DOT Throws Delta a Japanese Bone

Delta, Government Regulation

It’s here! It’s here! Maybe I need to tone it down a notch, but the tentative decision on which airlines will get the new daytime slots at Tokyo’s Haneda airport is out. And the results are… as expected. Oh but wait, there is one surprise. Our frozen friends in Minnesota are going to be very happy.

Tokyo Airport Locations

As a brief background, remember that Tokyo’s close-in Haneda airport is highly desirable. Not only is it closer to town, but as we all know, it’s the only airport that doesn’t require passing Godzilla’s home on the way in. Ever since Narita opened, Haneda has been primarily for domestic flights, but that has been changing. A few years ago, the US made a deal with Japan that opened up four slots at Haneda for US carriers.

Unfortunately, thanks to dumbassery on this side of the Pacific, those Haneda slots were only good for flights at night. Of the initial awards, only half are still operating today. Hawaiian had no problem running its Honolulu flights that way. And Delta has, through sheer will, kept its LAX flights running. But Delta’s Detroit flight failed, moved to Seattle, and then failed again. Now American picked up that slot and runs it out of LA. Meanwhile American’s original flight from New York was abandoned, and United turned that into a San Francisco flight.

In the last round of negotiations, it was agreed that US carriers would be given access to two more slots at Haneda for a total of six. The best part? Five of those could be run during the day making them far more commercially viable.

One of the most vocal opponents to all of this has been Delta. (I know, you’re shocked.) After all, United and American both have effectively unlimited access to Haneda with their joint venture partners ANA and Japan Airlines respectively. Delta, however, only has its lonely hub at Narita. It wants to be able to move its whole hub to Haneda or it wants no liberalization at all. Obviously, Delta failed at stopping improved Haneda access, so it had to play the game to see how much it could walk away with.

In the end, every airline that had a route to Haneda wanted to keep it. The Department of Transportation (DOT) thought that was a good idea. That means Delta and American will keep flying from LA, Hawaiian from Honolulu, and United from San Francisco. It’s just now they’ll be able to shift the existing flights to run during the normal hours when people want to travel to and from Japan.

In Delta’s case, it has already filed schedules from LA, and at the same time, it dropped its Narita flight. For people going to Japan, Narita becomes an afterthought. But this does mean that people in LA can’t connect to other Delta flights beyond Tokyo. We’ll see whether others cut Narita flights and deprive Godzilla of food as well.

With those four slots committed, that left two more slots up for grabs. One wasn’t a surprise, and that was the only remaining night slot. Hawaiian was the only airline that wanted it, and DOT already gave its blessing. See, night operations aren’t bad for Japanese travelers visiting Hawai’i. And with this slot, Hawaiian will split the week between Honolulu and Kona, giving the latter its first international route in several years. Good news.

And then there was one. The last daytime slot was hotly-contested with four requests. United wanted Newark, American wanted Dallas/Ft Worth, and Delta wanted both Minneapolis (first) and Atlanta (second).

The DOT effectively laughed at United’s Newark request since joint venture partner ANA will be starting a flight to JFK (as well as Chicago, I might add).

American was in a better place. The DOT really liked American’s flight from Dallas/Ft Worth, but in the end, it did what it should have done and gave Delta, the only one of the big three without a Japanese partner, one more flight.

Apparently for the DOT, it was important for the flight to “offer geographic diversity… which would serve a broad catchment area with arguably less circuity.” In other words, the DOT really cared about physical geographical location and connecting opportunities. This isn’t about providing the most benefit to the most people on a nonstop basis. It’s about providing the most benefit to the most people around the country. For that reason, Atlanta lost and Minneapolis won. Go figure.

The funny thing is that the DOT is putting Delta on notice. Basically, it’s saying “do not screw with us again, punks.” Or in the DOT’s words…

In light of Delta’s past conduct, should our tentative decision in favor of Delta at Minneapolis be finalized, we have tentatively decided to condition the award of that authority: in the event that Delta were to significantly deviate from its Minneapolis proposal in this proceeding, Delta’s authority would automatically terminate and a backup carrier’s authority would automatically activate…

Them’s fightin’ words. The backup authority, as you may have guessed, is for American from Dallas/Ft Worth. This puts a lot of pressure on Delta to make Minneapolis work. Even if it doesn’t, Delta might want to think twice about cutting the flight anyway.

So there you have it. We’ll see these flights up and running fairly soon, I’d imagine, after the decision is finalized.

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21 comments on “DOT Throws Delta a Japanese Bone

  1. Frozen friends? Today’s forecast for MSP is 98 deg and humidity in line with Miami. Yes it’s a heat wave but at least for the time being things are nicely thawed. As for Delta I’m wondering how much our congressional delegation from MN influenced this decision. There was a lot of local press about how if DL didn’t get this the daily Tokyo flight would be gone. Who knows how serious DL was about that but they had the attention of our senators for sure.

    I will say that the local business community does support that flight quite well. Have a number of friends that work for several of the larger companies based here that frequent that flight at least monthly. My question is, most of them use NRT as the jumping off point for all other places in SE Asia. With this change will they have to switch airlines to go onto other destinations? Didn’t sound like they are moving the entire hub over. I can’t imagine DL would maintain their NRT flight from MSP. Depending on where one wants to go and if they are loyal to Delta it may make more sense to go from MSP to DTW and catch a direct (if available).

    1. A – Yeah, it’s an interesting point. Delta has effectively cut off Minneapolis from any of the beyond Tokyo destinations now. This route has to stand on its own with feed from the US only. That’s going to be tougher. It’s probably one reason why DOT felt compelled to add that backup authority.

  2. So MSP is better then DTW or SEA going to Japan now, or did Delta know they would never have a chance of getting DTW or SEA back but needed a better feed location then ATL?

    1. I wonder if DL THOUGHT that they would have a better chance with MSP over SEA and DTW due to the previous failings. If that is indeed true, DL may have been too conservative in its request. In reading some of the order, the DOT basically said that the DTW failing showed just how bad the nighttime slots were for Central and East flights.

      I think had DL requested DTW, they would have got it.

  3. With all the kerfuffle over slots at HND, I had to remind myself whether or not there is an open skies agreement in place between the US and Japan. Yes, there is, (according to http://www.bloomberg.com/news/articles/2010-10-25/u-s-japan-sign-open-skies-agreement-to-liberalize-air-travel ), but of course with slot restrictions at some airports. There are a lot of rapidly changing conditions at play here: aircraft range is increasing so that some routes that used to require a stop in Tokyo often don’t need to anymore, which reduces connecting traffic. (I have no idea whether O/D or connecting traffic is more profitable – I suppose it depends on the market). Also, with increasing service all over Asia, there are no doubt many more opportunities for connections at points other than Tokyo. I haven’t seen it stated as such, but I would think the battle for slots at Haneda is focused more on O/D passengers than on connecting passengers, although connections to Japanese domestic flights are more plentiful at Haneda ,based on listings on Wikipedia for both airports.. So, there are factors at play here that are much more complex than we mere mortals can possibly imagine, and the real reasoning is undoubtedly considered proprietary information.

    That said, I do sometimes wonder about the MSP/DTW situation. Obviously the demand is there at both hubs, or Delta would have already made a LOT more changes than they’ve been allowed to. There was a lot of chatter at the time of the Delta/Northwest merger about restrictions connected with money Minnesota had given Northwest for various projects. That can’t possibly be the only consideration in keeping Asian service going at two closely-situated hubs. Unless there are differences in costs and/or major support from local customers in both places, it hardly seems like it would be justified for two hubs so close together to have so much duplication in service – both domestic and international. I think I know just the Cranky guy to do an informative and interesting analysis of this situation, too. (HINT HINT)

    1. I would argue that MSP and DTW serve different geographical areas. MSP effectively acts as the major airport for most if not all of the mountain west, and there are strong population and business reasons for MSP to be served (the sheer number of corporate headquarters in the Twin Cities area is a help, not to mention the Mayo Clinic in Rochester) with direct connections. It would be less effective for DTW to be a feeder for say, Montana, or other far flung regional airports.

      1. First time I’ve heard of MSP being part of a “mountain west” catchment area. Mid-continent would be a better term, but with enough O/D traffic to support a hub – unlike MCI. Do note that between the Mississippi river and the Rocky Mountains that MSP is the largest market outside of Texas, that includes places like Denver and St. Louis.

        1. I believe the only real reason to have the DTW-Japan routes in the past (NW days included) was due to the auto industry. Otherwise, this route doesn’t make a lot of sense. East coast with DL can go via ATL, and the midwest/”Mountain west” makes sense with MSP for the reasons stated above. Add to the fact that MSP is a much nicer airport than ATL and DTW(my opinion, biased on my home airport!).

          As for the “Mountain West,” the federal reserve seems to agree, it covers MN, ND, SD, MT as well as the UP of MI and northern WI :)

    2. Hint noted, Miss Informed. I do think they have different catchment areas. If you looked at the map, Detroit will pull more from the rust belt/east/southeast whereas Minnesota pulls more from the upper midwest and into the plains. They are relatively close together, yet somehow they remain distinct.

  4. While it is very fashionable to beat Delta up about its Haneda track record, the simple fact is that the DOT said that DL’s past performance at HND is not relevant to how well daytime flights might perform.

    There are precisely three US cities that have been capable of supporting nighttime service to HND – Honolulu, San Francisco, and LA. Delta and American both gave up flights from the Eastern time zone and DL found that SEA doesn’t even have a big enough market to support nighttime service. Delta’s two HND failures are reflective of the 2 attempts it made to try to make a flight outside of LA, San Fran, or Hawaii work.

    DOT data shows that in the 1st quarter of 2016, Delta carried more local LAX to Haneda passengers than UA did from SFO. AA’s LAX-HND route started to recently to get a decent baseline but DOT data also shows that AA entered the market by offering local LAX to HND fares that brought their average fares down to less than half of what DL offered in the quarter before AA started service. DL carried a higher percentage of local LAX-HND traffic on its flight than either AA or UA did on their California to HND flights.

    AA is using the smallest aircraft of any airline to HND and did not even propose larger aircraft despite the switch to daytime operations.

    The DOT specifically noted that it awarded the one remaining HND flight to DL at MSP because MSP is a less circuitous connecting point to more of the United States than DFW in addition to its attempt to preserve some competitive balance between alliances.

    Even with DL winning two non-Hawaii flights and AA and UA each winning one, UA and NH still will operate 50% of the service from the mainland to HND considering AA/JL as joint partners.

    AA and JL are actually in the worst competitive situation because JL made the decision years ago to add SFO service which UA now also serves from its large hub. AA, DL and UA all have LAX service from LAX. UA/NH have multiple gateways to HND, DL has the strongest position in the LAX to HND market, and also has MSP as the only US carrier service to HND from outside the west coast or Hawaii, while AA and JL have just two mainland flights, one of which offers minimal connectivity and the other is competitive with 2 other airlines and alliances.

    DL still has 6 NRT flights which remain (or can remain) even after LAX and MSP to Tokyo are converted to HND service. DL, JL, and NH will offer far more service to NRT than the local market dictates after HND service pulls off local passengers which means NRT will increasingly be competing for connecting traffic to elsewhere in Asia even as more and more nonstop flights are added from the US to other points in Asia outside of Japan. NRT as a hub will increasingly become redundant.

    It is highly unlikely that LAX to NRT service will be viable for any airlines alongside 3 daytime flights to Haneda.

    AA/JL and DL likely both want more HND service but UA/NH have got to feel pretty good about their position at HND from the US.

  5. Delta’s future removal of the LAX flight to Narita is already affecting connections beyond Tokyo. I was looking into a flight from L.A. To Osaka (a market large enough to support a daily nonstop on JAL), and all Delta could offer was a two-stop itinerary via Seattle/Portland/Minneapolis and Narita (theoretically a longer one-stop might be doable via Honolulu, but the flights don’t connect in the winter schedule). I believe the same holds for other cities in Japan. I don’t know how much Delta’s intra-Japan flights rely on connections from LAX, but the loss of these connections (and now MSP) could spell trouble for the Narita hub. Seattle–Osaka, anyone?

    1. Delta recognizes that it is not worth trying to vie for connecting passengers to major cities in Asia via NRT on a flight that will lose a lot of local traffic to HND when there are no shortage of airlines flying nonstop from LAX to cities throughout Asia or Asian carriers that are able to efficiently connect passengers over their own hubs.

      DL recognizes their future in Asia is either flying nonstop from the US to whatever cities in Asia are important enough to support on their own metal or they will carry passengers to their partner hubs for them to complete the journey.

      That strategy isn’t much different from what AAL and UAL does in Asia and all 3 do in Europe or other parts of the world.

    2. If you don’t want to take JAL’s nonstop, or AA/UA’s HND flights with JL/NH connection, you could always do a one-stop in ICN (Asiana or Korean Air) or in PEK (Air China/United). Plus, there’s a good chance that with Korean, some or all of your flights would be codeshared with DL.

  6. Completly un-related, but I just jumped on a great deal from Air China SFO-Tokyo. Flying into HND, and home from NRT. So I only have to dodge Godzillia on the way home.

    But I am going to lay over in PEK… :-(

  7. Cranky, I think you have the reasoning behind why MSP won and ATL lost wrong. If you read the application and the DOT proceedings on the HND slot applications (found here: https://www.regulations.gov/document?D=DOT-OST-2016-0048-0070 ), you can see that Delta clearly indicates its order of preferences: LAX, MSP, ATL. So MSP getting the award instead of ATL is down to Delta’s indicated preference more than it is due to DOT deciding on geographical diversity. If you’ll notice, all the carriers received their first choices, basically to keep whatever service they already had.

    1. quasar59 – The link to the award is in the post already, and I did note that Delta preferred Minneapolis to Atlanta But when looking at why Minneapolis was chosen over others, DOT explained that it liked the geographic position and circuity of connections.

    1. karen – Well, godzilla was born in a small fishing village in 19…. just kidding. I used this image long, long ago and for some reason I just liked it enough to keep using it on my Tokyo posts. Consider it an inside joke for those who have reading the blog for a long time.

  8. Northwest built a very successful dual Midwest hub system that allowed them to be the largest airline in the Midwest and which Delta has maintained even with consolidation.

    MSP and DTW serve most of the same large markets as ORD/MDW do but DTW has more service to smaller cities in the Eastern US that probably won’t make much of a difference on feeding Haneda.

    While routes like ORD to HND on NH will benefit from hubs on both ends, there is so little capacity to HND relative to local demand that airlines will be only sell connections beyond HND only if they cannot sell higher valued local Tokyo passengers. MSP will be the only US carrier flight east of the Rockies and only one of 2 (NH’s ORD flight being the other) from a large hub that connects to large parts of the US.

    MSP passengers to elsewhere in Asia will have to connect in another gateway to reach the destinations that are currently served beyond Narita but there is simply a change in connecting hub at stake.

    Delta does have to decide on (and release to all of us who are waiting to see those decisions) how they will connect cities like major cities that are only served on DL via NRT including Singapore, Bangkok, Taipei, and Manila. DL has said they will release their decision regarding their future Pacific network shortly after the DOT issued its HND decision.

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