When Delta decided to spend billions of dollars to wrestle LATAM away from American, it knew it had to invest in building up Miami. Miami is the unofficial capital of Latin America, and it’s a big operation for LATAM. But if LATAM was going to lose feed from American, it had to replace it somehow. The first tranche of new Delta destinations fits as you’d expect with only a mild surprise.
Delta’s initial growth plan involves four destinations from Miami:
- Orlando – 5 daily EMB-175s (eff May 4)
- Raleigh/Durham – 2 daily EMB-175 (eff May 22)
- Salt Lake City – 1 daily 737-800 (eff July 28)
- Tampa – 5 daily EMB-175s (eff May 4)
This makes perfect sense, and now that I have access to Diio by Cirium, I can really dive in. Cirium was kind enough to turn on access to FMdg data for me which is effectively ARC/BSP settlement data. You can click that link above for more info, but basically it means I can see international data which isn’t publicly available using DOT numbers. As you can imagine, this has significantly impacted my ability to get a good night’s sleep.
It also has made analyzing US to South America traffic flows much easier. I dove into the 12 months ending November 2019 for this analysis. I looked at daily passengers each way (PDEW) between the United States and South America. That’s the market where LATAM competes, and within the US is where it needs the most support.
Naturally, Miami has the most PDEWs originating/terminating with an astounding 29 percent of all traffic between the US and South America. That is good, but we need to dig deeper. LATAM doesn’t need Delta to help with travelers starting and ending in Miami. It needs help connecting people into LATAM there.
The Big Five
Let’s start with the big five. There are five markets that make up 70 percent of the passengers traveling to South America from the US, and each one tops 1,000 PDEWS.
Miami is number one, as discussed, but number five can also be lumped in there. Nobody is going to run flights from Ft Lauderdale to Miami, so it’s not worth considering for Delta. That leaves them with three options.
New York is already served by Delta nonstop from JFK to South America, but it can also connect into LATAM with existing nonstops to Miami from both JFK and LaGuardia. Since Delta already serves Miami from there, we’re down to two.
That brings us to Orlando, a downright massive market. Today, Delta carries about 6 percent of the market between Orlando and South America, but American via Miami carries 8.5 percent on its own. The routing via Miami is much quicker, and there’s just so much traffic there that Delta had to enter that market. It was a no-brainer.
The last of the top five is Los Angeles. I expect we will see Delta re-enter this market at some point, but for now, it has decided to hold off. The problem here is that much of the traffic avoids Miami and heads down nonstop or through other gateways. Possibly more importantly, LATAM already service Los Angeles directly, so it may not need Delta’s help. So adding that flight doesn’t bring as much value as others, especially since it’s so long and requires a lot of aircraft time. But I still imagine we’ll see it one of these days.
17 Over 100
Beyond the big five, there are 17 additional US markets that have at least 100 PDEWs in them. Of those, Delta already serves three (Atlanta, Boston, and Detroit) from Miami. There are an additional 7 which have are airline hubs (Baltimore/Washington, Chicago, Dallas/Fort Worth, Denver, Houston, Philadelphia, and San Francisco) and are less likely to be worthy of getting service in the early rounds. That means there are 7 markets that remain ripe for the picking. Here they are.
As you can see, the three markets Delta chose beyond Orlando are in this group, and that makes a lot of sense. It also gives a blueprint for where Delta might go next.
Tampa is the most obvious one here. Because of its location, taking passengers via Miami is much faster than routing through Atlanta or somewhere else. In fact, American carries about a third of all traffic from Tampa to South America via Miami. That’s a market that is ripe for the Delta/LATAM picking.
Meanwhile, Raleigh/Durham and Salt Lake were lower down the list than some others, but their status as focus cities/hubs must have been an important influence. For Salt Lake, it makes some sense to be able to route passengers from throughout the smaller cities in the mountain west and funnel them into Miami to connect. Meanwhile, for Raleigh/Durham, it’s a growing focus city for Delta that seems like a strong candidate. But I’m actually surprised it was chosen over Austin.
Austin is also a strong and growing focus city for Delta, and it has about the same number of passengers going to South America each day, but that’s where the similarities end. Today, American takes about a third of traffic from Raleigh/Durham but Delta takes 20 percent through its existing hubs already. That means the new Miami flight is more prone to cannibalizing existing traffic.
Meanwhile, Austin puts about 20 percent of its traffic on American via Miami, but Delta today gets only 7 percent of that traffic. Austin seems like it would be a good opportunity to pull traffic from elsewhere without much risk of just stealing Delta’s own traffic. To me, this suggests that maybe there is a corporate need in Raleigh/Durham that pushed this higher on the list. Regardless, whenever the next round comes, I’d expect to see Austin on the list.
While we’re at it, you’d think Seattle would be there too. This is a Delta hub, and its prime competitor there, Alaska, doesn’t fly into Miami. American only has a redeye from Seattle, so it doesn’t even connect into the South American banks. That’s likely on the list.
San Juan and Las Vegas seem further from Delta’s strategy, but they could be on the list down the line. Then again, it’s not clear just how much Delta is going to add to support LATAM here.
The adds Delta has made go a long away in providing opportunities for Miami connections from those cities with big South America demand that don’t touch other airline hubs. At the same time, Delta has bulked up frequencies especially on the intra-Florida routes to be able to capture the local traffic in the market as well. The blueprint seems pretty clear on what Delta will do next if it decides to keep growing. Watch out for Austin and Seattle as the next most obvious candidates.
