American’s Asia Strategy Centers on Dallas/Ft Worth

I talked a lot about Delta’s and United’s Asia strategies last week, but I didn’t touch on American’s. That’s kind of funny since American was the one that announced some big moves cementing Dallas/Ft Worth as the heart of its Asian strategy. So let’s discuss.

American, which already flies twice a day from Dallas to Tokyo/Narita and once a day on a new flight to Seoul/Incheon, will add a daily flight to Hong Kong and one to Shanghai. That’s quite the Asian operation for a place in the middle of the continent. But it makes a lot of sense considering American’s route network.

American Dallas Asia

United has San Francisco and Delta is building Seattle, so that leaves American as the lone member of the big three without a real west coast hub. Oh sure, it’s tried to build LA into one, but that’s a lost cause. The reality is that LA has a ton of service from a lot of different airlines, and any attempt to dominate will be turned back by the other players.

To see what I mean from an international perspective, you need to look no further than Shanghai. Until a few years ago, China Eastern was the only airline serving that market from LA. China Eastern isn’t exactly known as a leader in customer experience, but it had a partnership with American and the flight was a consistent presence in the market. China Eastern decided to become buddies with Delta instead about the same time American applied for its own flight to Shanghai. United, not wanting to lose ground, immediately followed. The end result was three daily flights, all horrendous losers. United has downgauged to a 787, which helps, but it’s still rough.

From Seattle, Delta was determined to serve the 5 biggest Asian markets in Tokyo, Shanghai, Beijing, Seoul, and Hong Kong. American would be foolish to try the same from LA. It serves Tokyo and, as discussed, Shanghai. But the rest already have multiple daily flights from the home carriers.

So what’s American to do? Well, look for the market in the airline’s network that has the best opportunity. And that’s Dallas/Ft Worth. Up until recently, there was one big problem in this market… American couldn’t come to a deal with its pilots to fly these routes.

Back in 2006 when American tried to apply for the Dallas-Beijing route, it had to back out. Since that route fell into the “ultra long haul” category, American had to get a separate agreement with its pilots to fly it. The two groups couldn’t agree on a deal, so it never happened. It was in bankruptcy that American’s pilot contract got a thorough thrashing, and one of the changes enabled these longer routes to come online. That’s why we’re seeing an Asia expansion now. And Dallas is a good place to try it.

Think about a place like Hong Kong. American doesn’t serve it today, though it does codeshare with partner Cathay Pacific. That relationship is a traditional codesharing deal and I’m assuming there isn’t much interest in a joint venture or it would have been attempted by now. But it’s not like American wants to really compete massively against the giant that is Cathay either. And Cathay is quite a monster.

Besides having a fantastic customer experience, it has a lot of seats on a lot of flights into the US. In fact, Cathay just announced it would begin its fourth daily flight from LA to Hong Kong. That’s four flights every freakin’ day on that ultra-long route.

So American could try the LA-Hong Kong route, but it would get destroyed. It wouldn’t make much sense. It could try Chicago but it has stiff competition there as well. United flies it daily and Cathay is upping its flights to 10 per week next summer. New York is no better, and well, Miami is impossibly long. Dallas is the only option American has. Fortunately, it’s a good one.

Dallas is an increasingly large hub of business, and it sees no flights to Hong Kong today. It can also provide connections to a lot of places around the Midwest and South that don’t have single stop connections today. Look no further than joint venture-partner Qantas to see how that works. Qantas abandoned San Francisco and decided to run a flight to Dallas instead. It’s such a long flight that a stop in Brisbane is required on the westbound trip, but it’s apparently worth it. Qantas has already expanded the service.

That all sounds good, but there’s an even bigger benefit when it comes to Asia flying… Latin America.

Flying from Asia to Latin America is really far and requires stopping somewhere. To give you an idea, connecting the two financial capitals of Hong Kong and Sao Paulo would require flying more than 9,700 nautical miles. You know the longest route in the world today, Newark to Singapore? That’s 1,500 nm shorter. So you need to stop somewhere. And today, the options aren’t great. But Dallas provides a real opportunity to make for simple connections between Hong Kong and Latin America.

The only thing preventing this route from being a tremendous success is probably that it requires a real airplane investment. American is putting a 777-300ER on the route. That’s an expensive airplane and there needs to be good revenue to make it work. I’d say it has a shot.

In Shanghai, the picture is a bit muddier. American already serves it from LA, but maybe the airline will euthanize that route (it would be a mercy-killing) so that it can focus on one with the potential for profit. I’d say ultimately Shanghai is bound to be a great market, but it may just not be there yet. We’ll see.

With these, American is left with Beijing as the only one of the top 5 Asian markets not being served from Dallas, and that may happen eventually… assuming management continues this strategy going forward.

I’d be remiss if I didn’t at least touch on what the US Airways merger might mean here. While I think the US Airways combination would mean better options to Asia from the western US, I don’t think that would mean Dallas-Asia flying would go away. But what about those in the west? That’s where the combined American/US Airways could make changes.

I still expect we’d see a Phoenix – Tokyo flight operated either by an American or Japan Air Lines 787 pretty quickly. Connecting the two hubs of joint venture partners would make perfect sense. And maybe over time, the Phoenix hub would be able to support flights beyond, but that may not be anytime soon.

American has to serve Asia and has to come up with the right strategy. At this point, Dallas is probably the airline’s best option. It’s also a good one.

[Original California coast picture via Shutterstock]


28 Responses to American’s Asia Strategy Centers on Dallas/Ft Worth

  1. The Latin America – Orient connection through Dallas would really grow if there were a transit lounge so that travelers do not need a hard to get US Visa.

    • Andrew C says:

      exactly!

      >> The only thing preventing this route from being a tremendous success is probably that it requires a real airplane investment.

      Nope, it’s US visa policy (or lack thereof, when it comes to transit)

    • George says:

      Agree on the Transit portion-it should be easy to do, but we’re talking about the US Government-the one slowly coming back to work after the shutdown.
      A bigger problem IMO is the layout of DFW. AA is scatered over 4 terminals. I would assume these flights will all be out of Terminal D. D was built to handle most of the International flights. The big problem is there is no room, at least that I can figure out, for a transit lounge. The way it is designed is you land, clear Customs, then go out of Customs to your next gate. If DFW/AA decided to make all of D a Transit Terminal ala the way most of AMS is configured, it could work. A ding against that approach is D also handles a lot of AA Domestic service-maybe make half the terminal Transit?

    • Alex Hill says:

      There in fact is a transit lounge in DFW. Terminal D is quite well set up for it, and you walk by the transit lounge en route to Immigration. It’s on the arrivals level in one of the walkways connecting the international-capable gates to Immigration Unfortunately, under bass-ackwards US law, it can’t be used.

      With the glassed-off jetbridges, international transit passengers could then be put on their departing flights without ever mixing with the domestic passengers.

    • CF says:

      I tend to agree with everyone that a better transit experience would go a long way toward improving traffic, however, it’s not going to make or break this one yet. Still, from South Asia, the gulf carriers can provide a good option that will take more and more traffic because of the ease of transit and shorter flights. They can do some of the bigger cities, but if you’re going to smaller cities in Latin America, then going through the US is still the only real option without making multiple stops.

  2. Is AA destined to be perpetually weak on the west coast and west coast-Asia? It seems like the only reasonable hubs are taken or so over served they’re SOL.

    • CF says:

      Nick – I think American has no choice but to rely on its joint venture partners. From big and even medium sized west coast cities, you’ll be able to get to Asia with JAL. But the options simply aren’t going to be as good as Delta or United.

      • Scott says:

        Which is why it’s crazy that AA still doesn’t show online award avail for JL or CX on its website. I live in SFO and am loyal to American, but using its codeshare partners to Asia for award tickets is way harder than it needs to be.

  3. Sean S. says:

    As others have pointed out, the sheer craziness of getting a Transit Visa for many individuals from Latin American countries, especially Brazil, makes the idea of transit almost impossible. No one is going to jump through those hoops. I’m not sure what Mexico’s policy is, and their airlines are notoriously unstable and weak, but I can’t imagine them passing up the opportunity to steal Latin American long-haul business to Asia.

    • Trent880 says:

      There are loads of people that transit between Latin America, Asia, and Europe every day over hubs in the USA. Sure there’d be a lot more without the visa nonsense, but it’s not a deal breaker as many imply by any means.

    • Arcanum says:

      I would think YVR would be a better option than Mexico, if only AC could get their act together.

  4. A says:

    How big of an O/D market is DFW to Asia? Everyone always says that for a hub to work it “must” have O/D traffic. Would an Asian gateway be the same? To me the argument of a local asian population seems absurd as even with the large populations on the west coast I don’t think there is enough leisure travel on those routes to fill the capacity – it’s business. So with that theory in mind and TX being a huge state of business an Asian gateway seems to make sense, right? Guess we shall find out.

    • MeanMeosh says:

      DFW actually does have a much more sizable Asian population than some people think to generate leisure traffic (currently pushing 350,000, though this tilts heavily to Indians/Pakistanis and Vietnamese), but the big thing the region has going for it is its burgeoning role as a financial/technology/logistics hub for large corporations with footprints in Asia. There have been a large number of multinational corporate relocations to the Metroplex over the last 10 years or so, many of which have operations of some kind in Asia. Just based on my travel to India for my former employer, there was a lot of short-term rotational-type business travel to Asia, so I think the O&D is there. It would certainly be more than just a transfer point for connections, which IMHO gives DFW a big advantage over someplace like PHX.

      And for that matter, with a large chunk of the region’s Asian population centered in India and Vietnam, HKG is as good a place to go as any to capture leisure traffic to fill up seats. That makes for an easy one-stop connection to any spot in either of those countries. I’d much rather do a connection in HKG than FRA, LHR, or DXB, which is about all you have to choose from for one-stop connections today.

    • Durcy says:

      One of the things that make 777-300ER such a great success is its cargo capacity. With DFW already being logistics and technology hub I can imagine they will have no problem selling cargo capacity on these flights, especially from HKG.

  5. bobsmith says:

    Great graphic Cranky. As a native midwesterner, much appreciated..

  6. S*A*A*D says:

    Latin America to Asia is already served directly by JAL (last time I looked it was via JFK) and Korean on through plane service. That, to me, seems to be the key to their success. So long as the passengers deplane but do not leave the boarding area while the aircraft is serviced, their fine. DFW does not have anything like that. Concourse D where all international flights operate from is nothing but wide open gates with major domestic flights mixed in (LAX almost always). Either way, transit visas aren’t much of a problem for the airlines. That’s up to the customer to obtain which companies will cover for their traveling employees and families will get no matter the hoops and hurdles if they absolutely have to go.

    I didn’t notice any transit lounges at the top of the escalators one takes to an upper level to reach immigrations but being such a new terminal it seems the designers would have been forward thinking to some degree and built a few.

    Another prime concern is the elapsed time using DFW as a gateway between the two continents. AA’s current flights touch down no later than 3PM to allow for decent connections and arrivals to major East Coast Markets. Their service to Brazil, Argentina and Chile, the “Big 3″ don’t leave before 7:30PM, with Peru also a strong player in the market. Northbound, flights arrive between 6-8:30AM with the first service to Tokyo in the neighborhood of about 11:00am. Does anyone want to stop/layover that long, up to 5 hours, during an already exhausting haul?

    American would be stupid to time those flights for Latin America and lose virtually every meaning connection to the East Coast so they have an interesting balancing act in Dallas/Ft. Worth to consider.

    • Sean S. says:

      To my general knowledge, there can be no real transit areas in US airports due to the nature of CBP that everyone has to come off and be rechecked. As to transit visas, while true in a sense that “anyone can get them”, not everyone can get them in the time frame needed for business trips. The wait time for visa’s in Brazil for instance are notoriously long, and it is doubtful a businessman is going to wait weeks on end to go to an essential visit in Asia. He’s just going to fly through somewhere else.

  7. PKL says:

    I’m with Chuck, Andrew and Sean. The USA’s transit “policy” is the biggest problem in creating an Asia-Latin American hub.

    All transit pax must pass through US immigration and customs. Many need to first obtain a visa. All non-US citizens are fingerprinted. CBP interrogates anyone it wants; non-citizens who decline to answer CBP’s often invasive questions can be detained and put on a flight back to their origin. Meanwhile, as at all “functional equivalents of a border,” CBP claims the right to review, retain and/or copy a pax’s hard drives and other electronic devices.

    Here in Asia, I see Air Canada ads touting “easy transfers” to Latin America. AC means, “Avoid the hassles of changing planes in the US police state.”

    Maybe the solution is for Mexico to take an existing air field near sea level on the southern part of its western coast — it has to be southerly enough so that flights can avoid the USA’s Secure Flight program by staying out of US airspace — and turn it into a Shannon-inspired no-questions-asked transit port for Asia-Latin American traffic.

    • PT Freeman says:

      As PKL said: “The USA?s transit ?policy? is the biggest problem in creating an Asia-Latin American hub.
      All transit pax must pass through US immigration and customs. Many need to first obtain a visa. All non-US citizens are fingerprinted. CBP interrogates anyone it wants; non-citizens who decline to answer CBP?s often invasive questions can be detained and put on a flight back to their origin. Meanwhile, as at all ?functional equivalents of a border,? CBP claims the right to review, retain and/or copy a pax?s hard drives and other electronic devices.
      Here in Asia, I see Air Canada ads touting ?easy transfers? to Latin America. AC means, ?Avoid the hassles of changing planes in the US police state.?
      Maybe the solution is for Mexico to take an existing air field near sea level on the southern part of its western coast ? it has to be southerly enough so that flights can avoid the USA?s Secure Flight program by staying out of US airspace ? and turn it into a Shannon-inspired no-questions-asked transit port for Asia-Latin American traffic.”
      I couldn’t have said it better. AM has a flight from TIJ to both NRT and PVG. Obviously, they’re on to something…….

  8. Matt says:

    It seems that AA in DFW and DL in ATL have a lot in common in terms of both being non-traditional gateways bolstered by the power of a mega-hub. With ATL not working very well for DL to Asia even though it is the largest hub in the airline industry (I believe NRT is the only surviving route), does DFW have anything else going for it that make it more successful for AA?

    • CF says:

      Matt – Well, Delta feeds a lot of traffic through its Detroit and Seattle operations so it is certainly siphoning off a lot of traffic through Atlanta that has a better option. American won’t have that problem. In addition, Atlanta seems to be doing just fine. Delta’s arch-nemesis Korean has even put an A380 on that route. It’s just that with so many other hubs, Delta has better places to focus Asia flying.

  9. Dianne says:

    Love your uber-wonky analyses.

  10. Harold says:

    What about Denver? As far as I know, there’s one UA flight to Tokyo, but almost no other direct flights to Asia; no Seoul, Hong Kong, Beijing, etc.

    • CF says:

      Harold – Denver has historically been a much thinner route when it comes to Asia. And altitude issues make for ultra long haul troubles. We’ll see if the new 787 flight to Narita works. If so, maybe we’ll see more. But United is better off focusing on SFO.

  11. Maybe AA finally learned to just give up on the west coast and stick with the midwest/east.

    I wonder if they are sorry now that they destroyed AirCal and RenoAir which could have made them a big player on the west coast now.

  12. Robert says:

    I just love seeing American Airlines suffer. It makes my day. I get this warm and fuzzy feeling. Yes. You see I have a memory. I remember what they did to put the final nail in the coffin of the better airline named……..Braniff International. Among other notorious reasons. Enough said.

  13. Matt Weber says:

    The AA/CX code share on CX’s LAX flights is a very strange creature. Typically in a code share, you sell seats from the general inventory. I don’t know if it is still true, but in the Premium cabins, AA actually used to own specific seats in the inventory.

    I.E. if you wanted a window on the starboard side in First Class, you need to be on the AA flight number. This Sometimes leads to some unpleasantness. Example in point. A C class AA customer decided they wanted to upgrade to F, only all of the AA F seats were sold. AA refused to sell him the upgrade because all of the revenue for the ticket would go to CX if they did.

  14. i think the qantas example is a great one. i remember thinking at the time that it sounded pretty wacky but it clearly has been a success. i have guests coming in next week that have one stop service from australia to DCA via DFW.

    this is a great idea IMO. DFW is a true fortress hub so they can offer connections to almost anyplace, there is little other competition on O&D routes and DFW probably has enough O&D business to make some of the flights feasible on a standalone basis. most importantly and as noted elsewhere, AA’s asia flights from DFW will be mostly unique within the AA system whereas DL cannibalizes asia connecting traffic via ATL with SEA and DTW and UA does the same with LAX/SFO/ORD. by concentrating most of their asian and south pacific connections at DFW, it greatly increases their chances for success as we’ve seen to some extent with QF at DFW.

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