DL invests in, deepens ties with China Eastern

[WorldTraveler]

considering that Skyteam is a larger alliance than oneworld, it would only be by a biased opinion that Skyteam is at a disadvantage.

DL has access to as many if not more of the world's top markets either on its own metal or via Skyteam as AA does.

Even though Star is larger, UA does not have deep strategic relationships with any more partners than AA does with oneworld carriers or DL does with Skyteam and its own equity partners.

and, yes, UA has agreed to invest in Azul because there are two large Brazilian carriers and both are affiliated with AA and DL. UA would have been left out if Azul developed a partnership with JetBlue.

UA's investment in Azul is similar to DL's in Gol and UA is doing some of the same strategic things that DL has also done including regarding fleet and regional carriers.

someone posted this article about MU's previous attempts to seek foreign investment which included SQ. It is actually notable that SQ has had a strategy of investing in foreign airlines and MU and VS both were either former or potential SQ investments.

http://centreforaviation.com/analysis/china-eastern-airlines-once-again-seeks-a-strategic-investor-to-welcome-it-onto-the-world-stage-180939

it's notable that MU actually has stated they want a foreign investor to help the government see the value of a commercial foreign investor, they prefer a non-Asian investor, and the Chinese government is allowing foreign investment in non-transportation companies.

the whole notion of foreign investment in government owned companies in China is new but also one which precisely follows what China has done in other parts of the world.

As I have noted before, the Chinese airlines recognize that they will not be global competitors if they don't have strong relationships with the largest global airlines.

 

[commavia]

Relevant to the actual point I'm making, I could care less about SkyTeam (as could, apparently, the people running SkyMiles).  I'm talking about Delta - which obviously acts in its own self-interest regardless of any marketing relationships (exhibit A: Alaska, exhibit B: Korean).
 
The reality is that there are absolutely multiple markets (in fact, some might even call them some of the "world's top markets") where Delta - not SkyTeam, but Delta - is at a structural disadvantage to one if not both of its primary U.S. rivals.  And, indeed, recounting said markets - the United Kingdom, Mexico, Brazil, now China and possibly soon Japan - is essentially a laundry list of places where Delta has felt the need to make these expensive investments and assume these substantial liabilities.

 

[eolesen]

United has recently agreed to make an invest in Azul.  But nonetheless, it's true that "no other US carrier" has been nearly as aggressive as Delta in making investments in foreign airlines.  As said, though, I'm not yet convinced as to whether or not this is a sign of the strategic strength or weakness/vulnerability of Delta's network.

It's all about feeding Richard's ego...

CAPA posted a piece back in August about MU looking for an investor: https://centreforaviation.com/analysis/china-eastern-airlines-once-again-seeks-a-strategic-investor-to-welcome-it-onto-the-world-stage-180939

They specifically wanted a non-Asian carrier, so the list of airlines that would be investors outside that were pretty much limited to DL, AF, IAG, and LHG.

I can't see the Chinese having ever considered Etihad, and I doubt that IAG was given much consideration given their relationship with Swire and its part ownership in CA.

The question that keeps being begged here is why they only wanted a non-Asian carrier as an investor. Did they want someone they could push around? I saw that working for them as a consultant -- they wanted were people who would validate their ideas more than people who would challenge or try to change their way of doing business.

DL will find out pretty quickly where they really stand. MU has had people from AFKL domiciled at the Hongqiao offices in the areas of pricing and RM. Firsthand, they were there for knowledge transfer more than to provide advice. The Chinese don't know what they don't know, but they're also not very interested in taking direction from outsiders. That may be one of the reasons SQ ultimately unwound their investment.

Relevant to the actual point I'm making, I could care less about SkyTeam (as could, apparently, the people running SkyMiles).  I'm talking about Delta - which obviously acts in its own self-interest regardless of any marketing relationships (exhibit A: Alaska, exhibit B: Korean).

Must have missed the context there, but if this were really about Skyteam, you would have probably seen AFKL participating. As mentioned above, they were already engaged with MU on sending domain knowledge experts to SHA for extended assignments and had been doing so from 2013 onward.

It's quite likely that AFKL chose to pass on investing, and for whatever reason, may or may not have advised DL to do the same.

Again, this may come down to hubris and ego.

 

[700UW]

and it is not legal for a US carrier to own partial equity or partially control another US carrier.  either you own it outright or there is a complete arms length relationship that is no different from that with any other competitior. 

Not true,  CO owned part of HP before, as did Mesa also own a piece of HP and US owns part of Mesa, another airline not under their direct control.

 

[eolesen]

Correct. NW also owned a piece of CO. They were all minority stakes, and yet NW had veto control over CO's merger with UA.

 

[WorldTraveler]

yes, it absolutely is true. what happened in the past in a lot of cases is not legal today. NW was required to dump its control of CO.

and regional carriers have long been owned by legacy carriers and even vice versa. and it is the level of control that is the determining factor.

I think I'll defer to what MU's own executives have said about the potential they see from a partnership than someone who posts on a chat forum and doesn't have any access to MU right now.

KE clearly doesn't want a partnership with anyone else and has no reason to develop one with AA despite what some people think. KE can't codeshare beyond DFW and AA can't codeshare beyond ICN. AA and KE are competing on far more direct routes than DL is. There is nothing that KE would find in AA than they can find in any other partner, even if they were allowed to shop around.

I guess we're headed down the same path of a bunch of people making fools of themselves just like they did with the refinery and WN's presence in ATL among other strategic issues.

They clearly don't have accurate information, can't grasp that DL found another strategic partner that values DL's size and experience, and DL is succeeding at a strategy that its competitors haven't bothered to pursue because they don't have the foresight to realize the value in them.

 

[commavia]

There is a statutory prohibition on U.S. carriers owning equity in other U.S. carriers?  Fascinating.  Anyone have a link to said statute?

 

[WorldTraveler]

call the DOJ. they will explain it to you


Their rulings will confirm it.

 

[700UW]

AA owns part of Mesa right now due to US owning the stake.
 
This is why the DOJ went after NW and CO.
 

The antitrust action, which had gone to trial last week after pending for� more than two years, charged that Northwest's 14 percent stake in Continental, which included control of more than 50 percent of voting shares, violated antitrust laws and could hurt service and stifle competition. Regulators said Monday's agreement to sell the stake was the result they had been seeking.
 

So if its illegal why does the new AA own part of Mesa?

 

[WorldTraveler]

once again,, regional carriers have long been owned by legacy carriers. See DL, Pinnacle or whatever its name is this year.

You highlighted precisely why the DOJ has not allowed any further equity investments between large jet carriers - because it is anticompetitive.

and in case you missed it, none of DL's investments are in domestic airlines.

Your sideshow is meaningless and irrelevant.

 

[700UW]

I am not talking about a wholly owned commuter/regional.
 
I am talking that the new AA owns a part of Mesa, and Mesa is not under control of AA, unlike a wholly owned commuter.

Republic owned Frontier.

So you are clearly wrong once again.

 

[WorldTraveler]

plz list the large jets that Mesa operates. The DOJ required NW to divest its CO controlling shares because it is uncompetitive.

If you want to argue otherwise, acquire a stake in a US large jet carrier, have that carrier acquire a stake in another large jet US carrier an dlet us know how it turns out.

And again, you and your point are irrelevant.

DL is not investing in domestic airlines.

 

[commavia]

Actually, why don't you call the DOT and get back to us, since you made the categorical statement.  Back here in reality, the DOJ is part of the executive branch, and thus empowered merely to interpret statute but not make it, so I'd like to see the statute that prohibits on U.S. carrier with owning an equity stake in another.

 

[WorldTraveler]

I don't need to because it is irrelevant to this topic.


and it is precisely because they can INTERPRET that you won't find a statutory position.

You can find precedent and the US required divestitures of all domestic to domestic large jet carrier investments.

meanwhile DL is investing in foreign carriers.

 

[LDVAviation]

United has recently agreed to make an invest in Azul.  But nonetheless, it's true that "no other US carrier" has been nearly as aggressive as Delta in making investments in foreign airlines.  As said, though, I'm not yet convinced as to whether or not this is a sign of the strategic strength or weakness/vulnerability of Delta's network.

 
Got to wonder which airline had the best day in China.  Delta for buying a stake in China Eastern?  Or AA because fears over China's growth led to another drip in oil prices?  
 
I'm going with AA because this is not a good time to be investing in a Chinese company.