DL expands SEA further with SEA-SFO flights

[FrugalFlyerv2.0]

DL will end up with a higher percentage of the local SFO int'l market with the buildup of DL's gateways at LAX and SEA than if DL had retained the SFO-NRT flight.

Huh?  Unless I'm a hard-core loyal DL customer, why would I choose a 1-stop vs a non-stop from SanFran to  Asia (NRT)? 

 

[robbedagain]

Like you frugal id choose nonstop over 1 stop

 

[WorldTraveler]

yet somehow AA has share from ATL-Latin America in markets that DL serves nonstop, US has share in NYC-Europe even though they don't serve it nonstop, and DL has share in LAX-PVG even though AA and UA fly it nonstop.

Given that DL has mainline costs 10% less than UA who is the dominant carrier in the west coast-Asia, there will be a reshaping of the market in the next few years. DL knows that UA is in a very vulnerable position which is exactly why DL is moving now.

You can count on it... and that is precisely why DL is rearranging the market in SEA now.

 

[FrugalFlyerv2.0]

yet somehow AA has share from ATL-Latin America in markets that DL serves nonstop, US has share in NYC-Europe even though they don't serve it nonstop, and DL has share in LAX-PVG even though AA and UA fly it nonstop.

Given that DL has mainline costs 10% less than UA who is the dominant carrier in the west coast-Asia, there will be a reshaping of the market in the next few years. DL knows that UA is in a very vulnerable position which is exactly why DL is moving now.

You can count on it... and that is precisely why DL is rearranging the market in SEA now.

 
Yes, AA has a loyal customer base in ATL and US has a loyal customer base in NY that will chose a 1-stop option vs a non-stop.  Likewise, there certainly are loyal DL customers in SanFran.  However, you're stating that by quitting SFO-NRT, DL will gain a higher percentage of the local international market.  This still doesn't make sense.  At best, DL will maintain the same % of the market (possible if their price is right) or even lose a few % of the market (more likely, since they're no longer a non-stop option from SFO).

 

[WorldTraveler]

DL could very well gain a higher percentage of the market if it can connect SFO to a hub which serves more of Asia.

Did you miss that UA is trying to be awarded the HND slot that AA gave up? If DL is in the position of being able to serve SFO to Asia and the Pacific from both LAX and SEA, then DL could be in a position to expand its presence in SFO. DL is also adding European service from SEA which SFO was not connected to.

It still doesn't change that DL has a 10% CASM advantage that no one honestly believes will close which means that DL has the ability to sell tickets at both what UA can do and still make money.

There is a reason why UA doubled capacity in the SFO-SEA market (+/-) and it is to cut SFO off from DL's SEA hub.

 

[FrugalFlyerv2.0]

DL could very well gain a higher percentage of the market if it can connect SFO to a hub which serves more of Asia.

Did you miss that UA is trying to be awarded the HND slot that AA gave up? If DL is in the position of being able to serve SFO to Asia and the Pacific from both LAX and SEA, then DL could be in a position to expand its presence in SFO. DL is also adding European service from SEA which SFO was not connected to.

It still doesn't change that DL has a 10% CASM advantage that no one honestly believes will close which means that DL has the ability to sell tickets at both what UA can do and still make money.

There is a reason why UA doubled capacity in the SFO-SEA market (+/-) and it is to cut SFO off from DL's SEA hub.

 
Now you're more reasonable in saying DL could very well gain a higher % or the market instead of stating that they will gain a higher % of the local market.
 
IMHO, it is possible, but not likely.  Besides price, I see no advantage to do a 1-stop to Asia via SEA or LAX and definitely no advantage whatsoever of doing a SFO-SEA/LAX-NRT-Asia.

 

[topDawg]

since the NRT hub is built in pairs of transpac and intra-Asia flying, it was a given that something would be pulled down to balance out NRT-SFO. PEK is one of the shortest intra-Asia segments left, has operated with a 763 for years, and can be easily served from the mainland.

DL will end up with a higher percentage of the local SFO int'l market with the buildup of DL's gateways at LAX and SEA than if DL had retained the SFO-NRT flight.

Despite the fascination with pulling down the NRT hub, the intra-Asia operation exists to create the largest transpac system possible which does give DL an advantage in the US-Japan market.

DL is also flying 2 744s from the west coast to NRT plus 2 767s to HND despite the schedule. The chances real high that other competitors will follow UA in pulling down more Japan routes. Remember DL has a 10% mainline CASM over UA.... that is a whole lot on a long int'l flight.

Pan Am and later UA was never as strong from Japan as NW and later DL has been which is why UA pulled down so much Japan in favor of HKG and China flying as aircraft became available to fly them nonstop . DL isn't walking away from Japan even though it is building up the rest of its network outside of Japan.

no it wasn't.
Delta didn't "have" to cut any flying due to the loss of SFO-NRT. Once again your just trying to make excuses.
 
 
Fact is Delta tried to make a marketing push to be able to get the traffic, with the idea of it coming from Japan and with-in Asia, to make the flight work. It didn't work and the flight started operating at a loss.
Has nothing to do with SFO. Simple fact is Delta is having a hard time in some markets keeping up profitable traffic with the addition of over-flights.
 
NRT is going to change, beach flying, MNL/BKK/SIN will stay. PVG/HKG/TPE are very questionable as more flying is added non-stop from the US. (I fully expect TPE will be started from SEA) 

 

[eolesen]

There will always be a strong US-JP market, but NRT is definitely less valuable than it was 20 years ago.

It started with the ability of the 777 to reach more secondary cities in Japan as well as other points in Southeast Asia which couldn't support service with a 744, and will end with the 787 being able to push those limits even further.

The day will come when even the beach flying will start to look questionable, especially as the Chinese start to figure out how to do tourism right...

 

[WorldTraveler]

so will the Japanese no longer be interested in going to the beach? That is the backbone of DL's beach market flying.. which DL has cut back as a result of the yen devaluation.

And as much as you and others want to cheer the demise of DL's NRT hub, remember that it is also JAL and ANA's primary int'l hub as well.

The US government - influenced by DL - is not going to give JAL and ANA more access to HND than what DL can get.
The US-Japan transpac market is not going to shift to HND. There aren't enough slots at HND for ANA and JAL to shift a large enough number of transpac flights to HND from NRT to make a difference.

Even if DL dismantles its own NRT hub, it does it at the same time it is building up its network overflying Japan which makes NRT less valuable as hubs for ANA and JAL as well.

The AA-JL decision to operate DFW-HKG as part of their joint venture recognizes this but it the success of diversifying away from Japan is dependent on AA's success in Asia - which hasn't happened financially - and on other carriers such as CX sitting by while AA and JL jointly market flights in CX and the Chinese carriers' key markets.

Finally, DL still has a cost advantage over both AA and UA that will have far larger and faster effect than the changes in the market dynamics. The Japanese carriers are also competing against lower cost carriers elsewhere in Asia where AA has fewer strategic partners, if any at all.

As much as AA needs to grow its presence outside of Japan in partnership with JL and as much as UA needs to defend what it has, UA's ability to defend itself against lower cost producers as well as AA in key markets post AA/US merger will leave UA as a smaller carrier at the end of 2014 than it is today.

 

[commavia]

no it wasn't.
Delta didn't "have" to cut any flying due to the loss of SFO-NRT. Once again your just trying to make excuses.
 
 
Fact is Delta tried to make a marketing push to be able to get the traffic, with the idea of it coming from Japan and with-in Asia, to make the flight work. It didn't work and the flight started operating at a loss.
Has nothing to do with SFO. Simple fact is Delta is having a hard time in some markets keeping up profitable traffic with the addition of over-flights.
 
NRT is going to change, beach flying, MNL/BKK/SIN will stay. PVG/HKG/TPE are very questionable as more flying is added non-stop from the US. (I fully expect TPE will be started from SEA) 

 
Precisely.  Amazing how quickly the tune changes - mere days! - once reality gets in the way.  So much for the alleged infallibility of Delta's NRT hub (as we were assured so recently), and so much for the fantasy that Delta doesn't have any problems of their own.
 
Despite the spin about flights in and out of the NRT hub being "paired," the truth is that of course no such requisite pairing exists, and Delta operates dozens of weekly flights between NRT and, for example, beach markets which are not "paired" to anything.  Instead, what this has to do with is the inescapable reality - for all those who have embraced reality, that is - that Delta's NRT hub continues its decade-long decline that frankly began before the Northwest merger.  It is no longer competitive to force double-connections over NRT to get to East Asia, particularly when the best Delta can ever hope to be in Japan is #3.  Luckily for Delta, they have an alternative in SEA - which is what all their expansion there is really about.  SEA doesn't come without its own problems, though - chief among them being the fact that Delta doesn't control most of its feed there (which, again, explains why they're playing such hardball with Alaska).  In the meantime, if Delta wants to continue shifting a larger and larger share of its NRT capacity to hauling Japanese vacationers to beach markets like GUM and HNL, I doubt JAL and ANA will be fighting them for it.
 
But I think the real bottom line here is obvious: Delta is cutting yet another NRT-Asia flight, and this clearly spells doom for AA.

 

[WorldTraveler]

You have beat the drum about DL's NRT hub for years yet you clearly don't understand the dynamics of the market.

The Japanese market is shrinking because of the yen devaluation... that affects ALL carriers as much as you want to think it is a DL-specific phenomenon.

DL is succeeding at diversifying its network away from Japan but it also is not giving up its position as the largest carrier in the US-Japan local market. UA and DL have about the same amount of capacity but DL has a higher share at higher average fares in the local US-Japan market.

DL is shifting its network to do more non-Japan Asia flying but DL is not going to give up its advantage in the US-Japan market by pulling down the NRT hub any faster than any other carrier. DL is driving the pace of moving traffic onto other Asia flights that don't touch Japan. DL is also in a far stronger position to recover its own traffic as well as take a larger share of the non-Japan market. ANA and JAL - and thus UA and AA - have a lot to lose by a rapid shutdown of the US-Japan-Asia market.

As much as you don't want to hear it, AA is a distant third to Japan and the AA-JL JV has not significantly changed AA's position in the market. AA continues to subsidize its Pacific flying including to/from Japan as they try to build a sustainable presence but the simple fact is that AA is losing a lot of money flying to Japan and cutting JFK-HND doesn't entirely fix the problem.

If you don't recognize that the weakest carrier in a market will be the one who will be most impacted in a general downturn that affects all carriers, then you probably won't ever understand the dynamic.

It also doesn't change that AA is trying to compete to Asia with costs higher than DL and only a little bit lower than UA. Add in that AA will be facing enormous competitive challenges elsewhere on its system including in its key markets and they won't be able to sustain money-losing operations from the west coast to Asia for long.

DL is using smaller aircraft from SEA to Asia than most carriers use so the number of seats that DL has to fill is smaller. Add in that DL is providing much of its own feed in the largest markets and AS only matters in the smallest markets that amount to less than 10% of the total feed to Asia. Further, DL has continued to add flights indicating they aren't at the limit of what they can do with facilities.

DL will have a large int'l operation at SEA that will be lower cost than what AA and UA have on the west coast and AS will provide the contractually required amount of feed in the small cities that DL needs or else DL will receive the breakup penalties under the contract and DL will find ways to add service in additional cities. Even if DL can't add more flights, they still have considerable ability to upgauge aircraft and increase feed via larger aircraft.

As the smallest and weakest player to Asia, esp. from the west coast, AA will indeed be impacted by the increased competitive environment.

BTW, on the subject of SEA, DL is supposedly restarting service SEA-JNU next summer. There are endless comments about how expensive AS' flights are from JNU. DL should do just fine.

DL continues to duplicate AS' most profitable SEA routes

 

[commavia]

It seems quite obvious to me that many people understand the dynamics (again, some might use that pesky word "reality") of NRT better than you, and have for quite some time.
 
While you've been doing the Baghdad Bob routine - for years, indeed - assuring everyone that NRT was perfectly fine, Delta has continued reducing capacity there, with smaller planes and fewer flights.  And once again, lest anyone forget, contrary to your latest attempt at finding a cogent argument, this long predates the recent Yen devaluation, and is actually a continuation of the long-term trend that began years before Delta and Northwest even merged.  NRT is simply no longer competitive as a hub for Asia for any U.S. airline, which is why we've seen both U.S. airlines with hubs there progressively dismantle said hubs.  United just accomplished this faster because it had so much better a U.S. hub structure to work with.
 
With respect to the latest diversion about the local U.S.-Japan market, Delta will, indeed, being offering about 37% more capacity between the U.S. and Japan next year than United by my count (based on present schedules).  Although, unlike United, which will dedicate 12% of said capacity to Hawaii, over 28% of Delta's U.S.-Japan capacity will be between HNL and NRT/KIX/NGO/FUK.  And once again, if Delta wants to be the airline of choice for vacationers flying between Japan and Hawaii, it's obvious other carriers aren't all that interested in fighting them for that traffic.  When you exclude the Hawaii beach traffic and look at the Mainland U.S.-Japan market, the gap in capacity between Delta and United falls to just 10%, which is perfectly fine for United considering it's far stronger non-Japan Asia network.  And all of this is rather academic anyway since sheer capacity is far less important that network access, and United's hubs are so far superior to anything Delta (or AA) has when it comes to Asia, that I'm sure United will be just fine.
 
Once again - this is precisely why Delta is behaving the way they are in SEA: Delta is falling further and further behind United when it comes to Asia and the most critical step in addressing this deficiency is replacing NRT with SEA as the key gateway across the Pacific.

 

[WorldTraveler]

Yet,, DL said that in the 2nd quarter, that was just this year, NRT was DL's highest margin hub.

You have wanted to believe that NRT is not a viable hub and yet the evidence is overwhelming that DL can make money there but is also controlling the shift of capacity away from NRT.

If NRT weren't viable, DL wouldn't be showing a profit year round flying to Asia and be able to see that NRT is their highest margin hub but it is.

You are fixated on the idea that UA walked away from NRT as its own hub years ago and think that is what DL should do. UA was never as strong in Japan as it is in China and HKG while NW and later DL have been the dominant US carriers to Japan.
Regardless of the size differences DL does have a fare advantage over UA between the US and Japan.

You also can't grasp that UA is trying to compete with DL with 10% higher costs. That is unsustainable and the best the analyst community thinks UA can do is slow the pace of UA's cost growth.

DL is in a very strong position to pick off revenue from UA on the west coast just as it has done with AA on the east coast.

The reason why DL and AS are going toe to toe is because DL has the strategic bandwidth to reshape the west coast market to achieve DL's long-term strategic objectives.

AA will be fighting off WN and other LCCs in AA's top markets of DCA, DAL, and Latin America. UA and AA will be fighting to retain their positions relative to each other.

In 18 months, the new 333s will go into service which will give DL the ability to add even more capacity in non-Japan markets and to serve Japan with much lower cost aircraft than several of the 744s and 777s which make up a large portion of DL's TPAC US-Japan network.

It also doesn't change that AA/JL is the weakest of the 3 US carriers across the Pacific. you can try to shift the conversation away from AA by talking about DL vs UA but the fact is that AA is totally at the whims of what DL and UA do in Asia.

Tell me what new routes UA is adding to Asia in the next year...

It also doesn't change that AA is up to its eyeballs in competitive challenges in 2014 which means that west coast-Asia will be one of the first challenges that gets sacrificed. There is a whole lot less strategic value in losing money in a region where AA is already third compared to defending AA's core money-making network at DFW, DCA, and Latin America.

 

[commavia]

"And yet" Delta's "highest margin hub" is materially smaller than it was a decade ago, and substantially more focused on flying to beach markets.  Once again - Delta can knock themselves out flying package groups and vacationers to GUM and HNL.  No other airline - United, JAL, ANA - seems all that excited about fighting Delta for this traffic.  Not only is United adding new routes to Asia next year - like SFO-CTU and SFO-TPE - but it also already has so much stronger a U.S.-Asia network that it has far less it needs to add. Delta is playing catch up.
 
As you continue to come up with new and creative "competitive challenges" for other airlines - especially AA - while ignoring those that Delta faces, it just reveals the fear more and more.  If you want to keep soothing yourself with the laughable notion that Delta can "reshape the market" at will whenever and wherever they want, keep telling yourself that.  Delta has had an easier time in the last few years while AA wallowed and United "managed a merger."  But now, AA will soon have a network essentially on par with (or stronger than) Delta in every region except the Rocky Mountains and Asia (and there, too, AA is closing the gap).  The fact that you need to continually remind yourself and everyone else about all the ways AA is doomed just shows how scared you really are that the writing on the wall may not just be written in chalk: Delta isn't invincible.  Shutter the thought.

 

[WorldTraveler]

DL is on track to report a $2.6B profit this year... probably one of the highest in the history of US aviation and certainly the highest since 9/11.

DL absolutely has strategic challenges but they are doing it from a position of strength.

You have tried to paint DL's NRT hub as failing but yet it is clearly making money which is the goal of a for-profit company. Size means nothing it is sustained by losses.

DL understands what it takes to reshape its Asian network and is doing it - at a pace that favors DL's growth at the expense of other carriers, including AA.

I'm not inventing strategic challenges, Com. If you don't grasp that handing over pre-merger AA's entire DCA slot portfolio to low fare carriers isn't a major strategic rearrangement to the hub that US' CEO called their highest margin hub, then you don't want to hear the reality.

Despite decades of trying to keep WN in a box, AA now will have to compete with WN who will deploy enough capacity in AA's top 20 DFW markets to materially shift the balance of power in N. Texas away from AA. Given that DFW is the largest monopoly hub in the US, to believe there will be no effect on AA is to deny the most obvious reality.

LCCs are rapidly growing in Latin America and they are doing it largely in AA's top markets = because they are the largest markets to the region.

AA has enormous strategic challenges ahead of it 2014. They are not manufactured and no other carrier comes anywhere close to facing the same challenges.

DL's number one strategic focus for 2014 is on the west coast where DL has the lowest mainline costs among AA and UA, a dominant market position in its primary hubs (something AA an UA do not have), and DL also will have the largest amount of capacity in top industry markets like JFK-LAX, something that DL has never had.

DL is in a position of strength and strategic advantage to reshape its own Asian and west coast network.