DL expands SEA further with SEA-SFO flights

[Kev3188]

Santa: "And what would you like for Christmas, Kevin?"

Me: "One post from WT that doesn't contain the phrase below."

And as much as you and others...

 
 

Precisely.  Amazing how quickly the tune changes - mere days! - once reality gets in the way.

Reality is inconvenient.

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.

Lol.
 
 

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

One quarter does not a trend make...

...Delta isn't invincible.  Shutter the thought.

+1

I think most "actual DL employees" recognize this, and focus accordingly.

 

[WorldTraveler]

Maybe we can negotiate a cease-fire that involves you ending your use of "actual DL employees" as if they have some corner on the market that others don't have.

You do realize, that despite have the largest and most Japan centric Asia network, DL reported a profit across the Pacific in the 1st quarter... the same quarter that AA reported a -26% profit margin?

DL's Asian performance is not weighed down by what is happening in Japan whether Commavia thinks so or not. DL is adapting to the market from a position of strength. Its results in the region and globally show it.

The inconvenient truth for AA and UA is that DL is in control of its destiny including to/from Asia where DL has the strategic advantages to reshape the market on terms that ensures DL REMAINS profitable.

 

[Kev3188]

You do realize...

That's another one I should've put on my list.

...that despite have the largest and most Japan centric Asia network, DL reported a profit across the Pacific in the 1st quarter... the same quarter that AA reported a -26% profit margin?

You've noted that before, but that wasn't the question. Tell us again how many quarters in a row NRT was the "most profitable hub."

 

[WorldTraveler]

DL doesn't release that information but neither do other carriers.

The fact is (I can negotiate on that one too) that DL IS running a profitable Pacific operation which is not at all what AA and UA are able to consistently do.

Commavia wants to argue that DL has a great strategic threat because of Asia/Pacific and SEA to try to deflect from the reality that AA really does have major strategic issues that DL quite simply does not have on anywhere near the same scale.

Suppose also that DL is sending a very clear message to the DOJ who was very dogmatic in saying that the legacy carriers don't compete with each other in justifying why DCA and LGA slots should go to LCCs?
Those are the kinds of words that DL only needs to hear once in order to kick into high gear a strategy that it intended to use anyway.

BTW, DL pilots seem to be indicating that some of the 757 retirements are being delayed in order to grow the network next year. They like the idea that the 739s become growth aircraft instead of replacements while it provides the resources DL needs to continue its strategy of focusing growth in key industry markets which are held by other carriers.

 

[Kev3188]

DL doesn't release that information but neither do other carriers.

They don't? Then how would you know NRT took the 2nd quarter crown?

BTW, DL pilots seem to be indicating that some of the 757 retirements are being delayed in order to grow the network next year. They like the idea that the 739s become growth aircraft instead of replacements while it provides the resources DL needs to continue its strategy of focusing growth in key industry markets which are held by other carriers.

Great. The '57 is a fantastic plane.

 

[Force Majeure]

DL is succeeding at diversifying its network away from Japan

That is truly a "Baghdad Bob" worthy quote.

Commavia just gave you a nice smack down. Each time when anyone takes the time to dissect your posts, they are exposed for what they are. They are "precisely" bombastic wishes sprinkled with delusions of Delta grandeur.

 

[WorldTraveler]

Commavia's statements are a smack down only in the minds of those who want to deny the reality of the strategic challenges that AA faces while making inaccurate statements.

Commavia can't stand that DL really does have strategic control over its destiny, esp. in Asia while other carriers including AA face enormous strategic challenges because of competitive pressures which AA has yet to demonstrate it can overcome. There is a reason why Crandall is making statements about AA needing to push back at DL and it is because DL is doing to AA what AA cannot do against other carriers.

DL made the comment about profitability of the NRT hub undoubtedly because there are people out there like Commavia who are convinced that the NRT hub is not viable. DL's results and its statements prove otherwise.

All US carriers report profitability by region on a quarterly basis to the DOT which in turn release the data which is reported on major aviation news channels such as Aviation Daily.

Profitability by global region is very accessible. Hub profitability is not.

DL undoubtedly made the statement to counter the notion that because DL pulled down SFO-NRT the hub is no longer viable.

It is smaller than it was and it will continue to be adjusted both using smaller aircraft and perhaps additional destinations cancelled but it is absolutely viable if profitability has anything to do with viability.

If Commavia wants to redefine viability on some other terms, he needs to convince Wall Street why his definition should not include profitability.

Specific to SEA, DL is building SEA into a major gateway to Asia as well as Europe and DL will have the feed it needs for those flights either on its own metal, its DCI partners, or via AS.

It should be obvious that the more AS pushes on DL, the more DL will add.

Markets like JNU and FAI only require one flight per day to have a major strategic and financial impact.

The 757 has plenty of life left in specific frames for them to be able to be used during the peak summer season. DL did the same thing with the DC9s that have remained in the fleet long enough to support a lot of strategic objectives. The 757 has the benefit of being able to fly longhaul domestic and near int'l routes.

The idea that there is going to be no competition between the legacy airlines is a fantasy of the DOJ that has no basis in reality.

 

[commavia]

Delta's actions continue to speak loud and clear about the long-term viability of the NRT hub.  The NRT hub has lost in recent years, or will soon lose, daily nonstop service to five markets in Asia and the U.S. - ICN, PEK, PUS, KHH and SFO - while gaining a whopping 1 new (beach) market, ROR (3 flights per week).  Comparing next summer to the summer of 2002 - chosen for comparison purposes solely because it's the last printed Northwest timetable I have - the NRT hub will have lost about 1/5 of its seat capacity (a CAGR of 1.74% decline per year) as multiple markets have transitioned - from 747s to DC10s, A330s, 767s or 757s, to eliminated entirely.  Average seats per departure has dropped from 344 to 275.  In that same time, there has been a sizable realignment of capacity, with fully 38% of NRT slots being used for beach markets - which function far more for O&D than hub connections to/from anything - versus just 19% in 2002.  And as already stated, if Delta wants to be the airline of choice for Japanese vacationers going to GUM and HNL, it doesn't appear they'll face much competition (although it's notable that Delta doesn't feel they have a better use for those 757s and 767s).  Meanwhile, since 2009 - chosen for comparison purposes because Delta chose it for their Investor's Day presentation just three days ago - non-Japan Asia flying has gone from 28% of "Pacific longhaul flying" to 51%, much of this attributable to the shift of more and more flying from NRT to SEA - as in the case of ICN and now PEK.  Delta is now referring to their strategy at NRT as "optimization" of the hub.  I don't think it takes someone who just fell off the employee shuttle bus to figure out what that has historically been code for.  Hint: the need for "optimization" doesn't typically mean "viability" (just ask CVG or MEM).  The numbers, and the words, speak for themselves.
 
I don't need to invent any creative new definitions of "viability."  I'll leave that to you.  Instead, I'll use the most basic test of viability I know of in the airline business: how many seats does the airline put into the market?  If, as is the case with Delta at NRT, the answer is it puts in substantially less today than in the past, and in some markets it puts in zero, then that tells me everything I need to know.
 
So yes, I'm clearly the one who denies reality.  You can't make this stuff up.  (Well, actually, you can.  And some people do.  Constantly.)  It's all quite understandable, though.  I don't feel the need to constantly remind everyone of AA's strategic strengths or weaknesses - as everybody knows (or at least should know) that AA, and every airline, has both.  But since we're forced to hear about it constantly, it's worth noting that Delta's competitive advantages are under threat, and the period of the last few years when its competitors were hunkered down and Delta could act with impunity are over.  And the fear and insecurity transparently obvious in these diatribes tells me that the Delta Internet Minister of Information knows it.

 

[MAH4546]

Delta's biggest problem remains trying to convince corporations that it provides value as their corporate carrier. Delta continues to fail in stealing lucrative corporate contracts from American and United, especially in Los Angeles (where AA absolutely dominates) and New York (where AA and UA are the strongest by far), where it needs it most. Years and years of growth, yet it continues to largely fail at convincing companies that it offers the better option, which is especially sad in New York, where it offers an insanely superior network to American, yet major companies like Bank of America aren't switching. At the same time, that's one of the reasons it is succeeding in Seattle - it's converting corporate fliers left and right. Maybe if Skymiles actually rewarded customers in a meaningful way, it would have more success luring these travelers in markets with more choices like LA and NYC. 
 
And the thought that Delta is going to put a stop to expanded Haneda-U.S. access is laughable and a comment of desperation. Of course Delta wants it capped - because long-term this type of expanded access will significantly hurt Delta's already continuing slide in the Japan market. But it's not going to happen. U.S.-Haneda access will be expanded. 

 

[WorldTraveler]

commavia,
nice work but now repeat the same exercise for JL and ANA and what do you get?

I have certainly not said the role of Tokyo as a hub is changing... what I have denied and what you cannot accept is that DL is adapting with the market and making the changes work FOR DL.

DL remains, just as it was with NW, the dominant carrier in the local US-Japan market and commands the highest fares.

You cannot get past the concept that companies don't exist to set size records. They exist to make money. If they can be big and make money that is great. But staying big if that is not what generates profits is exactly why companies fail.

DL understands why it exists and it isn't to retain a massive NRT hub if the market won't provide the sufficient financial returns to justify it. DL does understand the necessity of being profitable in NRT and also retaining its leadership position in the market, something it is doing.


When a company, any company, can maintain its position in the market and continue to be profitable, it is not failing as much as you want to believe otherwise.

MAH,
the simple fact is that DL does have a 12% revenue premium to the US domestic industry which means that for every $1 the rest of the industry collects in revenue, DL collects $1.12.
If DL can do that without having the corporate contracts you think they don't have, then apparently corporate contracts don't matter.

DL has a revenue premium across the Atlantic and Pacific as well. DL's system revenue premium is 105%. The notion that DL doesn't get premium revenue is simply an attempt on your part to deny that DL is winning in the marketplace.

Please tell me what those numbers are for AA, UA, and US.

There are at most 4 HND slots left for US carriers. That is in no way enough to accommodate the traffic that flows over NRT. And as much as you want to think otherwise, DL does have significant enough political influence to ensure that it is not left at a disadvantage. Not once, but twice, DL has won 2 of the 4 HND slots.

AA itself said that the reason they threw in the towel on JFK-HND is because there was very little likelihood that the slot times would be improved or that there would be more access. AA understands the HND market and they decided they wanted out.


BTW, specific to the SEA thread, SJC is the latest city to be added to DL's hub there with 4 RTs starting next Sept.

DL has now replaced more than 95% of the feed which AS has provided to DL's Pacific flights.

DL not only has grown LAX to within 10% of the combined AA/US operation and also has an operation at SEA that will be 60% of the size of DL's operation at LAX.

DL's focus for 2014 will be squarely on the west coast where they are decidedly reshaping the market to give DL a leadership position in all four corners of the US and in four interior hubs.

 

[FrugalFlyerv2.0]

DL not only has grown LAX to within 10% of the combined AA/US operation and also has an operation at SEA that will be 60% of the size of DL's operation at LAX.

WT,
Can you provide some numbers to back up your claims?  I'm starting to think you're rounding up a little bit. 
 
Granted, it is late and math is not my speciality, but from what I see, at LAX UA  has about 19% and AA controls about 18%.  WN (15%) and DL (14%) and Skywest (10%) round out the top 5.  If your claim that DL is within 10% of combined AA/US at LAX was to be true, then DL should have approx. a little over 16%+ of the market.  I don't think it does.  I didn't include the regionals (for AA and DL) in the numbers here, but even if they were to be included I think your math would be even more incorrect.  I also did not add the US numbers to AA, but I think that would not help your case.
 
At SEA according to my math, DL is closer to being approx. 45% of the size it is at LAX.  Again, I'm not using the regional numbers in my calculations and I'm looking at a relative short snapshot not a longer term trend.
 
The numbers/data I used for my math were from the BTS (airport snapshots).

 

[FrugalFlyerv2.0]

Actually WT, looking at some of your posts, I believe you have stated that the #3 carrier in a market is the most vulnerable.  So, given that DL is not even #3 at LAX, how vulnerable are they? 
 
If, as you have preached on numerous occasions here, DL strategy for 2014 is west coast expansion (eventually leading to domination ofcourse  ) , this is certainly a massive challenge. 
 
Perhaps as much as, even if not more so than the challenge AA/US faces in executing their merger (which IMHO is nothing too different from UA/CO, DL/NW etc.).

 

[WorldTraveler]

Well regional carriers DO matter since they are part of the revenue generating formula that legacy carriers use, including AS. Where do you think the revenue for regional operations go? The operating certificate may have the name of the regional carrier but they are no more than an operator whose revenue is completely controlled by the major carrier.

Since the discussion is about schedule additions, the appropriate metric is forward looking schedule data; BTS data is based on current boardings. This discussion is about all of the market additions that haven't even been flown.

SJC and JNU are just the latest two markets that DL is starting. Some of those markets won't operate for 9 months.

DL has announced plans to start serve to most of AS' largest SEA markets which ensures that DL will have the feed it needs plus have a large presence in a market that the Nationwide network carriers have left to AS for years.

But even if you want to look at current boardings, DL is currently the #3 carrier at LAX including its regional carriers.


The #3 carrier in a truly competitive market regardless of the industry is usually vulnerable. But LAX, like many coastal cities has not been truly competitive and won't be in the future. The coastal cities like BOS and LAX have long been divided fairly equally between carriers. NO carrier can become a truly dominant carrier at LAX because of gate limitations.

Thus, any carrier that rearranges the market using the existing capacity will benefit. DL is upsetting the order at LAX and SEA. The overall market can't really grow nor can any carrier add significant amounts of capacity.

DL has indeed built a position on the west coast that is much larger than what DL has been since all of the west coast capacity was pulled down after the Western, Reno, and PSA mergers which is precisely when Alaska grew so much. DL focused its attention on the east coast but is now refocusing on the west coast and doing it from a position of strength.

With the lowest mainline CASM among the network carriers, it is an absolute given that DL will succeed at gaining market share from AA and UA.

 

[commavia]

JAL and ANA have also reduced some capacity in the last decade, and this is somehow supposed to convince us Delta's NRT hub in its present form is "viable?".  Those two carriers are now, and always will be, the two local "home market" carriers with leading positions both at NRT/HND specifically, and in Japan in general, while Delta can never hope to do any better than third place.  If these local carriers have some capacity, this bodes ill for Delta's prospects, and only further underscores why the Northwest/Delta NRT hub has declined by 20% in little more than a decade, and continues to shed spokes.
 
Is this what passes for "world-class airline industry analysis" now?  My, how the never-as-mighty-as-they-thought have apparently fallen.

 

[WorldTraveler]

You want to paint DL's NRT hub as no longer viable without considering the competitive environment in which that hub operates?

Of course it is absolutely relevant to note that JL and ANA have reduced far more capacity than DL has at NRT.

DL is not a Japanese airline and ÁNA and JL don't have the slots at HND to shift capacity to HND which is a much larger operation for them.

A shrinking Japanese market including connections via NRT will impact Japanese carriers far more than it will impact DL.

BTW, JAL's capacity at NRT is down by one-third over the past decade. Surely you aren't going to say that since that is a larger number than DL, JL is not a viable airline... or at least NRT is not a viable for them?

As much as you want to, you can't make statements like you do out of a context and in that context, DL is doing better than some of its competitors in the market.