A Blueprint for American in Latin America

Last week I wrote about how American’s loss of LATAM as a partner wasn’t necessarily a problem from a commercial point-of-view but rather from a strategic and management point-of-view. Today, I’m going to dive deeper into the network to show exactly what I meant. It’s story time, but instead of a book, I have one of my favorite tools on Earth, the Great Circle Mapper.

Let’s start by comparing the current route maps for Delta and American. This shows all routes from the US to South America. (Yep, I’m ignoring the Caribbean/Mexico/Central America since LATAM doesn’t really help either airline with that.)

American and Delta maps generated by the Great Circle Mapper – copyright © Karl L. Swartz.

I’ll admit that even I was surprised at the stark difference between these maps. Delta has almost no presence in South America except for in the largest of cities, and it only serves the continent from two of its hubs. Having LATAM as a partner will be a game-changer for Delta in that it will provide huge connectivity not just to smaller cities but also to larger ones like Montevideo or Guayaquil. It will also give Delta more heft between the US and South America with LATAM’s metal. The additional feed should help Delta add more nonstop service into South America as well. This is great news for Delta customers.

But when you look at American’s map, you see it already has outstanding coverage in South America, and not just from Miami as you’d expect. Dallas/Fort Worth has proven to be a particularly good gateway as well. Though the coverage is quite good, there are still large swaths of the continent that remain uncovered, and that’s where American could use help from new partners.

Brazil is a particular point of focus here. If we look solely at American’s Brazil presence we see it is now down to only four cities.

Maps generated by the Great Circle Mapper – copyright © Karl L. Swartz.

That leaves much of the country uncovered without LATAM. To be fair, many of the cities that aren’t served by American are smaller, and they’re more important for Latin origin than US origin, but it’s not all like that. Think of places like Recife, Fortaleza, Belo Horizonte, Iguassu Falls, etc. Those are places where American would want a presence.

Now imagine a world where American picks up the stake in Gol that Delta is selling and works with the airline to offer true feed for American’s network. Just look at these four cities as connecting points (and assuming Gol and American can work together to coordinate connecting times), you see a very different story.

Maps generated by the Great Circle Mapper – copyright © Karl L. Swartz.

I had to remove the city names, because there are just SO many cities that Gol serves from those four points alone. It’s easy to dismiss Gol as the small low-cost carrier it once was, but that is far from reality today.

Beyond giving American instant access to every city it could ever want in Brazil (and in nearby countries), this network could also potentially help American expand into additional Brazilian cities nonstop from the US. That’s especially the case as the A321XLR comes in line in the next few years. Gol would be a great partner in that American would provide the long-haul and Gol could handle the short-haul. It is a more complementary partnership compared to American-LATAM.

But this only really helps with Brazil . You can see there is still a huge gap in northern South America. American has pulled back in that region as economics have worsened. It can no longer justify flying to Bolivia or Venezuela at all. (Bolivia service ends next month.) This is where a bolder move is in order.

If American can coax Copa away from United, it would perfectly fill the gap. Considering United owns a piece of Avianca and Azul, Copa must feel like a third choice, so there should be an opportunity here. Let’s zoom in on South America. Here you can see Gol’s network from the 4 American gateway cities in Brazil as well as Copa’s network to the south from Panama City.

Maps generated by the Great Circle Mapper – copyright © Karl L. Swartz.

That’s one heck of a network. The gaps you see between Brazil and the northern part of South America are filled with a whole lot of jungle. In other words, this partnership would cover nearly everything with the exception of points in Chile and Argentina. American could certainly find local options to cover those areas if needed, but it may be that American, Copa, and Gol could serve most of what they need in those countries without additional help.

Argentina, in particular, is an awful place to partner since most international flights come to Ezeiza while domestic flights depart from Aeroparque. If you can overfly Buenos Aires and connect in a single airport, then you have an advantage.

Now, put this all together with Copa’s North American network. If you assume that American would connect Charlotte, Dallas/Fort Worth, Philadelphia, and Phoenix into Panama City, you have one heck of a map here.

Maps generated by the Great Circle Mapper – copyright © Karl L. Swartz.

This doesn’t even consider future potential of those A321XLRs into long, thin markets.

Putting together maps makes it sound all nice and easy, but of course, it’s not. Well, I take that back. The piece with Gol is probably pretty easy now that Delta has cast it off. Copa, however, is a different story. It requires American’s management to paint a strategic picture of the benefits for Copa. It needs to develop that relationship and sway the airline to make a move.

Ties run deep between Copa and United going back to the days when Continental owned half the airline. It won’t be easy. But then again, pulling LATAM away from American wasn’t easy for Delta. American’s charge is to articulate a clear vision and get Copa what it needs to succeed. This is where American needs drive, energy, and momentum. The end result could be better for American than what it had before.

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42 Responses to A Blueprint for American in Latin America

  1. z o says:

    there is one critical flaw in what is an otherwise awesome idea : it requires American to be able to articulate a clear vision, something which current management has been utterly unable to articulate since the merger

  2. Kilroy says:

    Shame that American & Delta don’t serve Bolivia, though understandable given the limited demand and relative lack of international trade (fun fact: Bolivia’s GDP is slightly less than the annual revenue at each of Delta & American). It’s a beautiful country, inexpensive to visit once you get there, and flying out of LPB (El Alto airport, on the plateau above La Paz, at over 4,000 meters above sea level, one of the highest international airports) should be on every avgeek’s bucket list.

    I assume that the 500+k-strong Brazilian community in the greater Boston area is well served by TAP and Brasil-based airlines, but I’m still a little surprised that American and/or Delta don’t have a few flights from BOS to Brasil, especially given that many of the Brazilian enclaves aren’t far from Boston Logan.

    • CraigTPA says:

      If the have the right aircraft available, I wouldn’t be surprised to see Delta try to add something from BOS to Brazil before JetBlue starts receiving the long-range versions of the A321, where they could fly to Brazil and cover Brazil internally with its Azul partnership. Same for American if they can get something going with Gol – it’s easy to lose sight of the fact that American is still larger than Delta in Boston.

      As for Copa, I’d bet a nice dinner that Oscar is already in touch with them and ready to offer major incentives to tell AA to go away. (UA also has an Azul partnership in place too.)

      • Tim Dunn says:

        @CraigTPA
        the only metric by which AA is larger than DL at BOS is mainline operated number of flights and then by only a couple percent. AA and DL have nearly the same number of mainline seats but DL offers more than 60% more mainline ASMs as a result of greater distance on DL’s mainline flights.

        Delta, including regional carriers, passed AA at Boston a long time ago in terms of revenue, seats, and seat miles.

        but regional carriers aren’t excluded by AA or DL or UA or AS because those regional carriers are very much integrated in revenue and customer service and every other metric that isn’t directly related to operating carrier. If you want to exclude regional carriers from DL’s count at BOS, I can assure you that DL will look far better than AA or UA on a system basis because DL has reduced the number of regional carriers and RJs while AA and UA have both increased the number of regional jets on their systems.

        and, finally, Delta’s most commonly used regional jet at Boston is the E170/175 which is just a 24 seat smaller (and largely newer) version of the E190 that operates half of B6′ flights at BOS.

        Feel free to include or exclude what you wish but just be prepared to do it consistently.

        As for Copa, the notion that AA can just walk up to a partner of another airline and pry them away is a stretch.
        The only reason why Latam walked from AA is because the JV was denied in Latam’s home country. Not long ago, AA and Latam intended to work together.

        The only other significant recent partnership switch that took place was China Southern leaving Skyteam because of an equity investment by AA – but AA still ended up cancelling 2 flights from the US to China and there is no JV.

        Airline partnerships are not as fragile as you might want to believe.

        • CraigTPA says:

          @Tim Dunn,

          The market share figures I was looking at were passenger counts from a summary of the BSM report for 7/18-8/19, so there’s at least one statistic that shows AA is larger than DL at BOS. Please keep in mind that some of Brett’s readers, while we enjoy following the industry, have other jobs, post at breaks or lunch, and don’t have time for deep(ish) dives into ASMs or other measurements, so please forgive us part-time enthusiasts for not being up to your standards of statistical analysis. My basic point was that while AA is not the top carrier at BOS as (IIRC) they once were, they’re not a tiny player in the market either.

          As for your remark “As for Copa, the notion that AA can just walk up to a partner of another airline and pry them away is a stretch.” – by all accounts I’ve read, that’s what Delta pretty much just did with LATAM, isn’t it. Yes, the JV denial triggered them approaching LATAM, but since Copa (to the best of my knowledge) doesn’t have a JV with United, there’s nothing stopping AA from trying. (Or stopping UA from fighting back.)

          I enjoy reading your comments, but could you consider cutting back on the snarky I-know-it-all tone just a little bit? Just a thought…

          • CraigTPA says:

            BTW, the BSM report was for 7/18-6/19, not 8/19. I have fat fingers…

            • Tim Dunn says:

              I don’t know what anyone who posts on here does for work nor does it really matter.

              If you look at airport traffic statistics and it says they are based on operating carrier, you need to understand what that means. AA operates more flights on mainline aircraft at BOS. but not if regional carriers are considered.

              and, btw, based on DOT data, for the month of June 2019, B6 carried 465,410 passengers on its operated and marketed airlines. DL carried 343,383 and AA carried 275,530. B6 had 142 flights/day, DL had 106, and AA had 72.

              And, specific to Boston and Latam, they just started their GRU flight. It is highly unlikely DL would ask Latam to remove their flight so that DL could start one and the market could not support 2 flights.

              It is more likely that Latam will start flights from Atlanta alongside DL or that routes like DTW-GRU might be restarted.

              And, as has been noted, Delta did not approach Latam. Latam asked for help in looking at options.

              And, without you thinking I am being snarky – which I certainly don’t want, let me know when any other airline in Latin America that is aligned with another carrier in the US.

              I simply don’t see it happening. I most certainly could be wrong but the notion that what took place between AA-DL and Latam will be repeated by anyone else is a stretch.

              There were very unique circumstances that occurred in AA-DL-Latam case and the history of the industry shows that partner swapping just doesn’t happen that often.

      • Kilroy says:

        Hadn’t thought about B6 doing flights from BOS to Brasil, but that would certainly make sense, and (from all appearances as an outsider who isn’t familiar with the markets), B6’s flights to the Dominican Republic appear to do okay.

  3. Tim Dunn says:

    Nobody is doubting the size of AA’s Latin America operation but the significance of the Delta-Latam deal is that Latam moved overnight from being an AA partner to being a competitor’s partner. Even without knowing how much connecting traffic AA gave to Latam, AA did say that Latam’s value to AA was low – which undoubtedly gave Latam reason to look elsewhere as soon as it became apparent that any future relationship with AA would be limited.

    The future of the DL-Latam relationship and network including at Miami is unknown but it is certain they will cooperate much more than a lot of people expect, including by adding Delta metal to Miami as well a increased feed on both ends. We have no idea what AA will do but so far their response has been to tell us they will add back flights in the future which they previously cancelled and frame it as new capacity.
    AA has repeatedly listed its most profitable hubs as CLT, DCA and DFW; MIA is missing even though AA has a unique single carrier hub to Latin America at MIA. AA at Miami is currently the only single carrier hub to a global region from the primary US gateway to that region; DL only has a single route to HAV from MIA while UA has nothing on its own metal or even a JV. AA is a for-profit company that is being pressured on all sides to improve its operating performance; AA simply cannot throw a bunch of capacity at MIA when it already said, without direct US carrier competition, that MIA is not one of its most profitable hubs. And that is without considering FLL where B6, NK and WN are all over each other’s business and trying to figure out how to find a niche each one can exploit over the other.

    There is also no guarantee that AA will do anything with Gol other than a simple codeshare and you can be assured that it will be AA that will have to move its flights to accommodate Gol’s schedule at its hubs and not the other way around. Given AA operates from tightly coordinated banks in the US, the chances are slim that AA will have as good of connections as DL-G3 had or what DL and JJ/LA will have starting with a clean sheet of paper.

    Grabbing Copa or anyone else is just a pipe dream. UA is now at risk of being marginalized in Latin America to AA and DL; they are going to hold onto what they have however they can.

    And that is all before AM and Latam start working together in a relationship that will be orchestrated but not controlled by Delta.

    The A321NEO is no more of an advantage for AA than it is for any other carrier including DL and Latam which have the type on order; the fuel tank configuration and range are hardly show stoppers from a strategic perspective at this point.

    AA does have a huge advantage as a single carrier but it lost its closest partner in Latin America and that partner is now going to bolster a competitor’s presence. Based on current routes, DL and Latam already surpass AA in 5 of the 6 largest markets in Latin America. With the growth of DL’s own metal in Latin America countries where Latam does not fly, addition of DL metal to longhaul MIA to S. America routes , and addition of DL domestic feed to MIA as well as new flights by both DL and Latam in other cities, AA’s Latin America “advantage” might not be near as much as they or others want to believe.

    And all of this is taking place in the context of an AA that still has to find labor peace with its mechanics and rampers and figure out how to improve its profits to industry-comparable levels even while carrying tens of thousands more employees than DL and UA to generate comparable amounts of revenue. AA has already been passed as the world’s largest carrier by DL in revenue and UA in ASMs. AA”s presence relative to its largest competitors is smaller than it has been in decades in NYC, LA, and Chicago.

    • Albert Einstein says:

      Here we go again, we can’t have a post without Tim Dunn doing his usual AA bashing

      • Tim Dunn says:

        More than half of the replies are not exactly AA endorsements. Debate Tye issues instead of the people.

      • Armin says:

        Would you expect anything different?

        • Tim Dunn says:

          If the expectation is that AA should be given a pass for the strategic and operational decisions it has made, then you will be disappointed that I won’t ignore those.

          Otherwise, there isn’t a thing I said that was critical of AA outside of the context of this discussion. Like it or not, AA suffered an enormous strategic blow by losing a partner to a competitor. All of the growth that AA does at MIA won’t change the fact that 1. DL is on track to be a partner to AA’s former partner and 2. DL and Latam combined ALREADY are larger between the US and 5 of the top 6 markets – even before they do anything. 3. AA can certainly change its mind and grow more but they previously categorized MIA as not one of their most profitable hubs or where they would grow so growth now will not likely improve their already bottom of the industry financial performance.

          those are cold, hard facts that anyone that wants to talk about AA and Latin America has to face and you can be assured AA’s execs certainly are.

          • Albert Einstein says:

            “AA has already been passed as the world’s largest carrier by DL in revenue and UA in ASMs”. You know that’s a misleading statement because it’s only due to the grounding of the max and the lack of Max deliveries. Your hatred of AA is spewing at every post you make and therefore it makes you loose your credibility.

            • Tim Dunn says:

              No, it isn’t because of the MAX grounding.
              If AA wanted to make sure they kept their revenue up, they would have kept the MD80s in service and could have operated a higher percentage of their flights – which most certainly would have increased revenue. As CF has noted, AA has been afflicted by cancellations for much of the year for reasons that have nothing to do with the MAX grounding. WN had a very good 2nd quarter including w/ revenue growth despite being hit far harder by the MAX grounding.

              Telling the facts you and others don’t want to hear may make you think my credibility is at stake but there is virtually nothing I have said that others haven’t also said.

              I simply have provided detail behind the larger scale issues which everyone who talks about airlines know AA faces

              In the case of this article, the root issue, whether you accept it or not, is that AA failed to keep Latam from looking for alternatives in the face of the rejected JV application with Chile.

              As hard as it is for you to accept, Latam joined forces with Delta which moves a partner to the partner of a competitor and injects US legacy carrier competition into the S. Florida to Latin America market for the first time in decades.

    • DesertGhost says:

      According to this interview with Ed Bastian (who should know), Delta did NOT approach LATAM. https://www.panrotas.com.br/aviacao/empresas/2019/10/acordo-entre-delta-e-latam-foi-intermediado-por-uma-3o-pessoa_168163.html

      All of that notwithstanding the LATAM Delta hookup is a game-changer. No doubt about it. But the Chilean Supreme Court was the catalyst, not Delta or American. It should be interesting to see how all of this evolves.

      American’s dismissal of LATAM’s impact was a reflection (maybe artificially deflated) of its current value, not the potential value of their potential joint venture (which was projected at over $1 billion if I remember correctly). Sheer size doesn’t guarantee profitability. It’s quite possible that three roughly equivalent joint ventures can produce greater returns than the sheer size of one dominant partnership because joint ventures can maximize returns by deploying assets where they can maximize revenue and control costs.

      As for Miami, you laid out A reason (not THE reason) why it’s not as profitable as DFW or CLT. That reason: Fort Lauderdale. DFW, ATL and CLT have very little competition nearby. In places like Chicago, New York, Los Angeles, etc. margins will be lower because the markets are fragmented. One other factor is MIA’s costs, which are relatively high. There’s no way to do an apples-to-apples comparison among competing hubs. There are too many factors that affect their financial performance.

      As for labor, I truly believe (based on friends who work at the airline) that American’s board could hire Ed Bastian and Delta’s entire top executive team and it wouldn’t make one bit of difference. American’s labor problems have been bad for decades. Labor has hated Bob Crandall, Dan Carty, Gerard Arpey, Tom Horton, Doug Parker, and would in time hate Ed Bastian.

      • haolenate says:

        And the fact Doug & team let US/HP operate as two “separate” entities for HOW many years? And would brag about it. Add in pay polarity took a very long time between the two groups, then Nicolau came along and said the Mid Atlantic guys don’t count (for seniority/term of service, etc)…. so you have a LOT of L-US work groups who will never, EVER trust Parker.

        • DesertGhost says:

          Nothing personal, but holding a grudge is not an excuse for failing to do one’s job in a professional manner. Parker never “bragged” about keeping the pilots separate. They did that to themselves.

      • Tim Dunn says:

        ghost,
        it is worth digging a little deeper into your comment that MIA is not as profitable because FLL is nearby.
        There is absolutely data to back that up. B6 and NK have definitely pushed down fares in northern S. America in markets they serve. AA has not been able to grow its revenues as fast as its system in markets where it competes with a low cost carrier from FLL.

        The next group of markets is a big chunk of deep S. America which includes Brazil and Argentina, both of which have seen economic weakness for several years. Low cost carriers such as Azul have also pushed down fares.

        Finally, Venezuela was once one of AA’s most profitable markets (highest yields) from Miami but that market is gone.

        Keep in mind that Latam like Azul has lower labor costs. B6 even with US workers is lower cost than AA.

        S. Florida to Latin America is simply under attack from low cost carriers with AA having no choice but to pay attention to them in FLL. Add in weak economies and failing countries and a lot of revenue has just disappeared.

        So, ask yourself which carriers are best set to compete against low cost carriers. AA has shrunk in JFK and BOS against DL and B6, both of which have grown. Also, DL has a better track record of getting premium revenue in markets where AA, DL and a low cost carrier compete; that is seen in most markets from JFK.
        It’s worth noting that AA, the largest incumbent carrier in Boston to Los Angeles, now has lower average fares than B6 and DL.

        So, part of the question about the plan for AA to hold onto and grow Latin America esp. from MIA has to include rewriting the narrative that has taken place in the NE where it simply does not hold onto the highest quality revenue in the face of competition.

        And, also WN has grown dramatically at Love Field while AA has held onto its position better at DFW which is closer to Love Field than MIA is to FLL. Perhaps WN’s inability to fly international from Love Field protects AA and the contracts it has for its global network from the Metroplex.

        There are a lot of factors besides geography that explain why AA has not done as well in JFK and MIA against legacy and low cost carriers while they have done better at DFW. AA has to figure out those reasons and fix it in order to hold onto Latin America from S. Florida.

        • DesertGhost says:

          Airlines don’t have to compete head-to-head in every market. I seriously doubt American will grow muck at JFK. It really doesn’t have to. Southwest is pulling out of Newark, yet no one is whining abut its management. Southwest’s position in Dallas is similar to its position in Atlanta. The two legacies are so much bigger in those cities that Southwest is merely a distraction. What’s more interesting to me is how well American competes with Southwest in Phoenix, where the shares are much closer. I have a suspicion that Miami’s competitive situation will become much like Phoenix’s. The two main carriers don’t go head-to-head on every route. Each has a profitable niche. I seriously doubt that Delta is going to become another American in Miami. That would cannibalize its Atlanta hub.

          • Tim Dunn says:

            Good points, Ghost. Again, it is a pleasure to exchange ideas w/ you.

            WN is actually about 60% larger in revenue and market share in the DAL/DFW combined market than ATL – the separate airports benefit AA and WN; WN likes that model much better than having to compete w/ a legacy carrier in the same airport.
            DL will grow in MIA (they said so) by balancing their Latin presence between MIA vs. ATL; DL at ATL is the 2nd largest US carrier hub by ASMs to Latin America but they are at zero in MIA (actually they have 2 flights to Havana)

            DL protects Florida (including MCO) because of its proximity to Atlanta; MIA to Latin America has been absent but protecting ATL also means having a presence in the markets that matter from MIA which has to include Latin America. They will get some of that presence from the JV but they will have to build some of it with their own metal both in markets that Latam flies but also in markets such as to Central America that Latam does not serve but which are also strategically important.

            DL does not need to be on parity with the incumbent hub carrier; we have seen this with AS in SEA and B6 in BOS; as a legacy carrier, DL needs to have enough presence in the key markets to pull high value business passengers. DL has done that in both SEA and BOS. AA has held onto key business passengers in some markets at JFK despite being much smaller but has lost them in others. I doubt if there is any set formula but AA has to figure it out in order to hold onto its passengers in MIA and reclaim them in NYC and CHI against UA.

            AA has new competition in MIA; by virtue of losing a partner to a competitor that had no presence, AA will lose some share.

            AA hasn’t connected much traffic to other airlines in S. America including to Latam; that is undoubtedly why AA was quick to say that the loss of Latam was of low value to AA

            MIA is a large hub so they can fly nonstop to many destinations on their own; the economics probably favor a single AA flight vs. a connection to another carrier esp. as the A321NEO and MAX extend the range of markets that AA can serve nonstop from MIA.

            The MIA hub has changed for AA due to competition and deteriorating economics in some major markets– AA can’t control all of that but they haven’t adapted well to the changes, including increased competition

            Finally, one thing that AA can control is its passenger experience in its own MIA terminal. Scott Kirby went all out in banking hubs at AA and UA. In an international operation, that doesn’t work as well as in a large domestic hub. Customs and Border Protection is not going to staff to keep the wait times to a minimum when airlines have huge waves of passengers arriving at the same time and then nothing for several hours. The chaos that ensues in a banked hub that has a high percentage of international flights just may not be worth it compared to the fairly low number of additional connections that you gain. AA has to figure that out but it improving the passenger experience at MIA is essential (and yes, I have flown AA from Latin America via MIA in the last year)

        • Kilroy says:

          Southern South America (Argentina, Chile, southern Brasil) is a very underrated destination for leisure travel IMHO, and once you get there costs are much less that would be in many European destinations that require of similar length from the US East Cost / Midwest to Europe. There’s also the added benefit of little or no jetlag, as the time zones are only a few hours different at most.

          Buenos Aires is an amazing city, Bariloche (Argentina) is the equivalent of Lake Tahoe meets alpine Swiss town in the Andes (complete with mountain biking, skiing, and swiss-style artisanal chocolate), Iguazu Falls is one of the great waterfalls in the world, there’s great wine country in Argentina and Chile, great beaches in southern Brasil, etc etc.

          However, political and economic instability (with Chile being the relative exception) tend to scare away tourists, air fares are very high (relative to the more competitive European market), and the same lack of time zone changes that help with jet lag mean that US-based airlines basically have to let their planes sit for 12 hours if they want to offer convenient schedules.

  4. Jon says:

    Fantastic piece. Paints a smart picture for American. Only question is, do any of us believe American’s leadership is capable of doing anything this strategic?

    • CF says:

      Jon – If that’s the case, then maybe new leadership is in order. We’ll see how the airline moves forward.

  5. dan says:

    your maps are a good example of why MIA is the Mecca for south america…Delta in the past did fly to Medellin, Guayaquil, Brasilia, Manaus, Caracas, Maracaibo. Atlanta does not have the O/D of south florida. DL fills up 1 x 767 eze-atl…AA fills up 4 x 777 eze-mia

    • NathanP says:

      Yes, it is hard to see Delta adding flights to South America from its current hubs. It would seem that the best strategy would be to offer more domestic service to Miami to accommodate connections from LATAM flights. Maybe New York and LA offer some additional opportunities?

      Perhaps delta sees LATAM as a lower cost partner to outsource long-haul flying south of the USA. Virgin seems to be filling this role on the trans-Atlantic routes that touch London.

    • Tim Dunn says:

      @Dan
      Delta very well may add service back from some of the cities you cite from Atlanta or from Miami. The problem w/ making a comparison of the DL/Latam network compared to AA is that DL and Latam clearly did the deal because they see the potential to grow far beyond the 1 + 1 that they are today. AA has a very strong network in Latin America and they may have growth potential but there is no assurance that they will grow by adding a bunch of partners that are affiliated w/ other carriers right now. Even with Gol, there is no assurance they will do more than a simple codeshare with American. Remember also that Delta and Gol were in the same terminal at GRU; AA is not. DL might move to T3 with JJ but most of Latam’s domestic Brazil flights operate from T2 anyway – which means longer connecting times and a reason why Delta might stay in T2. A proper comparison of AA vs. DL is what both can do in the future rather than a direct comparison of what exists now; we really don’t know what either AA or DL-Latam can do but the chances are high that DL-Latam has more growth potential.

      Also, most of the passengers between the US and S. America are S. America originating which gives Latam an edge; AA has developed a strong sales presence in Latin America but Latam’s is stronger. The business cabin is more US originating for all airlines while coach is heavier skewed to Latin America. AA, like DL, has a strong US presence but DL’s network is better tuned to connecting traffic from the interior US (which benefits Latam greatly) while the MIA market is heavily local for both AA and Latam – and Delta now enters the mix both thru the JV but also undoubtedly with some of its own metal (shared w/ Latam).

      Finally, we have no idea yet how this affects B6, NK and WN at FLL but the chances are high that some of the FLL-Latin America traffic will come back to MIA by virtue of added capacity by AA as well as DL-Latam. As has been seen in Boston and Seattle where Delta has taken on an incumbent hub carrier, the loss of traffic is primarily from other carriers in the market rather than the incumbent hub carrier. The real question should be not as much what happens to AA but what happens to B6, NK and WN who all have aspirations of growing to Latin America via Ft. Lauderdale and need to pull Latin America traffic that is currently spilling to FLL. You also have to consider the Avianca group which is not near as strong as Latam and has a far smaller presence in MIA with virtually no ability for UA to help them.

      @NathanP
      While urban legend says that Delta just gives its longhaul flights away to its partners, the evidence, if one were to do the math, is that all 3 of the US carriers have pretty similar total balances between themselves and their JV partners, in part because their pilot unions keep the companies’ feet to the fire. However, Delta has a higher percentage of capacity at the primary hub airports of its partners than AA or UA; DL has a larger presence to the US from AMS than KL. Feel free to do the math if you disagree. The big difference is the size of each airline outside of its core hubs; i.e. Japan is part of the JV between DL and KE but KE flies just one flight while LHR is not a primary JV hub for UA. AA has a small presence to Japan and Australia compared to its parnters while it holds onto markets in CDG and Italy to balance its Euro JV.

      The point is still that the total global JV balance between US carriers and their JV balance is pretty similar and also pretty balanced.

  6. DesertGhost says:

    You wrote this in the last paragraph, “But then again, pulling LATAM away from American wasn’t easy for Delta.” But according to this interview with Ed Bastian (in the linked article which I originally saw on Airliners.net), Delta did NOT approach LATAM. Here’s a Google-translated excerpt copied and pasted from the article: “Neither Delta nor Latam. Who sought the two companies and brokered the deal announced by them last week was a third person. “I can’t quote more details or give proper names. I can only say that it wasn’t Delta that came to Latam or vice versa,” said Delta Air Lines CEO Ed Bastian.”

    https://www.panrotas.com.br/aviacao/empresas/2019/10/acordo-entre-delta-e-latam-foi-intermediado-por-uma-3o-pessoa_168163.html

    Your first map shows why the American/LATAM union ultimately wasn’t going to fly (pun intended – sorry, couldn’t resist). Not only that, but cases can’t be appealed above a Supreme Court, even in Chile.

    I’m not sure American needs Copa (although its addition would certainly add heft). American already has an impressive presence in Colombia and Equador from Miami. There really aren’t many holes in American’s northern South American network that couldn’t be filled (or refilled) from Miami or Dallas-Fort Worth. Many of those routes can be flown with currently available narrowbodies or even regional jets in some cases. The A321XLR could, on paper, reach nearly all of South America from Miami. This doesn’t mean that I think American shouldn’t explore adding Copa to its network of potential partners. It certainly should kick the tires.

    In theory, American and its partners could cobble together a pretty impressive South American network consisting of airlines like Gol, Aerolíneas Argentinas (even though Argentina’s New York-style airport situation isn’t ideal), Sky Airline Chile (H2), TAME, etc. As with Copa, the key is to demonstrate the advantages of forming the partnership.

    Of course, these map exercises are speculative, but they’re also kind of fun.

    • CF says:

      DesertGhost – It doesn’t matter who approached the other. That still doesn’t mean it was easy to pry them away once the discussions began, and that was my only point.

      As for Copa, it really does bring a lot currently. It allows American to serve Venezuela and Bolivia when that’s likely near impossible to do well with the current state of affairs. Further, it can make connections easier from other parts of the US to help avoid MIA. It can also add schedule frequency. If AA can do 1x a day to a city from MIA, it could then route people via PTY to get additional flight times. There’s a lot of potential in that market.

      • DesertGhost says:

        To me, the interview seems to suggest otherwise. As I read what Bastian said, the deal came together very quickly (about 2 months, according to the interview). That’s pretty fast for a deal this complex, and usually happens that quickly only when both sides are highly motivated (and Delta was motivated because it had virtually nothing to lose and almost everything to gain, even if it cost them over $2 billion). I could be wrong, but most of what I’ve read leads me to believe that LATAM wanted out once it couldn’t include its home country in its joint venture with American. But there’s no way to know for sure.

        As for Copa. I did write that I think American should kick the tires on a hookup. As you pointed out, Copa would be a great addition to a new American partnership, if it can get a deal done. I probably should have written that American doesn’t desperately need Copa.

      • ORDflyer says:

        CF, as far as I know, United already filed a three-way JV with Copa and Avianca. And I’ve not heard the JV has been blocked. So what is the possibility that American can actually steal Copa?

        • CF says:

          ORD – Why does it have to be blocked? If Copa seems a better opportunity — one that didn’t exist when American and LATAM were aligned — then there is nothing saying it can’t walk away, just like LATAM did.

  7. Erik S says:

    I go to Brazil about once a year. And I know that if I take a Delta flight, I’ll be in a 9-across 777 seat rather packed 10-wide on AA.

  8. S182 says:

    It’s worth pointing out American’s VP of Alliances Joe Mohan used to be Chief Commercial Officer at Copa.

  9. James says:

    AA needs to return to many of the markets in South America they dropped over the year as they don’t have partner that can provide connections now that LATAM is leaving the party.

    For Gol, I don’t really see them as a good partner. I did not view them as good partner for DL either being an LCC, not a premium product, etc. Certainly not what a AA corporate client wants to transfer to after getting off an AA F or C class product.

  10. Pilotaaron1 says:

    I would love to be interesed in a separate post about how American could go about communicating to Copa it’s vision. I personally don’t see it. I would love to see it but I can’t. My biggest issue is I feel currently that American is an airline without a clear goal or direction, and if they have one, they don’t really care about trying to reach it.

  11. aaway says:

    Very insightful article – enjoyable reading. The significance of the loss of LATAM is summarized in the first sentence of the first paragraph – “American’s loss of LATAM as a partner wasn’t necessarily a problem from a commercial point-of-view but rather from a strategic and management point-of-view.” No only did AA-LATAM benefit the broader commercial interests of AA in S. America, that partnership ostensibly limited competitive incursion(s).

    Ergo, I can’t believe the current AA management missed that strategic imperative, insisting in an all-or-nothing mantra in application of an AA-LATAM JV. Did the alliance teams consider carving out the U.S.- Chile portion to perhaps just a JBA? How could AA have missed that absent Chile, the JV would still practically maintain continent-wide marketing & revenue coordination?

    From my 30000ft perspective, I agree that GOL is the solution for Brazil. I’m a bit more skeptical regarding COPA.

    Quote – “As for Copa, it really does bring a lot currently. It allows American to serve Venezuela and Bolivia when that’s likely near impossible to do well with the current state of affairs. Further, it can make connections easier from other parts of the US to help avoid MIA. It can also add schedule frequency. If AA can do 1x a day to a city from MIA, it could then route people via PTY to get additional flight times. There’s a lot of potential in that market.”

    I view COPA more as market competitor than (potential) market partner – even if AA / CM were to form a commercial venture – by mere dint of geography. The Panama City hub is indeed the Miami alternative to Central/South America (and Caribbean, for that matter). Despite whatever form a potential partnership takes, the sales/marketing teams of each carrier will remain incented to own-carrier metal.

    Because MIA and PTY target similar (same?) flows, I view an AA-CM tieup as more cannibalistic in nature. I can’t currently fathom how a potential partnership agreement could be structured in near-equitable terms while each carrier targets the same traffic.

    While AA-JJ/LA competed on the major trunk routes between North/South America, the scope of the competition was more limited in that (1) JJ/LA have fewer U.S. gateways than CM, and (2) AA – JJ/LA was uniquely symbiotic in network utility beyond the gateways.

    CM would provide a fair number of destinations not currently flown by AA. But CM has a singularly focused regional hub that cannot replicate what JJ/LA provided to AA in South America.

    Indeed a big loss.

    • aaway says:

      I’ll just add that COPA is likely the only alternative from a market segmentation perspective (i.e. – full service carrier) – the significance of which cannot be underestimated.

      However, if merely having a northern partner is of greater importance, I’d likely lean toward Sky Airlines Chile.

    • Tim Dunn says:

      @aaway
      your analysis is accurate.
      just fyi.
      AM’s international hub at MEX (excluding Mexico destinations) is about the same size as Copa’s hub in PTY. AM has more flights, about the same number of seats, while Copa flies more ASMs – due to long flights on the 737.
      MEX like MIA have very large local markets while PTY is a connecting hub.

      and, yes, I know AM’s hub at MEX is not available to AA.

  12. littlerichard says:

    Never forget the economy which goes up and down. In the good days of the Brazilian economy, which was not so long ago, AA had direct flights from Miami to some capital cities of the northeastern states ( Fortaleza, Salvador….) , Belo Horizonte, Porto Alegre..but now this is gone. I see people here talking about flights to Boston, but even the NY -Rio direct flight has been canceled and will be a seasonal flight in the local vacation season ( Dec – Feb). Also don’t forget that US – Brazil flights are mainly filled up with Brazilians so if the economy goes bad and exchange rate is crazy high like now, bye bye , no Disneyland and Manhattan shopping for them. Number of US bound passengers has reduced in Rio and SP even with cancellation of these direct flights I mentioned.

    • Tim Dunn says:

      the real (Brazil’s currency) is near high levels vs. the USD and AA cut a number of Brazil flights within the past year specifically because that capacity couldn’t profitably priced. Now, AA is saying they will add back the same capacity in response to the DL-Latam announcement even though the currency situation hasn’t changed.

      If AA wants to lose money trying to hold onto market share, the move might make sense. Otherwise, it will just lead to further bottom line challenges for AA.

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