You can not tell that from your posting of dominance in that category.
DL’s overall profitability means they have to be profitable in their hubs whether they say so or not.
How much information to you have about other airlines’ profit margins in their hubs? Parker has commented that DCA is one of their highest margin hubs and AS’ overall profitability implies SEA is quite profitable for them since it is their largest hub but there isn’t a whole lot of information out there on the subject.
Good advice (for other people of course) when being proved wrong, over and over again.
Being willing to admit someone else is right is not something that goes one way. I have admitted I have said something wrong when I have and will continue to do so.
I haven’t seen anyone yet tell me what major strategic things that I have incorrectly predicted. I have incorrectly transcribed some data here or there which people have caught – as they should – but more of the discussions about data are which data should be used for what point. The whole discussion about which CASM number to use is an example. People like FWAAA have opinions and have correctly cited the data he uses to make his argument but that doesn’t mean that the data he uses is the correct one to tell the story. Same type of thing regarding the recent DAL/DFW share discussion.
The real test with any argument and any use of data is whether someone correctly used the data to predict what would happen regarding the strategic objective they tried to make; history does indeed answer some of those questions and tomorrow’s history will validate whether today’s assessment of the world (the airline industry in this case) was correct.
Regarding the discussions of strategic weaknesses and strengths which seem to be hot button topics, let me summarize the strategic weaknesses which DL has since Commavia raised the question – which is absolutely valid.
1. DL does have to build its Asian network outside of Japan. The yen devaluation showed that having the majority of one’s eggs in any strategy leads to being vulnerable. Because DL is building SEA - Asia which incidentally isn’t much different from what DL successfully did from DTW but with a whole lot less fanfare – doesn’t mean DL’s Japan operation is losing money. It just means DL needs to diversify. Unlike DTW, DL’s need to build its west coast – Asia network requires bumping up against other carriers who are stronger in west coast domestic markets.
As has been confirmed by top dawg, DL’s SEA – China expansion has been successful and Skyteam does provide DL with stronger alliance possibilities within China, whether that is being fully developed now or not. The new 333s will be able to fly very cost-effectively deep into Asia from SEA and probably from LAX as well. As top dawg also notes, DL undoubtedly has sites on JFK and LAX-Asia outside of Japan which could make it much harder on AA and UA but for now DL is focusing on SEA. HKG is a necessary market which CX and UA have both defended but UA is probably now most exposed by DL’s growth not just in HKG but to China because DL has a 10% mainline CASM advantage which is huge when operating long int’l flights.
2. DL has to develop its west coast domestic network because it takes domestic feed to make any int’l flight work. DL’s west coast network is very likely profitable but it is much less focused to the east where DL is strong. DL knows it needs to increase its presence up and down the west coast as well as from the mountain and west coast states which will not naturally connect over DTW to DL’s existing Asian network. Further, there is valuable business travel with the west coast. DL does have facility limitations at LAX and SEA, but that also makes it much easier for DL’s growth efforts to become profitable because other airlines face the same limitations. DL’s ability to focus on the west coast is now much greater given its success in building NYC. In fact, many of DL’s LGA and JFK markets are ripe for upgrades to mainline aircraft, freeing up large RJs for the west coast. Some markets like LAX-SFO are probably also good candidates for the 717.
3. LHR. DL is using its own limited LHR slots to serve LHR from BOS, JFK, and its interior hubs. It is obviously at a disadvantage to LHR overall and AA/BA are still larger and combined command revenue premiums in BOS and JFK to LHR. However, DL + VS combined have enough capacity to vie for a good portion of AA/BA’s local LHR traffic because AA/BA use LHR as a connecting hub to the rest of the world while both DL and VS are largely point to point operators at LHR. DL also has the strongest relationship between DL and VS compared to any other large US airline partner because of having a Joint Venture and a 49% ownership stake. It is certain that DL will be taking a very hands-on approach to maximizing not only VS’ overall franchise but also in key markets where DL knows it must move lucrative corporate contracts in NYC and LHR to DL and JV. Further cooperation could easily include DL and Skyteam networks in Europe and Asia, including Japan.
4. Latin America, esp. from MIA. DL has freely acknowledged that its revenues to Latin America are not at levels it wants. Latin America is the only global region, including domestic, where DL does not get industry average or better yields. Still, DL is largely profitable in Latin America due to its lower costs. DL’s average fare levels are attributable to AA’s dominance of the market as well as its presence in key local markets to Latin America, esp. MIA and to a lesser extent Texas. The fact that most of Latin America has just become Open Skies does not mean that DL is failing because it hasn’t immediately jumped in to start service. Latin America, while important, is DL’s and the industry’s smallest region.
DL’s failure at MIA-LHR is a whole lot less indicative of DL’s ability or not to succeed at MIA-Latin America than it is about DL picking up a route to LHR via the AA/BA divestiture process. Latin America is a whole lot closer to MIA than is LHR, much of Latin America can be served by narrowbodies which create lower risks, and of course the MIA-Latin America market is much larger and is more heavily concentrated in AA’s hands among US carriers.
5. Presence in Texas and the South Central/southwest US. While DL’s hub at DFW was losing more money because of flights that contributed very little to the local market, DL did give up a presence in some of the top DFW local markets. DL’s performance from DFW now in the markets in which DL does serve is stronger relative to AA than it has ever been. DL is now the largest carrier in the local market to DL’s interior hubs of ATL, DFW, and MSP from DFW even though DL only used to hold that title to ATL. DL is now approaching 25% market share in DFW-LGA which is better than what DL had when it had a hub. DL is also strengthening its position in MSY and other non-hub southwest/south central cities. DL will likely never operate a hub in Texas but the markets are large enough that a key presence in large markets is possible.
I am more than open to hear others perceptions of where DL’s strategic weaknesses are but what should be clear is that DL does know where they are, do have plans in place to address them, and generally DL’s strategic weaknesses are far smaller than those for other carriers.
With the successful DL/NW merger behind it, DL is methodically working thru its strategic to-do list. Some of them like NYC and SEA international have been relatively easy to achieve competitively while others such as the domestic west coast expansion is evoking stronger competitive responses.
DL’s strong profitability and success in key strategic markets like NYC provides a lot of momentum which can be used in other key regions. And it is also worth noting that DL is the largest carrier in all of its key interior hubs, ATL, DTW, MSP, and SLC; CVG and MEM as former hubs; as well as at LGA and at JFK in terms of revenue, even though B6 boards more passengers. It is also worth noting that the LGA markets which DL expanded into are far more valuable markets than most on the west coast and yet DL has achieved 20%+ market share in a little over a year in the key LGA markets which include to other carriers’ hubs.
DL does have work to do (it would be boring if they did not) but it is well-positioned to achieve those objectives.
