MIA new routes

[dfw gen]

careful now world traveler will stomp his feet and threaten to sue you for heresy.....

 

[WorldTraveler]

Delta has no meaningful, sustainable competitive advantage relative to AA (or United) that either or both of those competitors cannot combat and/or replicate.  Period.
 
The constant focus on AA being "#3 out of 3," Delta getting to "at least #2," etc. is a characteristic red herring masquerading as a cogent argument.  The reality is that this distinction matters little - what truly matters is capacity, and market access.  If AA can get you to pretty much all the same major European markets - national capitals, business centers, leisure destinations, etc. - that Delta and United can, and be within 5-10 bps in terms of overall market share, does the fact that it's technical "#3 out of 3" matter?  Of course not.  In Asia, the distinction is more meaningful, given that AA currently lacks a major west coast gateway, but there, too, as has already been said, the gap is closing as Delta dismantles its NRT hub and AA ramps up its nonstop Asia service overflying Japan.  And as for Latin America, AA's lead is so insurmountable that Delta simply cannot close the gap in the way AA has now done across the Atlantic via the merger.  AA is pretty much the size of Delta and United combined in the region, offering a level of nonstop access to every major regional market of consequence that no other U.S. carrier sans a MIA hub can ever replicate.
 
Still some bitter clingers refusing to accept reality ...

the only ones who don't want to accept reality are people who don't know or who won't accept industry data.

If you looked at that data, you would see that 45% of AA's European capacity is to/from LHR, the highest percentage of European capacity to any one city. Even DL with two large dual partner hubs at AMS and CDG has only 40% of its European capacity at those two hubs.

AA has 15% of its capacity at CDG which is quite impressive in a competitors JV hub but another 15% is in Spain so more than 2/3 of AA's capacity is in just four cities - 3 of which are oneworld hubs.

DL has just about 55% of its capacity in its top 3 markets - AMS, CDG, and LHR but then has the other 50% spread across Europe. UA only has about 15% of its capacity in Germany, its largest hub.

US' network is comparable in diversity to DL and UA's but it is heavily focused on Star hubs- FRA is its top destination. LHR and Spain are in the top markets and that is sustainable but about 25% of US' capacity is to/from Star hubs.

That is not sustainable long-term based on what other carriers have done and the average fares that US and AA receive in other carrier strength markets (Skyteam and Star heavy markets).

Thus, when you say that AA and US can get you to anywhere in Europe, that is true only if a high percentage of those itineraries are via connections which other carriers fly nonstop including from larger markets in the US such as NYC.

as for Asia, all the growth that AA is doing is meaningless in terms of talking about sustainability until it begins to be profitable on at least a seasonal basis. Given that AA is still losing hundreds of millions of dollars flying to Asia and hasn't been profitable for even one quarter in many years, AA can add all the capacity it wants but if those routes are subsidized from something else on AA's network or from lower employee salaries, it is not a sustainable position to be in.

The key principle once again is that AA/US combined have a lot of work to do to rationalize their network, they are still benefitting from US' low labor costs and Star association to make a lot of routes work that probably won't long term, and AA/US' European network is heavily concentrated in a few cities and dependent on an alliance which US doesn't belong to any more while Asia is not profitable.

And all of Asia and Europe is long haul flying while large portions of Latin America can be flown with domestic aircraft.
Add in that low fare carriers will be heavily pushing into Latin America in the next few years on top of whatever a legacy/network carrier does, and pronouncements of how much AA will be growing are premature at best.

I totally get that AA/US is trying to strike while the iron is hot but AA/US haven't come close to merging their operations or networks or dealing with the competitive environment that they will face post merger, including at DAL/DFW and DCA as well as whatever competitive response that will take place if AA starts to add service into markets where other carriers are stronger, including to TLV which was mentioned here as well as continental Europe where DL and UA are much stronger.

no one is saying that AA is dead in the water but too many people here are intoxicated by the promises of rapid growth as a result of a network that hasn't even come close to being rationalized for profitability while failing to appreciate that other competitors do and will protect their core markets, the very ones that AA will try to push into.

 

[FrugalFlyerv2.0]

the only ones who don't want to accept reality are people who don't know or who won't accept industry data.

If you looked at that data, you would see that 45% of AA's European capacity is to/from LHR, the highest percentage of European capacity to any one city. Even DL with two large dual partner hubs at AMS and CDG has only 40% of its European capacity at those two hubs.
 
<snip>
diatribe about DL superiority
<snip>
 

 
Given that the U.K. comprises almost 40% of all U.S.A. - Europe air passenger traffic, some people might be inclined to call a  strategy of an airline having 45% of its European capacity to LHR 'winning' ... ... ...

 

[CMH_GSE]

no one is saying that AA is dead in the water but too many people here are intoxicated by the promises of rapid growth as a result of a network that hasn't even come close to being rationalized for profitability while failing to appreciate that other competitors do and will protect their core markets, the very ones that AA will try to push into.

And who said anything about Rapid growth?
My guess is Everyone in the industry have learned their lesson with rapid growth.
How about growth, where is it warranted and without overtaxing the rest of your system?
 
And also, you keep saying the Miami competition is coming, fine, but don't think there won't be a response, just as you claim DL will respond to any move on their territory, so will AA.
 
The playing field is relatively level at this time, there are 3 big legacy airlines and SouthWest, and will remain so for some time to come.

 

[WeAAsles]

And who said anything about Rapid growth?
My guess is Everyone in the industry have learned their lesson with rapid growth.
How about growth, where is it warranted and without overtaxing the rest of your system?

Capacity restraint. Let's hope that they keep this in mind for many years to come?
 
And also, you keep saying the Miami competition is coming, fine, but don't think there won't be a response, just as you claim DL will respond to any move on their territory, so will AA.
 
The playing field is relatively level at this time, there are 3 big legacy airlines and SouthWest, and will remain so for some time to come.

The new area where the big three will look to differentiate themselves will be customer service. I say new because they haven't done a very good job in that area over the last dozen years or so.

 

[WorldTraveler]

LHR isn't anywhere close to 40% of the demand between the US and Europe.

By both passenger and revenue, it is about 17%. While LHR is about twice that of CDG, demand in Europe like in the US is heavily spread out over many cities.

I'm not sure what you, CMH GSE, would call rapid growth but adding two new routes to both Asia and non-LHR Europe on networks where AA has less than 10 flights is about as close to rapid growth as any airline could possibly imagine.

It is absolutely true that there will be a movement by all 3 airlines toward similar route systems and AA will absolutely "retaliate" against DL's incursion into MIA - Latin America when it comes but the point still remains that AA has to add a whole lot more to become the #1 or 2 US airline to Asia and Europe while the amount of growth that DL has to do in Latin America is a whole lot smaller - solely because MIA-Latin America is a much smaller and more concentrated part of AA's network than Asia or Europe is.

weAAsles,
I agree that the move will be to improving service. the LCCs have shown that good service or the perception of it translates to brand loyalty, something the legacy carriers have not done very well in developing.

given that DL is further along in its merger and has been able to push its revenue up, it isn't a surprise that DL is also doing a very good job of running one of the most reliable operations the legacy carriers have ever had and is also improving its customer service metrics.

US has done a pretty good job of improving the reliability of its operation.

At its core, passengers buy transportation and all the bells and whistles won't matter if the operation is not reliable and people aren't at least reasonably friendly.

Still, there are and will be differences in networks that will translate into advantages for some and disadvantage for others.

And the industry will continue to evolve and competition will enter that will threaten some airlines more than others.

 

[commavia]

Still stuck on being "#1 or #2" - still haven't figured out yet that it doesn't matter.  (Well, that is, of course, unless Delta doesn't occupy one of those slots in which case being "#1 or #2" is meaningless and an indication of "understanding.")  How predictable.  All this "best in commercial aviation" analysis is certainly worth a good laugh.
 
What matters for U.S. carriers isn't dumping capacity for the sake of being #1, but rather competitive market access and schedule presence.  And AA really doesn't need to add all that much more across to be broadly competitive by both measures with Delta across the Atlantic or Pacific.  (AA cannot ever be truly competitive with United to Asia due to structural hub disadvantages, but then neither can Delta, just as neither Delta nor United can ever be truly competitive with AA to Latin America for the same reason).

 

[WorldTraveler]

and yet AA has added two routes to Asia per year for several years and are losing money. I can't think of any other definition that would be more accurate for capacity dumping.

I'm quite sure you will never admit it, but DL has a larger Asia hub at DTW than UA has at either ORD or EWR. UA has the problem of having two gateways to Asia but DL built one which is as well connected - operates out of the same terminal and runs a much higher on-time rate than either ORD or EWR.

No one has tried to say that DL has an advantage over UA on the west coat but DL is already at 2/3 of the int'l flights at SEA that UA has at SFO, DL has a lower CASM than UA, and SEA is a more on-time hub and also is closer to Asia which reduces costs.

Further, DL still has a hub at NRT which UA has already dismantled. If DL fully dehubs NRT, it will by that point have a larger TPAC network outside of NRT. But I don't think DL is going to dehub NRT completely unless it can ensure that it means its position in Tokyo.

People on here - including you - don't seem to get that NW built the hub at NRT in part to be able to dominate the local Tokyo market just as any US airline dominates a hub such as DFW. DL is not going to dehub NRT if it means giving up its share of the local market. They can and will use lower cost and smaller aircraft like the new 333s and 767s to reduce capacity before they fully throw in the towel on NRT as a hub.

DL already fully competes with AA in Latin America markets outside of S. Florida. The only segment of the market DL does not serve competitively is MIA to Latin America. The amount of flights and the cost of operating those flights is relatively small considering the proximity of Latin America to MIA and the amount of demand that is concentrated in one city.

on a somewhat related note, I am glad to see Spain regaining some amount of respect in today's game at the World Cup in Curitiba, Brazil.

 

[700UW]

And DL has put a hub in both NYC airports yet they havent made money yet, DL's own Executives have admitted JFK/LGA are not making money, yet DL is #1 in the market, how can that be?

 

[MAH4546]

Responding to some earlier comments since quotes don't seem to work:
 
MIA-LHR is not a "smaller market than most Miami-Latin America" markets. It is only smaller than MIACCS, MIANAS and MIAEZE. It is a larger local market than MIASAO. MIAPAR is also larger than most Miami-Latin America city pairs, not to mention MIAMAD, MIAFRA and MIAZRH, all three which generate in excess of 200 PDEW.
 
A large bulk of Miami-Europe traffic is holidaymakers, but they aren't senior citizens from Germany, they tend to be younger and wealthy, which contributes to strong front cabin premium demand, especially from Spain, Switzerland, Italy, the UK and Russia. That said, I don't think it will be the easiest market for AA to crack because its skews heavily Europe-originating. Zurich is a huge market from Miami with high fares, but won't be easy for AA to come in and add a daily flight on top of Swiss' soon-to-be double daily A330-300s.
 
The northern markets like AMS, BRU, ARN, etc. don't have the strong premium demand you see from Russia, the UK and southern Europe, hence it's largely covered by the likes of Arkefly, Norwegian, etc.
 
Manchester and Tel Aviv probably are the two best markets for AA to enter - large local markets with no competition, and in the case of MAN, AA is the largest U.S. carrier and has the BA partnership to boost.
 
DUB is a small market from Miami, and Aer Lingus is supposedly coming this winter anyway.

 

[WorldTraveler]

And DL has put a hub in both NYC airports yet they havent made money yet, DL's own Executives have admitted JFK/LGA are not making money, yet DL is #1 in the market, how can that be?

given that DL more than doubled its size at LGA in less than 6 months and also has aggressively grown at JFK, it isn't a surprise that DL is not profitable in NYC.

But DL gets higher fares from NYC than AA does which begs the question of how AA can argue they are making money in NYC but DL says they aren't. Given that it has only been Parker's new mgmt. team who have been willing to admit where they don't make money, I have a feeling it has more to do with DL's level of accounting and the fact that DL like Parker recognizes the value in being honest with the investment community about what is working and what is not, esp. since so much data is available that they can figure it out in time.

But let's also remember that DL says it expects to be profitable in NYC this year.

I would have absolutely no problem if AA grows into profitability in Asia but their losses in Asia were higher last quarter than they have been for years, perhaps ever.

MAH,
your correction regarding "Most" is appreciated.

still, MIA-LHR is a hub to hub JV route and it still isn't as clear that Dl intended to go after the local MIA market as much as it wanted to have a larger presence in LHR and the slot provided a way for them to do that.

Am I correct that DL still managed to get one of the divested AA slots to fly an additional ATL-LHR flight because it originates at DFW since DFW was one of the cities that was part of the divestiture requirement. I am certain that US did the same thing with CLT-LHR using the MIA slot.

As such, an additional ATL flight is far more valuable to DL than a MIA flight.

While I would love to see DL metal on MIA-Europe, I'll leave that to DL's JV partners and would rather see DL in MIA-Latin America - and I believe that is exactly what will happen before two many moons.

The Euro soccer powers are trying to regain respect from Latin America!

 

[700UW]

Blah Blah Blah.

Bottom line is your own reasoning has failed.
 
DL is #1 at JFK and LGA and both airports lose money for Delta.
 
So if DL gets higher fares, how are both airports still losing money?
 
Spin Spin Spin.
 
Bottom line is being #1 at an airport, doesnt mean you are profitable.
 
Two Hubs in the same city, two hubs losing money.

 

[WorldTraveler]

DL has never said that LGA loses money. to use your own words, you are lying. IN fact, DL has said the problem has been at JFK and it will be solved by this year -may be resolved by now.

DL's losses at JFK could very well be related to the terminal situation at JFK which has very high costs due to the poor facilities.

DL has also said that 50 seat RJs are part of the problem at JFK - and they are being replaced with large RJs and more mainline.

The chances are very high that DL does make Money at LGA and will continue to do so.

If LGA didn't make money, the chances are very high that DL would be fixing it but they aren't.

DL has operations in 3 terminals at LGA, are adding the 717 to NYC -both NYC airports, and continue to say they are getting higher rates of corporate travel growth in NYC than the industry as a whole.

no, 700, DL has a very clear path to what it takes to fix NYC and they are going there.

Again, tell me how AA is fixing Asia which is the only part of their network where they have been willing to admit they are losing money.

specific to this discussion, it also doesn't change that it is a whole lot harder for AA to push into markets from MIA to Europe than it is for DL to push into MIA to Latin America.

MAH,
I appreciate your honest appraisal.

I am happy to see AA grow where it profitably can but you cite exactly some of the challenges that AA will have to overcome.

 

[commavia]

The economics of AA's Asian flights is likely to improve markedly once the 777s are configured to a more appropriate (i.e., higher-density, 2-class) configuration, and particularly once the 787s arrive.  Nonetheless, standalone segment profitability in and of itself, while ideal, is not necessarily a requirement if the overall contribution to the network is worth the "investment" (as Doug Parker recently put it).  Case in point: AA is almost certainly still losing money on most of its Asia flights on a standalone basis, and yet if current projections are accurate is on track to apparently produce the largest single profit (non-inflation-adjusted) in company history.  It's no different than the loss leaders Delta no doubt operates because of the positive halo effect on corporate contracts, business travel demand, network connectivity, etc.
 
Yet again - AA need not (and cannot) be "#1" to Asia, just like Delta need not (and cannot) be "#1" to Latin America.  These competitors need only offer a credible network with broadly comprehensive market access for U.S.-based business travelers.  And unlike five years ago, AA is now rapidly getting there in Asia.

 

[FrugalFlyerv2.0]

 
Given that the U.K. comprises almost 40% of all U.S.A. - Europe air passenger traffic, some people might be inclined to call a  strategy of an airline having 45% of its European capacity to LHR 'winning' ... ... ...

 

LHR isn't anywhere close to 40% of the demand between the US and Europe.

By both passenger and revenue, it is about 17%. While LHR is about twice that of CDG, demand in Europe like in the US is heavily spread out over many cities.

 
According to Figure 4 (pg.11) in this document, 38% of US-EU air passenger traffic was UK:
http://www.ita.doc.gov/media/publications/pdf/openskies_2007.pdf
 
Granted, it is a little old, and things may have changed a bit, I still think that "close to 40%" of USA-Europe market being to/from UK is pretty close.  (Yes, I do understand that UK has more than 1 airport (LHR), but I'm pretty sure LHR dominates quite nicely).
 
If you still doubt it, read this somewhat more recent (2009) document: 
http://www.nextor.org/pubs/Shen_NAT%20Report_2009.pdf
 
From the above document, it states that nine European countries (UK, Germany, France, Holland, Ireland, Italy, Spain, Switzerland, Belgium) account for approx. 90% of all USA-Europe air passenger traffic.  The numbers here show the same thing (~37% of passenger traffic between USA-Europe was UK - pg. 64). 
If you still doubt the importance of the UK market, you could check out the data on pg. 173 - but I'm sure you won't like the numbers you see there ... ... ... 
 
 

given that DL more than doubled its size at LGA in less than 6 months and also has aggressively grown at JFK, it isn't a surprise that DL is not profitable in NYC.

 
Oh the horror!!!  Doesn't DL know that it should only stick to serving and growing new markets from it's ATL super hub?  I mean afterall, according to WT, if an airline like AA tries to grow from any other airport besides DFW, it is doomed!!!!