Whoa! AA-KE Codeshare

[topDawg]

Once again, yet another reminder ... Delta isn't the only one who can make life "interesting" for a competitor ...
 
http://finance.yahoo.com/news/american-airlines-korean-air-announce-170000453.html

I saw this this morning and the first thought was "man the butt hurt that is going to be flowing out of WT when he sees this......." 

 

[topDawg]

If this press release just replaced "Korean Air, "American Airlines" and "Dallas-Seoul route" with "Cathay Pacific," "Delta Air Lines" and "Seattle-Hong Kong route," respectively, we'd be reading a WorldTraveller-penned eulogy on Cathay Pacific's oneWorld membership. 

dude you can replace it with fly by night airlines operating Atlanta to Athens GA and some how two things will happen. 
Delta is going to be better than AA somehow
Unions and labor suck
 
same story every time. 
 

yes, like your implication that a union can have anything to do with executive compensation is not supportable.

page two and the union card comes out. Shocker. 
 

sorry but contracts are based on facts and written agreements, not implications.

I'm sorry but this is just too funny. Now you understand how contracts work? Good lawd.
 

 
So, so true.
 
What this reminds - yet again - is that Delta isn't the 800 lb gorilla it was 2-3 years ago.  It's leverage and power with which to unilaterally shape partner and competitor behavior is waning as its financial and network "lead" versus its chief rivals narrows.  Contrary to what we've been told repeatedly, Delta doesn't hold all the cards in the Korean relationship - just as it doesn't, and never did, with Alaska.  Korean has leverage of its own - including the fact that it's the one, not Delta, with the strong, powerful and growing Asian hub - and it appears to now be using that leverage to seek out alternatives that make sense, regardless of what Delta thinks or wants.

I don't know about holding "all" the cards but Delta does hold cards in this. 
Not only does Delta offer feed on the US end for some of KE's largest markets you are talking about the 2nd largest carrier to Asia from the US. Don't think for a second KE wouldn't want to team up with that and reduce competition. 
 
 
For real this isn't a big deal (but it could be) as of now. But watching WT butt hurt flow is always a great read. 

 

[WorldTraveler]

uh, the only ones who think there is butt hurt involved are those who want to invoke a response from me.




I noted from the very beginning that this deal involves one route which is basically a surrender by KE to AA.

anyone that thinks that KE will find a friend in AA after being pushed out of a route by them with LAX-GRU very much still in question is nuts.

KE is simply trying to hold onto contracts that it will lose if it drops the route.

as for the larger question of AA vs DL partnered with KE is that KE is far more dependent on DL for feed in the US than DL is dependent on KE to make DL's flights to ICN work.

KE already is going to lose one route to the US to AA and faces reductions in its flights at JFK and ATL if DL decides to cut off interline sales which DL has done with carriers such as Turkish who used their access to DL's domestic network to undercut DL in longhaul markets.


the simple fact is that KE is overhubbed relative to the size of the S. Korea local market. They were the original ME3 type airline in Asia and their network is highly at risk by the development of new longhaul services from the US to China. KE also highly built its network around pulling traffic out of Japan onto KE's int'l flights at ICN, a strategy that delivers a lot less benefit as the yen weakens. Further, competition is growing between the US and S. Korea for local passengers, something AA and DL have both shown they can do very well.

so, the problem is KE's network - and Asiana to the same degree. KE will run to whoever they can to try to mitigate the problem but the problem at its core is that KE is too large.

 

[FrugalFlyerv2.0]

uh, the only ones who think there is butt hurt involved are those who want to invoke a response from me.

 
Says the poster who already responded 11 times ............

 

[WorldTraveler]

which just says that they succeeded at what they intended to do... make a mountain out of a molehill.

 

[FrugalFlyerv2.0]

You still can't just walk away.

 

[WorldTraveler]

sure I can if I want to... but you apparently want to keep talking.

 

[commavia]

I don't know about holding "all" the cards but Delta does hold cards in this. 
Not only does Delta offer feed on the US end for some of KE's largest markets you are talking about the 2nd largest carrier to Asia from the US. Don't think for a second KE wouldn't want to team up with that and reduce competition.

 
No question that Delta has leverage in this dynamic with Korean, too, but despite what we've been assured repeatedly - that it was Delta calling the shots, and it was just a matter of time until Korean submitted to Delta's will - the reality has always been that Korean has its own "cards" to "play" as well.  (And, in fact, several of us predicted precisely this - that Korean could and potentially would develop some form of relationship with AA.)
 
It's true that Delta is the second largest U.S. carrier to Asia - behind United - but Korean itself has the most extensive U.S. network of any Asian airline, so they're quite the "catch" for any prospective partner, too.  Plus, the real strategic criticality of Korean to Delta - at least from what I can see - is that Korean offers extensive, fast and convenient connectivity over the exceptional ICN hub deep into Asia - cities large and small.  As Delta's own NRT hub has been progressively dismantled, ICN has become ever-more-attractive as a jumping off point to access "deep" Asia.

 

[FrugalFlyerv2.0]

That's ~ 35.1% of the posts in this thread for WT.
 
Hey, does that qualify for a round up to 40%.
 
Winning!

 

[eolesen]

Good goes round.

 

[WorldTraveler]

No question that Delta has leverage in this dynamic with Korean, too, but despite what we've been assured repeatedly - that it was Delta calling the shots, and it was just a matter of time until Korean submitted to Delta's will - the reality has always been that Korean has its own "cards" to "play" as well.  (And, in fact, several of us predicted precisely this - that Korean could and potentially would develop some form of relationship with AA.)
 
It's true that Delta is the second largest U.S. carrier to Asia - behind United - but Korean itself has the most extensive U.S. network of any Asian airline, so they're quite the "catch" for any prospective partner, too.  Plus, the real strategic criticality of Korean to Delta - at least from what I can see - is that Korean offers extensive, fast and convenient connectivity over the exceptional ICN hub deep into Asia - cities large and small.  As Delta's own NRT hub has been progressively dismantled, ICN has become ever-more-attractive as a jumping off point to access "deep" Asia.

no, ICN is not more attractive. It is simply a different hub that already has abundant service compared to the local market demand.

the growth in Asia is not in S. Korea or Japan... it is in China.


increasing AA's reliance on KE and vv only weakens AA's ability to help JL. both are very reliant on transfer traffic to support oversized and weakening local markets or at least in the case of S. Korea, markets that are seeing more and more competition.

ICN has plenty of capacity. KE's biggest thorn is that it is overly dependent on connections and cannot lock out competitors.

DL is replacing NRT flow capacity with nonstop capacity. that is a fact regardless of what you want to believe. DL is moving capacity to where it is not only the most efficient but also where the market exists - not to another connecting market.

yes, AA is cozying up to KE. not a surprise. but it just reshuffles the strategic challenges AA faces in Asia and solves none of them.

as for "deep into Asia" you would do well to look at range circles for the 763ER from Asia - and remember that DL started both SEA-PVG and PEK with 767s.

 

[FrugalFlyerv2.0]

no, ICN is not more attractive. It is simply a different hub that already has abundant service compared to the local market demand.
.

 

 

[WorldTraveler]

the only sour grapes are from those who want to argue that shifting the connecting hub from NRT to ICN solves anything.

KE serves far more destinations than NRT but it is still a transfer hub for the vast majority of US to Asia traffic.

moving connecting traffic from NRT to ICN doesn't solve the real problem of having access to the markets that matter the most and are growing the most but also compounds AA's problem with diminishing performance at NRT>

but let's not get ahead of ourselves... the announcement was for one route that AA managed to muscle KE out of - or so it appears.

 

[Kev3188]

Cranky does his thing:
 
 
http://crankyflier.com/2015/02/05/strange-bedfellows-korean-to-codeshare-with-american/

 

[WorldTraveler]

fairly accurate.

He notes right off the bat it is small and involves one route.

He also notes that beyond alliance codesharing is allowed with Skyteam but jumps to the conclusion that it might
be allowed for KE to codeshare beyond DFW which would encroach on DL markets.

Finally, he notes the very same potential conflict with JL even though AA says it isn't an issue at this point.

He also notes that KE isn't likely worried about what DL thinks which goes back to all of the points that have been said before - if DL doesn't see much value in a key relationship vs. its ability to serve Asia, it is hard to imagine that AA could find much more value, esp. given that AA has more partners in Asia that DL does and thus more reason to have conflicting goals.