DL appears ready to take MKE convention center naming rights

[WorldTraveler]

My best guess is... this is all because of WN/FL.

bingo!

And the bigger issue is that MKE is a market where NW was historically strong, it borders on a region where NW was the dominant carrier for decades (and is one of the larger cities in the upper midwest region), NW invested in YX in order to try to preserve its position in the market w/o competing with them though I am certain NW could have driven YX out of MKE if they tried, YX's standalone business plan failed and they were bought by F9 whose business plan in MKE itself has failed, MKE became a knock-down drag out between F9, WN, and FL, and now that the market has consolidated with DL and WN as the two largest carriers, DL has decided it is worth investing in the city to ensure that DL regains the position NW once held and to also ensure that WN doesn't grow MKE to the point where it can pull traffic from cities throughout WI that are key to DL's upper midwest strategy.
Add in that one of DL's largest hubs is a couple hundred miles away on a route that WN will start flying shortly and DL has every reason to fight to protect its position not only in the MKE market but also the upper midwest.

E,
Yes, DL's investment if true seems expensive for an operation the size of which DL has in MKE but it is precisely the strategic and regional implications of what WN is trying to do that is motivating DL to act aggressively. DL is not only protecting its upper midwest strategy (NW called it the heartland strategy) but DL also wants to be in the position of being able to pull traffic out of the Chicago market as well.

Remember that we have talked for years about the fact that DL has managed to protect its markets from low fare competitors better than other network carriers - a trait that NW also had.
It isn't a surprise that DL found NW's market position in the upper midwest and its dual midwest hub strategy attractive and complementary to DL's dominance of the SE.

Notably, WN has added MSP recently and gains a larger position with FL, but in the MSP-CHI market, DL has managed to protect the leadership position in the market which NW established - and WN's growth has come at the expense of other carriers in the market.

History strongly favors DL's ability to protect its markets, for DL to recognize what it takes to protect its markets, and for WN to choose to gain a reasonably sized presence but then focus their growth efforts elsewhere with other carriers bearing the brunt of WN's growth in the market.

As always, we can check back in a couple years but I think it will be shown that MKE will become just one more of the many midwest markets where DL and WN coexist side by side while other carriers are reduced to smaller and smaller shares of those markets.

 

[737823]

Airlines spend money on all kinds of things that don't make sense in my judgement. Im not pretending to be an expert here but why did DL pay a significant portion of the construction costs for Terminal A at BOS (modern state-of-the-art LEED certified space) while neglecting to invest at JFK for so long? Don't get me wrong I like the terminal and enjoy using it just didn't seem like a sensible decision and facilitated JetBlues entry and growth to a 100+ flight operation to chase DL off all their Florida routes (except MCO), DCA shuttle, etc. Seems Massport and Logan travelers like myself did well for once and to a certain extent MA taxpayers too although the airport largely generates its own revenue.

Bob keeps carrying on about AA's marketing expenditures and other product and facility investments. With that said, I'm surprised AA doesn't have naming rights for any venues in NYC given the (unsuccessful) push to lead in that market. I guess CO gave up their arena years ago, Citi took Shea stadium, and there aren't any other suitable venues for them to pick up.

Josh

 

[WorldTraveler]

why did DL pay a significant portion of the construction costs for Terminal A at BOS (modern state-of-the-art LEED certified space) while neglecting to invest at JFK for so long? Don't get me wrong I like the terminal and enjoy using it just didn't seem like a sensible decision and facilitated JetBlues entry and growth to a 100+ flight operation to chase DL off all their Florida routes (except MCO), DCA shuttle, etc. Seems Massport and Logan travelers like myself did well for once and to a certain extent MA taxpayers too although the airport largely generates its own revenue.


Josh

because DL's worst leadership of all time was by a team w/ a CEO from New England. BOS and the NE market is important but DL's current mgmt recognized that the NYC market is far more valuable and was worth focusing DL's attention, esp. since DL made an investment in the Pan Am assets now more than 20 years ago that gave them the possibility of building to become something significant.

DL's revenues in NYC are about 75% of the revenues in BOS for ALL carriers. NYC is a much larger market.

And BTW DL is the #2 carrier in BOS by revenue behind B6. Notably, average fares for B6 are much lower than they are for other network carriers and DL is the largest US carrier in terms of international revenue which drives DL's overall revenues.
Although DL is not competing in the nonstop transcon markets, DL's presence in BOS is as good as or better than other network carriers.

How airlines or any company spends their money must be weighed by the effectiveness of the returns they obtain and whether their expenditures are in line with their industry.

Some would like to see every dollar airlines make in revenue be made available first for employee compensation but that is quite simply not the way business works.

 

[737823]

because DL's worst leadership of all time was by a team w/ a CEO from New England. BOS and the NE market is important but DL's current mgmt recognized that the NYC market is far more valuable and was worth focusing DL's attention, esp. since DL made an investment in the Pan Am assets now more than 20 years ago that gave them the possibility of building to become something significant.

DL's revenues in NYC are about 75% of the revenues in BOS for ALL carriers. NYC is a much larger market.

And BTW DL is the #2 carrier in BOS by revenue behind B6. Notably, average fares for B6 are much lower than they are for other network carriers and DL is the largest US carrier in terms of international revenue which drives DL's overall revenues.
Although DL is not competing in the nonstop transcon markets, DL's presence in BOS is as good as or better than other network carriers.

How airlines or any company spends their money must be weighed by the effectiveness of the returns they obtain and whether their expenditures are in line with their industry.

Some would like to see every dollar airlines make in revenue be made available first for employee compensation but that is quite simply not the way business works.

I would agree NYC is more important, generates more revenue and has more high value customers. With that said, it's interesting DL is so interested to fight for marketshare at places like MKE. Don't get me wrong there is a business community there with Johnson Controls, SAB Miller, NW Mutual, etc but they have DTW, MEM, MSP all nearby and no more than 90 minute drive from Chicago airports. Seems like a silly move to me.

Josh

 

[WorldTraveler]

I would agree NYC is more important, generates more revenue and has more high value customers. With that said, it's interesting DL is so interested to fight for marketshare at places like MKE. Don't get me wrong there is a business community there with Johnson Controls, SAB Miller, NW Mutual, etc but they have DTW, MEM, MSP all nearby and no more than 90 minute drive from Chicago airports. Seems like a silly move to me.

Josh

ever played the game of War or been involved in war planning?
You can't expect to defend your most important regions if you allow your enemy to get closer and closer to what matters to you.

I would simply say that DL obviously sees MKE as far more than just a single market.

I would also point out to you that DL - as a result of NW's midwest strategy of dual hubs and aggressive market protection - is the dominant carrier in the midwest. It is not AA and it is not UA. DL is the largest revenue if not passenger carrier in more "spoke" (non-hub) cities in the midwest than any other carrier.

DL is the dominant carrier in the SE and circles ATL and the East coast with cities in which it has fought to be the largest carrier.

Even in CVG, which DL has largely determined doesn't need to be as large of a hub as it once was, DL still aggressively defends its position as the largest network carrier in cities that ring CVG - IND, SDF, LEX, CMH, and I also believe DAY.

In contrast, look at the cities in Texas and the neighboring states since three airlines have hubs in Texas and each are viable hubs.... and most of the airports outside of those hubs are divided between those three carriers - and once you move east of Texas, DL which doesn't even have a Texas hub is the largest revenue carrier in many of them. DL is the largest network carrier by revenue at HOU - one of WN's hubs - as it is at MDW.

In war, you don't sit quietly on the sidelines comfortably expecting your enemy to abide by borders that you think the two of you mutually agree upon.
You mark your territory very clearly, you push into each other's territory to see if you can gain more, and defend what you have.

DL and WN seem to understand that war strategy and airline network strategy are not that much different. Perhaps that is why they are growing at the expense of other carriers and why they also manage to coexist at the same time as they take territory (revenue and market share) from other carriers.

DL's efforts in MKE - remember the mileage deal they just announced for WI residents with F9 - are part of DL's efforts to protect and grow its presence in its key heartland markets, to use NW's terminology.

 

[blue collar]

... DL is the largest network carrier by revenue at HOU - one of WN's hubs - as it is at MDW.

You sure do like to spin.. DL is the only network carrier at MDW. And their revenue pales in comparison to WN at MDW. It is easy to be the largest network carrier at an airport that there are no other network carriers at. Why don't you use ORD/MDW or IAH/HOU if you want to sound reputable rather than fox news-ish.

 

[WorldTraveler]

You can call it spin if you would like but the simple fact is that other network carriers have chosen not to compete at MDW but AA and UA each chose to compete there in the past.
DL has chosen to remain at MDW as did NW because FL and now MDW served MDW and DL and NW were not about to allow a low fare carrier to gain an advantage by operating from one airport in a multi-airport city like Chicago to DL or NW's hubs. DL - and NW - had their own strategies at ORD, where incidentally, they were the largest carrier from ORD to the DL/NW hubs.

The same principle applies to HOU.

DL recognizes that if you want to win in a region and against a discount carrier, you don't allow them to gain any advantage, including operating from an alternate airport in the region just to avoid the hub carrier.

You can call it spin if you want but the results are crystal clear - DL hasn't given up its revenues in its hub markets do low fare carriers just like NW in its respective hubs - and the same principle can be applied to the regions in which they operate.

Other carriers who have been far less aggressive in protecting their markets have allowed far more low fare carrier - as well as network carrier incursion into their key markets.

Sorry if you don't understand the concept of protecting your markets, but there are plenty of companies that do... DL just happens to represent the best example in the airline industry.

 

[blue collar]

You can call it spin if you would like but the simple fact is that other network carriers have chosen not to compete at MDW but AA and UA each chose to compete there in the past.
DL has chosen to remain at MDW as did NW because FL and now MDW served MDW and DL and NW were not about to allow a low fare carrier to gain an advantage by operating from one airport in a multi-airport city like Chicago to DL or NW's hubs. DL - and NW - had their own strategies at ORD, where incidentally, they were the largest carrier from ORD to the DL/NW hubs.

The same principle applies to HOU.

DL recognizes that if you want to win in a region and against a discount carrier, you don't allow them to gain any advantage, including operating from an alternate airport in the region just to avoid the hub carrier.

You can call it spin if you want but the results are crystal clear - DL hasn't given up its revenues in its hub markets do low fare carriers just like NW in its respective hubs - and the same principle can be applied to the regions in which they operate.

Other carriers who have been far less aggressive in protecting their markets have allowed far more low fare carrier - as well as network carrier incursion into their key markets.

Sorry if you don't understand the concept of protecting your markets, but there are plenty of companies that do... DL just happens to represent the best example in the airline industry.

I will call it what it is - spin.
I get that they are trying to protect their markets, but I wouldn't go as far as to make them sound like they're ruling the roost. They say that WN has the kool ade, but from your posts it seems Ma D can whip up a pretty strong batch herself.

 

[eolesen]

With the amount of time spent justifying this small of a deal, you'd think this was equal to the decisions on the refinery or buying up the FL B717 fleet...

 

[WorldTraveler]

My responses have been in directly reply to the issues raised by others who expressed doubt if what DL appears to be doing makes sense.

For the record, I am not sure that I would invest that much money.
But I don't have all of the numbers to look at that DL does... and more importantly I don't know how to value the impact of a growing WN presence in MKE on DL's revenues in its key upper midwest markets.

What I do know w/o a doubt is that DL has a long track record of successfully defending its key markets and that WN has ultimately not grown in DL's back yard near as much as it has in other people's.

That, I am certain, is DL's goal.