worked out.  Delta has indeed lost far more than "an ounce" of competitiveness at NRT, and in fact it has been shedding routes out of NRT - to both Asia and the U.S. - pretty steadily for the last several years, all while JAL is now quite successful and profitable, and growing, and the AA/JAL JV continues to rapidly close the gap versus Delta in the U.S.-Asia market.
 
Delta at NRT is now approaching precisely where I and many others predicted years ago - over the fanatical protestations - that it would end up: nonstops to the U.S. hubs, perhaps a few beach markets, and those few Asian points that cannot be served nonstop from the U.S.  Gone are ICN, PUS, PEK, HKG, KHH, SFO and - I predict - soon also PVG and PDX.  Delta was simply not going to be competitive hubbing at NRT - regardless of how many times we have had to hear that it's "the largest foreign airline in Japan" - because it is in a perpetually smaller and weaker position compared to both national carriers, JAL and ANA (neither of which, needless to say, are going to be "finished off once and for all" by Delta or any other foreign interloper).
 
Thus, as I said, where SEA comes in - it's the best possible replacement for NRT, and while imperfect as a hub for various reasons already mentioned, has a far higher likelihood of long-term viability than NRT ever did.  I'm not really sure why this is all that shocking a memo to receive - Richard Anderson has said and implied as much himself on multiple occasions.  I just assumed it was already thoroughly discussed at the monthly fan club meetings.

 

[WorldTraveler]

i'm not sure what disease you suffer from but you are either woefully ignorant of reality or you have a masochistic tendency in you that is a mile wide.

You can't understand the concept of NRT as a HUB and as a destination.

DL has restructured its flying over the Pacific relying less on NRT as a hub.

DL has LOST NOTHING in its competitiveness relative to its US competitors to from Tokyo.

It is only in your ignorance that you could make those signs.

DL carries TEN TIMES more passengers between the US and Japan as a destination than AA does.

And AA's share of the US-Japan market has SHRUNK.

Perhaps I was wrong. It wasn't JL that has been virtually shut out of the US-Japan market; it has been AA. AA has less than 4% of the US-Japan market. They are nothing but a pitiful afterthought. Correct me if I am wrong but AA operates 3 routes to NRT and ORD didn't even operate on a daily basis during the peak summer. AA is a distant third from LAX and has been trying for years to try to ditch LAX-NRT and replace it with HND. AA does so poorly on LAX-NRT that it is willing to fly in the middle of the night to HND in hopes of being able to connect to JL at HND rather than continue to lose money connecting traffic at NRT.

you can believe different all you want but DL has lost no share in the local US-Japan market.

and lest you fail to grasp the similarity between the way DL restructures hubs and the way DL does,, you need only look at BNA, RDU, STL, and SJC - all former AA hubs and in each case where AA gave up the local market to another carrier after closing the hub.

IN contrast, DL has closed CVG and MEM as major hubs and yet is still not only the largest carrier but also the majority carrier.

in your masochism, you seem to want to keep trying to accuse someone else of failing at the exact same things AA has failed at.

problem is that DL hasn't failed in its network the way you think they have but your repeated trying to accuse DL of doing it only provides opportunity to once again bring up AA's failure.

And DL will build a hub at SEA that is both far larger than anything AA will build at LAX but combined with the position DL has at LAX, will allow DL to far surpass AA on the west coast.

dream on if you think otherwise... reality is a far different picture - now and in the future

 

[topDawg]

Hahaha wow - the delusion continues, and interestingly, it's the same delusion from years ago.  Incredible.
 
Back here in reality, not only do I happily "acknowledge" that "NRT doesn't make sense as a hub" for Delta, but indeed I have been continually acknowledging that fact for going on a decade, even back when we were being treated to equally-hysterical diatribes about how Delta not only was doing so great at NRT, but also how Delta was going to "depress yields over the Pacific and in Japan as long as it takes to finish Japan Airlines off once and for all."  We see how that worked out.  Delta has indeed lost far more than "an ounce" of competitiveness at NRT, and in fact it has been shedding routes out of NRT - to both Asia and the U.S. - pretty steadily for the last several years, all while JAL is now quite successful and profitable, and growing, and the AA/JAL JV continues to rapidly close the gap versus Delta in the U.S.-Asia market.
 
Delta at NRT is now approaching precisely where I and many others predicted years ago - over the fanatical protestations - that it would end up: nonstops to the U.S. hubs, perhaps a few beach markets, and those few Asian points that cannot be served nonstop from the U.S.  Gone are ICN, PUS, PEK, HKG, KHH, SFO and - I predict - soon also PVG and PDX.  Delta was simply not going to be competitive hubbing at NRT - regardless of how many times we have had to hear that it's "the largest foreign airline in Japan" - because it is in a perpetually smaller and weaker position compared to both national carriers, JAL and ANA (neither of which, needless to say, are going to be "finished off once and for all" by Delta or any other foreign interloper).
 
Thus, as I said, where SEA comes in - it's the best possible replacement for NRT, and while imperfect as a hub for various reasons already mentioned, has a far higher likelihood of long-term viability than NRT ever did.  I'm not really sure why this is all that shocking a memo to receive - Richard Anderson has said and implied as much himself on multiple occasions.  I just assumed it was already thoroughly discussed at the monthly fan club meetings.

AFAIK Delta hasn't flown to KHH. (and you missed the short lived SGN flights, but that was more of a bilateral issue than a NRT hub issue) 
 
They do have NRT-TPE flights however. 
 

high fives all around for dawg.

and, yes, dawg, 737/320 availability will be tight but there are so few older generation aircraft left while A and B continue to crank out new narrow bodies at such high rates that there will be a bubble in the market very soon and prices will fall for good quality aircraft in the not too distant future.

 
I'm not sure I buy into this big narrow body bubble. Most of the carriers who will be replacing 737NG/A320s with things like the MAX/NEO will have CEO/NG frames that don't add any value to Delta. Unlike the MD90 and 717 that Delta got which have 15-20 years left in them, most of the 737NG and A320 frames that hit the market will be older birds that wont have a lot of life left in them. (5 years vs 15-20)
 
I'm not sure that does any good for Delta when they can get 50-60% off a 737NG and use it for 25-30 years. I'm sure some very limited chances will come up but I don't think Delta is going to get a ton of used 737/320s. 
 
And FWIW I would expect the M88 replacement to become clear in the next year or so. 

 

[commavia]

AFAIK Delta hasn't flown to KHH.

 
Correct - I believe KHH was cancelled pre-merger.  Nonetheless, it is representative of just how long this general (downward) trend - of fewer flights, and smaller aircraft - predated Delta, and was actually quite evident - and well-discussed by many of us - before the merger was ever even completed.