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jbs2886
Posts: 1088
Joined: Wed Apr 01, 2015 9:07 pm

Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 9:03 pm

commavia wrote:
atl100million wrote:
It really doesn't matter how hard AA is trying to get a commercially viable slot but simply whether they have one or not.


"Really doesn't matter" to a Delta fan. To the DOT? Only time will tell.

Cool story, bro. And in the meantime, the DOT bought AA's arguments over Delta's in the case of LAX-PEK.


:lol: :lol: As an attorney, I can tell you that making reasonable attempts to get a commercially viable slot is likely sufficient to avoid those rights being taken away, which, apparently, the DOT agreed.

I'll admit, I'm a DL fanboy, but you got to be reasonable man.
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 9:58 pm

It's time to distinguish between fact and opinion.

FACT: AA most certainly did argue for it to be given the route based on the fact that LAX is its west coast hub to Asia and that DL has a hub in SEA. DL made the argument that it should be given the route because it was building a hub to challenge AA's dominance of the LAX-Asia market. The DOT made it clear that it was awarding the route based on the ability to inject competition into the market. The docket has been repeatedly linked in this discussion and it isn't hard to find it.

FACT: The DOT requires airlines to start up a route within 90 days of issuance regardless of the competitive reasons involved in the route case.

FACT: The DOT gave AA until Sept to obtain a commercially viable slot.

FACT: AA has not said they have one; DL says they do.

FACT: No one has yet to provide an example of a route case in which a carrier has said it cannot obtain a commercially viable slot and was given permission to hold onto the authority when another carrier says it has a slot.

FACT: DL has a codeshare and alliance relationship with CZ. Neither CZ or DL have said they intend to dissolve their relationship.

FACT: Neither CZ or AA have said they will swap slots in order to allow AA to start LAX-PEK. DL has said China Eastern would swap slots.

FACT: If AA does not have a slot, the next IATA slot conference is for the summer 2018 season.

If the Skyteam CZ/DL relationship was not exclusive, why did AA need to invest in CZ?

Reasonable is reading the facts and distinguishing from opinion which is that we don't know how the DOT will rule. But it is also verifiable that AA and CZ have not released the specifics of any published agreement to cooperate across alliance lines or for CZ to change alliances.

Anyone that suggested that DL could walk into a oneworld or Star alliance carrier would be laughed off the board. Expecting that AA will be given a prime slot at one of the world's most difficult airports when neither AA or CZ said that would happen - and that is the sole reason why AA hasn't started the route - is laughable until the evidence is put on the table.

Maybe there is no exclusivity between CZ and DL for codesharing or cooperation but the default assumption is that there is or AA could have implemented a relationship already.

Maybe there is no breakup fee or contractual difficulty if CZ chooses to align with AA over AA but the assumption is that there is - or carriers would be switching alliance relationships much more frequently than they do.

Maybe CZ is willing to part with a slot at PEK in return for something that may well be in the middle of the night, but there is no evidence that will be the case.

Maybe AA can make a LAX-PEK route work with whatever slot they get and without codesharing.

... but those are a whole lot of maybes, all of which pretty have to happen in order for AA to begin the route when DL says it can.

Rational and reasonable is putting the facts for both sides on the table and coming to the conclusion that perhaps AA's ability to start the route is a whole lot more complicated than a lot of people think while the DOT might very well have to admit that DL can start the route even if there is less competition in the marketplace.

The decision on how the DOT will act is unknown.

There are abundant facts in this case and in DOT procedures that are known and have been misrepresented.

An accurate discussion of the issue has to include the facts as they actually exist and not the way some people want them.
 
winginit
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 10:00 pm

atl100million wrote:
some people want to believe that AA can come along and plop down a couple hundred million dollars for a couple percent stake in CZ and pick up a prime landing slot.


Do you doubt that that's possible? And I'm not sure I understand where alliance exclusivity comes into this discussion. I've reviewed well over 100 alliance and bilateral contracts between two or more carriers in my career, and never have I seen provisions preventing one carrier from swapping slots with a carrier outside of an agreement or alliance. Are there exclusivity provisions and restrictions as they relate to codeshare, interline, and FFP? Absolutely, and one of the worst kept secrets in the industry is SkyTeam's 'hygiene rules', that limit the % of member carrier ASMs that can be involved with codeshare outside of alliance members.

The point being, AA absolutely can, and probably did, put at least the good faith pursuit of a PEK slot via CZ's inventory in the contractual terms around their equity stake investment, and even if they didn't, they could pursue a swap with a carrier that they have virtually no commercial ties with (evidenced by their previous slot swap activity with Air China). I'm not sure why you're so resistant to the fact that AA is likely to acquire a viable slot for LAXPEK; and even if they don't, they can start the route with garbage slots before revising their schedule to incorporate new and more viable slots as they did with ORDPEK. I imagine this would be their path forward if confronted with a decision between doing that and walking away from the authority. At the very least, the DOT will give them that latter choice to make before just reversing course and giving the authority to DL.
Last edited by winginit on Tue Jul 11, 2017 10:03 pm, edited 1 time in total.
 
Sightseer
Posts: 754
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 10:01 pm

World Traveler 2.0, everybody.
 
11725Flyer
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 10:12 pm

Sightseer wrote:
World Traveler 2.0, everybody.


Huh?
 
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Polot
Posts: 6962
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 10:15 pm

11725Flyer wrote:
Sightseer wrote:
World Traveler 2.0, everybody.


Huh?

WorldTraveler was a poster at this site back in the day that had a very, and I mean very, heavy pro DL slant.
 
grbauc
Posts: 794
Joined: Sat Mar 28, 2015 9:05 pm

Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 10:15 pm

It's hard to have a discussion when somebody is just right no matter what always. The DOT might pull the authority and they might not. So far they have allowed time it not much of a reasonable leap of faith to conclude if AA is doing its due diligence that they will continue to give time has needed.
 
atl100million
Posts: 445
Joined: Tue May 23, 2017 1:28 am

Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 10:18 pm

winginit wrote:
atl100million wrote:
some people want to believe that AA can come along and plop down a couple hundred million dollars for a couple percent stake in CZ and pick up a prime landing slot.


Do you doubt that that's possible? And I'm not sure I understand where alliance exclusivity comes into this discussion. I've reviewed well over 100 alliance and bilateral contracts between two or more carriers in my career, and never have I seen provisions preventing one carrier from swapping slots with a carrier outside of an agreement or alliance. Are there exclusivity provisions and restrictions as they relate to codeshare, interline, and FFP? Absolutely, and one of the worst kept secrets in the industry is SkyTeam's 'hygiene rules', that limit the % of member carrier ASMs that can be involved with codeshare outside of alliance members.

The point being, AA absolutely can, and probably did, put at least the good faith pursuit of a PEK slot via CZ's inventory in the contractual terms around their equity stake investment, and even if they didn't, they could pursue a swap with a carrier that they have virtually no commercial ties with (evidenced by their previous slot swap activity with Air China). I'm not sure why you're so resistant to the fact that AA is likely to acquire a viable slot for LAXPEK; and even if they don't, they can start the route with garbage slots before revising their schedule to incorporate new and more viable slots as they did with ORDPEK. I imagine this would be their path forward if confronted with a decision between doing that and walking away from the authority. At the very least, the DOT will give them that latter choice to make before just reversing course and giving the authority to DL.


Thank you for confirming that alliance exclusivity rules exist.... that is a big step forward in the discussion.

Of course, any airline can buy an equity stake in any carrier they want and try to swap slots - but they don't have to do it. Did AA have an equity stake in Air China when they swapped slots (I didn't know they even swapped slots)?

Having a codeshare relationship in order to distribute traffic s absolutely necessary in order to make the route work and AA knows it.
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 10:20 pm

grbauc wrote:
It's hard to have a discussion when somebody is just right no matter what always. The DOT might pull the authority and they might not. So far they have allowed time it not much of a reasonable leap of faith to conclude if AA is doing its due diligence that they will continue to give time has needed.

The DOT MIGHT give them further time.

I don't know how the DOT will rule.

I do know that there are a list of things that AA has to make happen in order to make the route work which they have not confirmed they can do.

I am simply asking that people objectively call facts and opinions by what they each are and not try to mix the two.
 
winginit
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 10:37 pm

atl100million wrote:
Of course, any airline can buy an equity stake in any carrier they want and try to swap slots - but they don't have to do it. Did AA have an equity stake in Air China when they swapped slots (I didn't know they even swapped slots)?


They did not. They had no commercial ties whatsoever outside of I imagine the most basic interline agreement. Such is the way of slot swaps: they're capital transactions that are for the most part entirely separate from the core business and thus unaffected by commercial ties.

atl100million wrote:
Having a codeshare relationship in order to distribute traffic s absolutely necessary in order to make the route work and AA knows it.


I think that's a stretch. AA has had a pretty robust Mainland Chinese network for several years now without codeshare in and out of China with the exception of select flow with HU. To say that LAXPEK in particular, a highly local route by way of passenger mix with yields that are much higher on the local passengers versus flow, requires a codeshare relationship to be successful (which in and of itself is subjective to AA's strategy) is simply not true.
 
commavia
Topic Author
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 10:40 pm

winginit wrote:
The point being, AA absolutely can, and probably did, put at least the good faith pursuit of a PEK slot via CZ's inventory in the contractual terms around their equity stake investment, and even if they didn't, they could pursue a swap with a carrier that they have virtually no commercial ties with (evidenced by their previous slot swap activity with Air China). I'm not sure why you're so resistant to the fact that AA is likely to acquire a viable slot for LAXPEK; and even if they don't, they can start the route with garbage slots before revising their schedule to incorporate new and more viable slots as they did with ORDPEK. I imagine this would be their path forward if confronted with a decision between doing that and walking away from the authority. At the very least, the DOT will give them that latter choice to make before just reversing course and giving the authority to DL.


This. Thank you. This is the bottom line.

AA hasn't even responded to Delta's latest complaint yet, and when it does, none of us know how the DOT is going to ultimately rule. But I continue to expect that as long as AA can credibly demonstrate that it isn't playing games, the DOT will most likely be willing to give AA continued latitude to get a "commercially viable" slot pair at PEK. And if the DOT is less lenient, AA most likely does have other, suboptimal, alternative options available to start up the route and retain the authority.
 
Sydscott
Posts: 3221
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 11:13 pm

commavia wrote:
This. Thank you. This is the bottom line.

AA hasn't even responded to Delta's latest complaint yet, and when it does, none of us know how the DOT is going to ultimately rule. But I continue to expect that as long as AA can credibly demonstrate that it isn't playing games, the DOT will most likely be willing to give AA continued latitude to get a "commercially viable" slot pair at PEK. And if the DOT is less lenient, AA most likely does have other, suboptimal, alternative options available to start up the route and retain the authority.


And that is the bottom line. Why lose millions now with a sub-optimal slot time if you can get one which makes commercial sense by the start-up date? And if AA can't get a commercially viable slot they'll start it up anyway with a 787 to avoid losing the authority and then move it when they can. Lets not also forget what will be happening on the Beijing side as well with the new Airport scheduled to open which will, medium term, lead to better slot opportunities for all carriers.
 
atl100million
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Re: AA Applies For LAX-PEK

Tue Jul 11, 2017 11:23 pm

The issue is solely whether AA can start flying a route which they were awarded but have asked for an extension while DL has said it can fly the route within the 90 day standard DOT startup period.

It is not the DOT's job to decide whether a carrier can make money or not or to hold authority until a slot time that is good enough that can be obtained.

The only real reply which AA can give is to say they have a slot and will be able to start the route within X number of days.

It is very possible the DOT might extend the authority if AA has a slot in hand but which can only be started in early 2018.

It is not reasonable to think that the DOT will continue to grant exceptions on the basis of a hoped-for commercially viable slot.

My request is simply that people recognize what is fact and what is opinion in the case and also recognize that AA really does have a huge list in order to make the flight not just happen from a scheduling standpoint but more importantly on a financial basis.

If they wanted to simply sit on a frequency, they wouldn't be repeatedly saying that they are waiting for "commercially viable" slots.
 
jfk777
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Re: AA Applies For LAX-PEK

Wed Jul 12, 2017 12:44 am

atl100million wrote:
It really doesn't matter how hard AA is trying to get a commercially viable slot but simply whether they have one or not.

DL says it does have the ability to get one in time to start the route not months in advance but within the 90 days that AA has been given just like every other carrier in a route case and for which AA had to ask for a delay.

Commercially viable to AA and DL differ because DL currently has its code on dozens of China Eastern flights/day from PEK.

AA at best has to convince China Southern to swap a slot with AA that AA apparently does not yet have and unwind the CZ/DL relationship which doesn't necessarily go away just because AA invests in a carrier. All alliances have some degree of contractual exclusivity between carriers in the alliance and there simply is no assurance that CZ can terminate the codeshare relationship with DL if exclusivity does exist. AA is a minority equity holder and has not triggered any change in control provisions.

AA very much said that they should be awarded the rights for LAX-PEK because "DL has a hub at SEA" and because LAX is "our west coast to Asia hub." The DOT made clear that it is not deciding or awarding hub status but only the LAX-PEK route.

No one has yet to produce a single example of where a carrier has successfully argued to the DOT that they should be able to hold onto a route because they can't find commercially viable slots while another carriers says they have them.

The reason why DL is raising the issue and continues to push on it is because AA can't deliver on what it was awarded but DL can.

No one can be certain how the DOT will rule but it is highly unlikely that they will be swayed to continue to allow AA to hold the route into March 2018 when they don't have slots and could only gain a commercially viable slot via a commercial relationship with CZ that is still in development.

Instead of continuing to deny consumers of a route that no US airline currently serves and some suggest AA really would rather keep dormant and out of DL's hand instead of serve, the DOT will eventually have no choice but to grant the route to the airline that can and will serve the route, just as they have required in every other case, regardless of how badly they might think that AA might add a 3rd competitor into the west coast to PEK market.

btw, AA's ORD-PVG route carried the lowest number of passengers per flight of any US carrier mainland to China flights in 2016 bested only by AA's ORD-PEK.

AA carried the lowest amount of passengers per flight on its mainland USA-China flights compared to DL and UA. DL's 229 passengers/flight is 30 passengers more than AA and only 10 less than UA.

If any argument is made about about the efficiency of allocated frequencies, AA will not fare well.


Remember AA used badly configured 777-200ER on many flights to China so having lower passenger numbers was from lower capacity. AA also had 16 First Class seats, no all gone. Some AA flights are now flown by 787-8 which seat 226. United has flown many 777 and 744 on their flights to the PRC. Delta has the luxury of being able to fly 767 from SEA to PEK & PVG. The point is that saying "X" airlines carries more passengers per flights sounds great but if you fly 200 on a 767 your making $$ but 200 on a 744 from Peking to Chicago is probably a looser.
 
jbs2886
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Re: AA Applies For LAX-PEK

Wed Jul 12, 2017 1:59 am

jfk777 wrote:
atl100million wrote:
It really doesn't matter how hard AA is trying to get a commercially viable slot but simply whether they have one or not.

DL says it does have the ability to get one in time to start the route not months in advance but within the 90 days that AA has been given just like every other carrier in a route case and for which AA had to ask for a delay.

Commercially viable to AA and DL differ because DL currently has its code on dozens of China Eastern flights/day from PEK.

AA at best has to convince China Southern to swap a slot with AA that AA apparently does not yet have and unwind the CZ/DL relationship which doesn't necessarily go away just because AA invests in a carrier. All alliances have some degree of contractual exclusivity between carriers in the alliance and there simply is no assurance that CZ can terminate the codeshare relationship with DL if exclusivity does exist. AA is a minority equity holder and has not triggered any change in control provisions.

AA very much said that they should be awarded the rights for LAX-PEK because "DL has a hub at SEA" and because LAX is "our west coast to Asia hub." The DOT made clear that it is not deciding or awarding hub status but only the LAX-PEK route.

No one has yet to produce a single example of where a carrier has successfully argued to the DOT that they should be able to hold onto a route because they can't find commercially viable slots while another carriers says they have them.

The reason why DL is raising the issue and continues to push on it is because AA can't deliver on what it was awarded but DL can.

No one can be certain how the DOT will rule but it is highly unlikely that they will be swayed to continue to allow AA to hold the route into March 2018 when they don't have slots and could only gain a commercially viable slot via a commercial relationship with CZ that is still in development.

Instead of continuing to deny consumers of a route that no US airline currently serves and some suggest AA really would rather keep dormant and out of DL's hand instead of serve, the DOT will eventually have no choice but to grant the route to the airline that can and will serve the route, just as they have required in every other case, regardless of how badly they might think that AA might add a 3rd competitor into the west coast to PEK market.

btw, AA's ORD-PVG route carried the lowest number of passengers per flight of any US carrier mainland to China flights in 2016 bested only by AA's ORD-PEK.

AA carried the lowest amount of passengers per flight on its mainland USA-China flights compared to DL and UA. DL's 229 passengers/flight is 30 passengers more than AA and only 10 less than UA.

If any argument is made about about the efficiency of allocated frequencies, AA will not fare well.


Remember AA used badly configured 777-200ER on many flights to China so having lower passenger numbers was from lower capacity. AA also had 16 First Class seats, no all gone. Some AA flights are now flown by 787-8 which seat 226. United has flown many 777 and 744 on their flights to the PRC. Delta has the luxury of being able to fly 767 from SEA to PEK & PVG. The point is that saying "X" airlines carries more passengers per flights sounds great but if you fly 200 on a 767 your making $$ but 200 on a 744 from Peking to Chicago is probably a looser.


jfk777, agree 100%. So AA carried 199 passengers per flight on aircraft with fewer seats? 199 AA, 229 DL and 239 UA? UA, which was flying 744s to China...
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Wed Jul 12, 2017 3:16 am

jfk777 wrote:
atl100million wrote:
It really doesn't matter how hard AA is trying to get a commercially viable slot but simply whether they have one or not.

DL says it does have the ability to get one in time to start the route not months in advance but within the 90 days that AA has been given just like every other carrier in a route case and for which AA had to ask for a delay.

Commercially viable to AA and DL differ because DL currently has its code on dozens of China Eastern flights/day from PEK.

AA at best has to convince China Southern to swap a slot with AA that AA apparently does not yet have and unwind the CZ/DL relationship which doesn't necessarily go away just because AA invests in a carrier. All alliances have some degree of contractual exclusivity between carriers in the alliance and there simply is no assurance that CZ can terminate the codeshare relationship with DL if exclusivity does exist. AA is a minority equity holder and has not triggered any change in control provisions.

AA very much said that they should be awarded the rights for LAX-PEK because "DL has a hub at SEA" and because LAX is "our west coast to Asia hub." The DOT made clear that it is not deciding or awarding hub status but only the LAX-PEK route.

No one has yet to produce a single example of where a carrier has successfully argued to the DOT that they should be able to hold onto a route because they can't find commercially viable slots while another carriers says they have them.

The reason why DL is raising the issue and continues to push on it is because AA can't deliver on what it was awarded but DL can.

No one can be certain how the DOT will rule but it is highly unlikely that they will be swayed to continue to allow AA to hold the route into March 2018 when they don't have slots and could only gain a commercially viable slot via a commercial relationship with CZ that is still in development.

Instead of continuing to deny consumers of a route that no US airline currently serves and some suggest AA really would rather keep dormant and out of DL's hand instead of serve, the DOT will eventually have no choice but to grant the route to the airline that can and will serve the route, just as they have required in every other case, regardless of how badly they might think that AA might add a 3rd competitor into the west coast to PEK market.

btw, AA's ORD-PVG route carried the lowest number of passengers per flight of any US carrier mainland to China flights in 2016 bested only by AA's ORD-PEK.

AA carried the lowest amount of passengers per flight on its mainland USA-China flights compared to DL and UA. DL's 229 passengers/flight is 30 passengers more than AA and only 10 less than UA.

If any argument is made about about the efficiency of allocated frequencies, AA will not fare well.


Remember AA used badly configured 777-200ER on many flights to China so having lower passenger numbers was from lower capacity. AA also had 16 First Class seats, no all gone. Some AA flights are now flown by 787-8 which seat 226. United has flown many 777 and 744 on their flights to the PRC. Delta has the luxury of being able to fly 767 from SEA to PEK & PVG. The point is that saying "X" airlines carries more passengers per flights sounds great but if you fly 200 on a 767 your making $$ but 200 on a 744 from Peking to Chicago is probably a looser.


The difference was DL's 6% higher load factor.
 
SFOtoORD
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Re: AA Applies For LAX-PEK

Wed Jul 12, 2017 3:42 am

atl100million wrote:
The difference was DL's 6% higher load factor.


Which is basically meaningless much like some of the minutiae in the recent part of this thread. The super simplified version is that it's a wide business move for AA to try to launch this flight with commercially viable slots and also a smart business move for DL to make this filing against AA and try to get the slot. And beyond that we all have to wait for the regulators to rule on this. Not much else to be said.
 
qqflyboy
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 12:09 am

I love all the chatter about "commercially viable". How about the Chinese government wouldn't issue AA a slot at all, let alone a comercially viable one. That is why the DOT has allowed the extension previously. This has more to do with, and bigger implications on, diplomatic ties with China than AA's ability to secure a "commercially viable" slot. If the Chinese government won't make a slot available, any slot, then it's time for the DOT to start pulling route frequency or authority from Chinese carriers. Tit for tat.
The views expressed are mine alone and do not necessarily reflect my employer’s views.
 
atl100million
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 12:20 am

do you have evidence that AA received NO slot?
 
globalcabotage
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 12:38 am

ORD-BJS slots are still terrible, but better than the 1st allotment. DFW received great slots to both as the market was empty.

Maybe the US should slot Chinese carriers the way they slot US carriers.
 
commavia
Topic Author
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 12:47 am

globalcabotage wrote:
ORD-BJS slots are still terrible, but better than the 1st allotment.


Honestly, at this point I don't think the ORD-PEK times are that bad. A late morning westbound departure and afternoon eastbound departure may be better, but they actually compliment the DFW schedule fairly well and provide decent two-way connectivity/coverage to/from lots of markets over ORD.

globalcabotage wrote:
DFW received great slots to both as the market was empty.


... and China's government was motivated to find optimally-timed slots that facilitated good connectivity with DFW's South America flights.

globalcabotage wrote:
Maybe the US should slot Chinese carriers the way they slot US carriers.


I highly, highly doubt that will ever happen. If anything, the U.S. has sometimes even been preferential to foreign carriers over U.S. carriers at capacity-constrained airports.
 
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LAXintl
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 12:53 am

globalcabotage wrote:
Maybe the US should slot Chinese carriers the way they slot US carriers.


US does not have airports that are slot constrained to same degree.
The only slotted airport served by Chinese carriers in the US is JFK, and even there slots can be had outside certain peak times just for the asking.
From the desert to the sea, to all of Southern California
 
wn676
Posts: 1500
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 3:21 am

atl100million wrote:
do you have evidence that AA received NO slot?


Funny you should ask:

The difficulties faced by U.S. carriers have only worsened since American described these difficulties to the Department in its filing on January 17, 2017. On January 18, 2017, the CAAC rejected American’s request for slots at Beijing Capital International Airport (PEK) for nonstop service to Los Angeles (LAX). The CAAC did not, as it had done in the past, even offer American slots at commercially non-viable times, such as between midnight and sunrise when few passengers want to takeoff or land. Even though American was recently awarded the U.S.-China frequencies and necessary exemption authority from the Department to inaugurate Los Angeles- Beijing service, American cannot serve this route without slots in Beijing. To date, the CAAC has refused to provide any slots to allow American to exercise its bilaterally conferred rights.


https://www.regulations.gov/contentStre ... ntType=pdf

And spare us all the rambling bullshit that I'm sure is to follow.
Tiny, unreadable text leaves ample room for interpretation.
 
11725Flyer
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 5:19 am

Polot wrote:
11725Flyer wrote:
Sightseer wrote:
World Traveler 2.0, everybody.


Huh?

WorldTraveler was a poster at this site back in the day that had a very, and I mean very, heavy pro DL slant.


Got it, thanks.
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 3:40 pm

wn676 wrote:
atl100million wrote:
do you have evidence that AA received NO slot?


Funny you should ask:

The difficulties faced by U.S. carriers have only worsened since American described these difficulties to the Department in its filing on January 17, 2017. On January 18, 2017, the CAAC rejected American’s request for slots at Beijing Capital International Airport (PEK) for nonstop service to Los Angeles (LAX). The CAAC did not, as it had done in the past, even offer American slots at commercially non-viable times, such as between midnight and sunrise when few passengers want to takeoff or land. Even though American was recently awarded the U.S.-China frequencies and necessary exemption authority from the Department to inaugurate Los Angeles- Beijing service, American cannot serve this route without slots in Beijing. To date, the CAAC has refused to provide any slots to allow American to exercise its bilaterally conferred rights.


https://www.regulations.gov/contentStre ... ntType=pdf

And spare us all the rambling bullshit that I'm sure is to follow.


I appreciate your posting that information but I am still uncertain - and no one has answered - how DL can say they have a slot which they can swap with China Eastern and are ready to start the route but AA says they cannot even obtain a slot.
 
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Polot
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 3:47 pm

atl100million wrote:
I appreciate your posting that information but I am still uncertain - and no one has answered - how DL can say they have a slot which they can swap with China Eastern and are ready to start the route but AA says they cannot even obtain a slot.

Because DL has a partnership with MU, including a small ownership stake. AA does not. DL did not get that proposed slot all by themselves, they had some help (re: MU).
 
commavia
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 3:54 pm

Polot wrote:
Because DL has a partnership with MU, including a small ownership stake. AA does not. DL did not get that proposed slot all by themselves, they had some help (re: MU).


Indeed. Which is to say - the exact same way, in all likelihood, that AA is going to ultimately get its PEK slot pair for LAX-PEK - from its soon-to-be equity partner in China, China Southern.
 
winginit
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 4:56 pm

commavia wrote:
Polot wrote:
Because DL has a partnership with MU, including a small ownership stake. AA does not. DL did not get that proposed slot all by themselves, they had some help (re: MU).


Indeed. Which is to say - the exact same way, in all likelihood, that AA is going to ultimately get its PEK slot pair for LAX-PEK - from its soon-to-be equity partner in China, China Southern.


Bingo. The DOT isn't stupid - they can put two and two together, and I wouldn't be surprised if they're in routine contact at the middle management levels with AA, who are likely telling them that AA is confident they'll be able to secure a slot via swap with CZ.

Even if that's not at all the case, I'll say again that AA would likely launch the route with crap slots granted by the CAAC under the assumption that they'll swap it out with better swapped slots at a later date as was the case with ORDPEK.
 
atl100million
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 6:02 pm

Polot wrote:
atl100million wrote:
I appreciate your posting that information but I am still uncertain - and no one has answered - how DL can say they have a slot which they can swap with China Eastern and are ready to start the route but AA says they cannot even obtain a slot.

Because DL has a partnership with MU, including a small ownership stake. AA does not. DL did not get that proposed slot all by themselves, they had some help (re: MU).

Then that would have to mean that DL is being given a slot by China Eastern, not that they have received one and can swap it for a better slot with their partner.

If it comes down to AA injecting equity with a clause that a slot pair at PEK is included, then I certainly have no problem understanding what is going on....but given that people have posted that slots at Chinese airports can't be sold (IIRC), then that explanation seems inadequate.

Even with a slot at PEK, in order to make the slot economically viable, AA needs connections which raises the issue of codesharing across alliances or China Southern switching alliances.

We'll see.... the only real news that changes the dynamic of the route case is for AA to say they have slots...

and, as has been speculated on the previous pages of this thread, that could well trigger DL to start the route using its NRT-PVG frequencies.
 
commavia
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 6:15 pm

atl100million wrote:
Even with a slot at PEK, in order to make the slot economically viable, AA needs connections which raises the issue of codesharing across alliances or China Southern switching alliances.


:banghead:

Why. Is. This. So. Difficult?

Obviously the deal between AA and China Southern is intended to include codesharing. From the press release dated 28 March 2017:

"Later this year, the two carriers expect to begin codeshare and interline agreements that will give customers access to many more destinations in China, as well as North and South America. American customers will be able to access nearly 40 destinations beyond Beijing and more than 30 destinations beyond Shanghai."

atl100million wrote:
We'll see.... the only real news that changes the dynamic of the route case is for AA to say they have slots...


No, what would change the dynamics of the route case would be the DOT stripping the award from AA and giving it to Delta. AA doesn't necessarily have to have slots to prevent that. As many of us have been saying - repeatedly, in every possible way we know how - is that if AA can credibly demonstrate its good faith efforts to secure commercially viable slots, the DOT may well give AA continued latitude until it is successful.

atl100million wrote:
and, as has been speculated on the previous pages of this thread, that could well trigger DL to start the route using its NRT-PVG frequencies.


Anytime now, Delta. As AA has been saying for the last year - Delta can shift NRT-PVG to LAX-PEK any time it wants.
 
winginit
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 6:42 pm

atl100million wrote:
Even with a slot at PEK, in order to make the slot economically viable, AA needs connections which raises the issue of codesharing across alliances or China Southern switching alliances.


Goodness gracious we're on this again? AA already serves PEK from both ORD and DFW, and they do so without codeshare on China Southern. Therefore, it is very blatantly and visibly possible for AA to sustain economically viable (however that is defined) service to PEK without the CZ codeshare that you for some reason have deemed necessary for a commercially viable LAXPEK service.
 
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 9:28 pm

Why is "alliance exclusivity" still been discussed. Partnerships outside alliances happen all the time. Far too much importance has been put on alliance membership in this thread.

There is no need for China Southern to leave SkyTeam to deepen their partnership with AA. Further there is no requirement that alliance partners codeshare with each other, only interline. Subject to the language in the contract between CZ and DL, China Southern could theoretically terminate all DL codeshares tomorrow and that would be acceptable within the framework of the alliance. That's highly unlikely, but CZ is free to pursue their own interests while still codesharing with DL. There is no reason at all that a flight can't carry both a DL and AA codeshare.

Just to illustrate the rediculousness of this alliance centric mentality, did you know that China Eastern and Qantas have a JBA? Go look it up.
Worked Hard, Flew Right
 
atl100million
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 10:05 pm

RyanairGuru wrote:
Subject to the language in the contract between CZ and DL, China Southern could theoretically terminate all DL codeshares tomorrow and that would be acceptable within the framework of the alliance. That's highly unlikely, but CZ is free to pursue their own interests while still codesharing with DL. There is no reason at all that a flight can't carry both a DL and AA codeshare.
.

you could have stopped with your first sentence.

We honestly don't know because none of us know the contents of either the contract between CZ and Skyteam and DL. We also don't know what AA and CZ agreed to but we certainly can read what AA said regarding its intended partnership with CZ

And ultimately the question is whether AA can get a slot pair from CZ, if it requires that AA have one of its own (they say they haven't received one), and if the DOT is willing to wait for all of these machinations to play out.

No one has also answered the seemingly conflicting information from people who said on here that airlines can't sell or lease slots at Chinese airports and yet the assumption by some that CZ will provide a slot to AA for LAX-PEK?

RyanairGuru wrote:


Just to illustrate the rediculousness of this alliance centric mentality, did you know that China Eastern and Qantas have a JBA? Go look it up.

And you do know there is no Skyteam carrier in Australia so there is no conflict?

It is also worth noting that DL said on its earnings call that they intend to have a hub in Beijing by 2019.

They clearly intend to grow their presence in China.
 
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 10:53 pm

atl100million wrote:
No one has also answered the seemingly conflicting information from people who said on here that airlines can't sell or lease slots at Chinese airports and yet the assumption by some that CZ will provide a slot to AA for LAX-PEK?


By all means please allow me to be a source of fact for you having been a part of many a Chinese slot swap so we can finally put these questions to rest:

1) Airlines cannot sell or lease slots at Chinese airports

2) Airlines can, however, swap slots. Airlines (like Delta), have in the past make equity investments in another airline (like MU) with the contractual verbiage in the agreement that says MU will make a good faith effort to assist DL in securing say, a PVG or PEK slot. The transaction is done in the form of a slot swap, which, again, is perfectly permitted. The catch here is that the Chinese carrier and/or the CAAC often have the ability to dictate what the swapped slot can be used for.

In the case of AA and CZ, it is likely that the AA equity stake had a contractual stipulation that CZ make a good faith effort towards helping AA secure at least a single PEK slot pair for LAXPEK. This would be executed as a slot swap, possibly for a trash AA slot issued by CAAC or some other useless asset, and would not need to be made public.

Clear?
 
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 11:01 pm

[quote="atl100million
No one has also answered the seemingly conflicting information from people who said on here that airlines can't sell or lease slots at Chinese airports and yet the assumption by some that CZ will provide a slot to AA for LAX-PEK? .[/quote]

There is no conflicting information. This is China we're talking about where the only things you need in order to get things done are connections and cash. The entire reason AA is aligning with China Southern is for the connections part, (and I mean that both literally and figuratively), while the cash part is all about knowing exactly who you need to approach and in what way. Again these are things China Southern can help AA with so while you can't sell or lease slots at Chinese Airports there is enough opaqueness in how the allocate things that if you have the two before-mentioned things lined up properly you'd be amazed at what can drop out in your favour.

Winginit also illustrated the opaqueness, ie things don't need to be made public, in his post perfectly. What's not to understand here?
 
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Re: AA Applies For LAX-PEK

Thu Jul 13, 2017 11:03 pm

winginit wrote:
atl100million wrote:
No one has also answered the seemingly conflicting information from people who said on here that airlines can't sell or lease slots at Chinese airports and yet the assumption by some that CZ will provide a slot to AA for LAX-PEK?


By all means please allow me to be a source of fact for you having been a part of many a Chinese slot swap so we can finally put these questions to rest:

1) Airlines cannot sell or lease slots at Chinese airports

2) Airlines can, however, swap slots. Airlines (like Delta), have in the past make equity investments in another airline (like MU) with the contractual verbiage in the agreement that says MU will make a good faith effort to assist DL in securing say, a PVG or PEK slot. The transaction is done in the form of a slot swap, which, again, is perfectly permitted. The catch here is that the Chinese carrier and/or the CAAC often have the ability to dictate what the swapped slot can be used for.

In the case of AA and CZ, it is likely that the AA equity stake had a contractual stipulation that CZ make a good faith effort towards helping AA secure at least a single PEK slot pair for LAXPEK. This would be executed as a slot swap, possibly for a trash AA slot issued by CAAC or some other useless asset, and would not need to be made public.

Clear?



absolutely clear and what you said is exactly what I understood regarding leasing and selling slots at Chinese airports.

The obvious problem is that AA does not have a slot - based on what was posted above. They can't swap something they don't have.

I'm all ears as to how AA is going to get a slot when it didn't succeed using the IATA slot process.

I'm also still trying to understand how DL has managed to get a slot which it says China Eastern is willing to swap.

Are my unanswered questions also clear?
 
grbauc
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 12:15 am

atl100million wrote:
winginit wrote:
atl100million wrote:
No one has also answered the seemingly conflicting information from people who said on here that airlines can't sell or lease slots at Chinese airports and yet the assumption by some that CZ will provide a slot to AA for LAX-PEK?


By all means please allow me to be a source of fact for you having been a part of many a Chinese slot swap so we can finally put these questions to rest:

1) Airlines cannot sell or lease slots at Chinese airports

2) Airlines can, however, swap slots. Airlines (like Delta), have in the past make equity investments in another airline (like MU) with the contractual verbiage in the agreement that says MU will make a good faith effort to assist DL in securing say, a PVG or PEK slot. The transaction is done in the form of a slot swap, which, again, is perfectly permitted. The catch here is that the Chinese carrier and/or the CAAC often have the ability to dictate what the swapped slot can be used for.

In the case of AA and CZ, it is likely that the AA equity stake had a contractual stipulation that CZ make a good faith effort towards helping AA secure at least a single PEK slot pair for LAXPEK. This would be executed as a slot swap, possibly for a trash AA slot issued by CAAC or some other useless asset, and would not need to be made public.

Clear?





absolutely clear and what you said is exactly what I understood regarding leasing and selling slots at Chinese airports.

The obvious problem is that AA does not have a slot - based on what was posted above. They can't swap something they don't have.

I'm all ears as to how AA is going to get a slot when it didn't succeed using the IATA slot process.

I'm also still trying to understand how DL has managed to get a slot which it says China Eastern is willing to swap.

Are my unanswered questions also clear?



Well just sit back and when and most likely AA is able to get its slots from a swap then you might be able to grasp the process. AA accepts a nonviable slot that CAAC is on offer now and trade it for a viable slot on trade. No need to think to hard. I willing to bet it works out has it appears to be heading.
 
atl100million
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 1:03 am

if at all worked as written, we wouldn't be having this discussion.

For some reason which no one has yet been able to explain, AA says they don't have a slot (good bad or indifferent) while Delta says they do. What gives?

Once again, the next IATA slot coordination conference for winter was several months ago (season starts in a couple months) while the next conference is in a couple months for the spring 2018 season.

Once again, why did AA not receive a slot - or were they actually offered one - and DL knows it - but declined to accept it, only to say they didn't receive a slot?

There are several pieces missing in this discussion which are core to why the discussion is being had at all.

Continuing to persist with "but they are developing a relationship with China Southern" doesn't solve the question of why they don't have a slot and how they expect to get one if the IATA slot coordination process didn't work.
 
Sydscott
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 1:19 am

atl100million wrote:
Continuing to persist with "but they are developing a relationship with China Southern" doesn't solve the question of why they don't have a slot and how they expect to get one if the IATA slot coordination process didn't work.


They'll get one the same way Qantas got one.

http://www.afr.com/brand/chanticleer/qa ... 013-gs1oby

From the 4th paragraph of the article:

"Slots are hard to come by at Beijing's international airport and the only one available would have seen Qantas passengers landing in the Chinese capital at the unattractive time of 4am. However, China Eastern agreed to a slot swap which meant it would take on the 4am spot and give Qantas one of its existing slots which means the new service will arrive in Beijing late in the evening.China Eastern will also code-share on the service.

Qantas could not do this seven years ago as it did not have partnerships with Chinese carriers."

However AA is saying they weren't even offered a slot at all. So if they were unable to get a slot at all they have nothing to swap. If they get a slot, even an unattractive one, there is precedent for a slot swap.
 
winginit
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 3:14 pm

Sydscott wrote:
atl100million wrote:
Continuing to persist with "but they are developing a relationship with China Southern" doesn't solve the question of why they don't have a slot and how they expect to get one if the IATA slot coordination process didn't work.


They'll get one the same way Qantas got one.

http://www.afr.com/brand/chanticleer/qa ... 013-gs1oby

From the 4th paragraph of the article:

"Slots are hard to come by at Beijing's international airport and the only one available would have seen Qantas passengers landing in the Chinese capital at the unattractive time of 4am. However, China Eastern agreed to a slot swap which meant it would take on the 4am spot and give Qantas one of its existing slots which means the new service will arrive in Beijing late in the evening.China Eastern will also code-share on the service.

Qantas could not do this seven years ago as it did not have partnerships with Chinese carriers."

However AA is saying they weren't even offered a slot at all. So if they were unable to get a slot at all they have nothing to swap. If they get a slot, even an unattractive one, there is precedent for a slot swap.


Sydscott has touched on what will be the likely process here. It's correct that AA wasn't offered any PEK slot pair, even a crap one, during the most recent allocation, but I strongly suspect this is where there were some back end discussions that unfolded to the tune of "unless you can give us a good slot don't offer us anything at all". Had their been an offering that could be documented, especially a lousy offering, it would be ammunition for DL and whomever else to further pressure the authorities into forcing AA to start service before they were willing.

The PEK airport and the CAAC clearly have some garbage 3AM arrival or what have you slot pairs that they could give AA for LAXPEK. Thus, and I strongly suspect this will be the likely outcome, AA (it'll really be CZ) will approach PEK/CAAC and CZ will say "Give us (CZ) that trash slot pair (and they'll at that time essentially be able to choose the slot pair that, while trash for LAXPEK might actually suit a CZ service) and we'd like that to count as a swap with AA for one of our existing, primetime PEK slots" as was the case with Qantas and China Eastern mentioned above albeit with the crap slot having already been issued to QF.

Make sense?
 
atl100million
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 6:27 pm

Of course it all makes sense based on what is publicly known including that slots can be swapped which is exactly how DL moved its DTW-PEK flight from fairly unattractive slot times to ones that compete quite favorably with UA from ORD. AA also got good slot times for DFW-PEK so the Chinese have not put up a blanket “US carriers can’t get any good slot times” which is the only basis that the US would have to say that the Chinese are enjoying an advantage in slot times. Remember, Peking is building a new airport so no one is getting great slots because PEK is at capacity.

I suspect that what you suggested is exactly what took place; AA was offered crappy slots but because it didn’t have any means to swap the slots, it said “we don’t want anything at all.” Slot discussions are documented and I suspect DL and China Eastern both have access to the requests which is why AA is now repeatedly saying that they are working on obtaining slots. Problem is that I’m not sure that any airport is required to give a carrier slots outside of the IATA slot coordination process which is why the DOT frequently grants extensions up to six months in order to get DOT’s route awards in sync with the IATA slot coordination process. The DOT has repeatedly issued route decisions right after the slot coordination process so that US airlines are forced to delay implementation unless an airport has open slots.

I also suspect that the comments above that AA really didn’t want to start the LAX-PEK route are correct. They lost over $200 million on their Pacific network during the 2nd half of 2016 and the first quarter of 2017 so they have little incentive to start another route in the winter even though that is exactly what DL was willing to do. But AA also didn’t want to lose the route to DL so they have dragged the whole process out until they finally bought into China Southern from whom they hope to gain a slot and enough of a presence in China to be competitive with at least DL in size and revenues.

Even if AA ultimately wins the LAX-PEK route, there still is a good chance that DL will switch its NRT-PVG flight to LAX-PEK. Remember that neither China Eastern or China Southern can operate flights to the US from PEK. China Southern also cannot operate flights to the US from PVG. PEK to the US is the historic domain of Air China who has had United, the largest US carrier to China, as its partner, even if not on a JV basis. Both China Eastern and China Southern want to gain a presence in the PEK market through US carriers so it is highly plausible that both are willing to swap slots at PEK with their US partners.

Since Skyteam carriers are moving to the new Peking airport and there is a good chance that there will be a new or expanded treaty between the US and China which will allow further flights to Peking from the US (probably both airports), AA might be gaining at best a one year advantage. If DL starts LAX-PEK, AA gains no advantage in the LAX market and also still is at a disadvantage to DL and UA in the west coast to China market.

The machinations of the LAX-PEK route case make for great fodder on a.net but I'm not sure it will amount to much more than an expanded LAX-China air travel market but that is happening throughout the world, with or without route cases.
 
commavia
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 7:00 pm

atl100million wrote:
Even if AA ultimately wins the LAX-PEK route


AA already has "won" the LAX-PEK route. The only question now is whether or not the DOT continues to give AA latitude to secure a commercially viable PEK slot pair to operate the route. I agree with the sentiments of just about everyone (else) here that, absent clear and demonstrable proof that AA is playing games, this continued latitude from U.S. regulators is likely.

atl100million wrote:
there still is a good chance that DL will switch its NRT-PVG flight to LAX-PEK.


Any day now, Delta! Delta can shift NRT-PVG to LAX-PEK anytime now. I firmly believe that Delta just hasn't done so quite yet because it wants to play out the (unlikely) possibility of succeeding in prying this LAX-PEK authority away from AA and locking up the final remaining daily frequencies to China Zone 1. When - I believe - Delta's complaints go nowhere and AA secures a slot pair for LAX-PEK, I fully expect Delta to announce the termination of NRT-PVG and the introduction of either LAX-PEK or ATL-PVG almost immediately thereafter.

atl100million wrote:
If DL starts LAX-PEK, AA gains no advantage in the LAX market and also still is at a disadvantage to DL and UA in the west coast to China market.


With LAX-PEK, AA will have three daily nonstop flights from the largest China market in the U.S. (LAX) to the three largest and most globally-important economic/political capitals in China (PEK, SHA and HKG). And of course that's on top of the five additional daily flights to China from AA's two huge mid-continent hubs (DFW and ORD), and a pending extensive domestic codeshare with China's largest airline (China Southern), and a longstanding and extensive partnership with HKG's dominant carrier (oneworld partner Cathay Pacific). I suspect AA management will be quite happy with that, and is no longer too worried about any major "disadvantage" in China relative Delta.
 
ldvaviation
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 8:09 pm

commavia wrote:
With LAX-PEK, AA will have three daily nonstop flights from the largest China market in the U.S. (LAX) to the three largest and most globally-important economic/political capitals in China (PEK, SHA and HKG). And of course that's on top of the five additional daily flights to China from AA's two huge mid-continent hubs (DFW and ORD), and a pending extensive domestic codeshare with China's largest airline (China Southern), and a longstanding and extensive partnership with HKG's dominant carrier (oneworld partner Cathay Pacific). I suspect AA management will be quite happy with that, and is no longer too worried about any major "disadvantage" in China relative Delta.


At United and Delta, traffic to Asia is declining. Some of that traffic is going to Chinese airlines which have been expanding in North America and some of it is going to AA. In short, what we are witnessing is the start of a realignment as Chinese airlines recapture traffic from KE and AA recaptures traffic from its US competitors.

Even before the merger, there was an obvious discrepancy between AA's domestic market share and its share of the connecting traffic to Asia. For US Airways before the merger, the discrepancy was even more extreme as it commanded a leading position domestically on the east coast, but passed all of its connecting traffic to United and others.

In some ways, AA is in the best position domestically to continue to grow in Asia.
 
grbauc
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 8:20 pm

ldvaviation wrote:
commavia wrote:
With LAX-PEK, AA will have three daily nonstop flights from the largest China market in the U.S. (LAX) to the three largest and most globally-important economic/political capitals in China (PEK, SHA and HKG). And of course that's on top of the five additional daily flights to China from AA's two huge mid-continent hubs (DFW and ORD), and a pending extensive domestic codeshare with China's largest airline (China Southern), and a longstanding and extensive partnership with HKG's dominant carrier (oneworld partner Cathay Pacific). I suspect AA management will be quite happy with that, and is no longer too worried about any major "disadvantage" in China relative Delta.


At United and Delta, traffic to Asia is declining. Some of that traffic is going to Chinese airlines which have been expanding in North America and some of it is going to AA. In short, what we are witnessing is the start of a realignment as Chinese airlines recapture traffic from KE and AA recaptures traffic from its US competitors.

Even before the merger, there was an obvious discrepancy between AA's domestic market share and its share of the connecting traffic to Asia. For US Airways before the merger, the discrepancy was even more extreme as it commanded a leading position domestically on the east coast, but passed all of its connecting traffic to United and others.

In some ways, AA is in the best position domestically to continue to grow in Asia.




Good point on Usair passing all it Asia traffic off prior to the merger. They really don't have to be the third child and could be a second born. I
 
atl100million
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 8:38 pm

With all due respect, AA lost $200 million flying to Asia over just the past 3 quarters. Its growth has been heavily subsidized by its domestic system and more recently the return of traffic to Latin America. If AA feels it needs to have a presence to Asia, it needs to figure out how to do so and make money in the process.

UA over the past 3 quarters is barely profitable over the Pacific which is not a terribly great place to be as the world's largest transpacific airline.

DL made $200 million over the same 3 quarters - about as much as AA lost.

This isn't about "bigness" or anything else but maximizing shareholder returns.

AA might feel a strategic need to build a transpacific hub at LAX but DL and UA never said that they wouldn't challenge AA at every step AA makes at LAX. They also are using their hubs at SFO and SEA to do a better job of connecting traffic via their west coast hubs while maximizing their LAX to Asia flights to serve the local LAX market.

You do realize that even though DL was the last of AA, DL and UA to start LAX-PVG, it now carries the most traffic of the 3 both in the local LAX-PVG market and on the flight as a whole? Do you also realize that DL carries more passengers from LAX-HND in both the local market and the flight overall even though AA has a JV in Japan? Do you realize that UA's LAX-NRT flight does the same thing compared to AA's LAX-NRT flight?

so, as much as you want to think that securing LAX-PEK will lead to a great strategic win for AA, it simply ups the level of competition, one at which AA hasn't ended up in top place in any LAX to Asia market that DL and UA have also entered.

I suspect that is exactly why AA really doesn't want DL to enter the LAX-PEK market and their comments to the DOT about SEA being DL's hub are precisely because they don't want to have to compete with either DL or UA to Asia.

The reason why UA and DL are stronger than AA to Asia is because they bought assets from or merged with carriers that had a large Asia presence. Neither is going to give up their market position either in the US as a whole or in LAX to Asia.

As much as some people get all excited about the ins and outs of this route case, the end result is not really going to change that UA will remain the largest US carrier to Asia including to China followed by DL and then AA. Until less than a year ago when DL dropped LAX-NRT and AA started LAX-HKG, DL carried the most LOCAL passengers from LAX to Asia since the time when UA had a much larger presence at LAX with HKG.

More significantly for DL shareholders, DL is operating profitably to Asia and its presence is sustainable long-term which is something AA cannot at present say.

The reason why DL first applied for the LAX-PEK route only to have AA jump in is because DL has the foundation from which it can continue to build its presence to Asia including from both LAX and China. AA, in contrast, is trying to grab every opportunity it can including from LAX but has a long ways to go to turn their existing network into profits esp. in light of the competition that is not letting up just because AA decided to build a west coast gateway to Asia at the US' largest gateway to Asia.

Keeping the 40,000 foot view in mind might put alot of this discussion in the proper context.
 
commavia
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 8:50 pm

atl100million wrote:
With all due respect, AA lost $200 million flying to Asia over just the past 3 quarters.


Yeah, kind of like how Delta lost money for years in NYC because management thought it was a worthwhile long-term investment. Rome wasn't built in a day.

atl100million wrote:
This isn't about "bigness" or anything else but maximizing shareholder returns.


Absolutely right. And in that regard, AA and United have materially narrowed the gap in terms of both profitability and shareholder return compared to where they were relative to Delta several years ago. I expect that gap to keep narrowing.

atl100million wrote:
AA might feel a strategic need to build a transpacific hub at LAX but DL and UA never said that they wouldn't challenge AA at every step AA makes at LAX.


Appreciate the update - Delta and United can say and do whatever they want, just as can AA. Got it.

atl100million wrote:
They also are using their hubs at SFO and SEA to do a better job of connecting traffic via their west coast hubs while maximizing their LAX to Asia flights to serve the local LAX market.


Sounds like U.S. air travel consumers have a pretty vibrant, competitive environment between the west coast and Asia. Good.

atl100million wrote:
You do realize that even though DL was the last of AA, DL and UA to start LAX-PVG, it now carries the most traffic of the 3 both in the local LAX-PVG market and on the flight as a whole?


I should hope Delta does well on LAX-PVG considering it's the only U.S. carrier with an equity "strategic" partner's megahub at the PVG end.

atl100million wrote:
Do you also realize that DL carries more passengers from LAX-HND in both the local market and the flight overall even though AA has a JV in Japan?


I should hope Delta carries the most local passengers LAX-HND considering that, unlike AA, it enjoys almost zero online connectivity at the HND end.

atl100million wrote:
so, as much as you want to think that securing LAX-PEK will lead to a great strategic win for AA, it simply ups the level of competition, one at which AA hasn't ended up in top place in any LAX to Asia market that DL and UA have also entered.


Cool story. And in the meantime, AA now has more transpacific flights from LAX than United and double the number of Delta. AA has carved out a leading position in the LAX transpacific market and at LAX overall, just as United and Delta have done at other hubs up the coast. Once again, good - sounds like a win for the industry and consumers to me.

atl100million wrote:
As much as some people get all excited about the ins and outs of this route case, the end result is not really going to change that UA will remain the largest US carrier to Asia including to China followed by DL and then AA.


Yeah, once again, thanks for the update on the obvious.
Last edited by commavia on Fri Jul 14, 2017 8:54 pm, edited 2 times in total.
 
winginit
Posts: 1101
Joined: Sat Feb 23, 2013 9:23 pm

Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 8:51 pm

atl100million wrote:
With all due respect, AA lost $200 million flying to Asia over just the past 3 quarters.

UA over the past 3 quarters is barely profitable over the Pacific which is not a terribly great place to be as the world's largest transpacific airline.

DL made $200 million over the same 3 quarters - about as much as AA lost.


This is the second time you've mentioned specific profitability isolated to region and carrier. I'm not saying I disagree with your numbers, but please provide your source as I don't recall those being mentioned during earnings calls.
 
atl100million
Posts: 445
Joined: Tue May 23, 2017 1:28 am

Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 9:31 pm

DOT profitability by region is public information and you and anyone else that wants to honestly talk about the issues involved here should know the data that is available.

https://www.transtats.bts.gov/Data_Elem ... spx?Data=6


The DOT and no other public entity publishes profitability by hub.

Of course, AA has a right to build its own Asia system but it ultimately has to compete with DL and UA which have structural and long-term market advantages and, at least in the case of DL, higher system and Asia profitability. Considering that DL has had to completely restructure its Pacific network, that is no small accomplishment.

I am sure AA and UA will start to narrow the system profitability gap with DL but you can't underestimate the ability DL has to go after strategic initiatives including building its Asia route system which it specifically said just yesterday is front and center on its to-do list.

if China Eastern's "massive hub" at PVG is an advantage on LAX-PVG, it won't be any less of an advantage for DL's other PVG routes. Interestingly, AA, DL and UA all have partners with a large presence at PEK so, if all maintain a decent presence at PEK, PVG might well become the market that determines overall profitability for US carriers to China.

Even more interesting is that you argue that DL has an advantage on LAX-HND by NOT having a strategic partner in Japan so it can carry local passengers. That is exactly the point that I and others have made about why DL is at an advantage in moving its Asia connecting capacity to ICN and leaving its Tokyo operations for local traffic. It also is why limited HND access is more of a hindrance to AA/JL and UA/NH than for DL.

and while AA has more transpacific flights from LAX today, the number of flights that DL and UA offers is going to rise. UA has announced its new SIN flight - we have yet to hear from DL but there will be new Asia routes for 2018.

Competition is good - but let's be clear that not every airline fares as well in each market in a competitive environment... that has been true for the entire history of the airline industry and will be true with the LAX-PEK route, LAX as a hub, and the US to Asia market.
 
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diverdave
Posts: 599
Joined: Sun Mar 07, 2010 1:00 am

Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 9:31 pm

commavia wrote:
atl100million wrote:
there still is a good chance that DL will switch its NRT-PVG flight to LAX-PEK.


Any day now, Delta! Delta can shift NRT-PVG to LAX-PEK anytime now. I firmly believe that Delta just hasn't done so quite yet because it wants to play out the (unlikely) possibility of succeeding in prying this LAX-PEK authority away from AA and locking up the final remaining daily frequencies to China Zone 1. When - I believe - Delta's complaints go nowhere and AA secures a slot pair for LAX-PEK, I fully expect Delta to announce the termination of NRT-PVG and the introduction of either LAX-PEK or ATL-PVG almost immediately thereafter.


I don't understand why folks are agreeing with AA's arguments that DL can simply utilize other slots to start this service. Why is that relevant - after all, doesn't AA has other slots at other hubs that they could switch any time, right?

I cannot imagine that DL would end up moving NRT-PVG to LAX-PEK. It would be public admission that AA was correct and I would think be somewhat humiliating. Also it would mean two new competitors entering the LAX-PEK market instead of just one. Two new competitors would be great for travelers and non-revs, but terrible for yields.

David
 
jbs2886
Posts: 1088
Joined: Wed Apr 01, 2015 9:07 pm

Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 9:37 pm

atl100million wrote:
DOT profitability by region is public information and you and anyone else that wants to honestly talk about the issues involved here should know the data that is available.

https://www.transtats.bts.gov/Data_Elem ... spx?Data=6


As discussed in EVERY thread this data is posted, there is no required way to allocate revenue and expenses, and thus, this data isn't what it seems. DL could allocate more costs to domestic than international, or allocate more revenue from a domestic-connection flight to the international flight than another airline.

Edit: Even if we accept these numbers as comparable among the airlines, your point isn't acceptable. You say AA lost $200M in the last 3 reported quarters. In the Q before that, AA made nearly $300M, and over $300M in the Q before that (so more than $600M in the 2 Qs before that oh-so-terrible loss). AA also made nearly $400M in 2015. DL in 2016 made $350M and AA made $500M. In 2015 DL made $383M, AA made $393M.

You need to take a step back from this thread and chill out.
Last edited by jbs2886 on Fri Jul 14, 2017 9:42 pm, edited 1 time in total.
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