commavia
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 9:37 pm

diverdave wrote:
I cannot imagine that DL would end up moving NRT-PVG to LAX-PEK.


I think it's a virtual certainty that Delta will move NRT-PVG to a nonstop U.S.-China route as soon as AA's LAX-PEK authority is resolved one way or another. To me, the only question is whether that nonstop U.S.-China route is LAX-PEK or ATL-PVG. Of the two, though, I think the chances are better than 50/50 that it's LAX-PEK over ATL-PVG. As the data from AA's filings in the LAX-PEK route case highlighted, the NRT-PVG route truly is, at this point, largely meaningless to U.S. travelers - and I think Delta knows it, too. In 2015, over 2/3 of the traffic on the flight was intra-Asia (and that was before Delta cut JFK/MSP-NRT). As said, I think Delta is just exhausting its last and final option to try and lock up these final daily China Zone 1 frequencies by prying them away from AA and if (when, I suspect) it fails, Delta will quickly go to the obvious Plan B.

diverdave wrote:
It would be public admission that AA was correct and I would think be somewhat humiliating.


Not humiliating, just business. And not sure what Delta would ever be humiliated about - Delta is unquestionably thrilled that it has those seven prime China frequencies in reserve for reallocation in the near future to a nonstop U.S.-China route that is far more valuable to the Delta network as it exists today (as opposed to five years ago). That's quite a useful tool for Delta to have at its disposal.

diverdave wrote:
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.


Hardly unprecedented - that's exactly what happened with LAX-PVG. And again, I think there is a better than 50/50 chance it's going to happen here, too.
 
BroadwayLimited
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 10:06 pm

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

What happened to WorldTraveler?
 
atl100million
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 10:14 pm

jbs2886 wrote:
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.



except that those costs and revenues have to come to add up to the same bottom line.

Note that the DOT site I linked includes all 4 regions - domestic, Latin, transatlantic and transpacific. Feel free to let us know where AA or UA was LESS profitable so that their transpacific operations could have been shown to be MORE profitable.

Given that AA lost money in the latest reported quarter over the Atlantic and UA did to Latin America, there just might be a different philosophy in how AA, DL and UA manage their networks - and it might also explain why DL has higher system profitability.

Given how many people have clamored for public information regarding Asia markets, it is amazing how quickly some people want to exclude it when it doesn't say what some want.

And I happen to agree with commavia in his last post... DL has been holding onto its NRT-PVG frequencies while trying to get LAX-PEK and that DL is likely to start LAX-PEK as soon as the current route case is resolved.

But it also highlights that even though AA is building a LAX hub, it is not likely they will gain a long-term advantage at LAX and they will still compete against DL and UA's hubs further up the coast in addition to what DL and UA decide to add from LAX.

At the end of the LAX-Asia buildup that AA DL and UA are all engaged in, AA will very likely only have achieved a 3 way competitive presence to Asia from LAX that may be fairly comparable in size - which is perhaps not much different than what will happen in the domestic market - even as DL and UA have other domestic hubs on the west coast.
 
commavia
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 10:31 pm

atl100million wrote:
But it also highlights that even though AA is building a LAX hub, it is not likely they will gain a long-term advantage at LAX and they will still compete against DL and UA's hubs further up the coast in addition to what DL and UA decide to add from LAX.


Well I guess it all depends on how we (conveniently) decide to define "long-term advantage."

AA has already achieved the largest market share at LAX with more flights, to more places, than any other airline at the airport. AA is already operating the second largest network carrier hub on the west coast, and the second largest network carrier transpacific gateway, at LAX. And AA just signed an LOI with LAWA that, "paves the way for American to receive additional gates as they continue to grow their operation and add destinations."

If "long-term advantage" is (ridiculously) defined as building a 300-departure megahub to rival SFO, then sure, that's never going to happen - but of course nobody serious ever put the goalposts there to begin with. All AA needs - and is steadily achieving - is sufficient scale at a west coast gateway to provide meaningfully robust and competitive branded access to the principal cities of East Asia for core U.S. customers.
 
winginit
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 10:56 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


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


BTS?! You're accepting BTS as an accurate reflection of carrier profitability by hub? Oh lord. Look, I get that you're new here and all, but as has been brought up seemingly countless times whenever BTS is brought up or referenced on this forum, there's absolutely no way to appropriately allocate costs and even revenues to any degree of granularity or consistency between carriers given the backend data that's fed into what BTS publishes (not to mention JV settlement payments, various sprays of revenue associated with FFP, and the segment proration across O&Ds not being accurately accounted for), and it's for this reason that BTS data is essentially ignored by everyone when it comes to competitive analysis within commercial aviation, to include the models that are constructed by airlines to predict the profitability of competitors. Might it trend generally in the right direction with regard to profits versus losses? In some cases yes, but without any degree of consistency as you'll see by going back to previous years of data that show entirely irrational fluctuations.
Last edited by winginit on Fri Jul 14, 2017 11:09 pm, edited 1 time in total.
 
atl100million
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:08 pm

Let's break this down into two parts - domestic and international.

Since we started the discussion with LAX-PEK, let's talk about international first.

AA currently serves 3 of the top 5 Asia cities from LAX. PEK would add another, leaving ICN. You think they'll start it, I asked you how you think AA is going to compete against two JVs. My question remains.

DL serves 2 of the 5 cities now. PEK becomes 3. ICN is certain; DL knows it needs more presence at LAX to Asia and serving it is as certain as DL operating a JFK-ICN flight in time. There will be more Asia destinations and they revolve around DL's other cities and partners in Asia.

UA also serves 2 of the 5 cities. SIN is outside of the top 5 but highlights why UA at SIN is so strong - it goes beyond the top 5 cities, something UA and DL both do from their Pacific networks.

By the time AA, DL and UA all have finished their transpacific expansion at LAX, AA will have little if any advantage. AA will have simply forced DL and UA to build out LAX to Asia, slaomething neither of them were willing to do before.

Domestically from LAX, AA is indeed the largest carrier but DL just moved into facilities that can accommodate a lot more flights. It only takes about 50 more for DL to be on parity with AA at LAX in part because DL already uses larger average aircraft. UA says it wants more space. Sitting at the top of any pyramid is not an easy place to be and AA's competitors are actively interested in growing at LAX. I wouldn't proclaim victory yet.

btw, according to current schedules, the legacy carriers on the west coast line up with UA in 1st place, DL at 2nd and AA at 3rd. the same is true for international flights.

AA put all of its eggs in the basket of LAX while DL and UA each built their own hubs and also are committed to maintaining and growing their share of LAX.

Whether you want to accept it or not, AA has chosen a strategy that will give it a presence at LAX but it will still be the 3rd largest carrier both on the west coast and won't gain much, if any advantage even at LAX.
 
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Polot
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:09 pm

atl100million wrote:
jbs2886 wrote:
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.



except that those costs and revenues have to come to add up to the same bottom line.

Note that the DOT site I linked includes all 4 regions - domestic, Latin, transatlantic and transpacific. Feel free to let us know where AA or UA was LESS profitable so that their transpacific operations could have been shown to be MORE profitable.

Given that AA lost money in the latest reported quarter over the Atlantic and UA did to Latin America, there just might be a different philosophy in how AA, DL and UA manage their networks - and it might also explain why DL has higher system profitability.

Given how many people have clamored for public information regarding Asia markets, it is amazing how quickly some people want to exclude it when it doesn't say what some want.

And I happen to agree with commavia in his last post... DL has been holding onto its NRT-PVG frequencies while trying to get LAX-PEK and that DL is likely to start LAX-PEK as soon as the current route case is resolved.

But it also highlights that even though AA is building a LAX hub, it is not likely they will gain a long-term advantage at LAX and they will still compete against DL and UA's hubs further up the coast in addition to what DL and UA decide to add from LAX.

At the end of the LAX-Asia buildup that AA DL and UA are all engaged in, AA will very likely only have achieved a 3 way competitive presence to Asia from LAX that may be fairly comparable in size - which is perhaps not much different than what will happen in the domestic market - even as DL and UA have other domestic hubs on the west coast.


Of course they have to add up as a whole. But say I pay $1000 for IAH-LAX-PVG. How much of that $1000 is included in domestic (IAH-LAX), how much is included in Pacific (LAX-PVG)? There is no requirement on how it's divided up. The airline could account the entire ticket as Pacific, or only part of it. An if only part of it there are no rules on what percentage goes into what region. That is where they shift costs/profits to hide true profitability from competitors. Believe it or not many people fly connecting itineraries that fill several of those buckets.

That is the issue with using those stats to look at regional profitably.
Last edited by Polot on Fri Jul 14, 2017 11:11 pm, edited 1 time in total.
 
atl100million
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:11 pm

winginit wrote:
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


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


BTS?! You're accepting BTS as an accurate reflection of carrier profitability by hub? Oh lord. Look, I get that you're new here and all, but as has been brought up seemingly countless times whenever BTS is brought up or referenced on this forum, there's absolutely no way to appropriately allocate costs and even revenues to any degree of granularity given the backend data that's fed into what BTS publishes (not to mention JV settlement payments, various sprays of revenue associated with FFP, and the segment proration across O&Ds), and it's for this reason that BTS data is essentially ignored by everyone when it comes to competitive analysis within commercial aviation, to include the models that are constructed by airlines to predict the profitability of competitors. Might it trend generally in the right direction with regard to profits versus losses? In some cases yes, but without any degree of consistency as you'll see by going back to previous years of data that show entirely irrational fluctuations.



all you have to do is tell us where you want to adjust profitability to show AA and UA as being profitable. It does indeed add up.

I'm not surprised that you don't want to accept it but you have to tell us how the bottom line moves and aligns with SEC filed documents. Unless of course you believe that airlines have filed incorrect data with the SEC too.

In the meantime, until you come up with your own version of transpacific profitability, the DOT's data is the best public data that is available.

and you also realize it is based on airline-provided data?
 
winginit
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:13 pm

atl100million wrote:
AA is indeed the largest carrier but DL just moved into facilities that can accommodate a lot more flights.


You need to work on your facts. While DL is operating out of a slightly larger number of gates, they're sharing those gates with other carriers (AM, EI, WS, VS), and thus are running virtually an identical schedule to what they had on the southside of the airport (with the same exceptionally high numbers of turns per gate (close to 10!) when compared to AA/UA). Point being, they were tapped out in T5/6 and are tapped out in T2/3 now. There is no room for significant expansion of any degree, and won't be until they've completely renovated Terminals 2 and especially the ancient Terminal 3, which won't be done until 2021-2023. Given that the renovation process will require one if not two gates to be down at a time for apron and jetbridge replacement over the next four to six years, DL will be even more constrained in T2/T3 when compared to T5/T6 unless they can work a miracle and sort out a preferential agreement with the airport for more TBIT domestic gating. Of note here is that AA has just announced a comparable LAX investment, and are likely to take over all of T5 in addition to T4, which they already have full claim to.
Last edited by winginit on Fri Jul 14, 2017 11:24 pm, edited 3 times in total.
 
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Polot
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:15 pm

atl100million wrote:
winginit wrote:
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


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


BTS?! You're accepting BTS as an accurate reflection of carrier profitability by hub? Oh lord. Look, I get that you're new here and all, but as has been brought up seemingly countless times whenever BTS is brought up or referenced on this forum, there's absolutely no way to appropriately allocate costs and even revenues to any degree of granularity given the backend data that's fed into what BTS publishes (not to mention JV settlement payments, various sprays of revenue associated with FFP, and the segment proration across O&Ds), and it's for this reason that BTS data is essentially ignored by everyone when it comes to competitive analysis within commercial aviation, to include the models that are constructed by airlines to predict the profitability of competitors. Might it trend generally in the right direction with regard to profits versus losses? In some cases yes, but without any degree of consistency as you'll see by going back to previous years of data that show entirely irrational fluctuations.



all you have to do is tell us where you want to adjust profitability to show AA and UA as being profitable. It does indeed add up.

I'm not surprised that you don't want to accept it but you have to tell us how the bottom line moves and aligns with SEC filed documents. Unless of course you believe that airlines have filed incorrect data with the SEC too.

In the meantime, until you come up with your own version of transpacific profitability, the DOT's data is the best public data that is available.

and you also realize it is based on airline-provided data?

Again they muddy the waters by shifting what revenue/costs is allotted domestic and what is allotted international on connecting itineraries for regional statistics for the DOT. The SEC could not care less about regional statistics, they just look at the airline as a whole. The DOT's reporting standards are far less rigid than the SEC's. It is very easy to hide your true financials from the DOT (private carriers do it quite well, as we always learn when they have their IPOs).
Last edited by Polot on Fri Jul 14, 2017 11:18 pm, edited 1 time in total.
 
commavia
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:18 pm

atl100million wrote:
By the time AA, DL and UA all have finished their transpacific expansion at LAX, AA will have little if any advantage.


We'll see.

atl100million wrote:
Sitting at the top of any pyramid is not an easy place to be and AA's competitors are actively interested in growing at LAX.


We'll see where things end up as all three of these carriers (yes, including AA) continue growing at LAX.

atl100million wrote:
AA put all of its eggs in the basket of LAX while DL and UA each built their own hubs


And AA "built [its] own hub" at LAX.

atl100million wrote:
AA has chosen a strategy that will give it a presence at LAX but it will still be the 3rd largest carrier both on the west coast


Which, again, is all AA needs. AA doesn't need to waste hundreds of millions of dollars trying to challenge United's dominance across the Pacific. That would be a futile effort, anyway. What AA needs is what AA is very rapidly achieving - and that's a robust, credible and competitive offering across the Pacific for its core U.S. customer base.

As I've been saying for several years, if Delta wants to dump further capacity into LAX on top of AA, and on top of its own flights out of SEA, it can knock itself out. And as I've been saying for years, I'll look forward to hearing Delta's management explain that level of capacity addition to Wall St on future earnings calls. But in the meantime, I highly doubt it will change AA's trajectory or strategy one bit. AA can do - and is doing - its own thing regardless of what Delta (or, more specifically, Delta's fanboys) think.
 
atl100million
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:35 pm

commavia wrote:
atl100million wrote:
By the time AA, DL and UA all have finished their transpacific expansion at LAX, AA will have little if any advantage.


We'll see.

atl100million wrote:
Sitting at the top of any pyramid is not an easy place to be and AA's competitors are actively interested in growing at LAX.


We'll see where things end up as all three of these carriers (yes, including AA) continue growing at LAX.

atl100million wrote:
AA put all of its eggs in the basket of LAX while DL and UA each built their own hubs


And AA "built [its] own hub" at LAX.

atl100million wrote:
AA has chosen a strategy that will give it a presence at LAX but it will still be the 3rd largest carrier both on the west coast


Which, again, is all AA needs. AA doesn't need to waste hundreds of millions of dollars trying to challenge United's dominance across the Pacific. That would be a futile effort, anyway. What AA needs is what AA is very rapidly achieving - and that's a robust, credible and competitive offering across the Pacific for its core U.S. customer base.

As I've been saying for several years, if Delta wants to dump further capacity into LAX on top of AA, and on top of its own flights out of SEA, it can knock itself out. And as I've been saying for years, I'll look forward to hearing Delta's management explain that level of capacity addition to Wall St on future earnings calls. But in the meantime, I highly doubt it will change AA's trajectory or strategy one bit. AA can do - and is doing - its own thing regardless of what Delta (or, more specifically, Delta's fanboys) think.

'
you do realize that adding capacity goes both ways, or as many ways as there are competitors in the industry, don't you?

Industry analysts don't care about capacity additions at any city if a carrier can keep its RASM levels at industry comparable or better levels which do get reported at the level of global regions. They just don't have the detail and they also don't micromanage the choices airline managements make unless there is clear evidence that those strategies don't work.

You may be right that AA is only interested in gaining a west coast to Asia position but LAX won't serve as the best west coast gateway because of geography. Further, if DL and UA have a larger presence in the west coast as a whole because of their dual hub strategies, they are likely to hold onto their revenue premiums just as exists in LAX today.

As I said, I still have a hard time seeing how AA ends up any better than today with a market position of #3 out of 3 US carriers to Asia - they just have added LAX as a large gateway which DL and UA are also doing and are likely to maintain their #1 and #2 positions in the process.
 
commavia
Topic Author
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:40 pm

atl100million wrote:
Industry analysts don't care about capacity additions at any city if a carrier can keep its RASM levels at industry comparable or better levels which do get reported at the level of global regions.


We'll see.

atl100million wrote:
You may be right that AA is only interested in gaining a west coast to Asia position but LAX won't serve as the best west coast gateway because of geography.


We'll see.

atl100million wrote:
Further, if DL and UA have a larger presence in the west coast as a whole because of their dual hub strategies, they are likely to hold onto their revenue premiums just as exists in LAX today.


We'll see.

atl100million wrote:
As I said, I still have a hard time seeing how AA ends up any better than today with a market position of #3 out of 3 US carriers to Asia


For the final time, nobody is suggesting that AA is in any way threatening the #1 or #2 position of either United or Delta, respectively, across the Pacific. It has never been seriously suggested, is not being seriously suggested, and - I strongly suspect - will not be seriously suggested. It is truly stunning to me that this red herring (among several) keeps getting repeated ad infinitum as if it advances any argument at all. It's literally arguing a point that nobody is disputing.
 
jbs2886
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:46 pm

Unsubscribe and add as foe. This is a perfect example of the delusional person ruining this site.

The only time I'd want to read their posts is if they were debating with klm617, MSPNWA and IPFreely.
 
atl100million
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Re: AA Applies For LAX-PEK

Fri Jul 14, 2017 11:58 pm

commavia wrote:

atl100million wrote:
As I said, I still have a hard time seeing how AA ends up any better than today with a market position of #3 out of 3 US carriers to Asia


For the final time, nobody is suggesting that AA is in any way threatening the #1 or #2 position of either United or Delta, respectively, across the Pacific. It has never been seriously suggested, is not being seriously suggested, and - I strongly suspect - will not be seriously suggested. It is truly stunning to me that this red herring (among several) keeps getting repeated ad infinitum as if it advances any argument at all. It's literally arguing a point that nobody is disputing.


You are right that no one suggested AA was trying to grow to equal size to Asia as DL or UA but it is absolutely fair game to ask what AA gets for moving from #3 of 3, just in a bigger pond which AA chose to expand even if DL and UA decided they were going to play too.

Suggesting where market strategies might end up 5-10 years down the road is hardly a red herring but the essence of what companies have to consider and should be just as much of what gets discussed on here as the fascination with adding dots and lines to route maps even if actual data shows very different results than what some people thought or want to be the case.

While a.net makes it all seem like a game, there are hundreds of millions of dollars at stake just in the LAX to Asia market that we are discussing here. At the beginning and end of the day, figuring out how to serve markets profitably IS what AA, DL and UA ALL have to do for their shareholders.
 
grbauc
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Re: AA Applies For LAX-PEK

Sat Jul 15, 2017 7:34 am

commavia wrote:
atl100million wrote:
But it also highlights that even though AA is building a LAX hub, it is not likely they will gain a long-term advantage at LAX and they will still compete against DL and UA's hubs further up the coast in addition to what DL and UA decide to add from LAX.


Well I guess it all depends on how we (conveniently) decide to define "long-term advantage."

AA has already achieved the largest market share at LAX with more flights, to more places, than any other airline at the airport. AA is already operating the second largest network carrier hub on the west coast, and the second largest network carrier transpacific gateway, at LAX. And AA just signed an LOI with LAWA that, "paves the way for American to receive additional gates as they continue to grow their operation and add destinations."

If "long-term advantage" is (ridiculously) defined as building a 300-departure megahub to rival SFO, then sure, that's never going to happen - but of course nobody serious ever put the goalposts there to begin with. All AA needs - and is steadily achieving - is sufficient scale at a west coast gateway to provide meaningfully robust and competitive branded access to the principal cities of East Asia for core U.S. customers.



Exactly all AA needs to do is give a westcoast option and they have pretty much achieved that. AA doesn't need to have fortress west coast gateway hub rather a good/competive option for it FF and corporate customers. With MA, CX,JL,and even QF for Deep South east Asia coverage, has partners I can find decent flights and flow patterns. AA has come a long way west coast to Asia.

AA is already competing with DL, UA for Asia traffic,
I'm not sure how it matters that AA is competing at LAX with DL, UA matters or changes things or why they must achieve or have long term advantage.
 
airlinedork
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Re: AA Applies For LAX-PEK

Sat Jul 15, 2017 5:20 pm

commavia wrote:
atl100million wrote:

As I've been saying for several years, if Delta wants to dump further capacity into LAX on top of AA, and on top of its own flights out of SEA, it can knock itself out. And as I've been saying for years, I'll look forward to hearing Delta's management explain that level of capacity addition to Wall St on future earnings calls. But in the meantime, I highly doubt it will change AA's trajectory or strategy one bit. AA can do - and is doing - its own thing regardless of what Delta (or, more specifically, Delta's fanboys) think.


So, with Delta having dual TPAC gateways at SEA and LAX which, by the way serve completely different purposes and catchment areas, you're basically saying that having similar well established TATL dual gateways at ATL and JFK, is not appealing to Wall St or Delta's shareholders? Last I checked, Delta has been very shrewd and smart in that regard, and I doubt you're any smarter than Delta's Network Planning.
 
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Polot
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Re: AA Applies For LAX-PEK

Sat Jul 15, 2017 6:38 pm

airlinedork wrote:
commavia wrote:
atl100million wrote:

As I've been saying for several years, if Delta wants to dump further capacity into LAX on top of AA, and on top of its own flights out of SEA, it can knock itself out. And as I've been saying for years, I'll look forward to hearing Delta's management explain that level of capacity addition to Wall St on future earnings calls. But in the meantime, I highly doubt it will change AA's trajectory or strategy one bit. AA can do - and is doing - its own thing regardless of what Delta (or, more specifically, Delta's fanboys) think.


So, with Delta having dual TPAC gateways at SEA and LAX which, by the way serve completely different purposes and catchment areas, you're basically saying that having similar well established TATL dual gateways at ATL and JFK, is not appealing to Wall St or Delta's shareholders? Last I checked, Delta has been very shrewd and smart in that regard, and I doubt you're any smarter than Delta's Network Planning.

The east coast/TATL market and the west coast/TPAC market are two entirely different things. The TATL market is far larger than the TPAC market. As for East vs West coast, well this map of the population density of the US sums it up well:
Image
 
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Rajahdhani
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Re: AA Applies For LAX-PEK

Sat Jul 15, 2017 7:33 pm

atl100million wrote:
As I said, I still have a hard time seeing how AA ends up any better than today with a market position of #3 out of 3 US carriers to Asia - they just have added LAX as a large gateway which DL and UA are also doing and are likely to maintain their #1 and #2 positions in the process.


The question then becomes - what was the opportunity cost of that idea as well.

On a micro-minded discussion of the topic - not advancing their position at LAX (via investing), would have seen what else happen? The market is expanding, and if AA did not have a strong enough position, other carriers would have expanded for/into their space. It is not inconceivable, that in the face of an extremely competitive market, and in the face of expansions from both of their rivals (here, as in no other airport in the nation), that failing to even 'keep up' would have ceded space - not only to those very rivals (and watch them grow to challenge each other in greater parity) with that lost market space - but also, then having to rival that 3rd position against perhaps an aggressive competitor from below.

Essentially, for AA, to even keep up, they would have to throw money to the wheel. To see what they have accomplished, is dazzling at times. I agree with the idea that they know that LAX is a struggle, however understand as well, that there are few other options on the West Coast - and this market is dynamic, and their presence a gem (of it's own shine, even if not presenting itself as the Crown Jewel).

To pair that phrase, consider how UA feels about Florida (and knowing that if IAH beings to grow again, the arrivals of the 737 MAX's can change their operations and costs significantly). Or, how DL feels about ORD (with DTW and MSP) in the general area. Even though some of the effects of the merger-manic past decade - no man is the Sun - no one can shine everywhere. Consider how some of those very same 'effects' (specifically the addition of the A321T product, and the turns of the 77Ws (and/or 787s that replace them) through LAX (as with DFW-HGK-LAX) has seen the airline use high quality assets, but also leveraged themselves to use those assets well (utility wise). It may not be the cash cow that Dallas is, or the lock on MIA - but it too, can work. It though, needed work, and investment to get there, and in the face of competition that was, essentially slumbering and have not yet seen the full fruits of their investments come to bear - sitting on their hands would have likely hurt them more than anything else.

I guess, as some members have been suggesting, the key to a successful Pacific Strategy would be another West Coast Hub, with which to further 'fatten' yields via premium capacity. UA lords over SFO, and rightly guards a decent local o/d, in mix with a connection hub to create premium advantages. DL's stratergy is similar at SEA, with the markets also containing some decent (though not as high as SFO's catchement) local o/d yields as well. If AA were to consider options, what would truly be left for them? A return to SJC would essentially ride the tail end of the bubble, and would easily be overshadowed by UA at SFO.

Go up against DL at SEA? And fight against DL for the established premium yield, and go up against AS for the rest?

So, the issue for AA might indeed be that there may well be no other place to expand on the West Coast (to provide the needed 'boost').

I'm actually surfing for through ideas here;

NAPA? Have them transport wine, in the cargo holds?

Oakland? San Diego? Portland? I mean, where else can they really grow? PHX?
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 12:10 am

Thanks for a great post, Rajahdhani.

No one is doubting that AA had any choice for west coast to Asia gateways. For a whole host of reasons, LAX was it.
The question is whether, in the long run, AA will ultimately gain because of believing it had to compete in the LAX to Asia market and starting alot of service to Asia that other carriers weren't willing to do first.

LAX is the only large US carrier market where AA, DL and UA have even close to comparable market share. It is very much a divided and fluid market that no one has indicated they are willing to walk away from. Every US airline wants more space and flights at an airport where the airport's capacity limits are fast approaching.

AA as the largest domestic airline at LAX realized it has to compete in the top international markets even though the chances are pretty high that DL and UA plus a whole lot of foreign airlines will add service or reduce fares to maintain share either on nonstops or connecting service to Asia. AA does well from LAX to Europe and domestically but that doesn't translate to Asia markets. AA said in its DOT filing that LAX was its hub to Asia as if it hopes that DL and UA will not be able to compete directly with it but it is a given that they will.

Jack Welch of GE said that they would either be first or second in any market where they operate or they would exit that business – and GE largely followed that model. There are certainly businesses that are #3 or below in many industries but at least in the airline industry the #3 carrier rarely gets a fare premium – and that is exactly the case in the US to Asia market. AA does not get yields comparable to DL or UA in any Asia market in which they directly compete.

Given that the domestic market at LAX is not fixed and DL and UA can and likely will add service into key AA strength markets (and they do have the ability to do so despite what some believe), the bottom line is determined by strength in international markets where DL and UA do have an advantage, in part because of their hubs further up the coast and their historic presence in Asia (including via their merger partners) that will help them develop LAX to Asia.

While AA might believe it has a strategic need to develop LAX to Asia, the chances are pretty high that in any market that either AA or DL also choose to operate, AA will operate with a fare discount which means they will likely be subsidizing their network – which is exactly what is taking place now on their Asia operation.

Those who argue that AA simply has to wait for LAX to Asia to develop would do well to consider that AA has been flying ORD to Asia for years and they underperform UA in every market the two both fly.

It is also possible that DL won’t start LAX-PEK but will use its NRT-PVG flight to start ATL-PVG. We don’t know if the US and China will update their air services treaty but the chances are high that with the opening of the new Peking airport and the fact that both the US and China have reached the limits of the current treaty for PEK and PVG (which also limits new service to CAN), DL might wait for new PEK frequencies and gain an advantage at PVG while gaining potentially multiple new flights at PEK a year later or not much more than that.

As for DL’s dual hub strategy, they are indeed doing on the west coast what they have done over the Atlantic. The difference is that SEA, the more northerly hub is the primary hub for Asia connections while ATL, the more southerly hub on the east coast, plays the same role. In reality, UA is using the same strategy on the west coast with SFO as their primary connecting hub although it has a very large local market as well. AA has multiple hubs on the east coast including JFK where they compete against DL to Europe and UA to EWR both of which have larger connecting banks which also translates into higher average fares in most markets outside of LHR and Spain.

I honestly do hope this case is decided soon just because it is delaying the implement of a whole lot of other transpacific route issues. For those who think otherwise, I do think AA will figure out how to get a slot and they will get the route. My point is simply that this case is part of a much larger west coast to Asia buildup in which AA might “win the battle” but, well, not make any progress in the war, so to speak.

Nobody on this site should be afraid of having these kind of frank discussions, even if they do not agree with other member's conclusions.
 
globalcabotage
Posts: 510
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 12:53 am

atl100million wrote:
Thanks for a great post, Rajahdhani.

No one is doubting that AA had any choice for west coast to Asia gateways. For a whole host of reasons, LAX was it.
The question is whether, in the long run, AA will ultimately gain because of believing it had to compete in the LAX to Asia market and starting alot of service to Asia that other carriers weren't willing to do first.

LAX is the only large US carrier market where AA, DL and UA have even close to comparable market share. It is very much a divided and fluid market that no one has indicated they are willing to walk away from. Every US airline wants more space and flights at an airport where the airport's capacity limits are fast approaching.

AA as the largest domestic airline at LAX realized it has to compete in the top international markets even though the chances are pretty high that DL and UA plus a whole lot of foreign airlines will add service or reduce fares to maintain share either on nonstops or connecting service to Asia. AA does well from LAX to Europe and domestically but that doesn't translate to Asia markets. AA said in its DOT filing that LAX was its hub to Asia as if it hopes that DL and UA will not be able to compete directly with it but it is a given that they will.

Jack Welch of GE said that they would either be first or second in any market where they operate or they would exit that business – and GE largely followed that model. There are certainly businesses that are #3 or below in many industries but at least in the airline industry the #3 carrier rarely gets a fare premium – and that is exactly the case in the US to Asia market. AA does not get yields comparable to DL or UA in any Asia market in which they directly compete.

Given that the domestic market at LAX is not fixed and DL and UA can and likely will add service into key AA strength markets (and they do have the ability to do so despite what some believe), the bottom line is determined by strength in international markets where DL and UA do have an advantage, in part because of their hubs further up the coast and their historic presence in Asia (including via their merger partners) that will help them develop LAX to Asia.

While AA might believe it has a strategic need to develop LAX to Asia, the chances are pretty high that in any market that either AA or DL also choose to operate, AA will operate with a fare discount which means they will likely be subsidizing their network – which is exactly what is taking place now on their Asia operation.

Those who argue that AA simply has to wait for LAX to Asia to develop would do well to consider that AA has been flying ORD to Asia for years and they underperform UA in every market the two both fly.

It is also possible that DL won’t start LAX-PEK but will use its NRT-PVG flight to start ATL-PVG. We don’t know if the US and China will update their air services treaty but the chances are high that with the opening of the new Peking airport and the fact that both the US and China have reached the limits of the current treaty for PEK and PVG (which also limits new service to CAN), DL might wait for new PEK frequencies and gain an advantage at PVG while gaining potentially multiple new flights at PEK a year later or not much more than that.

As for DL’s dual hub strategy, they are indeed doing on the west coast what they have done over the Atlantic. The difference is that SEA, the more northerly hub is the primary hub for Asia connections while ATL, the more southerly hub on the east coast, plays the same role. In reality, UA is using the same strategy on the west coast with SFO as their primary connecting hub although it has a very large local market as well. AA has multiple hubs on the east coast including JFK where they compete against DL to Europe and UA to EWR both of which have larger connecting banks which also translates into higher average fares in most markets outside of LHR and Spain.

I honestly do hope this case is decided soon just because it is delaying the implement of a whole lot of other transpacific route issues. For those who think otherwise, I do think AA will figure out how to get a slot and they will get the route. My point is simply that this case is part of a much larger west coast to Asia buildup in which AA might “win the battle” but, well, not make any progress in the war, so to speak.

Nobody on this site should be afraid of having these kind of frank discussions, even if they do not agree with other member's conclusions.


And AAs ORD-BJS slot is so competitive to UAs. UA has been in the market much longer and has better slots. Give AA competitive slots and we shall see. Also, AA could add a 9:30 am flight to HKG with a return that gets in around 6:00 pm and you would get tons of connections that CX doesn't provide and UA is missing.
 
N628AU
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 1:05 am

BroadwayLimited wrote:

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

What happened to WorldTraveler?[/quote]

He was permanently sent to the cornfield and apparently has a new IP address and username of atl100million.
 
atl100million
Posts: 445
Joined: Tue May 23, 2017 1:28 am

Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 10:46 am

globalcabotage wrote:

And AAs ORD-BJS slot is so competitive to UAs. UA has been in the market much longer and has better slots. Give AA competitive slots and we shall see. Also, AA could add a 9:30 am flight to HKG with a return that gets in around 6:00 pm and you would get tons of connections that CX doesn't provide and UA is missing.


AA's ORD-PEK flight leaves about five hours after UA's flight and also is the last AA, DL or UA flight to arrive at PEK and the first to depart in the morning.

AA carries less local and connecting passengers and revenue than UA.

The same is true for ORD-PVG where there is no slot issue between AA and UA.

The same is also true of LAX to Tokyo (both airports) between both Dl and UA where there is no slot issue but also where AA's flights are operated
under the AA/JL joint venture.

The CZ relationship, even if it is approved as an exclusive AA-CZ partnership, might help AA narrow the gap in performance with DL and UA to China but that gap still exists to Japan even with AA's JV.

Whether some people are willing to admit it or not, DL and UA have fought very aggressively to hold onto their business to Asia. Simply securing new flights has not been enough to help AA close the gap with DL and UA to Asia in terms of the quality of the revenue each carrier attracts.

In asking the question of whether being #3 out of 3 is a decent place to be in a market, UA decided it wasn't worth trying to compete with AA in MIA to Latin America and pulled its hub there years ago. AA is the only US carrier that serves the MIA to Latin America market other than DL's lone MIA-HAV flight.
DL also decided it wasn't worth being a distant #2 to AA at DFW.

LAX is the only large US market where AA, DL and UA all have even remotely similar market shares and that is achieved in the domestic market by each carrier largely flying to their own strength markets plus overlap markets between the two.

I can't think of any other set of international markets where AA, DL and UA all compete other than from LAX.

As much as AA believes it needs to have an Asia gateway at LAX, it genuinely needs to be considered as a possibility that AA, DL and UA will not all succeed in LAX to Asia. DL and UA as a result of their longer and larger presence in Asia are going to always be one step ahead of AA
 
commavia
Topic Author
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 1:46 pm

atl100million wrote:
chances are pretty high that DL and UA plus a whole lot of foreign airlines will add service or reduce fares to maintain share either on nonstops or connecting service to Asia.


We'll see.

atl100million wrote:
Given that the domestic market at LAX is not fixed and DL and UA can and likely will add service into key AA strength markets (and they do have the ability to do so despite what some believe)


Right. The LAX market is not fixed, and just like how Delta and United "can and likely will add service into key AA strength markets," AA can and likely will add service right back into key Delta and United strength markets. All three airlines have the ability to grow into each other's "turf."

atl100million wrote:
chances are pretty high that in any market that either AA or DL also choose to operate, AA will operate with a fare discount


We'll see.

atl100million wrote:
Those who argue that AA simply has to wait for LAX to Asia to develop would do well to consider that AA has been flying ORD to Asia for years and they underperform UA in every market the two both fly.


That comparison is both incomplete, and ultimately, meaningless. First off, AA faces a structural and insurmountable disadvantage to United at ORD and in Asia, and thus, it would frankly be shocking of AA wasn't underperforming United on ORD-Asia flights. The key, though, again, is that making such simplistic observations and extrapolating such simplistic conclusions misses the bigger picture - AA doesn't need to overperform United ORD-Asia. AA just needs ORD-Asia to provide sufficient network access from the Northeast and Upper Midwest to Asia. AA will overperform United in other places. This is the nature of how the industry works - one airline has an area of particular strength in one place, another airline in another.

atl100million wrote:
My point is simply that this case is part of a much larger west coast to Asia buildup in which AA might “win the battle” but, well, not make any progress in the war, so to speak.


And the point many of us have made - repeatedly - is that for AA, in this case, the "battle" likely is the "war." All AA needs is a robust, credible and broadly competitive network to Asia. With three well-positioned and complimentary transpacific gateways, AA now pretty much has that. AA does not need, nor could it ever achieve, the level of scale and network penetration United has because AA doesn't have SFO. It's just like how neither Delta or United can never rival AA to South America because they don't have MIA. But again, that's fine. With LAX-PEK, AA will be operating sixteen daily transpacific flights from three major U.S. gateways to eight of the principal markets of the Pacific Rim. That's pretty close to "good enough" for AA - and, to borrow a phrase, when it comes to its Asia network, "good enough is what AA is going for."

atl100million wrote:
Whether some people are willing to admit it or not, DL and UA have fought very aggressively to hold onto their business to Asia. Simply securing new flights has not been enough to help AA close the gap with DL and UA to Asia in terms of the quality of the revenue each carrier attracts.


Oh jeez. "Quality of revenue." Wow. :roll: Now I really do think I know who is writing this.

atl100million wrote:
In asking the question of whether being #3 out of 3 is a decent place to be in a market, UA decided it wasn't worth trying to compete with AA in MIA to Latin America and pulled its hub there years ago. AA is the only US carrier that serves the MIA to Latin America market other than DL's lone MIA-HAV flight.
DL also decided it wasn't worth being a distant #2 to AA at DFW.


Cool story. Meanwhile, in the span of a few years, AA has dramatically closed the gap between itself and Delta in terms of network breadth and depth across the Pacific - through alliances and the expansion of its own branded flying. And that isn't going away. AA is in Asia for the longhaul because it has to be - whether Delta (or its fanboys) like it or not.

atl100million wrote:
I can't think of any other set of international markets where AA, DL and UA all compete other than from LAX.


Uh, how about NYC, where Delta and United both operate large transatlantic hubs and AA has its own network of a dozen daily departures to Europe (not counting JVs)?

atl100million wrote:
As much as AA believes it needs to have an Asia gateway at LAX, it genuinely needs to be considered as a possibility that AA, DL and UA will not all succeed in LAX to Asia. DL and UA as a result of their longer and larger presence in Asia are going to always be one step ahead of AA


That's hilarious. AA has, in the span of essentially a matter of months, grown its LAX transpacific schedule from two daily flights to six and soon seven - and Delta and United are the ones "one step ahead?" No. AA isn't going anywhere at LAX.
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 5:28 pm

The only issue that is being debated is that AA can ultimately perform financially in LAX to Asia as DL or UA. You seem to be willing to accept that AA has a structural disadvantage to UA at ORD which explains AA's weaker performance. You mention NYC and yet AA is the only major carrier that has cut capacity there since the US merger which has resulted in growing market share for B6, DL and UA which have all grown capacity. Even in the relatively few European markets which UA serves from EWR and AA and DL serve from JFK, performance is not equal among the three even if you consider EWR = JFK.

DL and UA choose not to compete with AA in MIA to Latin America. DL left DFW instead of competing against a much stronger AA.

AA has lost a lot of money building a presence to Asia. Given that DL and UA perform better to Tokyo even with AA's JV, I'm not sure the argument that "Rome wasn't built in a day" accurately speaks to what is at stake in the LAX-PEK route case or AA's broader plans to grow in Asia.

AA believes it needs to have a LAX to Asia presence even though DL and UA have both indicated they intend to serve the key markets and grow their presence; that is what the LAX-PEK route case is about.

DL is growing its LAX network - they are adding a couple new flights in N. America just with today's schedule discussion.

DL also says it will build a hub in Peking by 2019.

The outcome of the LAX-PEK route is far bigger than just slot swaps and codesharing.
 
commavia
Topic Author
Posts: 11390
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 5:37 pm

atl100million wrote:
The only issue that is being debated is that AA can ultimately perform financially in LAX to Asia as DL or UA.


That's not being debated at all, because it's the definition of "missing the forest for the trees." AA isn't investing to make 15% net margins on every single LAX-Asia flight. And AA isn't managing its network such that the bookkeeping of individual P&L reported to the DOT for one region or another looks relatively better or worse - the goal is overall system financial performance. And in that regard, AA (and United) have dramatically narrowed the gap versus Delta compared to where it was mere months ago. And as said, I expect that gap to continue narrowing.

AA is investing to build a robust, credible competitive presence across the Pacific that will support its acquisition and retention of overall higher-margin corporate and business traffic across it's network. If that means that AA makes a little less money in one place so that it can make more money somewhere else, I suspect AA's management is fine with that. And, alas, AA's economic performance across the Pacific at the moment is hardly representative of the future - AA's presence in the region is still very much in development. So as said repeatedly, let's check back in five years.

atl100million wrote:
AA has lost a lot of money building a presence to Asia.


Just like Delta lost a lot of money building its presence in NYC. That's how investments work.

atl100million wrote:
AA believes it needs to have a LAX to Asia presence even though DL and UA have both indicated they intend to serve the key markets and grow their presence; that is what the LAX-PEK route case is about.


Good for Delta and United. Both are obviously free to grow their LAX to Asia presence further. And right along with them, AA can - and, I strongly suspect, will - keep growing as well.

atl100million wrote:
DL is growing its LAX network - they are adding a couple new flights in N. America just with today's schedule discussion.


Good for Delta. In the meantime, AA isn't done growing at LAX, either.

atl100million wrote:
DL also says it will build a hub in Peking by 2019.


... which of course means that Delta will, in the future, flow connections over Daxing to points in interior China ... just like AA.
 
alfa164
Posts: 1942
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 6:33 pm

commavia wrote:
... which of course means that Delta will, in the future, flow connections over Daxing to points in interior China ... just like AA.


Except that, as of now, only Skyteam partners are scheduled to move to Daxing; OneWorld and and Star Alliance airlines will remain at Beijing Capital. Are you suggesting that AA will try to jump ship to Daxing - and leave its (admittedly limited) OW connecting partners behind?

And has anyone suggested that the Chinese government is aware of those plans?
 
carljanderson
Posts: 84
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 6:36 pm

alfa164 wrote:
Except that, as of now, only Skyteam partners are scheduled to move to Daxing; OneWorld and and Star Alliance airlines will remain at Beijing Capital. Are you suggesting that AA will try to jump ship to Daxing - and leave its (admittedly limited) OW connecting partners behind?

And has anyone suggested that the Chinese government is aware of those plans?


AA has a 5% ownership stake in CZ, and I don't think the entire story between AA and CZ is played out. I would expect some movement towards OW.
 
alfa164
Posts: 1942
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 6:38 pm

carljanderson wrote:
alfa164 wrote:
Except that, as of now, only Skyteam partners are scheduled to move to Daxing; OneWorld and and Star Alliance airlines will remain at Beijing Capital. Are you suggesting that AA will try to jump ship to Daxing - and leave its (admittedly limited) OW connecting partners behind?
And has anyone suggested that the Chinese government is aware of those plans?

AA has a 5% ownership stake in CZ, and I don't think the entire story between AA and CZ is played out. I would expect some movement towards OW.

If that happens - and I will believe it when I see it - then both airlines will remain at Capital, not Daxing.
 
BroadwayLimited
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 6:51 pm

commavia wrote:
Oh jeez. "Quality of revenue." Wow. :roll: Now I really do think I know who is writing this.


Commavia, have you officially welcomed WorldTraveler back to A.Net?
 
commavia
Topic Author
Posts: 11390
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 6:52 pm

alfa164 wrote:
Are you suggesting that AA will try to jump ship to Daxing - and leave its (admittedly limited) OW connecting partners behind?


I'm merely alluding to what Bloomberg has reported:

"Oneworld member American Airlines Group Inc., announced in March a 2.7 percent stake purchase in China Southern for $200 million, and will deploy some of its flights at the new Beijing airport as part of the deal. The U.S. carrier had to postpone the launch of a Los Angeles-to-Beijing flight earlier this year as it failed to secure a time slot." (emphasis mine)

And of course, that would only seem logical since the raison d'être for this AA-China Southern alliance is, seemingly, to improve connectivity over both airlines' hubs, with PEK obviously being one of the key airports in question. And frankly, I'm not sure why this seems that far-fetched. China Southern will be moving its huge PEK hub to Daxing, and it only stands to reason that AA would want to follow China Southern there. Setting aside any speculation about whether or not China Southern may or may not defect from SkyTeam to oneworld, the reality is that AA today does very minimal connecting volume over PEK with oneworld partners, so it hardly seems to matter whether or not AA is colocated with oneworld or not. Plus, given the fact that Daxing will be one of the largest airports on earth in terms of capacity, it doesn't seem all that implausible for AA to move with its new Chinese partner given that AA's entire Beijing operation will, in total, amount to a rounding error in terms of the overall daily operations Daxing will handle. In short: something tells me the Chinese government can find room for three daily AA 787s to the U.S.

alfa164 wrote:
And has anyone suggested that the Chinese government is aware of those plans?


Who knows? But seeing as connectivity over gateway hubs, perhaps chief among them Beijing, is presumably a (the) central feature of the partnership agreement, I'd have to think that colocation at Daxing would have come up in the discussions thus far between AA and China Southern. And if so, following that to its logical end, given that China Southern is effectively an organ of the Chinese government, if China Southern wanted to bring its new partner AA along with it to Daxing, one would think that, too, may have come up in conversation between China Southern and its owner.
Last edited by commavia on Sun Jul 16, 2017 7:19 pm, edited 1 time in total.
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 7:07 pm

We've made a lot of progress in the discussion As long as there is a recognition that AA will not likely operate the route by itself and it might have lower financial returns and DL and UA might end up with as large of an Asian operation at LAX, then we are all on the same page.

As for Daxing, AA and CZ, either CZ/Skyteam has to allow codesharing outside of the alliance or CZ has to leave Skyteam (which might affect) the plans to move airports. If codesharing outside of the Skyteam alliance was permitted, AA could have developed a codeshare relationship with CZ a long time ago.

I suspect there are indeed backroom negotiations going on and I suspect that CZ can be pried out of Skyteam - but at some price to DL. Ultimately, CZ has to decide if that price is worth paying - and AA might well be the party that ultimately pays.

The best outcome for AA and DL might be in moving to a new airport where both have the ability to grow.

Paying foreign carriers to switch alliances might be a slipper slope to head down...
 
commavia
Topic Author
Posts: 11390
Joined: Mon Apr 25, 2005 2:30 am

Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 7:12 pm

atl100million wrote:
We've made a lot of progress in the discussion As long as there is a recognition that AA will not likely operate the route by itself and it might have lower financial returns and DL and UA might end up with as large of an Asian operation at LAX, then we are all on the same page.


I'm so glad "our" progress is so pleasing. :roll:

atl100million wrote:
As for Daxing, AA and CZ, either CZ/Skyteam has to allow codesharing outside of the alliance or CZ has to leave Skyteam (which might affect) the plans to move airports. If codesharing outside of the Skyteam alliance was permitted, AA could have developed a codeshare relationship with CZ a long time ago.


We'll see exactly what it is that China Southern allegedly has to ultimately ask permission to do, and who it allegedly has to pay for said permission. Time will tell.

atl100million wrote:
Paying foreign carriers to switch alliances might be a slipper slope to head down...


Well if any U.S. network carrier would know a thing or two about paying foreign carriers for their allegiance ... it sure isn't AA. ;)
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 9:44 pm

Most people recognize that gaining a presence in a market sometimes requires businesses to invest to grow. DL and UA both bought or merged with carriers that had a large Asian presence. AA has spent alot of money trying to built its own presence. Size in the market does matter when airlines pick partners so it isn't a great surprise that DL and UA managed to sign up a disproportionate share of Chinese carriers as partners.
Perhaps AA's investment will crack the door open if everything works out with codesharing, a slot and more. Other airlines can increase cooperation with their partners but perhaps AA is now recognizing that spending money is necessary to gain market access - just as they did in Latin America and LHR, just for starters.

Competition is good for everyone.... but it doesn't involve carving up markets with "yours, mine and his" which is what AA did in its route petition to the DOT.

Air China, AA and DL at least will likely all be in the LAX-Beijing market in a few years and it is also possible that there will be enough market access for competitors that joint ventures between US and Chinese carriers can become a possibility.

There is indeed a whole lot that we might see.
 
commavia
Topic Author
Posts: 11390
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 10:04 pm

atl100million wrote:
Size in the market does matter when airlines pick partners


Undoubtedly. That's probably why Delta has spent billions buying up stakes in airlines in places - Mexico, Brazil, the UK, China, India, etc. - where its size and market presence is inferior to one or both of its U.S. network peers.

atl100million wrote:
so it isn't a great surprise that DL and UA managed to sign up a disproportionate share of Chinese carriers as partners.


Ha, yeah ... and yet one of those erstwhile Delta partners has just accepted a $200M investment, as a prelude to a "strategic relationship," with Delta's largest rival. Delta picked the Chinese partner it cared about - for totally logical and understandable reasons - and Delta's "other" Chinese partner seems to have gotten the message loud and clear.

atl100million wrote:
Competition is good for everyone.... but it doesn't involve carving up markets with "yours, mine and his" which is what AA did in its route petition to the DOT.


No "carving" of anything except in the fantastical mind of the Delta fanboy. It is quite clearly obvious from the DOT's Show Cause Order that two arguments and two arguments alone persuaded the DOT that AA was the superior choice for LAX-PEK:

"The Department tentatively finds that the potential benefits of selecting American, and thereby adding a third U.S. competitor to the West Coast-Beijing market, outweigh the benefits that would be achieved through selection of Delta. American’s clear advantage in terms of U.S. connecting points would enhance both service and competition, and thereby maximize public benefits more than would an award to Delta." (emphasis mine)

All of this other extraneous ridiculousness about "yours, mine and his" is just fabricated and detached from reality.
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Sun Jul 16, 2017 11:49 pm

Well, no, it isn't fabricated, except perhaps at AA's headquarters in Ft. Worth.

Since you clearly didn't read the LENGTHY filings in this case or chose to selectively ignore what AA itself wrote, let me post a few tidbits.

While American’s top priority on theWest Coast has been expanding Los Angeles service,
Delta consistently has favored Seattle over Los Angeles, and has executed on its publicly disclosed
strategy to make Seattle its premier West Coast gateway to Asia. When Delta’s application for
LAX-PEK authority is viewed in light of its avowed corporate strategy and demonstrated corporate
actions, the inescapable conclusion is that Delta fears, and now is scrambling to avert, the
development of a third West Coast gateway to Asia. Delta is more interested in stymying
competition from American to its West Coast-Beijing service and its U.S.-Asia service than it is
interested in benefiting passengers who would fly on those routes.
Delta’s prioritization of and growth at Seattle shows that its requested LAX-PEK
frequencies are not a core component of Delta’s international plans. Instead, Delta’s bid for
frequencies to Beijing from LAX is calculated to protect from competition its existing SEA-PEK
service and to deprive American of the ability to both strengthen its onlyWest Coast gateway and
compete more vigorously against Delta and United on theWest Coast, for the benefit of passengers
throughout the United States. This bid for LAX-PEK frequencies is just the latest gambit by Delta
to stifle American’s competitive potential at LAX.


This went on for months of filings... AA playing the victim and DL the bully that was out to block AA despite the fact that DL initiated the route request before AA even gave it a thought.

AA made it clear that SEA is DL's part of the west coast to Asia, SFO is UA's, and LAX is ours.

Whether you see that or not is immaterial.

The DOT awarded the current frequencies to AA but that doesn't in the least stop DL or UA or anyone else from starting any other new service that the treaties allow - and DL has made it clear that they are going to start LAX-Beijing with or without the current award.
https://www.regulations.gov/document?D= ... -0076-0002

Neither the DOT or DL bought AA's arguments that SEA is DL's hub... if you think otherwise, feel free to post the link and text.

Ironically, you got it right a page or so ago.... AA really didn't want to fly LAX-PEK right now (because they are losing too much money on their Pacific network right now) so they had LAX-PEK on their to-do list. But they sure don't want DL to be able to get the route.

Now that AA realizes that DL is going to fly the route, AA decided to buy its way into the market - which is perfectly fine as long as the contracts that exist between DL and CZ are settled - and AA is able to obtain a slot which it can swap with CZ.

So, let me rephrase what I said before.

No US airline wanted to make LAX a major gateway to LAX - until AA realized it had no choice. Problem is that neither DL or UA decided they were going to walk away from the LAX domestic or international market.
AA did initiate a land grab at LAX which they now have to play in.

AA could have had a significant startup advantage if it had tried to get a Chinese partner FIRST but it is now wasting time that it could be using to cement itself in the market and even if AA starts the route in 2018 (let alone later this year) it will have very little headstart before the new Beijing airport is open and slots will be available for multiple carriers - even if AA is permitted to move.

You are free to see it as you wish. The facts are pretty clear. AA realized it had no west coast to Asia strategy, has dumped capacity into the market and grabbed every route it can, but it hasn't reached market parity with DL and UA even in markets where AA has joint ventures and a multi-year headstart such as in LAX-PVG.

Competition IS good. The DOT affirmed it with the route award... which isn't exclusive.

AA, whether they wanted it or not, is not going to keep UA in SFO and DL in SEA.
 
commavia
Topic Author
Posts: 11390
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 12:00 am

The bottom line is that Delta and United can "decide" whatever they want for themselves - still don't know what's stopping them! :roll: In the meantime, AA is going to do just what AA is (successfully) doing - investing in the development of a network across the Pacific built around three well-positioned, complimentary U.S. gateways, a well-placed JV partner, an extensive codesharing relationship with one of Asia's best carriers, and (soon) a "strategic relationship" with China's (and Asia's) largest carrier.

Ultimately, I guess all that's left to say is "welcome back." :) This certainly brings back recollections of hilarious, and hilariously inaccurate, lectures on goodwill, and how Delta was going to "operate more than enough flights to depress yields over the Pacific and in Japan as long as it takes to finish Japan Airlines off once and for all." Ah, memories ...
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 12:12 am

Yes, I'm sure AA, DL and UA will all do what is in their own best interests including adding flights in markets that other carriers "thought' were not part of that carrier's strategy.


Who knows where that last paragraph came from but it couldn't be more timely to the discussion we are having.

AA DOES INDEED operate at an average fare disadvantage to DL, UA and the industry in the US mainland-Tokyo (both airports) market which all 3 serve.

Perhaps that reality really does apply to what the US-China market and LAX-Beijing will look like a few years down the road (regardless of the airport involved) and when the route will be started by each carrier.
 
United1
Posts: 3320
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 1:10 am

winginit wrote:
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.


The airlines do report profitability by region to the DOT (or some other alphabet agency) however you can't make apples to apples comparisons with the data. All of the airlines use a different methodology when they report the numbers (ie UA might assign 50% of the costs and revenue to the domestic portion of the ticket and AA might assign 75% of the costs and revenue to the domestic portion of the ticket.)
I know the voices in my head aren't real but sometimes their ideas are just awesome!!!
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 1:18 am

I am more than happy to buy that argument.... you just have to tell me where AA lost MORE money in order to make more money on the Pacific - or whatever airline/region we are talking about.
 
eamondzhang
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 7:39 am

alfa164 wrote:
carljanderson wrote:
alfa164 wrote:
Except that, as of now, only Skyteam partners are scheduled to move to Daxing; OneWorld and and Star Alliance airlines will remain at Beijing Capital. Are you suggesting that AA will try to jump ship to Daxing - and leave its (admittedly limited) OW connecting partners behind?
And has anyone suggested that the Chinese government is aware of those plans?

AA has a 5% ownership stake in CZ, and I don't think the entire story between AA and CZ is played out. I would expect some movement towards OW.

If that happens - and I will believe it when I see it - then both airlines will remain at Capital, not Daxing.

Not trying to derail the thread, but CZ is not back to PEK with so much investment already made to turn Daxing into a competitive base (with hangers, office spaces, apartments, etc.)
 
United1
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Joined: Wed Oct 08, 2003 9:21 am

Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 2:57 pm

atl100million wrote:
I am more than happy to buy that argument.... you just have to tell me where AA lost MORE money in order to make more money on the Pacific - or whatever airline/region we are talking about.


I have no idea if AA is profitable across the Pacific or not, actually I doubt they are considering how much growth they have been doing lately in the region. What I am saying is that the numbers you are quoting are apples to oranges as all of the airlines divvy up revenue/costs differently.
I know the voices in my head aren't real but sometimes their ideas are just awesome!!!
 
commavia
Topic Author
Posts: 11390
Joined: Mon Apr 25, 2005 2:30 am

Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 3:06 pm

United1 wrote:
What I am saying is that the numbers you are quoting are apples to oranges as all of the airlines divvy up revenue/costs differently.


:checkmark: Exactly.

Arguments about the individual profitability of one region or another for one particular carrier or another - as informed by data reported to the DOT - is not only incomplete, but ultimately meaningless. The only meaningful way to gauge the financial performance of airlines like AA, Delta and United is at the network level - because that's how these airlines make investment, and resource allocation, decisions. AA's management has spoken publicly about its growth in Asia being an "investment" in long-term network competitiveness and viability. The goal is not now, nor has it even been, to rival United's network presence across the Pacific nor - I suspect - for each individual flight to Asia to be, independently and in and of itself, as profitable or more profitable than the network overall.
Last edited by commavia on Mon Jul 17, 2017 3:32 pm, edited 1 time in total.
 
winginit
Posts: 1128
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 3:13 pm

commavia wrote:
United1 wrote:
What I am saying is that the numbers you are quoting are apples to oranges as all of the airlines divvy up revenue/costs differently.


:checkmark: Exactly.

The only meaningful way to gauge the financial performance of airlines like AA, Delta and United is at the network level - because that's how these airlines make investment, and resource allocation, decisions. AA's management has spoken publicly about its growth in Asia being an "investment" in long-term network competitive and viability. The goal is not now, nor has it even been, to rival United's network presence across the Pacific nor - I suspect - for each individual flight to Asia to be, independently and in and of itself, as profitable or more profitable than the network overall.


This is spot on. While it's not a TPAC example: take virtually any carrier's flights to MCO, especially the shorter-haul ones like ATL-MCO, MIA-MCO, etc. At the segment level, it is almost a certainty that the US3 lose several million dollars annually on account of low-yielding prorations from international itineraries to and from Disney. However, frame that in the broader context of network profitability and you have an absolutely critical route that's in many cases solely responsible for the long-haul international profits on segments coming from Europe, South America, etc. In short, it's a piece that, while in isolation might not be profitable, contributes and is in fact key to the broader performance of the carrier.
 
atl100million
Posts: 445
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 5:11 pm

The only reason why regional profitability was brought into the discussion was because I was responding to commavia’s suggestion – which I believe is accurate – that AA really did not want to start LAX-PEK right now but didn’t want to allow DL to get it, both because AA doesn’t want a competitor in the market when AA does get around to serving LAX-PEK but also because LAX-PEK is essential to building out its LAX to Asia route system.

The DOT does not consider profitability of regions or routes (at least publicly) but also does not consider whether carriers are building a hub at that airport or another – but AA brought that up anyway. The DOT also does not consider the use of previously awarded frequencies in determining how to award new frequencies – but that is exactly what AA did with its arguments about DL’s NRT-PVG frequencies.

The only issue the DOT considers is the increase in competition possible by awarding a route, something they have consistently held as the primary motivation in their decision, just as they did in the last Haneda route case. It is incredible that the DOT has taken as long as it has to resolve major route cases when it consistently awards routes to the smaller(smallest) player in the market.

Let’s also be clear that AA and DL both should have initiated China route requests at the time UA asked for the 2nd SFO-PVG flight. Based on the DOT’s own mantra of increasing competition, it is very doubtful that UA could have received a 2nd flight in a large market that is well served as long as AA and DL wanted to start flights in markets that did not have already service.

On one level, the issue in the LAX-PEK route case might be the DOTs desire to increase competition but it is far more about AA’s desire to break into the highly competitive west coast to Asia market which is currently heavily skewed in DL and UA’s favor. AA management knows full well that winning the route award is only part of the process – which is why they didn’t really want to add to their transpacific losses right now or have to deal with its alliance disadvantage in mainline China. DL’s route application for LAX-PEK, which came before AA’s, forced AA’s hand which is now not capable of putting all of the pieces together to make the route work, regardless of what the DOT wants, even while DL says it can.

To the US mindset, dividing up the world in 3s seems like the logical and just solution because there are 3 US global carriers. Problem is, very few countries have 3 even remotely similarly sized global airlines (let alone the same thing in other industries). The Chinese made the decision years ago – right or wrong and based on planned market and not free market processes – that China’s top markets would be divided between its largest airlines. China Southern has CAN, China Eastern has Shanghai, and Air China has Beijing. Alliances lined up along those same lines based on the size of DL and UA and other partners in the market with Skyteam getting China Southern and China Eastern and Air China going to Star. Like it or not, the alliances are built around contracts that include at least some degrees of exclusivity. Contracts usually also have penalties for breaking them.

Let’s also not forget that the China market does include HKG which is far more skewed to oneworld’s favor than any of the big 3 mainland China markets is to Skyteam or Star.

The opening of Danxing provides the opportunity for China to inject competition into the Beijing market as doesn’t exist in any of the other largest Chinese cities. The airport is being built around China Eastern and China Southern with Air China staying at PEK. As has been noted, that is unlikely to change and it has nothing to do with a couple flights from any US airline.

AA, realizing that its China performance is limited by its alliance position in mainland China – even though it has a privileged position at HKG – wants to upend the alliance situation in China. Moving or adding a “3rd wheel” to an existing alliance is not just about DL but about all of the other airlines including Air China and China Eastern who are very likely to not be interested in adding a THIRD competitor in a market where the Chinese have got to feel good about themselves for creating a plan to have TWO large competitors in Beijing.

Market strength does not easily move and companies build on their strengths, not to flippantly give it away just because a US government agency wants to maximize competition.

The DOT can certainly force the Chinese to give AA slots at PEK but what is commercially viable is highly subjective given that there are flights all over and to/from Asia leaving and departing in the middle of the night, including AA’s LAX-HKG flight.

In order to make LAX-PEK viable, AA has to figure out how to not only get slots but also develop the partnerships which currently exist with other airlines and change long-developed plans in China in order for AA to effectively compete with DL and UA.

Color me skeptical but I doubt very seriously that AA can pull all of that off, esp. before Danxing opens and DL is able to aggressively grow its presence in Bejing with or without China Southern. I’m also not sure why the situation in China with American is any more of a surprise than what has happened in Japan with DL as well as with other carriers in other countries, including Latin America where AA enjoys a significant structural advantage due in part to alliances.
 
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Web500sjc
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 5:31 pm

All this discussion about the Why the DOT awarded AA the slot over DL and DL forcing AA to start has been hashed out.

At some point AA has to start the route in order for there to be competition in the Far East. How long is it acceptable for AA to sit on the authorities when another airline is saying they are ready to start service, as soon as they have the authority? I believe he current DOt extension says 90 days from obtaining viable slots or by September 19th.

I feel Like that is fair, at some point the DOT needs to force the service of frequencies like they did with DL in HND.
Boiler Up!
 
winginit
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 5:40 pm

atl100million wrote:
In order to make LAX-PEK viable, AA has to figure out how to not only get slots but also develop the partnerships which currently exist with other airlines and change long-developed plans in China in order for AA to effectively compete with DL and UA.


You keep harking on the absolute need for AA to align stronger ties with CZ in order to make LAXPEK viable. Again, most on this forum probably agree that a stronger relationship between the two carriers is inevitable given the equity stake, but even if it doesn't come together, I'm not sure I understand your logic for the need given that:

A) AA has had viable service to PEK from both ORD and DFW for several years now with no partner on the other end

B) The ability for US carriers to flow passengers over PVG and PEK to Chinese secondary cities is not at this time financially advantageous. Yields between the US and Chinese secondary cities are significantly lower than those of the local market, and it's a stretch to say that partnerships with Chinese airlines are helping DL and UA capture more local traffic.

Apart from that, I'm not sure I follow your points of contention in this thread. Your points are, for the most part, verbose but otherwise obvious ones that no one is disagreeing with. So I'll ask - outside of stating the obvious, what points are you posing that aren't speculative?
 
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RyanairGuru
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 7:13 pm

atl100million wrote:
I suspect there are indeed backroom negotiations going on and I suspect that CZ can be pried out of Skyteam - but at some price to DL. Ultimately, CZ has to decide if that price is worth paying - and AA might well be the party that ultimately pays.


You are overstating the importance of Delta, who isn't actually the king/despotic dictator of SkyTeam. It's an "alliance," the opinions of other airlines count for something as well.

The relationship between DL and CZ is not particularly material and relatively easily replicated by their much deeper relationship with MU. Other than opposing as a matter of principle to screw with AA, DL probably wouldn't care too much one way or another.

Air France-KLM, on the other hand, would fight tooth and nail to make sure CZ don't go anywhere. CZ is their primary Chinese partner, and Guangzhou is a statistically outsized part of the AFKL network.
Worked Hard, Flew Right
 
commavia
Topic Author
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Re: AA Applies For LAX-PEK

Mon Jul 17, 2017 7:27 pm

RyanairGuru wrote:
You are overstating the importance of Delta, who isn't actually the king/despotic dictator of SkyTeam. It's an "alliance," the opinions of other airlines count for something as well.

The relationship between DL and CZ is not particularly material and relatively easily replicated by their much deeper relationship with MU. Other than opposing as a matter of principle to screw with AA, DL probably wouldn't care too much one way or another.

Air France-KLM, on the other hand, would fight tooth and nail to make sure CZ don't go anywhere. CZ is their primary Chinese partner, and Guangzhou is a statistically outsized part of the AFKL network.


Agreed. I could easily see the whole situation playing out pretty much as you outline. I doubt Delta is going to care much one way or another whether China Southern partners with AA since, again, Delta already has the China partner it wants down in Shanghai. But if China Southern is asymmetrically more important to other SkyTeam members (like Air France-KLM) than to Delta, I can envision those members pushing as hard as possible to reach some sort of an accommodation with China Southern that allows it to cooperate however it wants with AA so as not to risk pushing it further outside the alliance to the point that potentially imperils their own bilateral relationships.

Ultimately - stating the obvious - Delta doesn't get to dictate who China Southern does or does not partner with, anyway.
 
atl100million
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Re: AA Applies For LAX-PEK

Tue Jul 18, 2017 12:37 am

We have indeed made progress in this discussion as the reality has sunk it that the definition of commercially viable slot times is highly subjective since AA and UA both operate China/HKG flights that are significantly outside of the window that AA seems to be pushing for. More significantly, instead of reducing the conversation to slot times, the real issue is that “commercially viable” includes a host of other issues which AA does not have with its flights to China including alliance relationships with mainland Chinese carriers. Bringing financial data into the conversation - even if some people don’t like what it says – shows that commavia’s suggeston that AA might really not want to operate LAX-PEK right now is probably more right than a lot of people want to believe.

As far as the whole alliance issue, rather than attempt to argue that DL doesn't have sway over the decision, people who minimize the impact of an alliance change of allowing CZ to have joint commercial relationships with AA and DL or CZ moving to oneworld should instead be answering the question of who really wants AA to have a commercial relationship with CZ. I strongly suspect that there are a whole lot fewer parties that are interested in seeing AA join the mainland Chinese alliance party.

People also seem to forget, don’t know, or overlook that CAN, CZ’s home, is the 2nd largest airline hub in China behind Air China at PEK. The 3rd largest hub in China is CX at HKG; it takes one glance at a map to realize that placing the 2nd and 3rd largest Chinese hubs in the same alliance when they are just 85 miles away from each other could raise all kinds of problems even in a planned economy. China Southern and China Eastern combined do not have as many seats at PEK as Air China has. China Eastern has a whole lot of reason for not wanting to watch a competitor alliance move into a city where it agreed to a move based, in part, by being able to cooperate in the same alliance with CZ, esp. since CZ is larger at PEK than MU. MU has more but smaller hubs spread across China than CA or CZ. CZ has less international access to the US because of Chinese rules about which international routes Chinese carriers can serve. CZ would like to have a US carrier help feed its flights at PEK and PVG but it doesn’t have the right to serve US cities from those hubs on its own but has been given more domestic access as a result. That is just some of the issues that are involved with Chinese airlines. Add in other Skyteam airlines – and Skyteam is a larger alliance than oneworld – and there are a whole lot of stakeholders that have something invested in this case. it should also be obvious but Air Chiina and United are also clearly not interested in seeing AA align with a large mainland Chinese airline. I see far fewer parties that would be interested in AA and CZ cooperating than want it.

Further, no one has suggested it but it is entirely possible that there are bribes being paid to slot people to NOT give AA the slots it needs.

I have no idea how all of this will play out but it is grossly naïve to think that AA can walk into CZ’s offices and negotiate a commercial arrangement that involves breaking alliance exclusivity or a move – and that is on top of coming up with slots at one of the world’s most congested airports.

What is clear is that AA’s decision to enter the route case has left seven valuable frequencies unused for a year already (unless they manage to start the route before Christmas). Given that the new Peking airport opens in two years, it is becoming increasingly possible that DL might decide to move its NRT-PVG flight to ATL-PVG and gain an advantage in that market only to be able to increase its presence in Beijing when the new airport opens even while AA continues to stumble through a process to gain a larger presence in China which ultimately won't amount to much of an advantage in light of the opening of the new Beijing airport.

As much as some people want to believe otherwise, this case is extraordinarily complicated. The DOT can award AA the right to serve the route but it can’t force the Chinese to change their long-established aviation policies that are part of a planned, centrally controlled economy. Nor can the DOT restrain DL and UA's legal actions which are going to protect their long-standing investments in Asia.

I am glad that the discussion has moved from the simple discussion of wining the DOT’s approval and gaining slots to the much larger discussion of how AA is going to win in the mainline Chinese market.

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