The new AA - Attacking Delta one hub at a time

[WorldTraveler]

robbed,
didn't see the article you mentioned about potentially losing the deal and I have not said that things will not "get better."
I have simply said and will repeat that the network carriers are highly competitive and that DL in particular has been moving very aggressively to gain whatever strategic advantages they needed before AA/US can gain legal authority to merge and then begin the process of joint planning.
Given that DL has plenty of bandwidth to do more strategic transactions, I don't think anyone should think that DL has got all of the pieces on the table that it will ultimately have to compete with AA/US.

As I have noted before, I believe the most impacted carrier will be UA, not DL. UA is being forced to withdraw capacity in order to push its RASM up and cover growing costs which will only continue to grow as they sign new labor agreements.
UA also will lose US in the SE which has to be worth something to UA's network and UA will probably get downsized to less favorable partners in Latin America. Further, DL's deal w/ Virgin will impact UA heavily making UA the #3 carrier combo at LHR considering JVs.

As I have often noted, when AA is up, UA is down and vice versa. There is far more historical evidence linking AA and UA's performance inversely to each other with very little showing that DL has lost at the hands of AA, UA, or US.

Dunno if I'd describe MSP as "dwindling"... It's still pretty robust.

^this....
in fact, based on summer schedules, DL will offer more seats from MSP than AA will offer from ORD or US will offer from either PHX or PHL. US at PHL has more flights, though.

Under both NW and DL, MSP has been a very "on-time" hub. No surprise that NW taught DL how to do cold weather hubs.

 

[robbedagain]

GO TO www.justplanenews.com then click the next page and scroll down ill try to find the title but i found it interesting

 

[robbedagain]

The article is highlighted under usairways wins amr as horton wages last ceo and that link is under the big article titled american to unite usairways to create nbr 1 accrding to reuters.. so wt or anyone just click www.justplanenews.com and scroll down​

also phil inquirer has an interesting article too about parker being the man behind the merger​

 

[WorldTraveler]

found it... thanks much.
I think the key sentence there is that the creditors wanted a culture change and a break from the past - which is a nice way of saying they could not risk continued labor unrest and the potential for loss of their investments.
Labor at AA won what they wanted.....

 

[FWAAA]

found it... thanks much.
I think the key sentence there is that the creditors wanted a culture change and a break from the past - which is a nice way of saying they could not risk continued labor unrest and the potential for loss of their investments.
Labor at AA won what they wanted.....

Most definitely. The hatred of Horton from the unions and individual employees meant that he wasn't going to be the long-term CEO even if AA emerged on a standalone basis. Parker might have been able to snag the job as CEO by submitting his resume to the UCC even without the merger.

AA labor got what they demanded, but it might not turn out to be what they wanted . . .

 

[eolesen]

\
AA labor got what they demanded, but it might not turn out to be what they wanted . . .

Yep. They're getting the airline they asked for.

I hope they remember that when all the pissing and moaning starts up in about 23 months and three weeks, if not sooner.

 

[wcs]

My wager - no less than a 3 page rant from WT.

Hey,
You were right! When you add it all up, it's about three pages!!!

 

[WorldTraveler]

Most definitely. The hatred of Horton from the unions and individual employees meant that he wasn't going to be the long-term CEO even if AA emerged on a standalone basis. Parker might have been able to snag the job as CEO by submitting his resume to the UCC even without the merger.

AA labor got what they demanded, but it might not turn out to be what they wanted . . .

you are precisely right.

Very rarely do we get what we really want when we are motivated by negative emotions. The resurgence of les miserable highlights how crippling hatred is and how it is usually the one who seeks revenge of someone else who ends up losing.

Truth is rarely easy to hear for any of us.

Hey,
You were right! When you add it all up, it's about three pages!!!

but did the OP do one thing to enhance AA/US' ability to compete or diminish the trends that have marked the industry and which I have highlighted for years?

 

[NewHampshire Black Bears]

World Traveler.

There IS one way that DL could ABSOLUTELY Guarantee that it would Never lose the top spot at Kennedy, and that would be to merge with JetBlue, and move into JB great facility.
Short of that, the 'New' AA, along with ALL the International Business that US brings to the table....'COULD' (Yes I understand COULD) regain the #1 International spot again from JFK.

You can have 100% of feed coming into 'LGA', but landing in LGA, is not the same as landing in JFK. The Hardest NYC airport to get to/or from IS LGA.
Remember when AA had ALL those A/E slots landing in JFK ? Well whats to stop AA from landing a FLEET of E-Jets to feed thier International operation, or larger planes for that matter ?

AA has thier new TAJ MAHAL, while DL has that Shite house of a terminal.
Oh, and for all of DL's LOYAL FFers, and Business accounts. THEY are only as good as...'what have you done for me lately' !
DL has done a Superb job @ JFK, while AMR was too busy 'Snapping thier Carrot'.
DL stands a good chance of winding up soon, with a 'below wing' UNION, which as you know, cost MONEY.
All i'm saying is, what's been un-done, can be re-done given enough time. And the FACT remains, (new)AA 'can' control that ENORMOUS population center along the NE I-95 corridor, with the addition of US.

 

[WorldTraveler]

Although some here continue to hope that belittling the length of my posts will change my behavior, I post what I post because it contains solid analysis that addresses the real issues which are being discussed. Copying and pasting articles yet being unable to even discuss the topic demonstrates to me that several people here really don't understand what drives the industry or can't adequately debate it. I don't play in sound bites. Belittling someone else because you can't contribute says far more about their own inadequacies than what I write. For those who can't contribute, sit on the sidelines and watch. Your continued attacks, including thru the use of the post voting system, simply embolden me. Let me be very clear that I will not be bullied into silence by those who don't like what they read but can't argue against it; the history of the human race shows that such attempts have never worked anyway. If you don't agree or don't like what someone says, then have the backbone to stand up and engage in debate.
There are people who can discuss the issues and you, Bears, have demonstrated that you are willing to wrestle with the tough issues. I am regularly told that my contributions regarding key strategic issues add value to this forum; when those affirmations stop, I'll pack my bags and go home. For now, it is highly unlikely that I will stop doing what I do here.

Bears,

I have no idea on what basis you believe that DL is any closer to any additional large group unions on the property today than they have had in decades, but since you have been saying the same thing for years and it has yet to materialize, it is probably prudent to wait until something is even close to reality before discussing it.

As much as you would like to argue about DL’s vulnerability in this merger, you need only look back over the past 10 years and see that while AA was petitioning the FAA to eliminate slots at LGA in order to improve congestion, DL was adding flights at both LGA and JFK as fast as it could. When slot rules in NYC were tightened, DL ended up w/ the biggest pot of slots at LGA and JFK and only added to that pile with the slot swap which was an acknowledgement by US that it could not compete in the LGA market at the size it once had done so and didn’t need the slots to support an operation other than for the Shuttle and to its hubs.

AA/US will have about two-thirds of the number of slots at both LGA and JFK as DL has. It is very hard to imagine how anyone can believe that a carrier who is two-thirds the size of another can reach parity with the larger carrier, let alone surpass them.

The whole issue of growth and market dominance in the NE revolves around the “DCA problem” which I have highlighted already. AA/US can push to retain as much of its slots at DCA as possible which will only open the door for DL to expand more at JFK thru an acquisition such as B6 as you note OR AA/US can divest slots at DCA either voluntarily (highly unlikely) or by DOT/DOJ order in a size that could be as large as AA’s entire current DCA slot portfolio. That would open the door for a host of new low fare competitor growth at DCA, undoing not only the above average revenues that US has enjoyed at DCA but also significantly weakening AA/US market share and revenue position up and down the east coast. WN and B6 are salivating at the prospect of new growth at DCA and if they get new flights, they won’t be adding them to ILM and MHT. They will add them in the biggest markets from DCA which include many that the combined AA/US serve.

AA/US’ ability to compete at the slot controlled airports after this merger comes down to an attempt to overcome strategic missteps that both AA and US have made in the NE over the past decade and were compounded by US’ decision to construct the slot deal so that they are already over 50% of the slots at DCA, making it impossible to add more flights without triggering a review of US government policy regarding carrier size at slot controlled airports.

The likelihood in my opinion is that AA/US will be able to add some but not all of the slots of AA to what US now has at DCA. AA/US combined have about 67% of DCA slots; US currently has 55%. DL and B6 combined at JFK have about 59% of slots at JFK. B6 adds very little to DL at LGA where combined they are both still at 50%, far less than US at DCA today or UA at EWR.
If the price of the merger is significant divestitures at DCA to low fare carriers (which lawmakers would love to see), then DL might be content to just let that happen because AA/US combined position in the NE would be seriously eroded.

If there are not significant divestitures and AA/US are allowed to combine the majority of their current DCA slots, then B6 very much becomes a target for DL.
All of these discussions raise the question of how big does a carrier really need to be in order to compete today. AA, DL, and UA will all be about the same size, each clearly with market strengths. Even with a much smaller size in NYC than DL or UA, it is ENTIRELY possible that AA could be able to successfully compete based on being more of a large niche operator focusing on O&D markets rather than the hubs that DL and UA have. Current evidence in the industry suggests that it is very unlikely AA could gain revenues on par with DL and UA who have about twice the number of seats in the region based on current schedules. But it is possible that AA could offer service in the majority of key markets in NYC, just as DL could do in BOS.

If there is any consolation for AA in NYC, I believe the same principle that is helping DL succeed at LGA will also help AA if it really puts its focus behind maximizing the use of its slots there (the whole LGA terminal situation is another issue for AA/US since you want to drag terminals into the discussion). LGA is the preferred airport for short haul travel from NYC while JFK is the preferred airport for longhaul travel. CO grew as large as it did at EWR because AA and DL basically let them and were too focused on the mindset that LGA and JFK were spoke markets that were divided between each carrier. CO succeeded by growing a hub. AA has enough slots at LGA and JFK that they could expand their presence in key markets sufficiently to be able to compete with DL and UA but likely would never be of a comparable size overall. AA would have the advantage that its flights would draw more local passengers per flight than would those of UA at EWR based on the dynamics of the three airports. AA’s growth at LGA could also further weaken B6 at JFK because so much of B6’s presence at JFK is to markets which are within the LGA perimeter. Thus, AA’s growth at LGA and JFK could well come at the expense of UA at EWR and B6 at JFK.

Finally, Bears, in case you have missed it, the Pan Am Worldport is just months away from being shut down as DL’s new concourse at Terminal 4 is ready to open. DL has already signed a contract to extend it before it even opens. How long T2 remains is anyone’s guess but may I remind you that even with the armpit facilities that DL has used, they still have managed to grow dramatically at JFK, overtaking AA and by in terms of both flights and revenue. If DL does go after B6, there will be no need to worry about T2. One way or the other, DL’s facilities at JFK will be on par with other carriers but DL is still pushing, but there is no reasonable scenario that will change the reality that DL pushes far more passengers and revenue thru its facilities today than AA today. If a great facility was all that was needed, AA should have been #1 at JFK years ago… and for that matter, DL should remain far ahead of the crowd at BOS.

 

[robbedagain]

WT i found an interesting article thru www.justplanenews.com last nite that indicated that UAL would be the most vunerable bec of the fact that they and AA battle it out in places like ord bos and lax the article stated that the delta would largely not be as affected. but swa and jetblue would be the best to gain but swa would gain more

 

[WorldTraveler]

that is what I have said several times before due to UA's loss of a SE presence via US, a likely "downsizing" of partners in Latin America, and a reduced position at LHR relative to DL/VS.

It also validates what I have said that AA and UA are the two that have gained at the other's expense while DL has managed to do its thing.... when AA is up, UA is down and vice versa. This merger is an UP for AA; so far, there is no clear strategy that UA has - or has been suggested - that allows them to mute the gains AA will accumulate from the merger.

thanks for sharing the article.

 

[NewHampshire Black Bears]

WT,
You've agreed about the possibility of AA @ JFK, and the possibility of DL/B6, WHICH was my main point.
I don't give a sh!t about LGA, or EWR, or DCA, or ANY airline flying into there, Only about KENNEDY and International flights from there.
If you look at the history of the DNA of IDLEWILD/JFK, the 3 most 'Home-town' carriers there have been/are (in this order)..PAA/TWA/AA,...and I believe strongly that over a relatively short period of time, AA will regain it's rightful # 1 spot in the Jamaica Bay area !

 

[Kev3188]

DL stands a good chance of winding up soon, with a 'below wing' UNION...

...And an even better chance of one for Inflight; they have some serious momentum right now...

 

[WorldTraveler]

Bears,
First, are you really sure you want to put AA in the same sentence with Pan Am and TWA?

Second, your focus may not be on LGA or DCA or EWR, but the CEO that will run AA for the near term after the merger has already focused on two of those airports, if for no other reason than that AA/US has a better chance of competing size-wise at DCA and then LGA than they do at JFK. Remember B6 and DL have about twice the number of flights as AA/US at JFK but 2/3 of what DL has at LGA and the lead at DCA.

Third, while you and others may not be much interested in raw statistics, let me highlight several sets of them from the 4th quarter and full year results of each company. Each of these sets of statistics explain the competitive environment in the US airline industry far better than all the arguments you or I can make aside from them. Since there are a lot of numbers here, I am willing to be corrected if I have written or calculated anything incorrectly. I’m not sure that any error will change the overall conclusion, though.

Mainline RASM – for 4th quarter 2012
AA 11.85
AS 11.24
B6 11.03
DL 12.46
UA 11.74
US 11.96
WN 12.63

Mainline CASM – ex fuel, special charges, regional carriers, third party – 4th quarter 2012
AA 8.58
AS 7.77
B6 7.26
DL 8.45
UA 8.96
US 8.73
WN 8.15

Net profit (shown w/ and without restructuring items, if applicable, and important since AA is in BK while others are not) Full year 2012
AA $ -1.9B / $-130M
AS $316M
B6 $128M
DL $1.6B / 1.0B
UA $-725 / 589M
US $637 / 537
WN $421/ 417

For those who don’t want to sort thru those numbers or don’t know what they mean, the summary is that DL in the 4th quarter generated the highest revenue per available seat mile for mainline flights of any large US carrier except for WN who was 1.3% higher, although WN flies much shorter haul flights than DL. DL also had the lowest mainline cost per available seat mile among AA,DL, UA, and US.
If you want to consider consolidated (mainline plus regional), US had a higher consolidated RASM than DL by about 1% but its consolidated costs were about 5% higher than DL’s. AA’s consolidated CASM was lower than DL’s by about 1% but its RASM was lower by a percent also. All that says is that the combined AA/AE network is slightly more cost efficient than DL’s but still doesn’t generate comparable revenues. Since US has a higher percentage of its revenues coming from regional operations than other carriers, its RASM is slightly higher but it is not cost competitive.
Now, consider that DL is moving over the next two years to move large portions of the revenue that is now carried by regional carriers over to mainline, which has lower costs. So far, no other carrier has said they are doing that to any large degree, although there is some small movement in that direction at carriers besides DL, including AA.
Since mainline CASMs are lower than consolidated costs, DL has the ability to increase its operating margin; that is the entire purpose of the small RJ for 717 swap.
Rolling the discussion up one more level, on a system basis, it is very hard to argue that any of the other network carriers will be successful in winning competitive battles with DL because of DL’s lower costs. For now AA’s mainline costs are only 2% higher than DL’s and AA has the lowest mainline CASM of AA, UA, or US. Note that all of these figures are not mileage adjusted which does matter since DL and UA offer much more long haul Pacific and Middle East/Africa flights but RASM is also affected by the length of flight. But AA’s costs will go up as pay raises to support the merger start kicking in. Further, DL has said it expects to get about $1B in non-fuel mainline costs out, which could allow DL mainline to operate at a 5% or larger cost advantage over other network carriers – and within about 5% of AS’ costs and nearly identical to WN's (although WN has some significant cost cutting efforts underway as well). That probably explains why DL is not afraid to push AS regarding their joint relationship with AA and DL. Finally, DL is still expecting the refinery to lower costs by several percent more (all of these cost numbers above exclude fuel). DL's cost advantage over AA and UA in a couple years could be close to 10%. It doesn't take looking too far into history to realize what a 10% difference in cost does.

DL has long been known as an airline that can manage costs far better than its legacy/network peers. More recently, DL has become the airline that can generate revenues on par with or superior to other carriers.
It also shows that DL intends to be cost competitive with WN and the combined size of DL and WN means they have enormous ability to win competitive battles against higher cost network carriers. The US industry is clearly divided into two groups with respect to costs and revenues; DL and WN have made sure they can generate the highest group of revenues but do so from the lowest cost base. It also shows why DL and WN avoid directly competing w/ each other and instead focus their competitive energies on higher cost carriers.

It is highly unlike that other legacy carriers will win in competitive battles with DL and also explains why DL has been able to win in competitive battles with other network carriers for much of the past ten years.

As noted, AA’s greatest opportunity to win competitive battles is against UA which right now has much higher costs and has lost a lot of revenue momentum due to its merger integration problems.

I can appreciate your desire to see AA/US win, esp. in markets like JFK that personally matter to you.

Having adequate knowledge and perspective of the industry will help you and other AA/US fans target your competitive energies where they will most likely see success.