Remember that whole thing about American stagnating? The message reached a deafening roar when Delta took LATAM away. It looks like someone over there got the message. This morning, American is announcing that it and Alaska are planning to renew the codeshare that was set to all-but-end next month. Alaska will join oneworld as a full member by next year, and American is going to start flying long-haul from Seattle. It has taken me some time to get my head wrapped around this one, and after much thought… I like it, especially when looking at this from a corporate business perspective. This may or may not work out, but it’s a bold move with little risk that has a strong strategic rationale behind it. That is not something anyone would have expected from American.
There is a lot going on here, so let me start with the bullet points before getting into the analysis.
- American and Alaska will renew the codeshare that they announced last October would be cut dramatically starting in March. This will eventually grow to be much more important and include codesharing on international flying in both LA and Seattle.
- Alaska will join oneworld as a full member by 2021. That means the airline will now have standard shared elite benefits with all members but most importantly with American. It sounds like there’s an interest in having greater benefits for American and Alaska travelers, but there’s nothing to announce on that yet.
- American will launch nonstop 787-9 service to Bangalore in October and 777-200 service to London in March of next year.
What do you think of that, Delta?
Not a Merger, No Equity
Before I get too deep into this, let’s be clear about something. This is not a merger or acquisition. There is no equity being exchanged. There isn’t a joint venture or antitrust immunity. Yes, the codeshare will require government
approval review, but this is about each airline being able to take advantage of what the other brings to the party. They can increase cooperation significantly without running afoul of any potential regulatory issues, or so they hope. That’s up to the feds to decide.
Some of you may wonder, “why not merge?” After all, the Trump administration is likely to be friendly to consolidation, and really, there isn’t much if any concerning overlap here. Still, it’s a nonstarter. Why? Let me put it this way:
Translation: American’s stock price is just way too low right now. Even if it wanted to buy into Alaska, it couldn’t afford it. That will eventually change if the company is run well, but for now, there’s no way an acquisition would make sense unless Alaska decided to swallow Goliath. That would be something, but it’s not happening now.
Instead, these airlines can come together with what may seem like a codeshare and alliance partnership, but it has to be more than that. It’s a cooperation that, as I understand it, will make sure that each airline actually wants to take customers connecting from the other. Alaska’s Chief Commercial Officer Andrew Harrison told me that both Alaska and American “will both be rowing in the same direction,” and he said this renewed partnership will work better than it has in the past.
Alaska Gains Reinforcements to Fight Delta
You might be tempted to think about this as American opening up a new front with Delta, and to some extent that’s exactly what’s happening. But it’s not like the Russians opening a new front in World War II. This is just the US stepping in to fight with its allies on an existing front. (I’m not going to take that analogy any further.)
Alaska is already fighting Delta head-to-head in Seattle, but it is largely limited to the domestic market. Sure, it has partners that can fly internationally, but those partners don’t add nearly enough and don’t have the same level of integration to make Alaska competitive with Delta on the long-haul. Now, Alaska is getting reinforcements in the form of American. While it’s not a completely equal fight, it’s far from the completely unbalanced fight it is today.
For Alaska, this gives it an international network with enhanced benefits available for its elites. This network is important, and that’s why this is such a big win for Alaska, especially since nothing about this requires Alaska to get rid of existing partnerships. (Though you can imagine some might be on the hot seat in the future.)
I’ve been working with a partner on a more in-depth subscription product, and we looked at Alaska’s options for growth in one of our test reports. The end result was we saw a need for Alaska to be able to grow internationally to able to support more growth throughout its system since it’s largely tapped out in existing markets. We suggested it would be something more straightforward than what’s occurring — a Hawaiian acquisition makes the most sense — but that’s because we didn’t think American’s team had this kind of creativity in them. (Then again, this doesn’t have to preclude doing something with Hawaiian anyway.)
American’s Fight for the West
From American’s perspective, this creates all kinds of opportunity, most importantly with corporate accounts. First, American will now regain more access to the Pacific Northwest. It had that previously with Alaska, but American made the decision just a few months ago to effectively end that deal because it was thinking traditionally. Alaska was increasingly viewed as the enemy, but now there’s been a complete reset. Delta’s position as a competitor and American’s standing in the West are much bigger issues. Working with Alaska can help solve those problems. This changed in a very short time, so the shift must have come with a conscious effort to think smarter at American.
American’s challenge has long been relevance in the West. When Dallas/Fort Worth is your best Asian gateway, you know you have a problem. And that’s why this is even more interesting. Los Angeles is a bad Asian gateway, but this won’t see American walk away from that. (If anything, it might help a little if Alaska can feed a few people, but nothing will make it good.) This is American testing the waters with a different gateway that Delta happens to own today. If it works, then I imagine we’ll see more Asia out of Seattle and less out of LA. That would be great for American… and bad for Delta. Can American beat Delta? Maybe not. But can American + Alaska beat Delta? That is entirely possible.
Look at the routes American is launching. Seattle to London might seem odd since British Airways already serves the route, but remember, this is about connectivity and creating better access for both Alaska and American customers, especially corporate travelers. London is a key route. Delta has two daily flights via Virgin Atlantic and BA has the same (during the summer, at least). This new American flight helps American create a more favorable schedule, and it creates better upgrade opportunities that will make a big difference to corporates.
As interesting as any long-haul add like this is, it’s the Bangalore flight that has me really appreciating the strategic thinking here.
The Bangalore Strategy
Bangalore is very, very far from the US. It will be the longest 787 route in American’s system, and the second longest overall. (Dallas/Fort Worth to Hong Kong on the 777-300ER is a few miles longer.) It may seem like a strange route to start with in a city that isn’t currently a hub, but looking deeper there is a touch of genius here.
Bangalore is an important business destination, especially for tech. As mentioned, it’s also far away. I know I’m stating the obvious, but the point is that there aren’t a lot of cities in the US that can reach it nonstop without taking a weight penalty. Let’s put it this way… you think that United’s San Francisco to Singapore flight is long? San Francisco to Bangalore would be another 250 miles further. American’s strongholds in Dallas/Fort Worth and Charlotte are too far as is Los Angeles, so what should American do if it wants to serve this corporate market that gets a lot of requests from the sales team?
First, take a look at where traffic is coming from. I mentioned it was a tech hub, so this won’t be a surprise. Here’s a snapshot of ARC/BSP data in Diio by Cirium for the 12 months ending November 2019. The whole market has over 1,000 daily passengers each way, but I looked only at traffic originating in the US, assuming that is where American’s bread-and-butter would be.
The number one origin city is, unsurprisingly, the San Francisco Bay Area. But remember how I said that nonstop flight would be really long? Going via Seattle adds only about 50 miles versus the great circle route. Take a look at it compared to other options that are out there. The only thing that comes close is to take United to Delhi, but that requires overnight stays and changing airlines. It’s not great.
Throw in the Dallas, LA, Seattle, and Houston traffic and you’re now providing a good option to over a third of the daily travelers from the US to Bangalore. Travelers in the eastern US can fly via London on British Airways, so it is very well-covered.
Zeroing in on San Francisco, this is a market where the Alaska partnership is so important. Alaska can take those people from San Francisco to feed American in Seattle. This gives Alaska traffic to further grow its San Francisco hub both to Seattle and to other cities where even a double connection would be welcomed. American benefits from the feed without having to build its own domestic network.
Couldn’t United just start a Bangalore flight of its own and take all that traffic? Well, it could take some, but the question is… how many people could it carry? Sure, Qantas flies a 787-9 from Perth to London and that is further, but that route is easier to fly. United has a more dense configuration with 16 more seats onboard, so that adds to the weight issue. Further, winds are likely to be worse on this route over the poles than flying over the equator. Lastly, Perth and London are at sea level while Bangalore is at 3,000 feet. So yes, United could do it, but it’s unclear what the economics would look like and how much of a penalty would be required.
What Will Delta Do?
There’s a Star Wars-esque story here. The former Jedi (Delta) turns his back on the Republic (Alaska) to create a powerful Empire. The remains of the Republic dig in for a fight and get reinforcements (American)… but it’s not like the Empire just rolls over and gives up.
With this launching today, Delta is obviously already scrambling to figure out what it wants to do. Can it start flying to Bangalore? Only if it wants to dedicate a 777-200LR or a brand new A350. I doubt it wants to do that, but then again, it will now have to defend Seattle more broadly. The thing is, even if Delta does it, American is still going to have a compelling case for its corporate accounts in Seattle and beyond. And in Seattle, Alaska is going to have a great case to make to its own corporates. (Again, why Alaska should be positively giddy.)
Delta may very well try to poke at American elsewhere. We already know it’s growing in Miami to feed LATAM. Will it try to do more there? Maybe Europe from Miami? It could try it, but I can’t imagine that would have the kind of impact to make American run away from Seattle considering the heft that Alaska brings straight away. I look forward to seeing what happens.
In the end, it’s the combination of American and Alaska that makes this move by American so compelling. American doesn’t have to build a brand new domestic hub. Alaska doesn’t have to buy widebodies. They can have their networks work together to create a true competitor to Delta with minimal risk. Alaska has virtually no risk while American just needs to throw a couple widebodies in the market.
This may not be a “bet the company” kind of move, but it is most certainly a bold one that could pay dividends and allow American to remake its presence in the western US. This is definitely not something I would have expected from American, but it’s a good sign that someone is shaking the branches inside that place to get things moving.
Is this a late groundhog day or early April Fools Day post? Not from you, from AA.
There was a reason why the DOJ said that AA and AS had to sever ties before. Let’s deal w/ that first.
Second, Bangalore? They don’t fly to Mumbai even from the east coast but they want to add Bangalore.
Third, LHR is simply adding capacity or swapping service w/ BA. If AA didn’t get the traffic before under their JV, there is something wrong w/ their JV.
I was feeling so optimistic about AAL’s turnaround with the news they might pull out of LAX to China but it all evaporates with this announcement.
It is funny that so many accused Delta of doing route planning with a dart board 10 years ago but what Delta did then won’t hold a candle to what AA is doing now.
I’ve just moved up my estimates of AAL’s return to bankruptcy by 2 years.
I was wondering when you’re gonna spew some more hate for AA. It doesn’t matter what it is your credibility is in the toilet. Your darling (Delta) got outplayed and it will be a minority player at SEA. You don’t talk about that at all, just have your little collection of negative AA facts and throw them at every chance you get. I bet you’re gonna have trouble sleeping tonight cause this post is making you sooo angry
if you are as smart as you think you are, how about posting the net incomes and net profit margins for American, Delta, Southwest and United for 2019 and then it might be clear why I cheer for the team that I cheer for.
This is real business, not a game.
Delta not only gets it but is winning at it. American, not so much.
Lol. American will push Alaska’s passengers to Delta. The airline is horrible on every level.
Do you know how to read? Check out American’s performance and financial metrics as compared to Delta’s over the past several years. Buy a calculator, have someone show you how to use it, do the math, and gain a little common sense.
Well said on every count.
Bangalore is ridiculous and to think Alaska is going to provide enough supplemental traffic to make American successful, in a market where they have no presence, is just poor strategy.
Alaska’s passengers are accustomed to a level of service that American does not come close to. Aligning with American is going to push customers to Delta.
btw, do you want to explain how you managed to have detailed information about AAL’s plans in order to write an article like this before AA even made an announcement?
Tim: I always enjoy your reasoning and comments on Cranky’s posts.
The answer to your question about how the detailed info got to Cranky is painfully obvious.
Just say no to embargoed exclusives.
Give Cranky the benefit of the doubt: the excitement of this exclusive, embargoed story clouded Cranky’s judgement worse than a dozen rounds of the peatiest peaty scotch.
Just. Say. No.
It potentially has significant concerns about the leaking of insider information from American Airlines.
Even if CF was working as a consultant to American and was free to , on what planet does a consultant drop into full court press to push a project they worked on in front of an amateur fan blog site and why would AA want them to?
Could I get an explanation about why embargoed press releases are bad? They’re fairly typical in my industry.
Because when Cranky gets an embargoed exclusive he feels special. When Cranky feels special he gives AA the benefit of the doubt, and when Cranky gives AA the benefit of the doubt he writes that SEA-BLR is a brilliant move.
So then in your view there isn’t an issue with embargoed press releases as such; it’s that in this case through the series of steps outlined in your comment this particular embargoed press release has resulted in Cranky making an incorrect assessment of one element of the press release.
@darkwater both. Again, I shouldn’t have said exclusive, it’s just an embargo. Cranky has a strong, contrarian voice (see: Alitalia coverage), don’t compromise that by playing along with PR BS like embargoes. But it’s his blog, not mine.
Quite the lively comment section today. Let’s start with how I got the detailed information. No, there was no offer of an exclusive in exchange for an embargo, and no, nobody leaked it. The accusations of sinister behavior are rather hilarious in their clear attempt to somehow invalidate the analysis. Nothing like an ad hominem attack to start the day.
This was just a standard embargo which gets used ALL THE TIME. This has nothing to do with feeling special, nor does it in any way color my opinions differently. The whole point of an embargo is to allow media to write something up and have it ready to go when the news goes public. You can see all the stories that went live at various outlets at the same time today. This isn’t about being special. It’s about getting the information in a timely manner. This is what companies do in advance of releasing big news. They reach out to a whole ton of people to walk them through the rationale and give them time to think through how they want to write things up.
If an airline offers me information early in exchange for an embargo, then I will accept it. I would much rather get the information early so I can think it through. This happens so frequently it’s laughable. In recent memory, Delta sent me the CES materials under embargo, Spirit sent me its new seat reveal under embargo, and United keeps sending all the China cancellations under embargo. There is no downside to this as far as I see it, and I will absolutely continue the practice. In the meantime, let’s get back to actually discussing the issue at hand.
Your blogs are great Cranky and don’t get discouraged by trolls like Tim Dunn that has his whole life devoted to bad mouthing American and every move they make. Keep up the nice work, you are a true professional !
I am sure you do get information sent to you under embargo but we are talking about major international route additions and business partnerships. I am not a lawyer but I have never seen an outside journalist have access to the type of information you were given so that you could drop the announcement at nearly the EXACT minute it became public.
And, secondly, this article reads more like an article from the kiddie table site instead of an analytical approach to looking at American’s strategic moves. They have failed in competing in longhaul markets against Delta in New York City, United in Chicago and both in Los Angeles – and you somehow glibly tout this latest move despite the fact that multiple people – I am hardly the only one – believe this is a bad strategic decision that has little chance of success.
Maybe getting the early cut is simply too alluring to do the due diligence to make an honest assessment of why or why not these moves make sense. When I can pull statistics and you have access to far more tools including the new Diio subscription you gained, why can’t you do the research to ask the questions which your readers are asking about whether this truly makes sense?
Right, it’s from the kiddie table because it doesn’t align with the “facts” that you claim to have on every post. Cranky’s article is well researched and and it has a nice analytical approach with graphs analyzing the traffic from each region. You are the only one on this forum to believe this is a bad strategic decision and you have made no case whatsoever substantiating your claim. This is hardly the only forum you do this, and due to your pure hate your credibility is completely destroyed. I think your name is synonymous to “bias” and “hatred” towards American and cannot really be taken seriously or trusted. Maybe it’s better to sit back and listen to other viewpoints instead of insisting on having the last word on every post and having your bias thrown in at every chance you get.
since my statements are based on publicly available financial statements that no one on this site has managed to even accurately quote, maybe it is not I but others that are biased.
When you ignore or cannot even accurately quote facts that anyone with a modicum of knowledge of the airline industry see, then perhaps it isn’t really about hate but about being intellectually accurate and honest about the subject at hand.
The best way to prove me wrong is to provide real facts of where American has won at the type of game it proposes playing here.
Embargoed press releases are standard practice across industries. I work for a university based think tank that studies something completely different and we do the same thing. Sometimes we get good press coverage, sometimes we don’t. The consumer (you and me) benefits because we get Brett’s analysis right away instead of having to wait. I saw the Alaska-AA news on twitter and then in my inbox from Alaska first. You can be sure it was way more favorable. Only Brett really answered, is this India from Seattle strategy smart or just throwing a dart in the dark?
Dude embargo stories happen all the time in the sports world. Drop your tin foil hat conspiracy!
Tim – Frankly, I was debating whether to even bother responding at all. I don’t tend to enjoy interacting with people who resort to ad hominem attacks, mud-slinging, and condescension. But I will respond one more time to clarify a few points, and then I’ll be done unless the conversation turns more substantive and less combative.
1) “I am not a lawyer but I have never seen an outside journalist have access to the type of information you were given so that you could drop the announcement at nearly the EXACT minute it became public.”
Then you apparently haven’t looked very hard. The obsession with embargoed information being an outrage is completely lost on me. This is common practice as I’ve noted. You act like nobody else does this, but it happens all the time. On this topic alone, do you think all of these outlets just type really fast and can post stories within a minute of the news breaking?
https://www.sfgate.com/travel/article/Alaska-Oneworld-American-Airlines-alliance-15051850.php https://www.businessinsider.com/american-alaska-airlines-new-codeshare-frequent-flyer-agreement-2020-2 https://apnews.com/7d2a53a3e2e623c9437cb6ec2a220f29 https://viewfromthewing.com/alaska-is-joining-oneworld-and-american-will-launch-india-service-in-october/
I’m sure I missed plenty more.
If someone who gets the embargoed information is trading shares before it goes public, then I’m sure the SEC would take issue. Otherwise this just isn’t a thing. There is nothing to disclose here. It happens all the time, and there is nothing sinister about it in my view. I will not be changing my practices around embargoes.
2) “Maybe getting the early cut is simply too alluring to do the due diligence to make an honest assessment of why or why not these moves make sense. When I can pull statistics and you have access to far more tools including the new Diio subscription you gained, why can’t you do the research to ask the questions which your readers are asking about whether this truly makes sense?”
That tone…. It seems to me you should re-read the post to see that it’s because of the embargo that I had plenty of time to do all kinds of analytical work. I pulled the data on Bangalore to the US, and I looked at corporate accounts that would find this useful. There was plenty of research done here. Will this work? That I can’t say. But there’s minimal risk and there is strategic value. You disagree with that, but that does not give you an excuse for belittling those who take a different side.
3) “according to your own graph, the Bay Area is the largest O&D market for BLR. So help me understand how raiding United’s hub (they fly SFO-DEL at least on a seasonal basis because they can make it ) by using an AS codeshare to fly a route from Delta’s hub is going to work?”
United can fly to Delhi. It cannot fly with a meaningful payload to Bangalore. I was surprised to find that Bangalore is 1,000 miles further from San Francisco than Delhi. That’s why this move is so interesting for American. The planning team clearly did its homework on how the competitive response could look.
4) “wow… so they are reading your blog in order to correct what you have to say?”
You think that’s rare? It’s not, and it’s good practice. Every company reads what gets written about it, and if something is inaccurate, then they all contact the offending outlet. I never correct anything that’s an opinion, but if something is factually wrong, then of course I do. And I don’t hide it. As you can see, I crossed out the original wording. This is part of having even a basic level of journalistic standards. Newspapers never had the luxury of being able to update print, so instead they printed columns with retractions and corrections after the fact.
5) “You do realize that businesses are run on the basis of revenues and costs because they determine profits? And yet you want to toss out that information including how American has performed in multiple other markets that are competitive with Delta and United?”
And there’s the condescension. It only gets worse the rest of the way into that comment, and I won’t dignify that with a response other than to say this. American is trying to get ahead of the competition with creative moves. It is flying a market where United and Delta don’t (and possibly can’t) compete in the same way. In that sense, it’s brilliant. Sure, American may have different cost and revenue issues, but this is American trying to find a niche where it can actually address the revenue side by finding unique markets that corporates want. On the cost side, the longer the flight, the less those structural cost issues impact profitability.
Work with what you have.
It appears that you think there is no hope for American to do anything right, ever. Your “simple” solution to slash headcount and fix the operation sounds nice to you (though the former isn’t going to happen), but you act like until that’s done, the commercial team should sit on its hands and do nothing. Let’s just watch Rome burn. I, on the other hand, want to see the commercial team doing interesting and unique things to try to win the game with the hand its been dealt. This is the first time I’ve seen any sign from American that it is interested in even trying.
6) “If CF wants to have a no-thinking allowed rah-rah cheer section for whatever posts he puts up, I will respectfully walk away.”
I certainly have no interest in a “rah-rah cheer section,” but I do want a comment section that is respectful and constructive. If you continue to post as you’ve done today, then it may be best if you do respectfully walk away. I don’t know what triggered you here since your comments are usually without emotion and fact-based, but today’s efforts are not the kind of discussions that encourage others to participate.
First, I am not going to argue the point about pre-release other than to note that the timestamps of some of the articles you cite – which have timestamps – are after your article. And other sites did not rubber stamp and attempt to justify AA’s decision. They either reported it as is or they added enough commentary that perhaps it might not turn out as well as AA thinks it all will.
Still doesn’t answer the question of why American felt it need to have you plus potentially other aviation blogs push its latest strategic plans. Do you honestly think that you or anyone on here – including me – is going to make one iota’s worth of difference in what plays out?
And the issue, which you STILL have not addressed, is that you received significant market-moving pre-release information and didn’t disclose to your readers. I could care less if UA paid for your ticket to Chicago but it matters a whole lot that you are writing articles based on information that someone feeds you so that you can peddle it for them.
As for the market selection of SEA-BLR, Vasu’s own words were that they wanted to fly to BLR but SEA was the only hub that could support a 787-9 flight. Not only is AA adding BLR but he also said they are looking at adding more international routes. I am sorry if you find it condescending but I find it mind-numbing that you, someone that was in management positions at HP and UA, at least, don’t want to admit – or perhaps truly don’t understand – the storm that AA has started by deciding to add international service out of SEA. I also hope that you will be as honest in tracking the next steps and the success of this AA-DL spat, esp. since you have now have access to industry tools.
There is plenty American can do… going back and trying to undo the decisions it made years ago and expecting to be able to win now is just plain strategic insanity. That is not anything against you or anyone else. And I stand by my words that this is the most irrational thing any legacy airline – perhaps any US airline at all – has done since 9/11. If you disagree, perhaps we can discuss the actions by other carriers that you think was more insane and see how it turned out.
And I will still challenge you as to why you continue to feed the mindset that Delta “took” Latam. Perhaps you have actual facts to back up your statement but multiple sources said that Latam actually started the process of looking for another partner and the middleman made the match. How exactly did Delta “take” Latam if Latam started the process by going to look for a new partner because AA could not do for Latam what Latam wanted – a joint venture. We all knew years ago that AA would never have a joint venture to S. America because of its size and its US carrier monopoly of the Miami-S. America market. Delta is expanding in Miami because Miami to Latin America is strategically necessary to be a global carrier and because American, whether you or anyone including AA wants to admit it, can’t do strategically what other carriers can do. The Latam deal simply gave Delta an opening that they were undoubtedly looking to take at some point. Delta’s rational decision to move into a key market where it already with its partners carries more than 20% of the market doesn’t and never will lead to success for American in SEA just because it has walked away from too many markets and decides it now wants back in.
And it is precisely because American won’t deal with its excess headcount that it has an undenial cost problem which is why it has been unable to compete against DL and UA in major longhaul international market. Tell me, other than trying harder and deciding to fight back, what makes today’s AA announcement any different than any of the other longhaul routes which AA has tried to compete in only to withdraw them?
I’m sorry if you find my questions and comments about AA’s strategy condescending. People here call you an analyst; if you are, then you are capable of and willing to do the hard research to evaluate whether the actions someone is doing makes sense or not. It is not personal but is your job if you are an analyst. If you are peddling an article for American, then just say so at the top of your blog.
I’m grateful honestly that you have allowed my dissent. Let’s be clear that my issue with you is the fact that you failed to disclose that you received pre-release information which you used to write an article rubber stamping AA’s decision. No one on any of the other sites you cited put forth near as much effort to unequivocally endorse AA’s decision.
My issues with AA, which neither you or anyone else should take personally, are about its repeated strategic failures and the lack of willingness by so many not to answer the questions regarding why AA has failed so many times before and why this is going to be any different.
Let’s also be very clear that my posts here today are just as fact-based as they always have been.
“I don’t know what triggered you here since your comments are usually without emotion and fact-based, but today’s efforts are not the kind of discussions that encourage others to participate.”
Mr. Snyder, Tim Dunn – nee WorldTraveler – was triggered because you dared questioned almighty Delta. The mere thought that a – if approved – NON immunized cooperation; the launch of two(!!!) long-haul routes from country that DL has staked as its own has been enough to trigger this fusillade of obfuscations, qualifications & bloviations.
As an example, it’s somehow grand folly – and Tim Dunn, nee World Traveler easily cites – that AA flies some routes at a loss….has ceded market share in some markets…. Yet, conveniently overlooked by World Traveler, is how DL dropped SIN & MNL, closed NRT, discontinued PHL-LHR & MIA-LHR, closed a DFW hub (closed a hub in the 6th largest U.S. metro, btw)
Yeah, I can do it too.
You may find WTs’ comments “usually without emotion and fact-based”. However, these same comments possess a consistent, underlying bias that is reflective of a role he had in a past (professional) life. He isn’t cheering the possibility of AA discontinuing LAX-China as a prudent move by AA….he’s cheering for it simply because it would potentially boost DL’s position vs. AA at LAX.
It’s as simple as that.
So, sorry you had to experience this today – on your personal blog, nonetheless. But I (and I see one other poster here) had been waiting for this as this same behavior was exhibited on another blog/website that has an emphasis on airline discussions.
WorldTraveler, perhaps a moment of reflection is apropos here. Perhaps “walking away from this site” – at least for awhile – might be the honorable thing to do.
Of course you have been waiting for it. because you didn’t understand how real business operates ten years ago and you still don’t. This isn’t about laying in wait for someone to say something so you, like AA, can get revenge for what was said years earlier.
Business is about profit and losses.
American has been operating large portions of its network at a loss for decades. That is not an opinion but what AA has reported to the US DOT.
Feel free to cite public statistics, not your or anyone else’s opinions, as to what DL operates at a loss.
There is nothing wrong w/ dropping routes that don’t make sense. There is something wrong with operating routes that clearly lose enormous amounts of money.
Posting on social media is about social media.
How about you and everyone else that wants to resurrect the past tell me what I said that was factually wrong.
and then accept that AA has failed to achieve anything close to what it set out to do as part of the AA/US merger promises – of being a viable global competitor to DL and UA.
If it hurts you or anyone else to hear that AA has failed at its mission of being a global competitor to AA, then perhaps you are holding AA just a little to close to your chest.
Give it a rest Tim. You are a ponderous troll at this point.
Thanks for explaining it to the folks here who don’t understand how PR works. It seems that some posters would rather just make spurious attacks rather than try to understand how this business works. But, trolls gotta troll I guess :(
Alaska joining OneWorld is a big win for AA as my PNW friends have an almost blind loyalty to AS. If I were Alaska I’d be concerned most about the subpar product on AA tarnishing the reputation Alaska has. If it’s a DL vs. AA decision I think a lot of people will go DL, but DL vs. AS the decision isn’t quite as easy.
A – One thing to consider here is… how subpar is the product? We’re talking about the international product on American that’s going into Seattle, and that’s not bad. In fact, the seats are excellent in the premium cabin. Service, sure, it may lag, but this isn’t like flying a domestic 737 with a ton of seats and no entertainment. I don’t think the product issue is going to make much a difference.
“I’m not going to take that analogy any further.”
Ok we officially need a Cranky Flier “Downfall” video edit now, maybe replace the bad painter’s mustache with the delta widget.
You might want to sit tight on that thought for a nanosecond.
American’s consolidated system costs are 10% higher than Delta’s in 2019 according to the latest filings from both airlines. There isn’t a single longhaul market in the northern hemisphere outside of Tokyo or London where American gets an average fare premium to Delta and/or United where they directly compete.
Combined with AA’s “return” to markets in Boston and Raleigh, this is absolutely the most strategically stupid thing I have seen from a US legacy airline in decades. American is the 3rd US carrier at best in all of these markets; there is absolutely no history of a 3rd place carrier succeeding.
There are dozens of cities around the US that would make sense for AA to decide to grow/regrow and yet American is being driven by a sense of revenge at Delta because Delta stepped into markets which American dropped including because of American’s inability to come up with a deal with Latam. The notion that these markets are going to work now when American has an even higher cost disadvantage than it had five years ago shows how breath-takingly incompetent American management is in running the company.
Omg. Tim Dunn doesn’t like an AA move that Hurts Delta?
Color me shocked.
I doubt if you will get it but this is about hundreds of millions of dollars of profits that are being taken from AA’s stockholders and the lives of tens of thousands of American employees that are being asked to work for less money so that AA management can exercise its fits of vengeance.
Let’s remember that DL applied to the DOT to start LAX-PEK several years ago, AA jumped in and said they wanted the route which forced a route case, AA won the route case but has lost hundreds of millions of dollars per year flying to Asia.
They have cut Chicago to Asia which I repeatedly said was losing money and now their execs are saying they are likely to cut LAX to China, which I have also noted has lost hundreds of millions of dollars. AA is acting on the basis of vengeance and not what is in the financial best interest of the company including its stockholders and employees.
I may be the only one that is willing to say that but the financial results are very clear to see.
And it will be clear with their little Bangalore experiment
Your comments really are entertaining. Thanks for the laughs.
Hope your retirement from Delta is going well, Worldtraveler.
I’m sure AA’s investors value your sage, unbiased by Delta fanboyism, advice.
Star Wars is fiction.
This is real life.
I am sorry you don’t understand the difference.
AAL (American’s stock symbol) is recording the largest declines of the big 4 US airlines at this hour.
Tim – The level of vitriol being thrown at American is rather strange to me. You focus on costs and revenues, and the fact that American isn’t a hub carrier in Seattle, but those are really irrelevant here. This is about sales. American undoubtedly knows what its corporate clients wants, and so does Alaska. It has to know going into this what it can count on from its biggest corporate clients. This is obviously why Bangalore was chosen. The fact that they can rely on Alaska to provide feed is huge, and it’s what makes it have such little risk attached to it. American needs to be trying things like this. As I said, I have no idea if it’ll work, but I’m sure glad to see American responding to its customers and doing things that are creative. If I were a shareholder, I’d be pleased to see the airline actually trying to do something. I’d rather invest in a company that’s swinging and missing then one that won’t even step up to the plate.
You do realize that businesses are run on the basis of revenues and costs because they determine profits? And yet you want to toss out that information including how American has performed in multiple other markets that are competitive with Delta and United?
And if you spent time in airline network departments and you don’t see the enormous risks to American by deciding to drop international routes into another carrier’s hub, then maybe you truly don’t understand the airline industry as much as I gave you credit for.
Of course American needs to do something. But they needed to do it five years ago. In the six years since the American/USAirways merger, AAL has managed to go from having the advantage of the newest airline out of bankruptcy and a merger to having the worst cost position and having its hubs under an all out assault including by competitors that have not stolen anything from American but have simply waited for the natural trends that were long set in motion to take place including to step into markets that American walked away from.
American was losing money flying most of its international network before it ever merged with USAirways. They promised years ago that they would be a viable competitor to Delta and United as a result of the merger and yet they continue to fall behind both in Asia as well as continental Europe – exactly where they were at a disadvantage before.
American flew to India from Chicago before. They are simply rearranging the deck chairs on the Titanic by moving from one international route and gateway to another because they fundamentally built an airline that is not capable of competing with Delta and United in the international marketplace.
The only region that American dominated was Latin America and esp. Miami where American has had a near US carrier monopoly for 20 years since United failed at the Latin America gateway it acquired from Pan Am.
What happened as a result of the Chile Supreme Court’s decision doesn’t change the reasons why American has continued to shrink NYC (it is the only airline that is smaller in NYC than it was five years ago), why Delta has been able to grow Raleigh, Boston, and Seattle and why United is clearly winning the battle in Chicago as that city’s global carrier.
AA’s latest moves are nothing but desperation from a company that has failed to manage its business for over five years and now wants to go back to the markets it walked away and left to its most successful competitor – and that isn’t my opinion but confirmed by publicly available financial statements.
Again, let’s remember that American couldn’t help but run to the DOT to win over the LAX-PEK route when Delta wanted to start that route. AA won it, has lost hundreds of millions of dollars and is now talking about walking away not just from LAX-PEK but also LAX-PVG even after spending money on an investment in China Southern and then walking away from Chicago to Asia.
Are we supposed to just forget about these major strategic failures that you would be roasting any other airline over?
If you think I write with vitriol, then it is because you and others can’t manage to see the big picture and continue to bite on news like this as if it is going to turn around the trajectory that AA has been on for years.
I am mad at seeing how AA has been so mismanaged and how so many are so incapable of seeing AA’s repeated missteps for what they are. But then I was in the camp that pushed for a standalone AA while others clearly saw it differently. The more this show goes on, the more I and others are being vindicated that the decision to rush a merger with USAirways and not fix and restore American is leading to its downfall.
I haven’t flown AA’s long haul product in decades but friends that have said never again. I still say it comes down to product. If what you are selling sucks people won’t go with you unless you get them on price alone. So what good is a bunch of AA longhaul from SEA if you can’t make money doing it? In my field we like to say we don’t want to take a job if it’s only a break even or loss. Easier to just not do the work at all in that case.
I used to fly a lot of AA way back pre-merger days…mostly because NW’s product sucked then. Since the DL/NW merger I’ve only flown AA on price and all of those fares were rock bottom. To save $500+ I guess a layover at CLT and a subpar in-flight experience is ok if I need to get to Florida. Spending 14+ hours flying over the pole to the other side of the planet….that’s a different matter entirely.
I flew AA in J last year (77W). It was a good experience. Seat was IMO significantly better than 5* airline LH and service was good.
honestly, I have flown American’s 77Ws in the past year and I have to ask how you think a 10 abreast 777 is superior to LH’s service – which I have also flown multiple times.
seriously, detail the differences.
Tim, in case you don’t know, “J” mean business class. So Oliver was NOT seated in 10 abreast coach. He was sitting in an industry leading reverse herringbone business class seat. Its a wonderful seat, comfortable and private.
As someone who flies business class regularly, as Cranky noted, American’s hard product (read: seat) are actually very modern, sleek, and superior to that found on Delta (especially their vast and extremely aged 767 biz product). Delta’s new a350 cabin is great, however those are quite limited. Sure, the service is hit or miss on AA, but I find that to be the case on most airlines.
I think I’m safe to say that most road warriors would agree that AA’s biz hard product is actually great. It their one bright spot.
thanks for pointing out the J which I did miss.
As for the DL 767 product, CF says he has a story coming up on a DL 767 transcon flight so we’ll see what he has to say – but all airlines reach the end of product life cycles.
Delta has been asking Boeing for years to come up with a replacement for the 767 – and for now it isn’t a re-engined 767 or a short-range version of the 787 – or even the 787-8 which AA bought as its 767 replacement. The 787 is built for 14-18 hour flights and does not offer the fuel burn efficiency of an aircraft that is tuned for transatlantic flights.
So, yes, some of DL’s 767 interiors are tired but let’s also not forget that so are AA’s 767s; the latter are just getting rid of them.
So, if Delta hasn’t moved fast enough to update its 767s, it is because they don’t know how long they will keep them.
The product on the 777 business class cabin won’t fit on a 767 or even a 787 but it certainly won’t fit on an A321 which is precisely why DL said it isn’t interest in a new narrowbody for transatlantic use.
DL is also supposedly refurbishing a certain amount of 767s that it will keep and segregating the rest to markets that don’t demand a high quality business class product.
There are literally scores of articles by aviation writers including from a certain Miami-based miles/credit card specialist that says that some of his worst experiences in business or premium cabin service has been on American. There are also far more people that post they are leaving AA for DL than for any other airline pair on the internet. I don’t write experiential reviews but I do read some of them. by far, the bottom line is that hard product is immaterial compared to service.
There are multiple people that have said here and on other sites that discussed the AA/AS story that say that AA’s service isn’t close to the level of service that AS offers – and is also well below DL’s.
btw, DL has refurbished its 777 fleet and is also flying part of its new 767-400 fleet which has its new cabins and is expected to have them all in service by this summer. Its combined A330-900 and A350 fleet plus what it has refurbished is about 60 aircraft.
Many airlines including AA and UA have also
Tim – just to confirm, you are using CASM minus fuel/special costs for the 10% cost disadvantage calculation, correct? Looking at AA’s latest Q4 results from 1/23 (no 10-K provided yet), they have the following stats:
Total CASM: 15.06 cents
CASM minus fuel/special costs: 11.59 cents
Meanwhile, Delta has the following stats from their latest 10-K:
Total CASM: 14.67 cents
CASM minus fuel/special costs: 10.52 cents
I recognize from a competitive factor it’s helpful to see how the airline performs with fuel costs removed. However, looking at the bigger picture (i.e. Total CASM), AA’s cost disadvantage is a mere 2.6%.
CASM-ex which excludes fuel, specials, ancillary companies (including the refinery and Tech Ops for Delta) and profit sharing IS the standard for how US airlines report their “true CASM.” that is why all US airlines report that way.
And using the numbers you cite, AAL’s CASM (11.59) is 10.17% higher than DAL’s (10.52).
There is a reason why American has exited so many longhaul international routes competitive with DAL and UAL and added secondary routes. Adding longhaul markets in other carrier hubs is absolutely the recipe for American’s losses to accelerate – and won’t stop what Delta is doing or can do in AA hub markets.
These profits that AA is promising to its employees won’t exist – which means that AA’s renegotiated labor contracts are meaningless as long as they are willing to sacrifice profits in order to get back at a competitor that AA management let grow – including by losing a partnership with Latam – for more than 5 years after the AA-US merger.
AA is being driven by irrational emotions rather than profit-motivated business people. AA stockholders and employees will continue to pay the price.
You act as if it’s AA’s fault for losing their partnership with LATAM. I don’t know how you can possibly make that argument. When it became clear that Chile’s Supreme Court was never going to allow the JV, then LATAM went to Delta to ask for help. There was really nothing AA could have done, aside from implode their Miami hub in order to lose market share (which would have been stupid) in order to keep LATAM. I know you hate AA, and they certainly have their serious issues, but losing LATAM was not their fault in any way.
FIrst, no I don’t hate AA. I am appalled at how badly run they are – despite supposedly having some of the best assets in the industry.
Second, American could have proposed carveouts – but maybe Latam had grown too large for AA and Latam to cooperate.
If so, then AA and everyone else need to quit seeing DL as robbing Latam from AA. AA has had a virtual monopoly in Miami to Latin America for decades. No one should have been surprised when that came to an end.
And third, regardless of what AA or anyone else thinks about DL’s growth of Miami and its joint venture with Latam, AA is simply making very bad strategic decisions.
in the case of BLR, AA is adding a route that predominantly pulls passengers from the Bay Area – UA’s hub – and decides to fly it from DL’s hub – even though there isn’t a single longhaul route that American operates directly competitive with DL or UA other than to Tokyo or London that AA outperforms DL or UA.
AA has also decided to restart routes from Boston that AA previously dropped and now, years later, AA decides to jump back into routes as the third player. There isn’t a route in the US where 3 carriers successfully compete – ie retaining or growing share at average fares proportional to their costs.
AA thinks it can undo years of bad decisions and do it now with the highest costs in the industry.
No, I don’t hate AA. I am dumbfounded at the decisions that continue to come out of Ft. Worth.
Feel free to tell me what I have been wrong about regarding AA up to this point.
What exactly would you do differently? Where would you grow? What would you cut?
You can bag on the LAXPEK decision, but the people who made it are at UA now and to pull out of China you have to damn sure that you’re not going back, because the Chinese government will tell you to pound sand and you corporate customers will cry foul because they need to get to China. ORD-China lost a ton of money, but those are the reasons it took so long to pull that service.
I agree, some of the recent moves have been reactionary, but you’ve had American trying to be rational in capacity growth over the last 3 years, while DL and UA have given that concept the big middle finger. At some point that prisoners dilemma breaks down and you have to do something about it. Given the MAX issues and the capital required, they can’t do it all
I presume you were replying to me – but I’ll answer anyway.
There are tons of AA fans on the internet. I get it. When sites like this discuss key strategic issues, there should be objectivity. Doing a sales job for AA is not objectivity; CF sets the tone for how issues like this are discussed.
dropping LAX-PEK isn’t just about one route or even ORD-Asia – which notably includes NRT as well. I’m still trying to understand why American underperformed United so badly in a market that was a hub for both to joint venture partner hubs.
Those that are so quick to think that AA outsmarted DL with this move might want to list the number of routes from NYC, ORD and LAX that AA has dropped but DL and/or UA still serve.
As for the fix-it plan for AA, it is rather simple.
1. Get costs down – and that means getting rid of tens of thousands of employees. The AA/US merger brought together way too many employees to produce the amount of revenue that AA is capable of generating.
2. Once you get rid of tens of thousands of employees, pay the ones that remain much higher wages. AA employees are being tired of being told they can’t make more money. AA spends more on labor than any other airline in the US and yet produces less revenue than DL. and then expect AA employees to deliver industry-leading service. I don’t write on the customer service experience but there are literally thousands of posts about how bad AA’s longhaul international service is, even in the premium cabins.
3. Fix the operation and AA’s reputation. As I have repeatedly noted, UA cancels more flights and has a lower on-time than AA but both are well below DL and AS and HA…. Cramming a dozen or more seats on 737-800s/MAX 8s because American ordered the wrong size plane isn’t going to fix AA’s reputation.
we could go on but those three are most critical – if AA fixes those, I’ll give my next 3 recommendations.
Throwing a hissy fit because more nimble competitors step into markets and succeed at them where American can’t or hasn’t is not the recipe for success.
Joe, and how much of that CASMeX difference is due to a shorter stage length as a fleet? I would guess a lot which means they probably have minumal cost disadvantage on long haul routes.
American and Delta have very similar average stage lengths. Those two compared to United, no.
Longhaul, esp. ultra long haul routes, highlight the greatest cost differences.
Let’s also not forget that Delta gets 6% higher yields than American, again directly taken from their respective financial reports.
Tim, AA’s 2019 full year yields were 17.41. DL’s was 17.79. According to my calculations, that is a 2% difference.
So your 10% figure is false then correct? Admit that! When you purposely use fake facts to make your points your post the can be characterized as propaganda – you agree Tim?
you don’t need to calculate anything and shouldn’t.
All you need to do is read actual financial statements and care actual apples to apples statistics.
If I am wrong and you are right, AA should be reporting much higher profits than they are.
Perhaps you can tell us why they aren’t. See the same financial statements I linked.
The same 10% cost disadvantage you throw at every post. This is not something that will stay like that forever. Your darling (Delta) will have to get some more new planes than the crappy 20 year old planes they’re flying around and they might have to make it at a time of higher interest rates or a recession. American has pretty much completely updated their fleet and now as the debt is going down, servicing the debt will be cheaper and cheaper therefore CASM will go farther down. Did American turn you down for a job or something and you have made it a goal in life to spend hours and hours writing biased pieces and every outlet that will listen? Find a hobby man
If that new fleet is supposed to be the end all and be all for American, why are they the least profitable US airline?
With all your wizardry at math, we’ll wait for your answer.
psst. American, on a consolidated basis spent more on fuel and maintenance than Delta, so where should be expecting to see an advantage from its newer fleet?
Because they ran a shitty operation in 2019. It is expensive to run a shitty operation and the slowdown with the mechanics and the MAX didn’t help. There is no doubt about that. The problem with you assumptions is that you think past performance guarantees future results. American has been putting out some impressive operational reliability numbers over the past 3 months and that’s before the contract with the mechanics is ratified. New airplanes are an INVESTMENT that has to have time to pay off. Once the 767 was retired from the New York market a significant gain in yield was seen. The 767 exits the fleet completely from PHL and MIA at the end of this year and you shall see the same results in those hubs once the 12 new 787s are delivered. Once American has reduced the debt load over then next few years, then the newer fleet and a new collective bargaining agreement with the mechanics you will see American has the best YOY yield improvements in the industry.
Another thing you fail to mention is exposure to the China market. American has the least exposure to China and if the Coronavirus ends up trending the same way it has the past few weeks, Delta and United will have the most to loose from people limiting their travels to that region. Let’s not forget Delta’s terrible partners in the region that are almost exclusively all in China.
uh… tell me how the “shitty operation” added hundreds of millions of dollars in fuel and maintenance costs for American in 2019 that won’t be there in 2020.
And Delta has 1% more REVENUE exposure to China than American – it is hardly a dealbreaker.
The difference between AAL and DAL to Asia is that Delta makes money flying to Asia. Yes, I know there are people that will do everything to not acknowledge these statistics but they are based on data the airlines provide; further, the profit and loss numbers do line up with bottom line losses for the company as a whole.
American has simply lost billions of dollars trying to build an Asian route system while United got its from Pan Am decades ago and Delta got its from United.
American also operates its transatlantic network at virtually no profit.
in the two largest regions of the world, American is flying a bunch of planes trying to compete with Delta and United and losing hundreds of millions of dollars in the process.
And, no Korean, Delta’s ONLY joint venture partner in E. Asia, is not in China any more than Japan Airlines or ANA is in China. When you can’t even get basic facts straight and throw bias into the discussion, it is no surprise when you lose the discussion to those that know and can accurately discuss the facts at hand.
this is what an actual Wall Street analyst says about the coronavirus.
if American is leaving LAX-China, it is not because of the short-term hurt from the virus but because it does not have the long-term ability to successfully compete in the market
here is what a Wall Street analyst says about coronavirus
If American is leaving LAX to China, it is because they can’t make it long-term.
Please let us know what part of American’s fuel and maintenance bill in 2019 was due to “shitty operations.”
American is now flying the 777-200 in the JFK markets that were previously served by the 767. The 777-200 is the most expensive widebody in the US carrier longhaul fleet. The latest DOT data which includes the summer of 2019 in which the 767s were replaced by the 777s, still showed lower average fares for American compared to Delta from JFK and United from Newark.
Delta wasn’t always as strong as they are today United recently has gone through a turnaround. Why are you so convinced American won’t have a turnaround too?
Your emotion is very strong in your “Pro DL-Anti AA” responses today, even for you (not even taking into account your unwarranted and tasteless attack on Brett). This level of heated commentary makes it seem like maybe AA is on to something. If it was something truly ridiculous with no chance of success I can’t imagine there would be much reaction.
PS – When a large number of posts point out your consistent bias (other posts that don’t concern DL still elicit pro-DL comments from you) maybe it is time to consider changing the delivery…
…there are so many responses to responses and different threads, just want to clarify those points above were for Tim!
I’ll reply here to a number of posts.
First, I, and I suspect a lot of other people, did not realize that a significant portion of CF’s blog is getting pre-release scoop from airlines only to hype it without analysis. CF could have avoided about a dozen posts by putting a disclaimer but he didn’t and, so far as I know, never has for any of the articles for which he received pre-release material.
And to those that say such things are common even in research, US airlines are for-profit companies governed by regulations about who can have access to significant market-moving information. AA and CF can deal w/ the question of whether this type of release was in line with those SEC guidelines but this is a significantly different level of information than DL’s weird customized TV screen shown to scores of people or UA’s customer service upgrades. CF is careful to disclose that he receives transportation from various entities; he would do well to also note that he receives non-public material; this release just happened to be one of the most blatant in terms of releasing his story at virtually the exact same minute that AA sent its news releases.
I would also say that if CF had disclosed that he had received pre-release material, then it would be obvious that the purpose is not to be objective or to expect that he asked the analytical questions which I know he was trained to ask in his experience in management at America West and United.
I would also have had little reason to have questioned a number of statements he or others if I knew that he was simply shilling for American in pushing their latest strategic foray. When some readers either don’t know the facts to not even if what CF presents is accurate or challenge it, then the option is either to not have a reader response section or accept that there will be diverse responses.
You also have to ask the question of why American management would have felt the need to disclose something of this significance to have it discussed on an amateur aviation fan site. Does anyone including CF really think that anything really will happen in the market as a result of this will be moved by what is said on this or any other chat forum?
And, as I noted in several other posts here, I write what I do because so many people simply don’t know or accurately understand key financial or factual matters about the industry and come to grossly inaccurate conclusions because of that lack of accurate information.
And specific to American’s proposals here, no one here has yet to address the fact that American has repeatedly walked away from scores of major markets esp. those competitive with Delta and United. American continues to cut markets from JFK and yet you-know-who is still growing. The notion that American can turn the company around while walking away from major markets in New York, Chicago and Los Angeles and then win in much smaller markets which they have already walked away is more than puzzling to anyone that bothers to objectively look. And yet we have people here that either pretend all of those other market failures don’t matter or that this time will be different. Doing the same thing over and over again and expecting different results is generally called insanity.
Finally, the notion that there is some game of retaliation going on here – either from Delta or American – is just plain silly. These are two for-profit businesses that win or lose in the marketplace. American walked away from dozens of markets or allowed Delta to grow in those markets because Delta succeeded in the marketplace and AA was not able to do anything about it. Again, no one has yet to be able to explain why American has given up so much share in the dozens of markets where Delta (and others) have grown and, more importantly, why this latest foray will be any different, esp. as AA decides to undo the decisions it previously made – including pulling down Seattle service.
So, yes, I do apologize if I offended anyone including Brett. But as long as CF wants to build a business model around discussion of issues relevant to the airline industry, there will be dissenting voices with varying degrees of knowledge of the airline industry and in the force in which information is shared esp. given the lack of disclosure that put this blog post in the proper context. What I said here today challenges ideas and I did it in a far more civil manner than the vast majority of the public figures in the United States or world are doing right now.
First, if you don’t appreciate CF’s analysis, LEAVE. No one forces you to read his blog.
Second, press embargoes are more than standard in the industry and from what I have seen, in no way does the pre-brief impact the thorough analysis that CF has done. Your implications around journalistic integrity reek of trolling and it’s apparent that you are letting your emotion overcome what typically represents some pretty solid insights on your part.
Finally, you are detracting from your message through your condescension and emotion. I’ve never met Brett before but candidly, he seems like a pretty nice guy, and you are coming across as a jerk to him. Do yourself and the rest of us a favor and either tone down your message or a take a hike. There are plenty of other message boards that would tolerate your behavior but I don’t think this should be one of them.
I’m pretty confident that Brett doesn’t run this blog as a business. He runs Cranky Flier as a business and this blog represents a passion project for him which all of us AvGeeks benefit from. Don’t ruin it for the rest of us with your behavior. You are an insightful individual who brings a lot to the table. Don’t make us dislike you by being “that guy.”
Tim already pulled this crap on Airliners.net, the same style of Narcissistic Personality Disorder posting, the endless condensation of any poster that didn’t agree with him 100%, his obsessive fetishing of his beloved Delta and his endless and inane trashing of AA were on display every day.
He got kicked out, and as a result, it is a much better place to read without his nasty trolling. Hey Tim, start your own damned blog, I guarantee that no one will take you seriously there either.
” The former Jedi (Delta) turns his back on the Republic (Alaska) to create a powerful Empire. ”
Thank you @cranky. For once you’ve finally admitted that Delta is Darth Vader.
Nice write up.
I’m curious as to what the ceiling here is for how much Alaska is helped by AA. In their best case scenario Seattle becomes a sort of mini widebody hub for AA ? Say at the very biggest, in a few years time, daily, LHR, 2x Tokyo, Pek, Pvg, the BLR and maybe a HKG sounds about as big as it could conceivably go right?
Well.. if 7 widebodies a day will keep all of Alaska’s corporate accounts on side.. good for them
Richard – I imagine that’s probably right from a business perspective. I mean, maybe Qantas gets into the game and serves Seattle some day too, but for American, even Beijing is probably a stretch. That being said, American really has become interested in those seasonal long haul routes, so it wouldn’t shock me if we saw some more unique destinations with a lot of flow from Seattle leisure travelers in the summer, or something like that. Hard to say what they’ll try over there now that they’ve decided to wake up.
Another Brilliant Analogy @ CF. Great to see this new move on AA, SEA-BLR will be a hit, BLR is a robust well managed hub to connect in India as well, smooth and efficient. Perhaps and extended tie up with Indigo for connecting traffic beyond will serve well.
American and Alaska merge? BWAHAHAHA…American still hasn’t fully digested US Airways (or vice verse) and can’t get unified contracts out of its unions, and they should somehow decide to take on another acquisition? It would be even more insane if Alaska thought they could take over American. As long as American is the structural mess it is and with it hell bent on racing to the bottom…there’s no way the two would merge. Ever.
The codeshare and Alaska joining One World makes the most sense for now and into the distant future.
Doug – American has fully digested US Airways and the last unified contracts are going out for vote shortly. That merger is effectively done. It just can’t afford it.
BLR will be a big commitment in terms of airframes. Maybe there’s currently slack in the 787 fleet from their earlier drawdown of ORD-Asia?
I saw them flying ex-CUN recently, so my guess is you’re right.
Itami – I don’t think it’s just that. I think American has more widebodies than it knows what to do with in general.
It might be bold, but I respectfully disagree on the wisdom of SEA-BLR. Unless MSFT agreed behind the scenes to buy a bunch of seats through a corporate contract (certainly possible), based on your pie chart, I don’t see much of an O&D market at all for flights to BLR out of SEA. You have a market (US-India) with historically terrible fares that’s going to be heavily depending on connecting traffic from DFW/LAX/ORD/SFO. What could possibly go wrong?
Well don’t forget secondary West Coast markets to SEA on AS like SMF, BOI, etc., with their tech companies. Intel has a huge campus in Folsom (not to mention their campus in Hillsboro with AS feed from PDX) and Micron is still HQ’d in Boise.
MeanMeosh – Though I obviously don’t know the answer to what happens behind the scenes, I have to assume that American had deep discussions with Microsoft and all the other corporates that go there. They wouldn’t just go in there blind without having a sense of how much they could fill that airplane in the pointy end. Time will tell, of course.
according to your own graph, the Bay Area is the largest O&D market for BLR.
So help me understand how raiding United’s hub (they fly SFO-DEL at least on a seasonal basis because they can make it ) by using an AS codeshare to fly a route from Delta’s hub is going to work?
btw, congrats on lighting up the internet
He explains it VERY well in the write up! Did you even read the article? Alaska flies between the two cities 13 times today. That is FEED for both the Bangalore flight and the India flight
I meant London flight
For travelers/corporate clients who prefer SFO, it’s tough to make significant inroads, as Virgin America and now Alaska know well. This is one more nudge, and a handful of SFO passengers are likely to travel SFO-SEA-BLR instead of SFO-DEL-BLR, but it certainly won’t be a landslide. For passengers who’d rather fly out of SJC, OAK, STS, SMF, or FAT, the Alaska-American offering is even more attractive. And that’s particularly important for a lot of tech companies. But again, it’s an incremental step… this isn’t going to ruin SFO-DEL or destroy United’s loyalty in the bay area, and I don’t think anyone’s claiming it will.
Patrick – I went into the ARC/BSP data from Diio by Cirium to look at how this breaks down by airline from the Bay Area. Looking at US point of origin specifically (though I can’t break down by corporate vs leisure), the number one airline is… Cathay Pacific with 23%. Singapore is next with 20% and Emirates follows with 17%. United comes in fourth with 11.5%. So there are a lot of other places to take traffic from than just United.
Also, United takes very few people via Delhi. That requires an overnight sit. It looks like most people who buy on United are flying over Frankfurt on Lufthansa followed by going over Hong Kong or Singapore.
This is great news Brett! I always thought AA should do more internationally with Seattle because customers on the West Coast don’t want to fly south to LAX (and certainly NOT to DFW) to fly to Asia. As you say, AS already has the domestic feed so developing the international side is a win-win for AA/AS. I think Seattle customers who love AS were conflicted when Delta swooped in with all of the international service. Now these customers can stick with AS/AA. This also means more AA Frequent Flyers in Seattle so this will bring more traffic through PHL to the secondary European markets (and CMN) that AA only flies from PHL. Good news all around the network! –Scott Moyer, Phila.
For Seattle to Europe, why connect in PHL when LHR is available? Heathrow is better positioned geographically and OneWorld fliers can already do this via BA’s flights.
Sure, that’s an option. It all depends on what customers prefer for a transfer point.
NathanP – Casablanca is actually a perfect example. BA doesn’t even fly the market out of London! Other leisure routes as well can be difficult since they often get served from Gatwick instead of Heathrow. So there is some benefit, but it’s mostly on the leisure side.
Cranky, it seems like the number of “non-traditional connecting points” for flights to/from Europe and Northern Africa has exploded recently, for lack of a better way to put it (I’m specifically thinking of and referring to connections in/near Europe that are not major cities or traditional hubs, i.e. not places like London, Amsterdam, Paris, Frankfurt, etc). Iceland, the Azores, Casablanca, Lisbon, and more (even Istanbul, with backtracking to Europe) all seem to be offering some connecting options, as more airlines seek to get a share of the traffic across the Northern Atlantic.
I’m just seeing and hearing this very anecdotally as a person who doesn’t work in the airline industry and who isn’t as familiar with it many people on here, but I’d love to see a more thorough take or analysis on this… These kinds of different connecting opportunities (many of which allow for layovers of a few days in the connecting cities) make for some very interesting opportunities for leisure travelers seeking to go from the East Coast of the US to Europe.
Kilroy – It has exploded but there has been some pullback as well. (Delta walked away from the Azores.) But ultimately, the more capable narrowbody aircraft become, the more opportunity there is to add flights in those markets. They are incredibly efficient with lower capacity, and that’s magic. We haven’t seen a ton of it yet, but it’s coming. TAP, SAS, Aer Lingus, and JetBlue all have their eyes on using the 321LRs to connect more dots. Inevitably we’ll see others follow, including United and American with the XLR.
The stopover thing is different – it’s more of a gimmick to make people think connections aren’t that bad, and you know what? It works. Iceland built its tourism boom on that originally. TAP has really pushed it hard in Lisbon as well. And all the Middle East carriers will, if not actively encourage a long stay, at least make it more comfortable if you can’t connect more quickly. (Some go much further.)
I think you laid out the facts well in this article. I see nothing but positives in this move. Seattle is a large tech hub, as is Bangalore. And silicon valley can now get to Bangalore via a quick stop in SEA versus a stop in India (no brainer). AS has the presence in the NW to feed these routes – a region where AA has been lacking. It allows AS loyalists to fly international and have lounge access and the ability to earn miles on their airline. It doesn’t require major new investment. If it doesn’t work, pull out the aircraft. This has Vasu’s fingerprints all over it – take risk and fail fast. Geographically, this makes sense every way you look at it. And it is happening at a time when India’s airlines are in a mess.
Plus, it opens up potentially better routes to Asia. Try booking a trip to Asia today if you live in the Northern two-thirds of the country. No routes make sense. If you can read a map and understand geography, business centers, and airline economics, you will understand how much sense this makes.
And for Tim Dunn’s rants above, I’m an AA shareholder and this makes me want to buy more shares. Instead of curling up in a ball and getting hit from all directions, they are finally playing offense again.
I will respond to both of your posts to me here.
I write what I do on aviation social media precisely because of the error which you have made in trying to quote Delta’s revenues vs. American’s.
On a direct comparison basis, and coming directly from both carriers’ 2019 full year statistics, AA’s consolidated passenger yield is 17.56 while DL’s for the exact same statistic is 17.79. DL’s yield is 1.3% higher.
Doug Parker pushed the move from PRASM to TRASM (total RASM) several years ago to be able to include all of the ancillary revenue that AAL collects. AAL’s 2019 TRASM was 16.05 to 17.03 for DL which is a 6.1% difference.
You are free to invest your money how you wish but AAL has been the worst performing US airline stock since American emerged from bankruptcy and merged with USAirways. It has the lowest market capitalization of the big 4 even though it had an identical market cap to DAL in the first six months after the merger.
Those are simple facts, as uncomfortable as they are.
It’s not like American is spending $1.9 billion to buy a stake in Alaska. This is a minimal risk strategy to add value to two networks. I was a bit surprised by the cutback in the old codeshare agreement, but this action reverses that. The only way to find out if a flight from Seattle to Bangalore is going to work is to give it a shot. Looking at the map, there are plenty of opportunities to feed the new flight as well as those via London. Paying too much attention to day-to-day fluctuations in the stock market or a particular quarter’s earnings report is part of the reason airlines went bankrupt back in the day. So was adding capacity willy-nilly. None of the recent transactions and additional flights have been done willy-nilly. They’re strategic, and have minimal risk when considered in context. It could be that Brett gets “insider information” because of his standing in the industry. It also could be because he isn’t rooting for an airline to go bankrupt. Trying to predict the outcome of any business venture is like predicting the outcome of the Super Bowl. The only way to find out what’s going to happen is to play the game.
DesertGhost, well put on the low risk strategy. One thing I have been thinking about is, what happens during a recession, especially a severe global recession, with Delta owning stakes in airlines all over the world. Not only will they have their own issues to deal with, but the value of the stock they hold in other airlines with lose value dramatically. If these routes don’t work out, AA can simply stop flying them.
DesertGhost – Exactly right, it’s not a big risk or cost to do this. It’s not like, say, paying $2 billion and taking a bunch of airplanes to secure LATAM as a partner!
Another interesting aspect of this deal will be the government approval process, especially in light of the concessions Alaska had to make as part of the Virgin America acquisition. As usual, the devil is in the details. It’s a different time competitive situation now, and a different administration.
Pardon the bad proofreading. LOL. The comment should read, “It’s a different competitive situation now,” The word “time” stubbornly stayed in the comment.
DesertGhost – Yes, though American reached out to me this morning to clarify that it’s a government review, not a government approval.
Practically I don’t know what that means, but it does require the government to at least look at it.
wow… so they are reading your blog in order to correct what you have to say?
Don’t you feel just a tad bit like a puppy on a very short leash?
Are all these early scoop/suck up to whoever provides you the scoop stories really worth it to your ability to independently think?
Tim, these attacks on Brett are a very bad look for you. Brett is one of the most-respected aviation analysts out there and this emotion seems to be coming out of an insecurity regarding Delta and a resurgence of its competitors (though not sure why there would be an emotional attachment to giant corporations).
So many are calling out your bias. Why do so many think that way? One of the best things about this website, apart from the great analysis, is the (for the most part) level-headed comments that are so hard to find these days.
Your emotion, anger, and vitriol detract from what is otherwise such a great place to be. Ask yourself why so many think you’re biased. They can’t all be wrong.
see my reply to Mark above.
in summary, CF failed to disclose his relationship with American in receiving confidential significant market-moving information. I am sorry if you disagree but that is a major factor that, had it been disclosed, would have dramatically changed the course of this conversation.
And, my vitriol is addressed at American Airlines. I’m sorry if you or anyone else feels emotionally tied to any company such that you take what I say personally.
I would rather you – and anyone else that wants to harp on what I have said here – actually answer the questions which I have asked including about AAL’s strategic failures and its inability to succeed in major markets esp. in NYC, Chicago and LA. I’m sorry if you or others find it uncomfortable that I am asking those questions and pointing out the data which is easily available to anyone that wants to understand the airline industry.
If CF wants to have a no-thinking allowed rah-rah cheer section for whatever posts he puts up, I will respectfully walk away.
Wow! That is big news! It’s made sense for so long, and I’ve never understood why they didn’t do it before. Sounds like they’re finally realizing how powerful they are together. Honestly, it makes them the clear choice for west coast fliers, esp. California (pretty big competitive threat to UA too). They’ll be able to get all around the west on Alaska, and then connect thru PHX, DFW, or ORD to go anywhere else they want. AA also gets a better feed for Asian flights from LAX or SEA. The India flight makes total sense with Amazon and Microsoft in Seattle. Delta may have a real fight on their hands. I see a AA-DL war in SEA, LAX, MIA, NYC, and BOS. This will be fun to watch…
It looks like this alliance will essentially own/dominate LAX, which is a very, very big deal. Combined they’ll have almost double the market share at LAX of DL or UA. I think this will put them over the top there. Any LA flier wanting to maximize the destinations and flights available with their loyalty would probably pick OneWorld. LA is the second-largest metro in the country, so this is a really big deal. Their terminals are also right next to each other, so any connecting feeds will be easy. It will be interesting to see how this plays out with market share at LAX. I suspect many business fliers will gravitate to OW over time, even with AA’s service/brand disadvantage.
I do think UA will respond with SFO-BLR though, esp. with all the planes freed up by from the China cutbacks. To solve the weight problem, it will probably be a premium heavy plane (including Premium Plus) to reduce passenger count, and they may not do a daily frequency.
I don’t need to get to Bangalore but I am excited about the prospect of using oneworld status at Dallas Love Field. What happens to overlapping American and Alaska routes, like the west coast hubs to Dallas?
Stan – I have to assume that they won’t be able to codeshare on those, but I guess we’ll have to see. Still, you’d be able to fly American to Seattle and connect locally on Alaska if you wanted. Or you could fly Alaska out of Love and still be able to get those reciprocal elite benefits. It just may not be on a codeshare, which will no longer matter once Alaska joins oneworld.
A couple observations:
1. This seems like a great deal for Alaska. They get to advertise that they have an international route map, and significantly more international partners than they currently do. This helps them retain frequent flyers vs. Delta and United. I know multiple people in the SF Bay Area and the Seattle area who love Alaskan, but choose to do most of their domestic flying on UA or DL because they want the opportunity to redeem their miles for international travel. This seems to come at very little cost to Alaska.
2. This seems like a mostly bad deal for American. If they are relying on Alaska to feed their international routes, then Alaska has no reason not to “squeeze” them on the fares for the domestic legs. This is classic double-marginalization, and it’s normally not workable without a JV, which isn’t possible here. If they’re not relying on Alaska for feed, then the partnership is mostly pointless. It’s a no-win.
3. I’m very skeptical of the SEA-BLR flight, for multiple reasons. Yes, it’s an important business destination for the major tech companies (especially MSFT), so you can probably fill the front of the cabin *if* you offer discounted business rates that are under those companies’ travel policy caps. However, the business travel volume is not actually that high, so you’re mostly going to have to fill the back of the cabin with cost-sensitive VFR passengers. Overall, it’s telling that BLR doesn’t have any existing direct service to North America. If the route worked well, I would expect DL to work with Korean to add an ICN-BLR route (SEA-ICN-BLR is only 1% longer by distance), which they could feed from SEA, MSP, and DTW. Overflying Siberia also adds a lot of additional cost per passenger, which might be hard to recoup in fares.
4. Once Alaska is in oneworld, I expect that passengers will have the option to credit any AA flight to their AS account, and vice-versa. This will create tension between AA and AS, because they’ll end up competing for who owns the relationship with the passenger. Given the more extensive AS network on the West Coast, I expect most passengers (including current AA elites) around SEA, PDX, SFO, and SJC to choose Alaska. The LA area will probably split, but the AS program has historically been more generous for redemptions, so I’d expect AS to win most of the frequent fliers who travel primarily domestic. Everyone east of the Rockies will probably choose credit to an AA account, but I don’t think Alaska has many truly loyal passengers there anyway. Overall, this is potentially a big net loss of AA – they could lose a huge fraction of their elites on the West Coast, without gaining many new elites elsewhere. Those elites would still fly AA, but Alaska would own the relationship. Big risk.
Overall, I’m impressed that AA is taking a risk here and attempting to develop a city that’s not currently a hub – I thought they had lost all appetite for non-hub flying, except whatever they’re attempting to do in BOS. Tactically, their specific actions here seem unlikely to succeed, though.
While I absolutely agree that SEA-BLR may be a disaster, isn’t the response to your comment that “it’s telling that BLR doesn’t have any existing direct service to North America” simply to point out that there are very few airplanes owned by US carriers that can fly that distance without a severe weight penalty? It’s a seriously long flight, which is probably one of the major reasons no one has tried it.
Also, Air India is a basket-case of a company, so it’s pretty obvious why they haven’t tried long-haul from BLR either.
DL does JFK-BOM, and UA does EWR-DEL, EWR-BOM, and DEL-SFO, so it’s doable, but you’re right that it’s extremely long and requires a larger aircraft than they’d probably prefer to use on a route with this volume.
I think this helps make Alaska competitive with Southwest for intra-state flying in California too. And that’s their goal in California. If you look at a place like San Diego, you can go to more places on Southwest, especially outside of the west coast. Throw in the ability to earn Alaska miles on American – where you can get to almost any airport in the US – and you’ve got people who will do more of their intra-California flying on Alaska. American does hardly any intra-state flying in California compared to Southwest, so it’s not a loss for them. It may even be a win for them if they get former Southwest passengers onto their cross-continent flights.
Between this and your Hawaiian comments I’m really wondering what the future for geographic niche players is in North America. The ULCCs have been really diversifying their geography, leaving Alaska, jetBlue, and Hawaiian as the remaining geographic niche carriers. Can they survive as such? Is this perhaps the first domino of many as the smaller players look to insulate themselves against mega airline competition?
Also, pretty impressive that a single commenter has written more words on this topic than you have, while bringing the “cranky” back!
Eric – It’s a good question. Alaska promoted the value of being independent for many years, but now it has seen a different path as being better. It does make you wonder if others will see the same opportunity as being necessary.
AA service, even internationally, is light years away from the service on Delta. The majority of long haul AA FA’s are mean and nasty!
Excellent analysis Cranky, but there’s one big part I don’t see you discussing. That’s LAX. AA’s own memo specifically talks about how this moves makes its LAX hub stronger. That seems very true, and I was expecting to see one of your diagrams showing how AS’s Terminal 6 connects beautifully with AA’s larger operation immediately next door. The devil is in the details, so we’ll have to see how much code-sharing and cooperation occurs. But from a customer perspective, this seems like a very big deal. Right now, AA is the largest carrier at fragmented LAX, but barely: the market share numbers look like the Democrats’ NH primary results. But add AS to AA’s numbers and suddenly this dynamic duo has a 10 point lead on the next biggest operator (which just so happens to be DL!). As a Los Angeles customer, neither AA or AS right now can really take you to all the places you’re likely to want to go. Indeed, no airline can. But now AS and AA can suddenly take you pretty much anywhere, especially when you add in oneworld. Looks like a competitive game-changer to me, at least if the two airlines can play nice with each other. Oh, and as an after-thought, I think this partnership helps AA in PHX, too!
Except that you can’t just add the two market shares for AA and AS at LAX and presume they are one.
First, AA hasn’t even said what they might ask for in terms of codeshares but it is precisely because they are the largest carrier there that the DOT will look closely at the level of cooperation.
Of course, AS would like to have AA help them out after they have dismantled large portions of the former Virgin America operation – but that doesn’t mean that it will be permitted.
And as much as AA might want to spin it otherwise, dropping two longhaul international routes is a big deal. Sure they could keep trying to find something that sticks but China is a huge market that AA appears to be walking away from. Add in that carriers in the most of the rest of Asia are affiliated w/ DL or UA and it is doubtful that AA will find any markets that they can add as replacements to China that bring as much to the table.
And let’s also keep in mind, once again, that none of what AA is proposing – whether it succeeds or not – changes anything that Delta is doing – except perhaps accelerate the growth of Delta’s own hublet in Miami. With all the jubilation here, it might be time to remind readers that Delta’s response to American’s list of new Boston flights was the addition of a dozen or so new flights from Miami.
As much as some want to see this as a contest of bravado or will, it is all about – and only all about – who can win over the best revenue at the lowest cost for each of the new routes that are lost.
An even semi-objective look at the history of AA and DL over the past few years shows that DL has gained far more from AA than the other way around – and there is no reason to think based on verifiable financials that anything has changed that will change that pattern.
I’m sorry your beloved DL got beat today, but facts are facts. To the average frequent flyer in LAX, AS joining AA and oneworld is a HUGE deal. You suddenly have a network that can take you anywhere you want to go — even if they don’t extensively codeshare. It’s a game changer. Sorry for your loss.
When you say that dropping two international routes is a big deal, is it as big as when Delta dropped service to Singapore, Taipei, and Hong Kong?
You do realize that Delta never flew to Taipei nonstop from the US? American flies to two Chinese cities in Los Angeles and is talking about dropping both.
Let me know when Delta last dropped two transpacific routes at the same time.
And it really doesn’t matter whether American drops 1 or 2 or 3 routes to China now – but the fact that there are literally scores of routes which it has dropped which are competitive with Delta and/or United and even more where its share loss over the past 5 years far exceeds anything any other airline has seen.
American has retrenched to its strength hub markets – DFW, CLT and DCA – and suddenly woke up and decided they want to go on the offensive to regain share and drop routes into someone else’s hub.
Please let me know where that scenario has ever played out before and how it turned out.
AA’s actions today -as hard as you or anyone else may accept it – rank as the most irrationality any of the legacy carriers have displayed at least since 9/11.
Iahphx – Indeed, I only skimmed over the LA piece in my post today, but it can’t hurt LA from a profit standpoint. The problem is that LAX really won’t let anyone dominate the airport. They’ve structured it so that one airline can’t really win there. Certainly if American and Alaska come together, that gives more heft to the two. I looked at Diio by Cirium schedule data, and the markets that Alaska serves and American doesn’t are Boise, Baltimore, Dallas/Love, Newark, Guadalajara, Spokane, Liberia, Loreto, Missoula, Seattle/Paine, San Jose (CR), Ixtapa/Zihuatanejo, and Manzanillo. For AAdvantage members, it will be good to have more destinations like that. It does add utility. For Mileage Plan members, it’s a whole different ballgame in that they can now go international and tap into the American network and still get their benefits. That to me is a big deal for Alaska since it hasn’t been able to get the position in California it had hoped by acquiring Virgin America.
Of course, they still can’t coordinate schedules or jointly price, so this isn’t a slam dunk the way it would have been in a merger, but it’s still good for both.
with all due respect, American would have seen an INCREASE in its profits IF it had simply walked away from its LAX to China routes. They have lost hundreds of millions of dollars since they launched the routes; ORD to Asia bit the dust first and now LAX to China goes.
It wasn’t that long ago that multiple people -including yourself on this very forum – about how significant LAX and AA’s expansion there was.
Not once in all of the discussions that have been had on here about LAX have you ever said that “no one can win at LAX” and yet now we hear that in response to AA’s decision to walk away from LAX to China? Perhaps we can reopen a couple of your many LAX articles (it will boost your page views) but I simply don’t buy these repeated excuses and rationalizations that are served up for AA’s market failures from one end of the US to another.
And LAWA is actually very open to providing gate space for carriers including the big 3 that add longhaul international service.
No one NEEDS to be dominant in a market as big as LAX.
They do need to be profitable at the markets they serve.
You do recall AA’s statements about restructuring LAX the last time in which they decided to switch from 762s on JFK-LAX to A321s? Since they made that change, Delta has become the largest airline in the JFK-LAX market (also NYC-LAX, all airports) and flies 767s that carry twice as many passengers per flight as AA’s A321s which undoubtedly gives Delta a significant cost advantage on top of the millions of pounds of cargo that Delta now carries – and American used to carry.
And AS and AA will not have a joint venture or any other revenue sharing arrangement which means they, at best, will just be swapping revenue and hoping for incremental codesharing gains from an airport which is not very well suited for connecting traffic anyway because the local traffic is worth so much more.
So, I’m sorry if I challenge you or anyone else that the rationalization of market withdrawals and hoped for next steps at LAX sound an awful lot like the very same things we have heard from AA say about NYC and Chicago.
And, as you noted above, American has too many widebodies and won’t shrink its international network down to the size on which it can make money so they keep running from one market to another; this latest move just happens to take a different direction because they are now rejoining with AS (or hoping to unless the Feds say otherwise) so that they can raid someone else’s hub. Since they haven’t succeeded in competing against Delta in any other hub where the two directly compete, tell me again why this is supposed to work, esp. given that American has a 10% cost disadvantage to Delta?
Thanks for that added LAX analysis. Since I’m not a left-coaster, my knowledge about LAX mostly centers on my (generally miserable) experiences at that airport that then prompts me to do some independent research. :)
In addition to those extra markets — which, obviously, are meaningful, but not game-changing — it would be interesting to see how many more flights between major West Coast markets an AA-AS codeshare would give each carrier. My guess is that might be even more meaningful than the new markets. My impression (I haven’t studied the data), is that AA has flights to many West Coast destinations, but not a particularly robust schedule. And, on the Pacific Coast itself, it only flies mainline flights to SFO — everything else is on Eagle. I would strongly believe that AS’s mainline product would have strong appeal to AA’s LAX customer base, as would the additional frequencies.
Lost in the excitement of this deal is the fact that this partnership again shows how terrible a deal AS got by overpaying for Virgin America. I’m sure if that deal had worked out as advertised, there would have been little interest from either AS or AA in joining forces on the West Coast. So I guess you can call this a silver-lining to that failure.
Finally, I think AS is going to have to now do something about their frequent flyer program. It is too generous to low fare paying customers. I know this personally: Last, year, I bought two cheapo tickets from the East Coast to Hawaii and Australia (the Australia ticket on their partner Qantas), and I got an absurd number of AS frequent flyer miles (like 50,000) and wound up as an AS elite. This never would have happened on any other USA airline. As part of this deal, AA isn’t going to be willing to let AS “steal” all their AAdvantage members with a much more generous loyalty program. Undoubtedly, AS’s overdue devaluation of their frequent flyer program will lead to some customer unhappiness — as similar moves did at AA, DL and UA. But I’m guessing that, overall, it will lead to more profitability at AS. Especially since, at this point, there won’t even be a remaining “miles-based” loyalty program for customers to switch to!
iahphx – Well, I can look at that too in Diio by Cirium. But of course, the way it is now, without the ability to upgrade, it’s not going to be as attractive even with more frequency. The benefits need to be better aligned for that to truly sway the business traveler. It also doesn’t look as appealing for AA loyalists as you might have thought:
But here are the markets with overlap using the summer schedule (daily number of flights except where noted): Anchorage – AA 1x, AS 2x Bend (OR) – AA 1x, AS 1x Boston – AA 5-6x, AS 1x Cabo San Lucas – AA 2x, AS 3x Chicago/O’Hare – AA 10x, AS 1x DC/Dulles – AA 2x, AS 2x DC/National – AA 2x, AS 1x Honolulu – AA 5x, AS 1x Kahului – AA 4x, AS 1x Las Vegas – AA 7x, AS 2x Mazatlan – AA 1 weekly, AS 5 weekly New York/JFK – AA 9-10x, AS 5x Portland (OR) – AA 3x, AS 8x Puerto Vallarta – AA 1x, AS 2x San Francisco – AA 7-8x, AS 14x San Jose – AA 5x, AS 7x Santa Rosa (CA) – AA 1x, AS 3x Seattle – AA 4x, AS 14x
Other than Mexico beach markets which really don’t matter, Alaska only really enhances American’s service significantly in a couple of markets.
Obviously, Portland and Seattle are better served by Alaska. I’d say both of the DC markets probably can benefit, but those are far so without upgrades it’s not ideal. New York gets more coverage, probably most importantly for those who actually want to fly coach since AA has all but eliminated it on the A321T. And for San Francisco, I don’t know if that really helps at all, but there are a whole lot more together.
Interesting — especially that AS still has a fair amount of service to the East. I say “still” because I’ve twice had my AS California transcons cancelled in the past year and AS has walked away from some former Virgin America routes. Perhaps a codeshare with AA would cause them to walk away from more? It will be interesting to see how this dynamic plays out. Would could sharing lead to more service or less? I suppose it’s too early to guess as we don’t know what sort of “cooperation” AS and AA are planing. I suspect AS and AA THEMSELVES don’t yet know what they’re going to do together at LAX! And there are supposedly also some antitrust rules that AS agreed to as part of the Virgin America deal, which I don’t know if they can get out of (it’s hard to see how the government could find anything AS and AA would want to do truly “anti-competitive,” but if Sprint and T-Mobile could be hassled on their merger for years, it’s certainly possible).
Code shares usually lead to more service, not less –but I supposed AS could pull down some service if they want.
Re: “This changed in a very short time, so the shift must have come with a conscious effort to think smarter at American.”
How confident are you that the change in mindset was at American? It seems at least possible that the October announcement was a negotiating tactic… American saying “Cozy up or get out.” Maybe Alaska was reluctant to go to full earn-and-burn mileage at LAX and was initially looking for something smaller-scope?
I don’t have any information to dispute your assertion. I’m just curious.
Patrick – Fair point. I guess I don’t know for sure, but as far as I understand it, it was American’s decision to walk away in the first place.
That’s why I assume that American had a change of heart here.
I suspect AA’s “change of heart” was motivated by AS’s willingness to turn over their SEA long haul flying to them — an idea that probably never much crossed anyone’s mind before. Once AS agreed to this (it’s better than DL stealing it, right?), and AA determined they could make money with these flights, the deal became “easy.” At that point, the advantage of integrating largely non-overlapping route networks exceeded the possible benefits of seeking a competitive advantage over the other.
Aside from the obvious that this is a clear retaliation from AA on DL’s tieup with Latam, AS seems to be the big winner here. They’d probably have to now drop most of their *A partnership, but that’s a small price to pay to get AA’s entire domestic network.
If it isn’t obvious by now, AA’s LAX TPAC gateway isn’t working. PEK/PVG is not coming in all likelihood. Maybe they can take a crack at SEA.
One thing for sure, the next recession comes along, there is not a lot of reasons for DL to stick around at SEA.
Aside from DL, another loser here is B6. It now loses out on a possible future partnership with AS. It makes more sense for DL to stick around in BOS than SEA in the event of a major recession.
JetBlue management needs wake up and see if UA is interested in a partnership and see if they can join *A. Their network complements *A and UA far better than the other 2 alliances. Maybe UA will also think that it needs to strengthen in NorthEast/Florida and in Latin America and would be open to such a partnership.
perhaps you can tell us why Delta will walk away from Seattle.
With billions of dollars MORE in profits than American and AAL has hundreds of millions more in interest payments (due to more debt), it is the weakest company in an industry – that is AA, sorry to tell you, that cuts in a downturn.
AS is a winner as long as they can figure out how to manage all of the airlines that want part of their business – remember that AS chose the “codeshare with everyone except Delta that flies an international flight to SEA” strategy. Now AS either has to tell a lot of other airlines that they aren’t interested in feeding them anymore or those airlines will come to the conclusion that they aren’t interested in competing with American.
interestingly, CF notes that CX is the largest carrier in the SEA-BLR market. Are we supposed to think they are just going to smile at AA’s intentions to start routes that siphon off their traffic? Maybe the next move in this big chess game is for Delta to make an offer for Cathay Pacific; they could REALLY use the cash about now.
When the next recession hit, it’s really going to hit DL hard. They rely on those middle of the country high yielding corporate spending more than anyone else does. But it really has acted like a teenager recently that’s too eager to jump onto the next project.
It’s numbers at SEA has improved slightly over the years, but it’s still a really under water market compared to even LAX/JFK. I thought BOS was the obvious weak station to cut in the event of a recession due to their only recent increase to the market. But AS has done a pretty good job recently to concentrate all its growth on SEA. And now with AA and OW, it has enough international presence to keep those precious ff and corporate contract around.
You see the big mistake DL made was to start focusing everywhere when it should have went into SEA/PDX/ANC at the same time. That would have prevented AS from only focusing its growth at SEA. So over time, DL would be able to chip away at the gate count from AS since SEA allocates gates based on seat share. But since it didn’t try to attack PDX/ANC, AS could just direct all of its traffic through SEA and keep adding flights and turning other flights into mainline. This allows AS to keep having the most number of gates. As long as AS has the gate advantage over DL, it’s position at SEA will be safe and sustainable. But of course, DL decided that it wants to get in a bunch of other markets like BOS/MIA/RDU/AUS because its one major project at NYC turned out to be a winner. So of course, everywhere must be successful for DL.
When the recession hits, DL will be left with a bunch of underperforming station around the country. It needs to pick which one or ones to cut off. Frankly, DL could’ve won this SEA battle if it just focused on AS. The entire DL management should get canned if they draw down SEA down the road.
I suspect that of the Big 3, Delta would weather a recession better than AA or United due to the age of their fleet. Delta has 75ish MD88 and MD90s that can be immediately retired as well as many older 777/767/757/737 aircraft that can be stored at little cost to the airline or retired.
What will AA and UA do with their fleet of newer aircraft if demand suddenly drops?
Cranky I wonder if SEA offered AA incentives for adding the Bangalore route? DFW has a list of cities they want added, and the offer amount they will pay to Airlines that start the desired new routes.
PMAC – It’s possible, but a quick search only turned up incentives for small city markets. Still, it is definitely common for new international destinations to get waived landing fees for a period of time. Just not sure if Seattle does it.
Bangalore Airport did roll out the red carpet for AA. Lots of concessions and waivers.
It feels like revenge on the AA side and desperation on the Alaska side. Alaska seemed intent on retrenching to SeaTac with all their reductions in California in order to combat Delta, which feels like a strategy borne from weakness, not strength; and AA is angry at Delta for the LATAM thing and adding service into Miami. We’ll see how the AA adds work. Having to deadhead a crew to work these flights is going to make them more expensive to operate. If I live in the Bay Area, I don’t know if I would use SeaTac as a transfer point when I could fly the ME3 through some much nicer airports and not have to deal with US customs as a connecting passenger. It’s always best to clear US customs and be done with flying.
AA better figure out ASAP how to improve their on board service or they will struggle with getting high flying tech workers and corporate clients. Everyone knows many of the AA flight attendants are snarky. When I’m on a long flight and trying to put the final touches on a presentation, it would be nice to not be ignored from a flight attendant when I need a fresh water bottle or snack to power me through. (Here’s looking at that AA attendant playing candy crush and told me to wait until he was done.) If I’m on a roll, it’s a PIA to stop working, get up, wait for fight attendants to finish chatting and request water. Delta (or non-US carriers) tend to bring me a fresh water bottle without requesting when they see I’m getting low.
So my prediction for last year was correct and then some! Just 2 months too early…
I’m late to join this thread as I don’t expect CF posts on Thursdays.
Most “joint” work (M&A, JV, codeshare) starts with a limited number of options:
Who – Big4( DL, AA, UA, WN) and Next2 (AS, B6)
Where – On West Coast (SAN, LAX, SJC, SFO, PDX, SEA) and Near West Coast (PHX, LAS)
Why – Growing SEA (DL), Dominates SFO (UA) , Mega-competitive (LAX, LAS?), Too Small (SAN, SJC, PDX), Already Big At PHX (AA), Too Small And Limited (SNA, LGB, BUR)
1. AS probably has stronger “West Coast Presence” than either AA or B6
2. AS & B6 relationship only solves domestic
3. AS & AA relationship can add international
4. Do the “extra 10K employees that AA has” all retire in next 5ish years?
5. Excellent debt rating compare in latest WN=LUV Investor Relations Deck and shows WN > DL > Others
6. SEA has MSFT and AMZN HQs with each Top5 Market Cap at >$1T
7. I enjoy Tim Dunn’s analysis and understand why he is bullish on DL but he can go a bit too far being a DL Fanboy
8. CF is a great site
Hope above is concise and not Cryptic
glad you joined the conversation.
regarding number 7, I’ll rest my case when SOMEONE here, CF would be ideal, would address the question of why AA has walked away from so many strategically important markets and why this latest initiative will be any different.
If being a DL fanboy involves looking at publicly available financial statements and coming to logical conclusions based on facts and not emotion, then I plead guilty.
number 8. I agree. unfortunately, he hasn’t walked away from his relationship with HP; he is still just as loyal to HP leadership as he was in Tempe. Not a single other site that he bothered to cite as also receiving pre-released information about this story bothered to turn this into a war between AA and DL but rather they presented the facts and perhaps personal impact of this transaction and nothing more. Yes, AS and DL had a previous commercial relationship but so did AA. AA walked away from AS as did DL. DL managed to build a replacement hub for Narita (which CF has devoted ENORMOUS amounts of time to) and has achieved at least what it set out to do – and it is not finished yet. They said all along they would not add more service until the new international arrivals facility is finished = and that will be done in the fall of 2020.
AS and AA are rejoining to fix their own strategic failures – two mergers that failed to deliver what both said they would. Not a soul should see this for anything other than what it is.
I would stay tuned to the schedule changes that are filed for the next several weekends – but, hey, I am just a DL fanboy.
I personally apologize to you if the “fanboy” term was taken offensively. Your analysis and comments are always excellent, and I encourage you to keep extensively participating as you are my favorite poster after CF.
I like the adage “one should be as rapid with praise as criticism” and hope we all use it when we do our analysis of DL, UA, AA, WN, AS, B6, other and all airports. Too much criticism gets one dubbed a critic and too much praise gets one dubbed a fan.
There is NO question that DL has the best performance results in the industry and this financial $ucce$$ allows them to focus externally on growth via logical attack while others have to focus internally on restructuring and defending. If DL has lowest CASM and highest RASM then everybody in the industry knows it and should be working to get themselves in a similar position as DL has set the benchmark and bar.
With regards to UA, AA, WN, AS, and B6 how about a “What Would Tim Do” list for each? For instance, lots talk about AA having >10K more employees than DL and lots talk about AA’s “aged staff”. This makes me think it may be better for AA labor relations to just let this age cohort retire across time?
Another nudge nudge encouragement would be to analyze, contrast, and compare each of the Top4 and Next2 in the area of Digital Experience across Convenience, Cost, and Choice. Does DL have the best Digital Experience?
In my local context, one could do the same “What Would Tim Do” list for each of LAX, LGB, and SNA given their constraints.
While you may hate the analogy, airlines are like medicine in that it is a challenging balance of cost versus quality (aka customer experience).
thanks for the kind words.
Since this is CF’s blog, I will address the questions you raise if he addresses them in his articles/blog posts.
Thanks for the great article CF. JetBlue is mentioned a few times as a possible loser in this deal. My thought is “could a similar strategy with B6 be in the future cards?” Let AA do the international flying out of JFK and give the domestics to B6. BOS would be even more similar to SEA.
I know, one step at a time, but if this works, I’d place my bets on similar transactions.
Seatback – It is certainly possible, and Boston does look a lot like Seattle, but there is one big difference. JetBlue has designs on flying to Europe starting next year, so it’s not as clear of a line as it is with Alaska. Still… yes, it’s certainly possible.
I’d be pretty doubtful re: B6. AA and B6 compete head to head a lot more than AA and AS in places like South Florida and the Caribbean so the commercial and regulatory hurdles would be a lot higher. Plus, building out BOS international flying through B6 feed would undermine AA’s existing transatlantic hub in PHL and they had already cut duplicative international flying out of JFK for that reason.
Thanks Cranky! I enjoyed reading the insights. What do you think are the downstream impact in terms of int’l flight possibilities for PDX?
Bob – Well, BA already has a flight to Portland starting up, and I would be surprised to see more than that. It would seem that a flight to Tokyo would make sense, especially with JAL on the other side. But I doubt we’d see more than that, if we even see that. Then it just depends on where Nike needs to go.
I think there’s already plenty of capacity to Tokyo (DL, NH, JL) but it would be relatively easy to add in the future if demand grows, especially if JL+AA would have 1x NRT, 1xHND.
Reading through today’s slew of comments has led me to think about this in a grander scheme beyond immediate potential revenue and retaliation against competitors—and beyond the directionally indicative metrics of CASM and revenue. CASM and revenue are outputs of how you run your business—the inputs are how many people land on a booming platform for your flights per day, your soft and hard products, and your route network.
As someone who has at one or another point worked for Amazon, a company that, while facing current scrutiny, has undoubtedly grown significantly in the face of stalwart opposition and competition. I present a theory of opportunistic customer obsession in the Seattle (and broader Western US market). These insights are as data based as I can make them with the limited industry data I have access to, and strongly influenced by the publicly accessible Leadership Principles that I’ve come to live by.
And before this turns into any mention of any Amazon contracts, I have never seen anyone booked in a premium cabin.
At initial glance, the opportunism is quite clear. Delta serves the Indian market poorly, particularly from Seattle where people are likely more apt to fly Emirates or a Southeast Asia based carrier. The also do not serve London on their own metal, or a SkyTeam member.
American saw an opportunity to serve both of these markets easily without significant investment beyond operating costs. When there are low capital expenditure barriers to entry, you are effectively playing with a “two way door.” When you have a two way door, you simply make a decision and move forward because you will spend less up-front for a potential huge upside. While Alaska joining oneWorld is more or less a “one way door,” there will still be some time for American’s new long haul services to begin to prove themselves.
Additionally, in the even more immediate short term, American and Alaska may earn loyalists that are reluctant to leave one or the other, even if the partnership doesn’t materialize past mid-2021.
At the end of the day, American and Alaska found a way to serve customers who were unserved, or underserved in the PNW market, and by extension, the US market for certain routes.
Optimize free cash flow now to reduce operational and CapEx strain in the future.
Serve customers and get them where they want to go with a product that fills enough of the “how” they want to get there and you might be successful. Start filling (potential) voids, rest and learn, and reap the benefits. Nobody is truly saying this will ruin Delta or make/break Alaska and American, but it is an interesting move that ultimately us consumers will make (un)successful.
And I barely touched on the different stages of CapEx and FCF for long term success…
Tim Dunn – Care to share with the group why you haven’t posted on airliners.net in 10 years?
because CF has pictures.
This definitely has Raja’s fingerprints on it, and good on AA for finally waking up/hitting back.
People can sulk in mud puddles if they want, but this is the sort of excitement that keeps us all drawn to the industry.
And hey, if BLR doesn’t work, they can always go back to running 787’s to places like LAS & CUN. :)
An even more novel idea would be for American to develop its OWN focus cities and new hubs. Given that American and USAirways have shuttered more hubs than any other airline, why can’t they go back to STL or PIT or even SJC and build a hub there or even, wait, wait – CVG, the hub that Delta abandoned? The Midwest is littered with closed hubs, many of which still have very decent facilities and several offer as much or more intercontinental service as AA has at Chicago. Most of those cities can’t support flights to BLR but the excuse that “we’re going to launch a flight to BLR and it has to be from SEA because that is the only hub that will support it” simply camouflages the revenge that everyone – including CF – sees as the motivation for this move.
There are good reasons why AA and AS walked away from each other, not withstanding the government which told them they could not cooperate to the levels they once did as a result of the AS/VX and AA/US mergers. To somehow think that this deal is all positive financially for both sides is patently false; either AA or AS or both are having to give up something to each other that they once said was not worth it – and that may well include AS’ relationships with virtually every other international carrier except DL that flies to SEA.
Revenge never works as a business strategy but it also doesn’t explain AA’s withdrawal from scores of markets in NYC, Chicago and LA or why DL has managed to grow as quickly as it has in so many key AA and UA markets. After all, Delta was the 6th largest airline at the time of deregulation and is now the largest in terms of revenue, profits and market cap – and most of DL’s growth has come at AA and UA’s expense in terms of market share and revenue.
And, if AA is really acting as revenge for DL’s move on Miami, it is highly doubtful that swapping market share in a secondary gateway to Asia can possibly replace what DL will very likely gain in Miami where AA has enjoyed a US carrier monopoly to S. America for decades.
It is actually those that are unable to see the 40 year long trends that have been taking place in the US airline industry including over the past 5 years at AA that are the ones sulking in mud puddles.
Tim – Do NOT put words in my mouth that are completely inaccurate.
“Most of those cities can’t support flights to BLR but the excuse that “we’re going to launch a flight to BLR and it has to be from SEA because that is the only hub that will support it” simply camouflages the revenge that everyone – including CF – sees as the motivation for this move.*”*
I do not see this as revenge at all. I see the LATAM move as being the straw the broke the camel’s back. There are those in American who had wanted to push for more aggressive strategies, but there wasn’t enough momentum to make that happen. Now, with the LATAM loss, American finally has been pushed to be more aggressive. This isn’t revenge. This is an airline awakening from a slumber after finally being poked enough. This isn’t a direct retaliation. This is just a long-overdue shift in motivation to actually do something.
Let me reply to you and address a few other things that other users have addressed to me – and then absent a reply from you, I would like to wrap up my contributions to this article.
First, I apologize if you feel I put words in your mouth in using the word “revenge.” I’m glad you don’t see what is going on between AA and DL as revenge in either direction. It is a high stakes effort by both companies to increase their influence (profits) in the US airline industry. Business is far from certain and there is no assurance that any of the steps any of the carriers take will work.
It isn’t a game, and despite what some people have written, there are enormous amounts at stake. The $435 million net loss which AA reported for its Pacific network in 2018 was so large that if AA didn’t lose that money it could give every American employee at least a 5% pay increase or increase American’s net income by more than 20%. I fully understand that you and others want to see American turn itself around; believe it or not, but so do I. American is a large enough company that I have plenty of friends and acquaintances that work for or previously worked for American or fly them. Delta is clearly benefiting handsomely from American’s inability to run its business more successfully; if I am as committed to Delta as some argue, why would I want American to deal with its issues and become much more profitable and become a much better company?
At the same time, as hard as it is for some to accept, Delta is the most profitable, highest revenue, and most valuable airline based on market value in the world. They have made very few strategic missteps since emerging from bankruptcy 13 years ago and, despite what some here might believe that really is not likely to change. It is precisely because of their similar size and intense competition that AA and DL are and always will be targets for direct comparison.
I have participated in aviation social media since, well, Al Gore invented the internet and the Wright brothers gave us aviation geeks something to write about. I have repeatedly seen on multiple sites that there is an enormous loyalty in the airline industry, and I would dare say, for most people that participate in social media, it is blind – or absent the facts and data to accurately determine if something is economically viable or not. No one likes to have someone criticize their mother or the party that provides their paycheck but the very reason why people said in replies to this article, as they have elsewhere, is that I know what I am talking about and provide information that isn’t usually provided on general “fan” aviation sites. But I also say what makes some people uncomfortable. I wandered back to one of the sites I used to participate in and was quite surprised to see that several people acknowledged that I was right about most of the things that I said about the airline industry including American and USAirways. As I have said before, I am grateful for the opportunity to participate in your site and to add value, which I genuinely hope does translate into real value and profits for you.
You might also note that some of my greatest levels of participation on your site have been about articles about Asia. Perhaps it is the draw of distant lands that engages aviation fans but Asia has also been one of the most financially problematic regions for US airlines. And, yes, it is those high risks that also lead to great discussion about how to make it work; I don’t expect that will change regardless of what happens with AA or AS. As discussions about Tokyo wind down, I guess there will be other Asia-related topics that will take center stage here.
Finally, I hope you realize that American included the press release which I presume they gave you as part of a Regulation FD (fair disclosure) filing yesterday, as it is required to do with any information that could potentially impact the value of its stock and to ensure that everyone that is interested in news about American has access to the same information. They, not me, made the decision that the story you broke at the same time they did was materially significant to the company. Despite what the so-called media and PR experts above have said, it is NOT the practice of most US companies to pre-release information that is governed by FD requirements. Further, none of the topics that you said you previously received as pre-release embargoed information were covered by FD requirements – or at least there is no matching FD disclosure from those companies for the information you disclosed. I am sure that American has done legally what it had to do to disseminate the information it sent you and others. I also hope you understand that there were several people here that immediately recognized that the information you discussed in this article was materially significant to American, was different from other articles you have written, and also is not in keeping with the practice of US airlines. I have read your blog for years; feel free to correct me but I don’t think there has ever been a topic you have discussed on a pre-release basis that was governed by an FD disclosure. Hopefully we have all learned from this experience.
My apologies if my words were offensive to you. All the best to you and yours this weekend. I still hope that a handshake at Dorkfest will be in order.
Please add up/down voting back to your comments secction. The comments on this post show how much this is needed.
With AS joining OneWorld, I wonder if we could see them leaving DAL and consolidating at DFW?
And give Delta the opportunity for full time use of those gates…I wouldn’t think so. Although I’d say, Alaska’s probably losing money on its Love operation. Can AA take them over?
IMHO, this is a simple transaction that has been blown way out of proportion. It’s not unlike the overreaction we saw with the LATAM switchover. Both of these moves – Seattle and LATAM/GOL – will have an impact on aviation, but that impact has been blown way out of proportion by the pundits. These moves simply show that the airline industry is dynamic and competitive. I feel relatively confident in predicting that more changes are in the offing, even though I have no way of knowing what they’ll be. In prospectuses and corporate presentations, one usually sees a sentence to this effect: “Past performance is no guarantee of future results.” That’s true in every form of human endeavor. The truly sad part of all of this is that there are a few pundits who seem to be actively rooting for a major U.S. airline to file for bankruptcy protection and potentially cost thousands their livelihoods.
Good point. With SEA-BLR, AA saw an opportunity, made a plan, and is executing it.
If it works, it works. If it doesn’t, there’s not a whole lot at stake.
Vigorous competition keeps everyone on their toes.
This is great news. Finally, another route to get to London (LHR) from Orange County (SNA) and avoid the nightmare that is LAX.
Wow! This is simply fantastic! And great write-up @CrankyFlier. Honestly, if I expected anything out of the blue from AA after the proposed break-up with AS – it would have been a play at PDX. However this makes complete sense – why should you play for PDX when SEA is wide open in terms of connecting feed that AS is badly looking to funnel away from DL? A great match and a great solution for both carriers. I find the following things most important in this deal:-
1. Oneworld will be the only alliance with non-stop options between every major city in the East coast (NYC, WAS, PHL, BOS) and every major city in the west coast (SF, LA, SEA, PDX, SAN), including all alternative airports (SFO/SJC, JFK/EWR, DCA/IAD/BWI, etc.). This will be the bulk of my travel.
2. This will balance the size of all three alliances within North America in terms of passengers carried (AA/AS, UA/AC and DL/WS/AM).
3. This pretty much ensures that SEA-Australia is going to be on QF/AA and not DL/VA.
4. All this happens at a time when most US-Asia routes are suffering. AA having the least presence in Asia probably would suffer the least (I mean there were already burning a lot of money, so by cutting the routes, they are probably trimming the losses! :-P)
Without doubt, this is a punch in the face for DL at SEA. After all the effort that DL put in there, suddenly SEA becomes a oneworld hub with double the market share of DL/SkyTeam. DL’s SEA hubling has been probably its least successful (they have even cut a few routes lately). If we think about DL’s intercontinental routes, the China routes are going to be in a pickle for a while. So we are essentially talking about HND (1x), ICN (1x KE, 1x DL) and KIX (1x DL). Plus CDG (1x DL, 1x AF), AMS (2x DL) and LHR (2x VS). That’s it? If we look at Oneworld and partners, we have NRT (1x), HKG (1x), BLR (1x), LHR (3x) and DUB (1x). And that’s not a whole lot of gap with DL. If IB merges with UX, we could see them give SEA a try as well? A return of Finnair? Who wants TPE and SIN?
I am really interested in what DL’s response strategy is going to be. DL has also been having additional fun on the side poking AS by poaching international customers at PDX – I don’t think that strategy is going to work for them now – they will need to focus on defending SEA. AS/AA will have a much more attractive portfolio for the business customer. The interesting point is that AA/AS are better able to compete on every single international route (if they want) out of SEA except ICN, CDG and AMS (and these are probably not the ones that AA would go for).
So now DL is having to fight AA to expand MIA, fight AS to defend SEA and fight B6 to defend BOS. And I think we can put to rest the whole slew of ‘focus cities’ that DL has been embarking on, especially AUS and SJC. I think the most probable outcome is DL putting even more eggs in three baskets: CDG, AMS and ICN. These are three markets that they are guaranteed to succeed.
I also wonder about the following:-
1. With BA jumping on LHR-PDX and now getting tons of connections at PDX and LHR, how long will DL stay on the route?
2. Will we see JL on PDX-TYO? If so, how long will DL stay on the route?
3. What about SEA-KIX? Do you think JL wants to go for it in addition to LAX-KIX?
> 1. With BA jumping on LHR-PDX and now getting tons of connections at PDX and LHR, how long will DL stay on the route?
That’s only summer seasonal, I think. It probably still works during the summer.
> 2. Will we see JL on PDX-TYO? If so, how long will DL stay on the route?
This one I assume relies more on corporate traffic. I would think JAL/American might try it (and should try it) but that wouldn’t necessarily push Delta off if the corporates stick around.
> 3. What about SEA-KIX? Do you think JL wants to go for it in addition to LAX-KIX?
KIX does not do well to the US for the most part. I would be surprised to see this.
Why all the excitement? American is subpar to Delta in virtually every arena and there is a reason they originally planned to sever their relationship with AS.
This will actually work to Delta’s benefit. Passengers prefer a single carrier vs a codeshare, and it’s just a matter of time before AS’s passengers grow tired of AA’s poor service and reliability.
Bring it on!
MLC –there is (some) truth to what you say but AA’s hard product internationally is very good and I’m betting that AA is betting that Seattle area customers prefer to fly AS (their hometown airline) and can earn miles on AS when they fly AA internationally. They can still fly AS domestically and will only fly AA if AS doesn’t serve a specific domestic route. But they WILL fly AA if nec. to earn miles. That’s why I’m betting the AA/AS partnership wins out. I think that is what Brett is saying in his analysis. DL should’ve kept the partnership with AS.