new service from MIA to MXP

[robbedagain]

what will be really interesting is to see how DL and UA respond as well as the new AA when the merger closes and all i could also see possibly all 4 airlines competing for that type of thing but we shall see

 

[WorldTraveler]

I really hate to do this because it will invite a thesis-like response about the supremacy of a certain ATL-based carrier by some posters (WT and/or Spec), but nevertheless here it is: shouldn't the thought of Emirates starting T-PAC service to the USA scare DL since they would have the most to lose? Afetrall, DL is huge across the Pacific, so a good chunk of marketshare that Emirates might pick up could be DLs? No?

UA is the largest airline across the Pacific but DL is the largest from Japan. UA's strengths are larger from HKG and China which do not have Open Skies with the US which would limit their ability to grow.

OTOH, the Japanese government has been very careful to give Emirates very little access to Japan because of the fear of what they can do to the Japanese airlines.

Yes, EK could do a lot of damage to DL but if they are of a size to start doing damage to one US carrier, the rest will not be exempt.

Further, EK is already infiltrating US to Europe routes and could easily do the same thing between the US and Latin America. All they need are the rights to be able to fly beyond the US to other countries.

There is undoubtedly a strategy by EK to enter the Italy-US market at a time when Alitalia is weak... but maybe that is part of AA's proposal too.
The question is whether AA can build enough traffic fast enough esp. to Latin American markets which EK doesn't serve to overcome the startup losses that are typical of every new route but esp. those that are started in the winter to a country that is facing deep economic problems.

As in all types of competition, the carriers that are in the best financial shape are the ones that can survive increased competition as well as economic downturns. EK happens to be a very wealthy airline right now while some of the airlines and countries in Europe are holding on for dear life.
Maybe a few European airlines will fall off the cliff and if they do then the next targets could well be US airlines but even then those carriers that are strongest will fare better than the others.

 

[FrugalFlyerv2.0]

Further, EK is already infiltrating US to Europe routes and could easily do the same thing between the US and Latin America. All they need are the rights to be able to fly beyond the US to other countries.

IMHO the threat of EK and other Gulf-based airlines to US-EU traffic is overrated, regardless whether you're a USA-based or EU-based airline. The major European hubs (LHR, CDG/AMS, FRA/MUC) are pretty well covered by 1-world, skyteam and *. Secondary cities such as BRU, ZRH, MAD, MXP, FCO,etc., are also well served by the aforementioned alliances. That doesn't leave too many major markets where EK can make a killing.

On the other hand, EU-based carriers should worry about EK stealing long-haul traffic. If I'm in Germany and need to travel to Asia (India, China, Japan, etc) I have a choice of either connecting on LH (in FRA/MUC) or EK (in DXB). Sure there is European patriotism (racism) that to some degree will keep Hans & Helga flying on LH, but EK is becoming a brand.

There is undoubtedly a strategy by EK to enter the Italy-US market at a time when Alitalia is weak... but maybe that is part of AA's proposal too.
The question is whether AA can build enough traffic fast enough esp. to Latin American markets which EK doesn't serve to overcome the startup losses that are typical of every new route but esp. those that are started in the winter to a country that is facing deep economic problems.

Back to AA and MIA-MXP. It does seem a little odd that this route would be started up in the winter. I don't know that Italians right now have two euro cents to rub together, never mind a junket to SoBe. Although I guess the AA strenght is the gateway to LatAm, (and I guess maybe the fashion industry has demand and ability to sustain this route?).

 

[FWAAA]

I don't know whether MIA-MXP will sink or swim, but I do know one thing: travel from Europe to Miami picks up in the winter, and the typical passenger from MXP to MIA doesn't care about the mouse 200 miles NW of MIA. MAH4546 has postulated that this route is about the fashion industry, the cruise industry (the industry itself, not cruise customers) and well-heeled leisure travelers from Italy who want to visit MIA.

 

[WorldTraveler]

Frugal,
I agree with you that the threat from the Gulf airlines is greatest to the European airlines because the Gulf is between Europe and some of their top longhaul destinations, but the fact that EK is beginning to pick off select transatlantic markets and says they want to do the same over the Pacific is a warning sign of what could happen. SQ has long flown 5th freedom routes between the US and both other countries in Asia and Europe enroute to SiN but they have never had the mindset to kill competitors that EK seems to have.

Yes, the biggest hubs in both the US and Europe can be defended but that is not what is at risk here… MXP no longer functions much as a hub for AZ but it is an important European market. If EK – or any other non-European, non-US carrier starts picking off key cities in Europe in competitions with weak European carriers, there will be significant impacts to the existing airline industry on both sides of the Atlantic. It is possible that the US carriers will fare better than European carriers over the next few years since the US carriers have spent ten plus years plus restructuring post 9/11; in contrast, European airlines are probably now facing their greatest challenge to survival w/ a very damaged Eurozone, continued growth and influence of European low fare carriers, and the impact of the Gulf carriers. If a disproportionately large number of European carriers fall, then the US carriers could benefit but the European carriers might be replaced by Gulf carriers picking up point to point routes just like JFK-MXP.

FWAAA,
Every airline would like to think they can make a route work just with well-heeled, high value customers but data shows that is not the case. Although the MXP-MIA market does fall off less in terms of average fare compared to some other TATL markets in the winter, the size of the entire MIA-MXP market – of all fare types – could be accommodated in the business class cabin of an AA 767-300ER. Further, MIA and MCO are top destinations off of AA’s JFK-MXP flight so they run the risk of cannibalizing their own traffic at JFK in order to make MIA-MXP work. Since JFK-MXP is one of AA’s stronger performers relative to its competitors, AA cannot strategically afford to weaken another route in NYC where they already are half the size of DL and UA in the int’l market. It also doesn’t change that MIA-MXP will be the only winter MXP route, IIRC, that will not be operated to/from the NE US where the ability to connect traffic is the greatest and the flight time is the shortest; there are a number of top destinations from MXP that AA simply will not be able to compete for via MIA.

It is very possible that they have a plan to pick up a lot of Latin America connections but remember that UA also has a fairly decent Latin network at EWR where they can compete for MXP-Latin America passengers and DL can do the same via ATL during the part of the year when ATL-MXP operates. Further, AZ does fly to Latin America and coordinates its schedules well with other Skyteam and affiliate airlines.

Finally, MXP-MIA is strategically not much different from DFW-ICN where AA is trying to start a new route into another alliance’s hub/key market and also having to compete against a wealthy Asian carrier in the process; on DFW-ICN, the two are the same while in MXP, the Asian carrier and the alliance hub are two different entities.

AA might very well make MIA-MXP but it increasingly appears that the only places AA has left to expand are to/from other highly competitive markets. That is part of why I believe int’l growth opportunities are strongest for the new AA in PHL where they have a large hub that has a fairly small presence by foreign carriers and is geographically well-positioned for both TATL flows beyond western Europe which US has done well and flights to Asia – which US does not do at all. Add in that NE is in the heart of the northeast which has a large Latin population and new AA should have substantial growth opportunities.

Even if MIA-MXP does not work and if AA is forced to reduce its int’l presence in markets which are not performing as strongly, there still should be opportunity to grow new AA’s int’l presence into regions where there is higher growth than western Europe (esp. the southern part of it) and where the economies are growth; even before MIA-MXP was announced, AA was expanding its TATL presence even when other carriers were pulling back.

 

[eolesen]

For Jan 2013, MIL-NYC generated ~10,000 pb's, ROM-NYC generated ~7900, and MIL-MIA generated ~3,800 PB's.

Looking across the year, it peaks at 5100 per month in April, with the low was 2400 per month in October.

The average is 4000 for Dec-Jan-Feb-Mar-May.

Averaged out a bit, the local MIL-MIA winter market alone could easily fill half a 767 just on MIL-MIA.

As already mentioned, the fashion trade is what pays the bills in/out of MXP. Throw in the manufacturing facilities in the Caribbean and Latin America, and I could see this being a lot more lucrative than some might want to make it out to be.


Perhaps WT is really just looking out for Skyteam partner AZ... Given their <cough> stellar reputation </cough>, it will be more interesting to see how long they stay in business, let alone remain in the MIA market.

 

[wings396]

Fwiw, as far as PHL goes I don't believe that they have ample gates for a huge amount of increased International service. The A gates are pretty much filled at peak times already. Not saying that there isn't room for a few more flts, just not capable of a lot more.

 

[WorldTraveler]

Sorry but those numbers are way elevated beyond what I see... but even if they aren't - and I will assume here that your numbers are accurate - if the market was that big, why has AA taken this long to start it? And who has been carrying that traffic before and what kind of response to you expect them to have to losing such a large portion of that traffic including Latin traffic?

And if AA is carrying much of that traffic on its own flights via JFK, what is keeping that flight from collapsing, esp. with the arrival of EK

There is no benefit to me or anyone else to prop up a perpetually failing airline. In fact, given the Skyteam joint venture and AF's ownership in AZ, it would be far better if AZ did fail and allow more efficient operators to take over.

Your optimism may have merit but there are still a lot of unanswered questions even from your data, even if it is accurate, including that the Eurozone continues to get worse, not better and your response also doesn't address the arrival ok EK in to the US-MXP market also in the winter with the addition of the equivalent of 2 near new 767s worth of capacity in a market that just a few months ago only supported 4 flights/day in a month.

It is hard to imagine how AA expects to make the market work on a daily basis (it is right?) when AZ barely broke 70% LFs even in the peak summer months, and they didn't even operate it on a daily basis.

As for PHL, US has been in discussions many times w/ PHL and with other airlines about giving US more space for int'l flights at PHL... and they still could get them. Further, Asia and Latin America flights do not operate at the same times that European flights do, which constitute the majority of the int'l flights from PHL.

And a key issue with MIA-MXP is that AA is following its same strategic plan that it has operated for years in trying to keep in int'l markets that are heavily competitive w/ other carriers. Whether I have any loyalty to AZ or not doesn't change the fact it is a Skyteam hub, not unlike ICN.
In complete contrast, US has built its network around hubs and cities that are far less competitive and US has been financially rewarded for it.
AA has built its network around the largest markets in the world, many of which were long protected but are now open to competitors. I understand that AA has to respond to competitor growth in AA's key markets but the simple evidence is that other carriers have been far more successful growing into AA's key markets than AA has been in other carrier markets.

New AA which will be run by Parker will have to resolve this significant strategic disconnect but the problem is real and it isn't just going to go away.

 

[eolesen]

Here's my source... what's yours?

http://www.amadeus.c...ng/air-traffic/

Happy to put you in touch with someone for a subscription. It's a couple grand per month.

AZ runs a nonstop A330 to MIA, but about 25-30% of the traffic in the market is currently flowing over JFK & EWR on AA & UA. AZ's appears to be filling up with a lot of connections at MXP.

It's possible that running the MIA nonstop will cause some dilution at JFK for AA, and I have no doubt EK will certainly trash the yields for everyone, including DL and UA.

Preemptively moving MXP to MIA, and opening up the slot at JFK for something more lucrative may not be such a bad decision.

 

[WorldTraveler]

Even if we accept the numbers you present &ndash; which I&rsquo;ll do for the sake of the discussion &ndash; they still don&rsquo;t come close to providing enough passengers to make a MXP-MIA flight work, even if you assume that AA would get all of the market, which they won&rsquo;t. Notably, by your numbers, MIA-MXP has amounted to more than 10% of the total MXP-US traffic &ndash; but in reality they have about half that amount. Further, you discount a number of key points that have been raised, including
- If EK trashes the NYC-MXP market, AA will most certainly be affected as much as any of the other carriers.
- If AA is carrying significant amounts of traffic to MIA, which they are, pulling higher yielding traffic off of one of AA&rsquo;s better performing routes at JFK in order to fill up more of the JFK flight w/ lower yielding passengers as a result of the increased competition, what happens to the JFK flight which is one of the better performing routes for AA?
- AA is still starting the route in the winter when it is hardest to obtain leisure traffic &ndash; important since even by your numbers AA doesn&rsquo;t have enough passengers to fill the flight &ndash; and when average fares are lowest.
- AA may have about 1/3 of the MIA-MXP market which is the largest share of the big 3 but others fly there too. What routes do you think AA&rsquo;s competitors are going to start in response into AA&rsquo;s key markets? UA matched AA&rsquo;s LAX-PVG flight within days. DFW-LGA? DL is adding more service just like it did in LGA-MIA where it is now up to 1/3 of the NYC-MIA market&hellip;. And AA had that market practically all to themselves just a couple years ago. Don&rsquo;t you see that every route AA adds into a competitor&rsquo;s key markets gets answered with responses where those competitors for years have been able to gain more from AA than AA does from its peers?
-

MIA-MXP may actually be the strongest of AA&rsquo;s recent market adds, but let&rsquo;s take a quick look at the rest:
ORD-DUS is a route between ORD and Germany, a market dominated by Star where AA has had little success, including from ORD and yet AA believes they can now make that route work?

DFW-ICN is the largest Asian transpac airline already with a flight DFW-IC and with flights of its own or via its partner DL in all of the top markets. Where does AA think they are going to find traffic at decent fares that KE doesn&rsquo;t have or won&rsquo;t fight to retain?

AA enters JFK-Ireland as the smallest player in an already highly competitive a highly seasonal market. Already competitors on the route have added capacity and have it in the schedule going forward&hellip; they aren&rsquo;t about to make room for AA in the market.

In total, AA&rsquo;s capacity for winter 2013-14 is up 15%, a whole lot for the winter to a continent whose economy is in the tank and continues to deteriorate &ndash; and these other routes aren&rsquo;t routes where AA has historic strength like MIA. Same for ICN.

If there is a common theme here, it sure seems to be that AA is attempting at a minimum to start a lot of routes into markets where other carriers are strong but also seeming to abandon caution in the process. Anyone who can&rsquo;t see the high risk AA is taking in attempting to expand its network doesn&rsquo;t want to see it.

Suppose AA mgmt doesn&rsquo;t have any choice but to add high risk routes because their business plan says they have to fly a certain amount of capacity in order to keep their CASM at a certain level? AA has been reluctant to cut capacity for a number of years even though both DL and UA have done so with significant improvements in their RASM.

So forgive me for being a tad skeptical and voicing thoughts which nobody around here wants to hear. After years of hearing that AA labor was paid too much, I&rsquo;m kinda wondering what excuse we&rsquo;ll see here for why these routes don&rsquo;t work&hellip; or maybe by the time the data comes out to show how these routes are doing, the merger will be approved, everyone will be giddy about how big the new company is, and it will be Parker and co&rsquo;s job to figure out how to stop the bleeding.

 

[Glenn Quagmire]

Even if we accept the numbers you present

Why wouldn't "we" accept the numbers.

Although I do not agree with E on many non-airline issues, he has a long track record of providing accurate data with his analysis of said data. Whether or not his predictions will come true can be debated, but the data, not so much.

Please do not include "us" in your generalizations of misbelief in his posted data.

 

[WorldTraveler]

Where did you EVER get the idea that I would possibly include you in any interpretation of what I have written?

Let's face it, Q, you would love to turn this into a personal spitfest... but in so doing you only make it more and more apparent you don't understand the business of the airline industry.

Yes, E, has been telling AA employees for years that they were too highly paid even while he managed to ignore or pretend didn't exist that AA had a revenue problem.

AA has lost its ability to generate the premium revenue that once made them the powerhouse they were.

Anyone who looks at the list of int'l flights they have added in the past year can't help but come to the conclusion AA's network people have lost the ability to find and fly profitable routes.

IF there was any doubt about AA's difficulty in generating revenue, then a look at their Pacific network and a big chunk of their TATL history should remove any doubts.
Shall I go into the numbers about AA's financial performance... like that they dropped JFK-NRT and then added JFK-HND where they obtain average fares that are half of what other carriers receive in average fares for flights from the west coast that are thousands of miles shorter?

I don't really care whose side you pick or how many votes up or down anyone gets.

Truth has never been subject to popularity ... and it still isn't.

MIA-MXP along with a half dozen other new flights are high risk new markets that will very likely come nowhere close to providing the additional revenue AA needs - whether you or E or anyone else believes it or not.

 

[Glenn Quagmire]

Thank you for the carification where "we" all stand in the hierarchy (and that I am not even rated in that group).

You have called the data presented by E in question.

I know I am not even remotely qualified to call anything you say into question, but you can silence this by providing your own data set to refute his. (Feel free to define "data set" for us statistical illiterates).

I have seen others point out your exaggeration of real data in the past so please do not round up for us who cannot read big numbers with lots of decimals or weird mathematical symbols.

I am/will not call your analysis into question here. I am simply pointing out your condescension of others who provide data and arguments that differ from your myopic perspective.

You have been very accurate with your long term analysis of most things Delta. I feel that your wishful thinking of the degradation of AA as a whole and in certain markets is ill-founded and will ultimately be proved wrong.

 

[WorldTraveler]

I'm not interested in getting into any data wars... because it can be sliced into a million different flavors in order to get the answer one wants....

and it still doesn't change that E isn't challenging the basic assumptions of the market - just the size of it.
Scale doesn't change that there are basic strategic issues which I raised and neither he or you have addressed.
I can repeat them if you want but they are very clearly laid out above.

I have no wish for the degradation of AA... but I quite frankly am disgusted to see AA workers give up hundreds of millions in pay and benefits only to have the company start up a bunch of new routes which are high risk and poorly timed... just because a business plan says that AA has to fly a certain amount of capacity in order to keep its costs at a certain level.

Adding 15% capacity into Europe in the winter all into cities where other carriers are much stronger doesn't demonstrate wise use of the 2nd chance that AA got in BK - largely on the backs of its employees.

If AA makes these routes work, I'll be happy to eat crow ... but right now AA has a long list of int'l routes that it is flying because it thinks it needs to compete in the same league as DL and UA and yet performs well below those two on comparable int'l routes... and where AA does outperform those two is in markets that are not large enough to offset losses elsewhere.

Thank you for recognizing the accuracy of what I have to say about DL.

All the best to you in all you do - and to the good people of AA.

 

[eolesen]

Tim, you need to make up your mind. Two pages ago you were mad that everyone was going off on tangents.

Now that I've provided real data (not something ginned up in your home office), you suddenly want to go off on tangents, and discuss a half dozen other markets, revenue premiums, etc?


Hey, let's just go crazy-wild on the tangents since you've done so... it looks like the current rep scores are -788 compared to +997....

Feel free to team up with your alter-ego and knock mine down to +987 if you want.

There's your data point. With some cheese on it.