MIA new routes

[commavia]

if an airline like AA tries to grow from any other airport besides DFW, it is doomed!!!!

 
No, no, no ... how quickly we forget ... Delta is poised to "win in N. Texas," don't you know!
 
Like I said - always good for a laugh!

 

[FrugalFlyerv2.0]

Spin Spin Spin.
 

 
+100

 

[FrugalFlyerv2.0]

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.

 
I think similarly to what AA has done in Europe for years - that is serving only "major" business markets, it will only be interested in serving the "major" Asian business centers.

 

[MAH4546]

AA has stated it is taking a looking in secondary China markets. I would not be shocked if it launches the 3-4w flights to Chengdu, Xi'An, Chongqing or some other smaller market from LAX with the 787 2-3 years down the line.

 

[commavia]

I think similarly to what AA has done in Europe for years - that is serving only "major" business markets, it will only be interested in serving the "major" Asian business centers.

 
With the merger, AA is no long as heavily focused on just the "major" business markets of Europe - that's still AA's primary network focus, but USAirways brings a far more diversified network of flights to smaller and/or different cities that AA did not previously (or no longer) serve(d) - some primarily business (BRU, AMS, etc.) and some primarily leisure (VCE, LIS, etc.).
 
That being said, the big difference with Asia is the distances involved, so it's harder to serve smaller, non-"major" markets.  Put another way - nobody is flying a 757 from the U.S. on thinner routes to East Asia like AA, Delta and United all do to Europe.  On the other hand, the "second-tier" cities in Asia are, in many cases, larger than even "first-tier" markets in Europe.  That's where the 787 comes in, and is already proving itself to be a real game changer.  As already discussed, United has a clear, distinct, structural and insurmountable advantage that no U.S. competitor can replicate because it has SFO - which is without question the preeminent U.S. gateway to Asia (again, similar to AA's equally-insurmountable structural advantage in Latin America because it dominates MIA).
 
Nonetheless, if AA really is serious about building up LAX in the coming years, as AA executives have expressed, then I don't think it's at all out of the question that some secondary Asian markets could see nonstop 787 flights to LAX on AA.  LAX is a considerably smaller hub for AA than SFO is for United, and obviously the market is dramatically more competitive both among U.S. and foreign rivals, however LAX is an absolutely massive market that generates enormous O&D.  It may seem inconceivable now, but I wouldn't be surprised if 5-10 years from now AA were serving 5 or more Asian cities nonstop from LAX.

 

[FWAAA]

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. 

While the reconfiguration to the 772s will dramatically increase the number of economy seats, current rumours are that they will feature just 37 new lie-flat J seats.
 
AA's 2013 yield in the Pacific region was about 12 cents, far lower than UA or DL.   What I don't see is how the reconfiguration is going to dramatically increase the yields.  Sure, the 772s slanted J seats probably depressed sales of those seats, but with 14 First Class suites to offer those who paid for business class (after any F sales were accommodated), I doubt that it was AA's poor J seats that caused such a big disparity in yields.
 
With a rumoured 289 seats on the reconfigured 772s (37J and the rest MCE/E-), it looks to me like AA is really going to have to chase the low-fare economy passengers even more than it has been doing, and that can't be good for yields.   
 
As for load factors, AA's 2013 Pacific load factor wasn't much above 80%, so it's not as though AA's low-density configuration meant leaving behind lots and lots of high-yield passengers (like the argument made in 2003-05 for un-doing MRTC).   
 
Lots and lots more seats will lower the CASM, with all those extra seats against which to divide the costs, but I don't see the configuration increasing AA's low yields all that much.

 

[commavia]

While the reconfiguration to the 772s will dramatically increase the number of economy seats, current rumours are that they will feature just 37 new lie-flat J seats.
 
AA's 2013 yield in the Pacific region was about 12 cents, far lower than UA or DL.   What I don't see is how the reconfiguration is going to dramatically increase the yields.  Sure, the 772s slanted J seats probably depressed sales of those seats, but with 14 First Class suites to offer those who paid for business class (after any F sales were accommodated), I doubt that it was AA's poor J seats that caused such a big disparity in yields.
 
With a rumoured 289 seats on the reconfigured 772s (37J and the rest MCE/E-), it looks to me like AA is really going to have to chase the low-fare economy passengers even more than it has been doing, and that can't be good for yields.   
 
As for load factors, AA's 2013 Pacific load factor wasn't much above 80%, so it's not as though AA's low-density configuration meant leaving behind lots and lots of high-yield passengers (like the argument made in 2003-05 for un-doing MRTC).   
 
Lots and lots more seats will lower the CASM, with all those extra seats against which to divide the costs, but I don't see the configuration increasing AA's low yields all that much.

 
Well AA has a better idea of how many J seats are actually being sold versus being filled with upgrades, to Asia and/or anywhere else, so perhaps that's what justifies the smaller J cabin on the reconfigured 777s.
 
However, the vastly improved J product soon to roll out should give AA at least a little pricing traction.  But in general, I completely agree that the 777 reconfiguration is all about CASM, not yields for sure.  But at the moment AA seems to need help with both across the Pacific.  Any support for yield improvement in Asia is going to have to come from long-term investment in the market - that means sales offices, corporate relationships, etc.  And I have no doubt AA is doing just that - building on its strong corporate presence in the U.S. (further buoyed by the addition of USAirways) to ink deals that include Asia travel.  Somewhat counterintuitively, AA's growing network may also help somewhat in this regard, as it does dump capacity into the market but also improves the overall attractiveness of AA's offering (to Asia specifically, and in general).
 
But you're definitely right that AA's cost and yield challenges in Asia are larger than what just a 777 reconfiguration can fix.  That's why, again, I think the long-term answer is almost certainly going to be the 787.

 

[WorldTraveler]

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.

 
except that DL doesn't have loss leaders anywhere near the size of what AA is doing in Asia... that is why it draws such attention. DL lost about $40M to/from Latin America in a couple quarters and yet was profitable on a year round basis.

it is NOT the same thing.

If AA can make money to Asia, I won't be saying anything further. But to be talking about all this growth when AA doesn't make money flying what it has, it is hard to believe it is a viable strategy.
 

No, no, no ... how quickly we forget ... Delta is poised to "win in N. Texas," don't you know!
 
Like I said - always good for a laugh!

 
you are free to define 'Win' as you want including being profitable in what it does serve.

yet it is hard to argue that AA is profitable on key routes like JFK-LAX when it walks away from 40% of the capacity per aircraft.

Likewise, all the talk about AA's plans to/from Asia don't correct the problem that they get significantly less revenue in markets directly competitive with DL and/or UA and in O&Ds where they directly compete even over different hubs.
 

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

except that this is TRAFFIC - not the origins and destinations where people are going. Traffic is heavily concentrated at LHR because it is a large hub and BA (and now AA via the JV) connects a lot of traffic there.

but it doesn't change that less than 20% of all US-Europe passengers are going to LHR.  
 

I think similarly to what AA has done in Europe for years - that is serving only "major" business markets, it will only be interested in serving the "major" Asian business centers.

except that is a strategy of Crandall that doesn't work today because other carriers are not interested in doing the same. If there is a market for service to secondary cities and AA chooses not to fly them while others do, AA can't be competitive.

 
 

AA has stated it is taking a looking in secondary China markets. I would not be shocked if it launches the 3-4w flights to Chengdu, Xi'An, Chongqing or some other smaller market from LAX with the 787 2-3 years down the line.

again, if AA wants to throw even more money away, they can answer to the shareholders but the notion that AA, as the smallest of the 3 US carriers to Asia, is going to develop secondary markets when it can't make money flying to the primary markets and doesn't have a significant Chinese partner is more than a stretch.
 
 

With the merger, AA is no long as heavily focused on just the "major" business markets of Europe - that's still AA's primary network focus, but USAirways brings a far more diversified network of flights to smaller and/or different cities that AA did not previously (or no longer) serve(d) - some primarily business (BRU, AMS, etc.) and some primarily leisure (VCE, LIS, etc.).
 
That being said, the big difference with Asia is the distances involved, so it's harder to serve smaller, non-"major" markets.  Put another way - nobody is flying a 757 from the U.S. on thinner routes to East Asia like AA, Delta and United all do to Europe.  On the other hand, the "second-tier" cities in Asia are, in many cases, larger than even "first-tier" markets in Europe.  That's where the 787 comes in, and is already proving itself to be a real game changer.  As already discussed, United has a clear, distinct, structural and insurmountable advantage that no U.S. competitor can replicate because it has SFO - which is without question the preeminent U.S. gateway to Asia (again, similar to AA's equally-insurmountable structural advantage in Latin America because it dominates MIA).

I'm sorry but there are a number of markets that are served by 757s from the US to Europe that are absolutely larger than markets in China.

And it may well be true that the 787 will open some of them up for nonstop service from the US, but DL can do the same thing with paid for 767s from SEA - just like what CO did with 757s from EWR.

and again talking about the network US brings means little until it becomes apparent how well those cities will do when the Star alliance connection is fully removed, we are outside of the peak summer season when just about anything to Europe works, and after labor costs go up and US' historic pricing strategies of undercutting competitors have ended -and none of that has happened.

While the reconfiguration to the 772s will dramatically increase the number of economy seats, current rumours are that they will feature just 37 new lie-flat J seats.
 
AA's 2013 yield in the Pacific region was about 12 cents, far lower than UA or DL.   What I don't see is how the reconfiguration is going to dramatically increase the yields.  Sure, the 772s slanted J seats probably depressed sales of those seats, but with 14 First Class suites to offer those who paid for business class (after any F sales were accommodated), I doubt that it was AA's poor J seats that caused such a big disparity in yields.
 
With a rumoured 289 seats on the reconfigured 772s (37J and the rest MCE/E-), it looks to me like AA is really going to have to chase the low-fare economy passengers even more than it has been doing, and that can't be good for yields.   
 
As for load factors, AA's 2013 Pacific load factor wasn't much above 80%, so it's not as though AA's low-density configuration meant leaving behind lots and lots of high-yield passengers (like the argument made in 2003-05 for un-doing MRTC).   
 
Lots and lots more seats will lower the CASM, with all those extra seats against which to divide the costs, but I don't see the configuration increasing AA's low yields all that much.

someone gets it.

When AA offers seats from the US to Asia for $400 under government contracts, their yield problems reflect a deep inability to either fill the flights they do have or to attract the premium revenue that other carriers attract.

Given that Asia is becoming increasingly competitive, AA cannot sustain a strategy of dumping capacity into the market - which is exactly what they are doing when add capacity even while losing money.

AA's fundamental problem is the inability to attract key revenue and throwing capacity into the market doesn't fix it.

I have to laugh when some here talk about how great of a strategy it is for AA to remove seats from its 777s when there were people who trashed DL for doing the same thing by saying they couldn't sell premium seats - and now AA is doing the same thing and ending up with the same size business class cabin.

Further, I still have yet to hear how AA is ending up with a dozen or more fewer seats than DL despite using the same size business class cabin while DL has 9 abreast in coach and AA has 10 abreast.

I'm guessing it has to do with DL's crew rest cabins not being on the main cabin floor but if AA's crew rest facilities are on the main deck, why didn't AA invest in crew rest facilities above the cabin as many 777 operators have?

And adding seats might help but if DL and other carriers have more seats as a result of not having crew rest facilities on the main deck, AA is still at a disadvantage.

 

[FrugalFlyerv2.0]

 
except that DL doesn't have loss leaders anywhere near the size of what AA is doing in Asia... that is why it draws such attention. DL lost about $40M to/from Latin America in a couple quarters and yet was profitable on a year round basis.

it is NOT the same thing.
 
--------------------------

yet it is hard to argue that AA is profitable on key routes like JFK-LAX when it walks away from 40% of the capacity per aircraft.
 
------------------------
 
except that this is TRAFFIC - not the origins and destinations where people are going. Traffic is heavily concentrated at LHR because it is a large hub and BA (and now AA via the JV) connects a lot of traffic there.

but it doesn't change that less than 20% of all US-Europe passengers are going to LHR.  
 

 
1.  Ofcourse DL doesn't have a loss "anywhere near the size of what AA is doing in Asia" in Latin America, but the analogy is the SAME:  there is a region of the world (latin america) where DL is not only by far not even close to being the dominant carrier but still continues to operate the routes at a loss.
 
2.  I don't know why you keep on parroting the BS that AA is walking away from JFK-LAX? True, AA now uses a much smaller aircraft than in the past.  However, you seem to purposefully ignore the savings in fuel the new & smaller aircraft delivers to AA, and at the same time you seem to ignore the increased frequency.  So, no you are not correct, AA has not and is not walking away from JFK-LAX.  (I know, you'll now give a lecture on the cargo AA left behind .... and how DL is now 'winning' the JFK-LAX cargo market ....)
 
3.  I can't believe you failed to grasp the point that the UK is by far the largest USA-Europe market, and therefore when an airline focuses so much of its trans-Atlantic capacity to LHR, it is not a bad business decision.  (Actually I know exact;y why you missed the point - it doesn't fit your narrative).
 
Spin away.

 

[WorldTraveler]

again, AA is the ONLY US airline that is losing money in a global region on a year round, sustained basis.

what AA is doing is NOT the same as what other carriers are doing.

UA has posted losses in each of its global regions at one time or another over the past year but has managed to post a profit in each of them.

DL makes money in Latin America on a year round basis.

When AA posts profits on a year round basis, or pulls back capacity such that it takes seriously that it cannot continue down the path it is going on, then I'll rest my case.

As for JFK-LAX, on a per aircraft basis, AA has cut 40% of the coach seats and even with their increased frequency, they have less coach seats and more first class seats. Tell me the business logic behind increasing capacity of a product that you alone offer.

LHR is the largest O&D market from the US; yet AA has nearly 3X more capacity in the market than the local market supports - but more significantly a whole lot less capacity in key markets. what AA DOESN'T have is far more significant than what it does have. Tagging on to US' capacity only makes sense if those routes are sustainable on a long term basis. For the reasons noted above, it is far from certain that US can maintain the capacity it has to the continental European cities where AA needs to have a presence.

 

[FrugalFlyerv2.0]

Oh you're so predictable.
 
It's quite fascinating that you're so obsessed with DL that all your posts on here contain more  exceptions, qualifiying statements, pre-conditions and disclaimers than my HOA documents  ... ... ...
 
 
BTW:  Is there an AA forum here?  Even the 'specific to this discussion' sentence (see below) has been contaminated with ... ... ...
 

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.

 

 
 

 
except that DL doesn't have loss leaders anywhere near the size of what AA is doing in Asia... that is why it draws such attention. DL lost about $40M to/from Latin America in a couple quarters* and yet was profitable on a year round basis^^.

it is NOT the same thing.

If AA can make money to Asia, I won't be saying anything further. But to be talking about all this growth when AA doesn't make money flying what it has, it is hard to believe it is a viable strategy.
 
 
you are free to define 'Win' as you want including being profitable in what it does serve.

yet it is hard to argue that AA is profitable on key routes like JFK-LAX when it walks away from 40% of the capacity per aircraft^^.

Likewise, all the talk about AA's plans to/from Asia don't correct the problem that they get significantly less revenue in markets directly competitive with DL and/or UA and in O&Ds where they directly compete even over different hubs.
 
except that this is TRAFFIC - not the origins and destinations where people are going. Traffic is heavily concentrated at LHR because it is a large hub and BA (and now AA via the JV) connects a lot of traffic there.

but it doesn't change that less than 20% of all US-Europe passengers are going to LHR.  
 

except that is a strategy of Crandall that doesn't work today because other carriers are not interested in doing the same. If there is a market for service to secondary cities and AA chooses not to fly them while others do, AA can't be competitive.
 
 

 

again, AA is the ONLY US airline that is losing money in a global region on a year round, sustained basis**.

what AA is doing is NOT the same as what other carriers are doing.

UA has posted losses in each of its global regions at one time or another over the past year^^ but has managed to post a profit in each of them.

DL makes money in Latin America on a year round basis.

When AA posts profits on a year round basis, or pulls back capacity such that it takes seriously that it cannot continue down the path it is going on, then I'll rest my case.

As for JFK-LAX, on a per aircraft basis**AA has cut 40% of the coach seats and even with their increased frequency, they have less coach seats and more first class seats. Tell me the business logic behind increasing capacity of a product that you alone offer.

LHR is the largest O&D market from the US; yet AA has nearly 3X more capacity in the market than the local market supports - but more significantly a whole lot less capacity in key markets. what AA DOESN'T have is far more significant than what it does have. Tagging on to US' capacity only makes sense if those routes are sustainable on a long term basis. For the reasons noted above, it is far from certain that US can maintain the capacity it has to the continental European cities where AA needs to have a presence.

 

[WorldTraveler]

hope you didn't spend too much time with your colored pencil.

My original post was to note that AA's plans to expand into TLV and other TATL markets where other carriers are stronger are far from the certainty that some people on here want it to be.

We had people argue with that assessment and here we are pages later.

The principle is still the same.

If you don't want to talk about the competitive nature of the industry, don't bring up topics such as routes and pricing and size which are related to it.

 

[ChockJockey]

In this thread: philistines and intellectual plebians unable to come to terms with the fact that DL is winning in S. Florida.

It's not too late, brothers and sisters, to open your heart to Delta, and make serving Delta the joy and purpose of your life.

 

[WorldTraveler]

if winning means that I believe that DL will add S. Florida to Latin America because that is a strategic necessity over the long term, then yes, DL will win.


If you think that winning means that DL will bulldoze out of its position of dominance in MIA or Latin America as a whole, I never said that.


what you do with your life and who you serve is not something that applies to this topic or this board although that is indeed very important.

 

[ChockJockey]

if winning means that I believe that DL will add S. Florida to Latin America because that is a strategic necessity over the long term, then yes, DL will win.

By the grace of the Widget this shall come to pass.