The Time to Manage for Cash is Over

American, Delta

Since the pandemic began, the focus in the airline industry has been on who has the most cash. What’s the cash burn rate? How do they stem that? When will they be back to NOT burning cash? Those questions were all important, but that’s no longer the case. More airlines continue to find ways to prepare for a post-pandemic life, but not everyone has begun to make that shift. Those that don’t risk being left behind.

I realize this may sound strange and overly confident in the recovery, but it’s not. It’s just a reflection of how the industry is choosing to compete today. If everyone had antitrust immunity, got together to discuss options, and decided to go with a broad cash conservation strategy, well, then it would make sense. But this is a competitive industry and some are making moves to solve their problems no matter what. Because of that, no airline can afford to sit idly by.

It’s the dynamics of US bankruptcy law that make this especially true. Sure, a tiny airline might go out of business, but that will not be the fate of any of the main players in the US. Instead, the worst case scenario is that they file for Chapter 11 bankruptcy protection, reorganize, and come out leaner and meaner. That would be bad news for management in some cases, but don’t worry about them. That golden parachute will help them sleep at night. It’s worse news for all the airlines that don’t go bankrupt.

Of all the airlines, Delta finds itself in the stickiest situation. While others are looking ahead and trying new things to address new and previous issues, Delta remains focused on its primary hubs, hoping everything will eventually get back to the way it was last year. With the COVID vaccination plan already in motion, the recovery is coming. It certainly won’t happen in January or February, but it’s going to start soon after. It’s just a matter of when. Thinking everything will look the same on the other side is dangerous.

Delta Tries to Wait it Out While JetBlue Makes a Move

I continue to be confused by Delta’s strategy during the pandemic. It has gutted its focus cities and tried to rally around its primary hubs. Just last week it floated a big increase in Florida seats for March from its hubs. That isn’t much of a stretch. New York and Boston have seen massive cuts, responding to the demand in the northeast, but with NYC slot waivers being handed out, Delta has a free pass. It can just ramp up later. The only place Delta seems to be making a concerted competitive move is in Los Angeles. And by that, I mean Delta just isn’t cutting as much there. It’s not trying anything new.

At LAX, Delta has maintained a very high level of service, higher year-over-year than all other hubs save Salt Lake City with nearly 80 percent of the previous year’s flights being operated in January. Demand in LA is still very low, but Delta seems to want to win there. That’s fine. Take that chance, lose a bunch of money, and maybe it will net something on the other side. Or maybe it won’t, since LAX really doesn’t like any airline having a dominant position.

But while this is happening, Delta is ignoring other markets that it should be defending, right in its own backyard. Look no further than Raleigh/Durham. Delta had made that a focus city, but it has kept a skeleton schedule for months now, and it won’t resume significantly more flying until at least April, if then. Just recently, it permanently canceled flights to Austin, Cleveland, Columbus, and Pittsburgh. What happens in a vacuum? Someone steps in.

JetBlue had already announced an initial move from Raleigh/Durham beyond its own focus cities earlier this year when it said it would fly to Cancun, Fort Myers, Los Angeles, Montego Bay, and San Juan. Just recently, JetBlue has doubled down, now adding Austin, Jacksonville, Las Vegas, Orlando, Newark, San Francisco, and Tampa. This is a smart, strategic move for JetBlue, and it’s a market where the brand will likely resonate.

Delta opted to cut back significantly in these markets. It hasn’t flown to Austin, Fort Myers, Jacksonville, Las Vegas, or Newark since the pandemic began. Austin is gone for good while the others will maybe, possibly, eventually come back? The rest of the markets are operating again, but at about half where they were. The only exception is Cancun, which has grown.

Delta has used a strategy of maintaining fare integrity while sacrificing share. Looking at the short-haul markets that overlap with JetBlue, Delta’s fare has stayed relatively the same while other airlines have reduced fares. The end result is that before Q2 2020, Delta had a ~30 percent passenger share in those markets. In Q2, that had plunged to just under 10 percent. I only wish we had more recent data to look at, but anecdotes suggest the strategy hasn’t really changed.

Meanwhile, JetBlue is also trying to build up a solid strategic play in Newark (which I like) and in Los Angeles (which I don’t). The difference between the two airlines could not be more striking.

American Creates a Small/Mid-Size City Problem

This issue of competitiveness for Delta, however, extends beyond strategic focus cities. In small and mid-size cities, Delta is falling behind. We know that Southwest will dominate in mid-size cities so I don’t need to show that, and United has long been weaker in the domestic world. But American and Delta butt heads a lot, especially in the Southeast and Midwest, and I found this rather illustrative. Here’s a look at Indianapolis Cirium schedule data, a market that was a key part of the old Northwest heartland strategy that Delta inherited:

YoY Comparison of Indianapolis Flights and Destinations (in Circles)

Compares Jan 11-17, 2021 to Jan 13-19, 2020 – Data via Cirium

Each airline has cut about 50 percent of flights, but Delta has also shrunk its footprint to serve just a bare minimum number of destinations. American, meanwhile, retains eight. This isn’t limited to Indianapolis. Take a look at Jacksonville, Kansas City, Lexington, etc. There are just a lot of examples like this. Delta is crawling back into its shell, rallying around its primary hubs, while others are trying to race ahead.

We can argue whether this is ultimately the right move for American, but in tons of cities around the US, it is proving to offer more utility than Delta now. I keep hearing about American floating this idea of a “green flag.” When the recovery comes, it wants to be off to a rolling start. (Or something like that. I don’t speak NASCAR.) That could serve the airline well in the future, or it could be a disastrous money-loser. Either way, American isn’t going out of business. In fact, Delta should hope this works for American, because it would be better off competing with an American that hasn’t gone bankrupt.

Southwest Grows Stronger

Beyond American, when it comes to domestic travel, nobody looks to be the opposite of Delta more than Southwest. It has added a mind-blowing 12 new airports this year plus the big expansion in Long Beach when it got those extra slots. These cities range from big leisure destinations like Miami and Palm Springs to ski spots like Montrose and Steamboat Springs. It includes primary airports like Chicago/O’Hare and Houston/Intercontinental. And yes, it even includes smaller cities like Fresno, Jackson (MS), and Colorado Springs. These are all plugging into Southwest’s “hubs,” which just keep getting stronger. That’s bad news for every airline.

Delta, as we know, continues to position itself as a premium, business-focused airline. That’s an area where Southwest sees opportunity. It has finally gotten around to doing basic things that will make it more competitive in that world. For example, it is finally participating fully in several global distribution systems. It still isn’t there in the most important in the US, Sabre, but even just doing it in the other systems can help move some share. The key point is that it is not sitting still.

United Puts In the Work

You can say the same for United. On the network side, it has put together some really interesting routes during this pandemic (Bangalore, Johannesburg, etc), but more interesting to me is that United is actually spending money while revenues are down. For example, it invested in an agreement with its pilots — offering things like guaranted premium cabin travel when deadheading to/from a flight — that creates flexibility during the recovery. United also hasn’t retired a single fleet type since it doesn’t know what will be needed once everything is back up and running. It wants to keep its options open.

The airline has also put money into its aircraft. It modified its 787-9s so they could fly further and open up routes like Bangalore. United has sped up the reconfiguration of the widebody fleet to have the new Polaris seats. It’s even putting money into direct carbon capture technology which will actually make the airline carbon neutral by 2050. This is an airline that is positioning itself for the — admittedly sometimes very distant — future.


Delta seems to be positioning itself for a future that looks a lot like the past. It wants to be a business-focused, premium airline. It’s just going to quietly go about its business until the time comes for that to happen again… if it does happen. It continues to block middle seats in the name of safety and has spent a ton of money on Delta Clean. The airline seems interested in trying to bank on healthy and safety as a differentiating factor. It even has a VP in charge of the effort.

Ultimately, every airline is doing something in the “health and safety” realm, and there hasn’t been any significant case of broad transmission on any US airline. Delta may get a short term bump for this PR effort, but once people have the COVID vaccine, well, they’ll care a lot more about price than they will about cleaning procedures. (And there’s no world where the empty middle seat can remain.) This seems like a short-term play instead of a long-term strategic focus. That’s not where I’d put my efforts.

The time to hide and wait for things to improve is gone. Some airlines seem to understand this better than others, banking that they know the way forward better than the rest. Only time will tell which strategy was right, but I’d certainly place my bets on those who are willing to take chances now to get ahead of their problems. It’s hard to imagine that the future will look like 2019.

77 comments on “The Time to Manage for Cash is Over

  1. “[Chapter 11] would be bad news for management in some cases, but don’t worry about them. That golden parachute will help them sleep at night.”

    Doug Parker still has over 2 million shares of AAL. At one point these were worth over $100 million. His current holdings are still worth over $30 million at current share prices. That could be the single biggest factor that forestalls a Chapter 11 filing. To be sure even if shareholders were wiped out he’d still be a very wealthy man, but he has a lot at stake personally.

    1. Like the author and Mr. Dunn, you summarily announced that there should be no additional PSP for the airlines when Cares Act 2 (originally called the “Heroes Act”) was initially contemplated. Like so many outside the industry, you quietly root against it while simultaneously making your living off it. Wannabees and used-to-bees don’t really cut it in the real world.

      1. Delta may need another Tim Dunn bailout on this forum. Here they go again cancelling hundreds of flights over XMAS. Some due to MSP weather but many due to DL’s scheduling incompetence.

        1. Feel free to let us know what numbers are weather-related and how many are incompetence. We’d all love to know.

          Before you post, take a look at national radar. A good chunk of the eastern US looks pretty messy and it isn’t getting better soon.

            1. omg. Per the Tim Dunn “cancelled flights don’t matter unless there’s massive media about it” doctrine, now that the Washington post is on the story, it’s real! lol
              On a serious note… two big holidays in a row with large cancellations. Somebody at Delta is messing up.

            2. I never said that cancellations didn’t matter if passengers didn’t complain.
              I did say that the indications were that there appeared to be few passenger disruptions because of the lack of media coverage.
              I still believe that the Thanksgiving cancellations happened early enough that they were able to reaccommodate passengers with MINIMAL, not NO, disruption.

              That is clearly not the case. These are last minute cancellations which are leaving people with few options.

              Bad Delta. When will they ever learn?

              btw,

          1. Oh look, Delta screwed up again, and Tim is out being the minister of propaganda again. It never changes, such a ponderous bore.

            1. When I see a Delta siting on this blog it can be assumed Tim Dunn will comment sooner rather than later.

              Happy holidays everyone! Yes including Tim.

            2. He really could’ve had an amazing career as Tokyo Rose or Baghdad Bob. Tim’s ability to defend Delta against all rational belief and facts is truly unsurpassed. He’s already back at it today explaining why Sky Clubs planned pre pandemic explain Delta’s amazing future network strategy…

            3. When this forum becomes no different from a.net with anonymous people making factually incorrect statements and personal attacks, the site is at a loss.

              The entire thesis of the discussion is wrong.

              Cash burn still matters and will matter until any particular airline isn’t burning cash. Delta’s cash burn is lower than any other big four and lower than most of the industry on a cost adjusted basis.

              Delta’s capacity position in every one of its hubs and focus cities is unchanged or improved pre-pandemic.

              Delta spent 10 years after the NW merger reworking the parts of its network that didn’t work and had the best financial performance of any global carrier. and nearly identical to WN which has been the yardstick for financial success in the airline industry.

              Some but not all of those statements may be true about other airlines.

              There is no facts or data to support any notion that Delta is retreating from its pre-pandemic network strategy. THAT is not true for all other US airlines.

              Delta is not throwing darts at a map trying to find markets that will work post-pandemic.

              Fact-based statements – even if they are counter to what some people believe or want for the industry – is what real industry analysis has to do.

            4. Ironic you bring up a.net.
              I mean… you were banned from a.net for your lack of facts and bluster. So any “facts” you provide and analysis sort of lose relevance.

              A quick look at your article titles from seeking alpha is pretty hilarious and just reinforces your bias and Baghdad Bob persona: delta can do no wrong and you hate AA.
              Sort of ironic for someone fired from Delta but not AA but live your life.

            5. Interesting that you want me to provide facts but you make statements for which you don’t provide facts.

              CF is one of the few aviation writers/bloggers that provides market-level capacity information. Through CNW, he has provided graphs and charts showing capacity changes for a number of the top markets since the pandemic started. All of them have involved AA and UA markets and show that in many of them, including NYC, LA Basin and S. Florida, Delta has increased capacity share while AA and UA have lost capacity share.

              He could have provided a capacity chart showing what is going on in DL’s network but he didn’t. He could have also done a financial analysis showing why cash burn doesn’t matter but he didn’t.

              He wrote an opinion piece based on his belief – not supported by facts – that Delta is at risk of falling behind because it hasn’t added a bunch of new markets or flown a bunch of capacity that hasn’t sold.

              He, like all of us, is free to have his own opinion. We are all free to interact w/ each other’s opinions.

              We can’t change facts and those facts, whether you like them or not, show that AA and UA’s capacity share in a number of its top markets is falling not just going into 2021, but has been for a number of years.

              He or you or I could produce graphs looking at capacity in DL markets.
              You and I can’t post graphs to CF’s blog even if we had the data.

              You can count flights at each airport via airport arrival/departure websites, flight tracking services or any number of other public data sources.

              The simple fact, as uncomfortable as it may be is that Delta is not losing capacity share in its top market and/or its capacity ranking (1st, 2nd, 3rd etc) has not changed in ANY of its hubs or focus cities since the pandemic based on accurate published schedules.

              Delta’s cash burn projections for the 4th quarter is projected to be the lowest on a cost or revenue normalized basis compared to at least AA, B6, UA and WN. That data from each airline is available on their investor relations sites.

              Your argument is not against me but against the facts which I highlight.

            6. Dunn >The simple fact, as uncomfortable as it may be is that Delta is not losing capacity share in its top market and/or its capacity ranking (1st, 2nd, 3rd etc) has not changed in ANY of its hubs or focus cities since the pandemic based on accurate published schedules.

              Factually untrue. NY-NJ Port Authority stats show UA and DL essentially tied in January in the NYC market, but UA substantially ahead by Oct. In fact, Delta flipped from being ahead domestically to behind UA (it’s always been behind internationally)
              https://www.panynj.gov/airports/en/statistics-general-info.html

            7. Tory,
              As I have noted before, local market share is defined by O&D (origin and destination) share, not by passenger boardings. There are a couple sources of O&D share – mostly the US DOT but also via extrapolated CRS/GDS data.
              Boardings are provided by airports and also reported by the DOT but include connections – which is why they are not meaningful to determine which carrier has the highest share in the LOCAL market – those passengers that end/begin their travel at that airport – ie not connecting.

              As has been noted, LGA is recovering far slower than JFK or EWR and NJ has (somewhat) less onerous quarantine restrictions than NY which might favor NJ.

              For the month of November, UA scheduled more flights from NYC’s 3 airports while DL had the lead in December and January. As has been noted, DL is blocking seats which probably means they are not selling all they could esp. right now as NE to sun destinations are packed.

              For years, DL has had a couple percent advantage over UA In terms of number of flights and domestic seats from NYC while UA has had more ASMs and more international seats. Both of those are not likely to change post-covid.

              Capacity and traffic is well below historic levels; trying to project medium and long-term trends for any airline is risky – in part because we have no idea what any carrier will do.

              That said, B6 is expanding into EWR and that is very likely going to be a long-term reduction of UA’s share at EWR. JFK and LGA are both still slot-controlled which means that UA cannot offset its share losses at EWR with more capacity at JFK or EWR.

              AA has been operating well below its slot usage at JFK for years and underperforms DL in average fares in many LGA markets; that is not likely to change.

              UA will face much greater pressure on fares at EWR than carriers at JFK and LGA. UA is facing the most competitive pressure in its hubs with B6 and UA’s growth than any other carrier.

              It is also noteworthy – and CF will probably touch on it tomorrow – that UA has not pulled down its system schedules for Feb or beyond – the only big 4 airline not to do so. Most airlines are now selling much “fuller” schedules for March and beyond, either because they intend to pull them down later (more surgically) or because they believe there will be a big bounce back in demand as soon as vaccines start being given aggressively in the 1st quarter – and hopefully death and cases counts also start falling aggressively.

              It is still very possible that DL could add more destinations including from EWR but they just are not jumping into any major market growth until the pandemic is over.

              Based on what is happening in NYC right now and also based on graphs which CF has provided in NYC, DL is set to gain a higher share of NYC seats than it has ever had while AA and UA will fall; B6 has the potential to significantly grow if it uses most of its JFK slots and also grows EWR – although they realistically do not have the aircraft to fly most of their new flights plus all of the flights they previously operated from BOS, JFK and FLL. They will be relatively smaller in some of those cities or they will sacrifice some of their new routes.

              NYC will likely be a smaller market but there is every indication it will still be highly competitive and there is a very good chance that DL will have an even larger share of both JFK and LGA as well as the entire NYC market than they now.

            8. A lot to unpack there Tim. For those who found it TL;DR, I will summarize it as “Yes, I was wrong – Delta has given up NYC market share to United, but I expect them to eventually get it back for many reasons.” Good discussion/debate.

  2. I wouldn’t count Delta out here. While shrinking AUS and RDU are mistakes, in my eyes, Delta has never followed the herd and emerged as the industry’s bell weather once it cleared Chapter 11 in 2007 and has not looked back since. It stitched together a merger with what was arguably one of the worst US airlines at the time (2008, Northwest) successfully and the integration was a textbook example of how to merge two airlines. Delta had invested billions in NYC from 2007 and lost money there until 2014 when it finally turned profitable. Delta is in it for the long game and I suspect they will emerge from all this in a strong position.

    United has also done some very interesting and smart things during the pandemic and probably has laid the foundation for emerging from this crisis without the need for a Chapter 11 filing. This is all due of course to having one of the industry’s best CEOs. I still think there are some not so hidden problems at UA that eventually will need to be addressed, namely what to do with the dormant 767-400ER fleet, which hasn’t been retrofitted, the larger than needed 777-200ER fleet, and the retrofitted but aging 767-300ERs. United though seems to be thinking forward.

    American would be the one airline I think may end up in bankruptcy again. The COVID19 strategy appears to have been spitballing rather than well thought through, but to their credit, they made money in the small window of opportunity that was Summer 2020 and expanded where others retrenched. American’s global route map struggles look today just as they did in the pre-US merger days. Struggling in Europe, very weak in Asia, and too reliant on Latin America. I suspect AA is positioning itself for an eventual merger with AS or will pick away at the carcass that may be B6 (B6 burns more cash relative to revenue than any other US airline) and its strategy of jumping in where others vacate isn’t entirely thought through.

    B6 is not an airline with deep corporate contracts and so the RDU game isn’t entirely smart and they’ll find themselves on the wrong side of the competition at LAX when things return to some degree of normal. Back to American….it has made some significant changes, but 45% of the company remains managed the way it was in the pre-merger days and the myopic approach embraced by the US/HP crew still dominates today.

    B6 will also delay the TATL expansion far into 2022. The landscape there is changing rapidly and STN and LGW are not game changing routes. It remains a nice carrier, highly vulnerable, and its aggressive moves in EWR, MIA, and RDU aren’t going to be long term.

    WN is also spitballing, but it stands to gain as domestic travel will likely rebound much faster than international traffic. The more WN expands though in places like ORD, IAH, and MIA, the more operational headaches it will face when things return to some normalcy.

    Lastly, to round out the list, Frontier and Spirit will eventually merge, to capture scale.

    1. B6 is getting its first A321LR early in 2021. Do you think they will keep it ground until spring of 2022? They are not going into STN. LGW slots should be widely available given the current troubles facing DY and many other airlines there. The only question is whether they can secure LHR slots. There are a lot of airlines willing to lease them slots for 2021 to 2022, but who is willing to lease them long term? Hard to say. That will determine whether they end up in LHR or LGW or both.

      B6 had a lot of cash pre-COVID. Much better financial position than any of the big 3. Why do you care how much cash it’s burning?
      https://crankyflier.com/2020/11/10/and-the-winner-of-the-q3-cash-burn-derby-is/
      burned less cash as % of revenue when combining Q2/3 than AA and about the same as NK.

      With business travel likely down for a few years, being more leisurely focused rather than corporate focused seem to be a pretty good thing right now. They will be more attractive after that with a large station at EWR, focus cities at LAX/RDU and possibly SFO. Keep in mind that mint prints money and that’s going to be the majority of their flying out of LAX for a while.

      As for RDU, it’s the land of Northeast transplants. They’ve always performed well out there. You don’t get chance to build new focus cities during good times. Those opportunities come when airline industry is struggling. They build BOS when all the legacy airlines shrunk. RDU is clearly a place they identified. I actually suggested RDU as a place they should build up back in April. There is no better fit for JetBlue than RDU as a new focus city.

    2. “To round out the list”

      Huh. There’s an Eskimo you’re missing. Same with Cranky. I would assume that they’re doing nothing special given that similarly sized Jet Blue got called out but Alaska didn’t.

      1. Alaska had an entire article devoted to them yesterday. First airline to put in a big plane order post-covid and it involved no additional capital costs. They’re setup to return to pre-covid fleet size in 2023 with options to grow substantially by 2026. (Presumably they could change course and keep the Airbus and so grow pre-2023, if they chose). They haven’t been trying for new focus cities as others have done, but they’ve certainly been connecting lots of dots they hadn’t previously, which might also be prep for their tie-in to One World in March.

      2. eponymous – Alaska is definitely doing something. I suppose I could have put them in here, but it was already long enough! There is the fleet stuff from yesterday, but the tightening of the partnership with American and the entry into oneworld is a big shift that shows Alaska is rethinking its place in the world. I’d love to see Alaska get together with Hawaiian, but that’s just me. Oh how I love that combination…

        1. What I see in AS forum is that they expect a lot of growth from 2024 to 2026, but that seems quite far away for an airline that has the financial strength to be more aggressive. I wonder if they are missing out on opportunities. While aggressive moves are risky now, they are also easier/cheaper to execute while other carriers are down.

          Also, now that AS is going back to single fleet, that really opens the door for WN merger.

        2. Say some more about how you see an HA-AS merger working? I’d love to see it too, and HA’s interisland and A321 operations fit nicely with what AS does, but how would you see AS using HA’s widebodies? And what happens to HA’s brand equity, especially in Japan? Would love to see your thoughts in a future post.

          1. WrightHI – Oh, I could go on and on about this. I actually put together a lengthy analyst-style report about it with someone earlier this year. To me, the idea is to basically create a carrier that is more leisure-focused and sits nicely in between American and JAL. As American looks to build up its international focus city in Seattle, a combined HA/AS could then use the widebodies to supplement. There are going to be leisure cities from SEA that are more leisure-focused, and the Hawaiian A330s would fit the bill better than anything American has anyway. They could even route them to the east coast and offer flat beds on some flights where Alaska can’t compete today. Hawaiian just has too many airplanes for its network, so it needs an outlet.

            Then between the mainland and Hawai’i, you rationalize capacity. It used to be that HA/AS competed with each other on secondary routes. Now Southwest is in those markets, and they need to come together to fight that. It basically maintains the level of competition that existed before Southwest entered. The 737s can also allow them to shift lower capacity airplanes on some routes, and even rotate them into interisland if they found it worth doing.

            Over in Japan, this is a powerhouse, because you really let JAL lead the way on sales. It doesn’t really matter which airline operates the flight when JAL can lead. But there is an argument to be made for keeping both the Hawaiian and Alaska brand names if there’s a reason to do it. I’m just not sure it’s even worth it.

      3. AS is actually doing (almost) everything right, it seems. Simplifying the fleet and getting rid of the Airbus jets with a good deal from Boeing and aligning frequent flyer reciprocal benefits and some scheduling with AA. The next step for AS as it ramps up oneworld and the partnership with AA is what to do with LAX/SFO to JFK. The AS product isn’t competitive there at all. I suspect AS will eventually move into T8 at JFK, align SEA, maybe SAN and PDX with AA, and drop LAX/SFO altogether.

  3. I work in a former “Heartland” market, and it’s been tough to watch our market share slip away. Historically, NW (and now DL) commanded a 20-30% lead in local market share over UA & AA. That’s currently in the low single digits. And while I’d like to think the C-Suite knows what they’re doing, it’s demoralizing.

  4. For an airline that strives to be “business-focused and premium” airline, DL sure cut it’s D1 service to bare bones.

    I think the fact that DL has made no change to its strategy comes from the firm belief within DL front office that DL had the best network pre-COVID and nothing needed to be changed. It’s kind of hard to argue against restoring their core hubs, since those receive the least attention from LCCs. So, DL really doesn’t need to make any changes.

    I think UA faces the most challenge at their hubs. EWR hub will never recover to what it was because a 100 flight B6 station and another 40 flight between NK/F9 would not only dilute the yield but also reduce the number of flights UA can operate before the airport gets constrained again and slots get reinstated. With a reduced TATL schedule and fewer flights, it will become less competitive to all the within perimeter market vs DL at LGA. SFO is also facing a huge challenge. TPAC demand will be down for a long time. WFH has led to a lot of people moving out of the expensive Bay Area. At least in the next few years, O&D out of SFO will be reduced, which hurts their ability to compete against other airlines hubs. Just think about stuff like ATL/DTW/MIA-SFO, how does UA stick around in these markets? DEN also faces challenge from the rapidly growing WN there. Since DEN is an interior hub, UA has no advantage over WN. WN is going into all their small markets now. ORD is the only place they are likely to emerge stronger due to AA pulling back a little bit.

    AA is real financial mess, but at least some of its hubs are in great location. DFW/CLT are obviously going to drive their recovery. MIA and PHX are doing great through this crisis despite a lot of competition. All these 4 airports are likely beneficiary of population movements. However, their overall financial health means they will permanently be smaller at LAX and NYC. Which obviously would benefit AS and B6. They will have to rely on its partners to win over corporate contracts/ff in small and mid sized towns. Which is not a terrible idea. PHL is in a lot of trouble too imo. It’s O&D never looked good. With TATL travel down for a few years and it’s hard for me to see PHL running as many flights as before. If you factor in the need to use DCA slots and growth of CLT, AA will be encourage to have people connect at those airports rather than PHL. And add on top of that, EWR is getting more competitive and BWI is getting larger, PHL is going to bleed customers to those airports. I also think they will be #3 in Chicago behind UA and WN. For an airline with AA’s costs, that means it will be a below average station going forward.

    WN is obviously going to thrive here. It’s doing great geographically through this. It’s domestic and non-premium focus is a huge plus for the next few years. Until international and premium demand recover, WN is going to have a few years to really build up its interior “hubs” and do real damage to AA/UA.

    So, I will just point to why AA’s AS/B6 partner strategy might work. Let’s pick a medium sized market like IND. That’s a market I’m pretty sure B6 will announce next year. AA’s hubs already cover some of the bigger markets out there. Let’s say AA ff have good mileage earning and upgrade priorities on AS/B6 flights. Now, someone with AA could fly AS to SEA or even LAX (if AS launches this route). B6 would be more helpful than AS in most of these east coast and midwest markets. It would add BOS/JFK/EWR at a minimum and possibly LGA if AA drops out. Here is why I think AA/B6 partnership is expanding. What does AA have to loose by expanding its partnership with B6 if it’s already gifting JetBlue with LGA/JFK slots + interlining and ff benefits? At a place like IND, adding B6 service to BOS/JFK/EWR + RDU/MCO/TPA would give AA a route network that DL simply cannot match. That’s going to help AA retain its ff and gain other ff at DL/UA/WN’s expense.

    And you can make this argument all across these small/medium sized airports that have no dominant WN presence.

    CF, I’m not sure if you will make an entry on JetBlue into RDU, but I think here are the factors to think about:
    – RDU and CVG are clearly the lowest in DL’s list of priorities.
    – DL’s RDU operation had a lot of loss leaders like BWI/MSY/ORD/PHL in their bid to win market share there. In a low business demand environment, RDU is likely going to be out of non-hub/leisure markets for a while.
    – DL has had a larger headcount reduction than most other airlines (with only UA close to them). That means, they will have trouble quickly building things back up. It will take time to get the unassigned pilots back to trained status and even longer time to hire new pilots replace the ones who have left. They are having trouble staffing their Christmas schedule.
    – JetBlue has the opposite problem. It made conscious decision to not aggressively trim head count in order to capture a rebound in leisure demand. Which means high cash burn when paired with NYC/Boston demand drop.
    – But they had great cash position pre-pandemic because they did not buy airlines. That cash position now allows them to acquire the gates they need at EWR, LAX, SFO and RDU for future expansion. Those gate leases at EWR/LAX/SFO are not cheap. But it’s cheaper than AS paying $2.6 billion to acquire those same gates + another fleet type they don’t want.
    – B6 has a bunch of E90 pilots sitting around getting paid at 75 hours a month to do nothing. Those E90s need to fly somewhere now that BOS short haul demand is shot
    – The sweet spot of e90 (under 2 hour flight time) covers all of the northeast and Florida and good chunk of midwest out of RDU.
    – JetBlue probably has 2 years to build up its RDU network before DL has taken care of its other priorities like SEA/LAX/NYC.
    – A big question is JetBlue’s partnership with AA. Does it expand to include places like RDU? That could make a difference here. it’s a lot easier to make some of these new routes work with AA ff.
    – interesting to compare AS and B6 approach here. Both airlines had pretty good cash position pre-COVID, although was a little better due to not having purchased VX. Both airlines now having partnership with AA. Both are less exposed to reduced international long haul flying and business demand than Big 3 airlines. AS actually have a huge geographical advantage over B6. B6 has made more strategic moves than AS.

    1. Phenomenal analysis, CF, and FC, your assessment on AA/B6 is spot on. I would take it a step further – if an airline’s value is really heavily dependent on it’s FF program, is it actually advantageous for AA to continue to shirk from these uber competitive markets, cede those to B6 and focus on their Latam and TATL traffic? B6 could ultimately buy out AA (either outright or out of bankruptcy which would help in finally getting rid of all those mechanic contracts) and make AA’s frequent flyer program dominant? Almost similar to what BA has done with Avios and being an airline holding company?

      1. Shrinking and turning your own flying over to competitors – not joint venture partners – only works if you can get the costs out or find new routes to fly.
        AA has been trying to find new places to fly for years but the costs are still there.

        Historically, the only way airlines have managed to get costs out on a long-term basis is via bankruptcy.

        1. Exactly. As you’ve noted, I think the financial pressure on AA will ultimately be too much and they’ll need another trip through Chapter 11. With all the value held within the frequent flyer program (that which they haven’t already used as collateral), it could lead to an interesting change in their relationship with B6.

          1. I just don’t see any reason for other airlines to want to merge with AA and its mess. AA’s are still way too high. If anything, DL and UA have managed to really reduce their head count in this downturn and that will allow them to be more nimble going forward. It’s hard for me to not see DL strengthening and the AA/UA weakening from COVID. Although, I think the big winners are going to be the LCCs, especially ULCCs. NK/F9 are going to be able to just grow like mushrooms in places like EWR, PHL, DEN and ORD while UA/AA don’t have the international and business tickets to balance out all their price matching.

            I don’t know if AA will go through another chapter 11, but I can certainly see AA not being cash neutral even by Q4 of next year, while all other major airlines are probably going to be cash neutral by second half of the year. All that debt will be crushing.

            Again, it’s important to not ignore the huge head count reduction by DL/UA. They will benefit from lower cash burn now, but it will take them several years to get back to pre-COVID size. In AA’s case, they might have to keep reducing head count all of next year as they get hammered by wall street for being the only carrier that is bleeding cash.

  5. This is one article that needs to be bookmarked to come back to a year from now and see how accurate it is.

    We can all postulate about the strengths and weaknesses of specific carriers but the only way to know what works is to see the results.

    Delta’s relative capacity share of its hubs and focus cities is unchanged – other than for its seat blocking – from one year ago.

    While RDU seems to be the internet windup subject of the month, B6 is largely adding capacity that other carriers have dropped at least temporarily (LAX, AA), are markets that DL wouldn’t add (the Caribbean), are already highly competitive (Florida) or are competitive w/ more than one legacy airline (EWR – DL and UA, just as EWR-ATL which sees just as much new capacity – but B6 is also adding EWR-ATL on the same basis.)

    History of the airline industry is full of knee-jerk reactions and attempts to steal marketshare and few of them have worked.

    History does show that DL rationalized its route system after the DL/NW merger by closing hubs (CVG, MEM and NRT) and then opening new ones (BOS, SEA), strengthening existing competitive hubs (LAX) and adding focus cities based on point to point flying, something AA and UA don’t do even though that is the model WN has used. It is noteworthy that AS and B6 are two of the lowest cost carriers (aside from the ULCCs) and yet DL has managed to build hubs in both of AS and B6′ top markets.

    Low cost carriers will continue to grow, the industry will continue to see a shift in capacity from competitive coastal markets plus Chicago that have been dominated by AA and UA – because those are the roots of AA and UA’s historic route systems. DL (and NW) built their hubs in medium sized markets that are less competitive, where DL (and also WN does the same thing) gets higher average fares and has higher revenue flowing through those hubs including connections than more competitive large hubs.

    Low cost carriers like B6 will diversify away from their NE hubs but they will not succeed at anywhere close to the number of markets they are trying – or some propose for them – right now.

    WN will increasingly move to be a hub and spoke carrier with multiple large hubs, some focus cities, and a pattern of disruption as they move into markets where they have not been present – AA and UA’s remaining hubs.

    AS learned its lesson BEFORE covid about trying to stray too far from its strengths, will pull back from its loss-making transcon flying and remain strong in the west. B6 should learn from AS. It is precisely because both have such different strategies despite having similar costs that there cannot be a merger of them as long as they take different paths. AS and DL compete well with each other and have largely figured out how to coexist but neither are doing stupid stuff anymore.

    It is a tribute – not a reason for panic – that DL is not flailing around trying to find new strategies in the middle of an economic crisis and a period of deeply distressed demand. After winter break, demand will plummet, deaths will rise again and there will be little travel until mid Feb, after which the vaccine will begin to start reducing deaths.

    DL could have picked up more revenue during the holidays by not blocking seats but it has clearly calculated that they are getting higher yields due to passengers that want more space for any number of reasons during the weeks and weeks that are not holidays.

    American will still be the weakest financially. It had poorly performing hubs before covid and that will still be true after covid. Giving flying to AS and B6 is revenue lost for AA; a relatively few passengers that book on AA but fly AS and B6 won’t change the trajectory of those underperforming hubs. CLT and DFW simply are not capable of competing with nationwide and worldwide route systems. AS and B6 will “cheat” on the agreement and further weaken AA by having data and the ability to start routes in AA’s top markets.

    UA’s market share will fall the most in its core markets. UA depended on loyal business travelers that offset the competitiveness in its hubs. That type of passenger won’t be back for years – if ever.

    And the basic assumption of the article is flawed. Cash burn does matter and will continue to matter until airlines are not burning cash. That won’t happen until well into April and likely May.

    Even with another round of government help, airlines are taking on enormous debt. Once cash burn stops, some of that cash can be released – but there will still be enormous debt that has to be repaid.

    As much as some want to argue with it – Wall Street investors recognize that DL and WN are the two best run and financially strong airlines in the industry. They both have the resources to grow at the expense of others, scrap with each other where they need to, but gain more from taking on other carriers.

    Rather than debating something that go one here can prove right now (on a holiday), let’s check back in six months, a year and five years. Bookmark this article.

    This forum is a great place to debate and discuss and a true present to all of us.

    Whatever holidays you personally celebrate, may you enjoy them with the people that you love.

    Be safe and responsible and a positive force in the communities where you live.

    1. thanks for the laugh. I’m sure we can expect you to be ready next year with your dystopian quotes regardless of Delta’s status: “Good guys win. Bad guys lose. And as always, Delta prevails”

      Thanks for the article Cranky. It certainly will be a fascinating 2021 to see what happens to all carriers.

  6. CF,
    I am a resident of AUS and a Platinum Medallion with Delta. Last week I was in the AUS Delta Club. It was pretty deserted (myself and 4 others). I had a conversation with the bartender about Delta growing here quickly before Covid and if she thought it would eventually bounce back. She mentioned that a lot hinges on the suspended KLM flight. She says that when that happens Delta will start flying to non-hub cities. She mentioned that with some large companies relocating here that she is expecting flights to SFO and SJC. She even said they are considering a flight to India. I’m not sure why a flight to India makes sense.

    One of the agents who sits by the elevator in the club heard our conversation and said that Austin has a diverse economy made up of corporations, academia & government which makes it worthwhile to offer nonstops to key cities outside of their hub & spoke ecosystem, especially when they get more A220’s that will focus on cities with a diverse economic base that have a higher percentage of educated, affluent professionals..

    I am going off of my memory (which is scary).

    1. Thanks Angry Bob. Of course, it’s always good to be wary of any front line employee on rumors like that. They generally don’t get the insight into those decisions, so it ends up being more rumor than anything. Not that I know either, but I don’t imagine the KLM flight is hugely important in the Austin strategy for Delta. It’s a nice flight to appeal to corporates, but it doesn’t make or break it. As for India, I’d be shocked to see that.
      I’d actually be shocked if that was even possible considering how far it is. But without a hub on either end, that’s one crazy flight to try.
      You’d need to have some serious corporate guarantees.

      1. the size of the Sky Clubs has more to say about DL’s intentions for any market.

        The SkyClub in BNA is going from about 1000 sf to 10k- which is similar to AUS. The SkyClub in SLC is enormous.

        There will always be people that want more than just to go to/from a flight.

        1. Ahhh yes. The sky club is how we should measure Delta’s future network strategy… the sky clubs planned pre pandemic… that’s how we should measure future strategy.
          Tim… where do you come up with this nonsense?

          1. Delta has continued its airport construction projects during the pandemic and accelerated some of them; its new Sky Club at BNA is still on schedule and it will handedly be the largest airline club at that airport. It still has gained additional gates at AUS – the most growth in gates for any carrier, IIRC.

            Delta apparently believes its pre-pandemic plan for its network still works. We’ll note your dissent as we bookmark this conversation to check back in the future.

            Delta’s relative position in each of its hubs AND focus cities is unchanged as much as some people want to continue to believe DL has shrunk. Where it was #1 – such as in RDU – it still is. Other carriers have shrunk their presence in the same markets such as RDU, AUS, or BNA – by similar degrees such that DL’s market position is not changed.

            There is also no evidence that any carrier is any better positioned to regrow their network post pandemic.

            2020 is clearly the year to believe what one wants to believe but the notion that DL has retreated in any city across its network or is unable to continue its strategies post-pandemic is not supported by actual facts and data.

            1. lol. I mean… Cranky literally just wrote an article about nearly every point you’re making and how other carriers are making network moves that reflect a new reality while Delta is not.
              But… Your magical fantasy world is probably more fun for you. Stay there while the rest of us move to 2021.

              And you of all people should know the “share” in focus cities and hubs isn’t true by middle seat blocking alone, much less absolute flights. Stop saying “delta’s share hasn’t changed” when it absolutely has. Even Cranky addressed that exact point (focus cities) in this post alone.

            2. Writing an article and presenting facts are two entirely different things.

              If CF wanted to make a point about DL’s supposed retreat from its focus cities, he could have produced lovely graphs showing capacity changes in the markets being discussed and noted that the data comes from Cirium and Wall Street analysts.

              He didn’t.

              He wrote an opinion piece and the gallery, including you, took it from there.

            3. Ahhh yes. And your facts are where again?
              Link to anything, literally any data. But you never do. Just bluster

  7. For what it’s worth, I’m a physician who has taken 4 -5 flights to small markets (LEX, EVV) with Delta over the last few months. I would not have even considered flying for those trips without Delta’s open seat policy. From my perspective, it would not have been worth the risk of sitting that close to someone on a CRJ-200 with every seat filled (plus I was able to get Row 1 seats that I felt further reduced the risk of contracting COVID-19 from an asymptomatic passenger).

    1. …and I got COVID-19 shot #1 this week; shot #2 is scheduled for Jan 9. By March 31, I suspect I will care a lot less about blocked seats.

      1. Thanks for flying DL. We’ve been told repeatedly that passenger feedback is overwhelmingly positive w/r/t to blocking the middle seats, but COVID or not, who *wouldn’t* say that?

        I’m much more interested in stories like yours- people who deliberately chose to fly DL, and/or wouldn’t have flown at all otherwise. I think that’s the story the rank-and-file employees need to hear, along with a clearer idea on what the next 6/12/18 mos. look like network-wise. The blocks currently go until 3/30/21. My hope is that vaccinations render them moot.

        1. Kevin,
          Let me go out on a not-very-long limb and say that Delta’s network will look more like it does today than any other airlines’ while DL’s relative market share (capacity and share rank) will be as good or better in its top markets than it was at the end of 2019.

          While other airlines have talked about hubs that haven’t produced the desired financial results, Delta spent the last 10 years working on the parts of its network that didn’t produce results (closing CVG MEM and NRT) and building new hubs and focus cities. You do those kinds of things in the best of times based on strengths that will be there for the long-term.

          Delta has also built joint ventures in all 3 of the major global regions, and each of those joint ventures will be the strongest in those regions. Those that love to talk about the money that Delta lost on some of its joint venture investments fail to note that the JVs are still there AND those investment losses will become tax assets which Delta can use to reduce its future profits. Other airlines (including Delta) bought back their own stock and you can’t deduct those losses from your future taxes; Delta was unique in investing in other airlines and building joint ventures that will endure.

          Of course, there is no certainty how fast business travel will return or how much work will be done remotely but humans are social beings and they travel. Finding the right mix of business vs. leisure capacity will be the job of every airline – as well as putting the right amount of capacity into the places where people live and work. Having a strong and stable global network allows Delta to readjust capacity better than carriers that will have to fight off other carriers that are trying to grow in their top markets.

          The key to financial success post-covid is matching “new” revenues with the costs necessary to deliver those services. In the nine months of covid so far, Delta has demonstrated better ability to manage costs even while preserving its network. Not engaging in costly and destructive market share battles and not being the target of them anywhere to the extent that other carriers are provides a strong basis for post-covid. There will always be a market for more premium airline service just as there will be a market for deep-discounted, bare bones travel.

          And regarding seat-blocking, we will find out in a couple weeks how well airlines filled seats for the quarter – because that is as much detail as most of the industry reports- but it is highly doubtful that any carrier is filling anywhere close to the amount of seats they are selling. If seat blocking provides the incentive for some customers to choose Delta because of feeling more secure, then it is a long-term investment while other airlines are filling their last X% of seats with deeply discounted leisure travelers that will never be brand loyal. Given that the CDC says 1 million people have been vaccinated so far, the impact of the vaccine will start to make a difference very quickly and seat blocking will likely not be needed by the end of March when Delta now plans to end it. They can easily put extra capacity into heavy leisure markets between now and then.

          Crises reveal what an organization was made for. Delta did its homework well after the NW merger and used its position as being the first megamerger to set strategies that will still be viable as well as provide the bandwidth to innovate and expand in new areas as the post covid era undercovers new opportunities and shifted market opportunities.

          Happy holidays and all the best to you and yours.

          1. I think you are failing to acknowledge the effect that having such huge headcount reduction will have on Delta’s ability to recover market share. It will take Delta probably until at least 2023 to be at it’s pre-COVID size. All the ULCCs will be 20 to 30% larger than pre-COVID size by then. WN and JetBlue will be 10% larger than pre-COVID size by then. Even AS will be a little larger by then. Only UA is likely to be slower at recovering to pre-COVID size. For the rest of this year, Delta can pretty much just remove its seat cap to add back capacity while other airlines will actually actively be adding flights. So your argument that Delta is increasing market share doesn’t hold water. They have increased market share in certain markets precisely because all their flights are capped at 70%. They struggle to even run their Christmas schedule with their currently active pilot group.

            As for JVs still holding up, there is still plenty of time for more JV partners to go under. VS is in a whole lot of trouble. Neither AA/UA bought equities on their way to have JVs. And those JVs have all lasted.

            1. Why is that ? All airlines reduced headcount. It would be a different story if Delta was the only one to reduce headcount but since all did, you would need to take that into account.

            2. Getting the pilots training/scheduling squared away is a certainly a big hurdle, but ramping up capacity and/or traffic back up wouldn’t take too long; on the Airport side, most stations could go back to almost pre-COVID size tomorrow and not miss a beat. Most staffing is still there, the same footprint, etc.

            3. Aside from UA, nobody reduced head count as much as DL. DL had a huge reduction in pilot seniority list. It takes time to bring back pilots that took extended time off and make them current again. It will also take time to move those 1700 to 1800 pilots off the UNA list. And then, they also have to aggressively hire to replace all the pilots that have retired. There are only so many new pilots that you can train at a time.

              DL will be smaller for a few years.

              As for why ULCCs don’t have the same problem. Most of them a younger airlines that don’t have as many pilots about to retire. NK, for example, only offered short term leaves and only has 1 fleet type. It’s a lot easier bringing back pilots. I’d be shocked if they are not hiring again next year. They have been operating at 80% pre-COVID capacity during holiday season. B6 only offered short term leaves and have very few retirees, so they can bring back capacity sooner. Again, I’d be shocked if they are not hiring again next year. AS has already revealed their plan. They will be back to same fleet size by 2023 and probably the same capacity (7M9s have more seats than A319/A320) by late 2022.

            4. FC–

              I don’t think anyone is arguing that DL won’t be smaller for years to come- DL themselves have repeatedly stated that.

              I also don’t discount your point about hurdles to getting pilots back in the cockpit/trained on new types/etc.

              That said, I don’t think ramping back up is the years-long climb you have made it out to be, and I don’t think DL has a greater structural disadvantage compared to other carriers.

              Guess we’ll see…

        2. Kevin,

          I am a loyal Delta flyer, but I would have driven for my recent trips instead of flying without the blocked seat policy. I will say Delta significantly hurt my loyalty with its handling of refunds and with wait times on the Diamond Medallion line (and on other lines); I finally filed a DOT complaint after waiting over 4 months for one refund. The front-line staff, though, have won me back with great service during my recent pandemic flights. From ticket counter agents to gait agents to flight attendants to pilots, nearly all have been great and have made feel genuinely appreciated. Whereas I was heavily leaning toward becoming “a free agent,” the frontline staff have kept me in the Delta fold.

        3. I get the “those who wouldn’t fly… but are flying with delta”… but it seems the better question is “those who continue to fly that aren’t choosing Delta”. The “those who wouldn’t fly and barely do” aren’t producing any significant revenue for Delta and Delta is leaving money on the table with those that have to continue to fly or aren’t bothered by flying.

          I’ve continued to fly for work during the pandemic and have barely used Delta. Delta basically shut down for ~2 months during the pandemic and I switched carriers. Sure, an open middle seat is nice but Delta just isn’t as useful to me anymore. I live in BHM and, unless I’m going to Atlanta, where I normally drive, it doesn’t make sense to fly East to go West. AA just has a better hub structure for me these days. DFW can take me places ATL doesn’t and I don’t backtrack. And CLT can do whatever ATL did for me. Plus, I get to avoid the Alabama cliche of “stopping in atlanta on the way to hell…”

          It’s been a nice thing to watch the Delta operational meltdown stories on the news this time around instead of experiencing them… I’m not sure why they seem to be the only carrier that has massive operational meltdowns the last few years.

    2. +1 to Dave’s comments. Since April, I’ve flown several flights and every single one of them was either on Southwest or Delta due to the middle seat policy. Southwest got the bulk of flights from me so that I could avoid the smaller Delta regionals, but when a flight was Delta mainline, I booked equally. And every time I booked, I kept track of whether the price was different – on average, I spent the same as other legacy airlines or $50-70 more than the bare fare of an ULCC (not counting buying seats or carry-on or pass to use the lav).
      Ultimately I would not have taken 75% of these flights if the middle seat wasn’t blocked.
      I’ll admit this won’t necessarily translate to undying loyalty a year from now – price still matters. But these two airlines did something that potentially hurt their bottom line to provide me potentially a safer experience and definitely a whole lot of peace of mind and that won’t soon be forgotten.

  8. I love flying B6 and wish they would succeed, but the RDU strategy doesn’t make sense to me. Flights to AUS, LAX, & SFO do not offer sufficient westward options. People in upstate NY/NE may be willing to connect in NYC/BOS, but people in the southeast won’t do that. Until B6 is willing to invest in a mid-continent hub or merge with AS, I don’t see them being successful beyond east coast/carribean and transcon flying.

    1. One step at a time. JetBlue needs to walk before it can run. You have to expand to places that have strong links to your existing focus cities. RDU is the land of Northeast transplants. Cary is also known as “Containment area for relocated yankees”. In addition, there is a lot of traffic from northeast and midwest to Florida and places like SJU/CUN/MBJ. RDU is a good connection point in between, although the initial adds/frequencies are likely just for the local market.

      Over the next 2 years, you should expect them to also add LGA/DCA/PHL/BDL/BUF and some other markets with 750 miles of RDU
      http://www.gcmap.com/mapui?P=EWR-RDU%3BBOS-RDU%3BORD-RDU%3BDCA-RDU%3BFLL-RDU%3BATL-RDU%3BMCO-RDU%3BPHL-RDU%3BRDU-TPA%3BBNA-RDU%3BDTW-RDU%3BRDU-STL%3BBDL-RDU%3BIND-RDU%3BCLE-RDU%3BPIT-RDU%3BCVG-RDU%3BBUF-RDU%3BCMH-RDU%3BALB-RDU%3BPWM-RDU%3BRDU-SYR%3BJAX-RDU%3BPBI-RDU%3BRDU-RSW&R=750miles%40RDU&MS=wls&DU=mi

      So, RDU works well as a north/south connection along east coast and it has a rapidly growing local population with high tech industry and good schools. Only AUS/BNA are comparable to RDU in these areas. And of the 3, RDU has the most transplants from New York and is not dominated by WN (like BNA) or overly fragmented(like AUS). And now, DL has left a huge vacuum there. I would also guess that RDU has probably leaking traffic to CLT and has potential for even more traffic than it already has.

      LAX/SFO/LAS/AUS are 4 of the 6 top markets from RDU to Texas or further west. This gives them a legs up over DL/AA in the markets that are served directly.

      As they’ve in Boston, they can start from nothing and grab a huge portion of local traffic by adding direct service when legacy airlines withdraw from those markets. There is no reason they can’t do it here. It’s a much larger and well known airline than the one that started building up Boston back before 2010. They will start flying to Europe soon and they can offer service in RDU-LON market if things are going well. They have a partnership with AA that would allow them to put passengers to destination in the even of mass cancellations.

      They are also trying this P2P strategy to a smaller extent in BDL, RIC and CHS. It’s just harder to notice since those are smaller markets.

      1. I feel your reply focusing on NE-FL traffic reinforces my argument. Flying westward to only 4 out of the top 6 markets won’t enable people to substitute B6 for a legacy carrier.

        1. > Flying westward to only 4 out of the top 6 markets won’t enable people to substitute B6 for a legacy carrier.

          Depending on the extent of the AA partnership, they may not need to. “Hey RDU, fly with us when you can, and connect on AA thru CLT, DFW, or ORD when you can’t.” It’s a pretty compelling value proposition, and one I expect they will also make to more cities in Florida too: FLL, MIA, TPA, MCO, JAX. This attack on Delta is larger than just the RDU focus city – it’s part of an overall attack on the Florida market, one that’s booming with escaping New Yorkers/northeasterners.

        2. I actually don’t think west of the country is their problem. In a couple of years, LAX will be a pretty good connection for them to major markets along west coast. I think not serving middle of the country is their problem. I guess we will see where this AA partnership goes. I think the scope of the AA deal is expanding based on the rumours I’ve been reading. Give it another month or so and we will see what else might get announced.

          The other thing to think about it is that JetBlue doesn’t need to capture most of ff around the research triangle to be successful. Remember, it took them years to slowly build up BOS. And even now, a lot of people in Boston still do not pick JetBlue because they do not fly TATL or have interlining or fly to many places in the middle of the country. But, they have definitely own over a lot of corporate contract and ff over time. And they are also going through that same process in South Florida right now. Due to their lower cost, JetBlue has never needed to dominate market share to be profitable in a market.

          What they are doing now in RDU is just start of process. They have a much larger network and well known brand than they did when BOS/FLL focus cities first started. So, I think they will be able to win over customers in the research triangle area more quickly. Especially if DL takes its time to bring back RDU. At minimum, JetBlue should be able to win over a lot of leisure travelers. And by the time, business demand comes back, they can have a more complete network there.

          1. For those who remember the defunct Midway Airlines, after they left their old home at the airport of the same name they set up shop at RDU. Although it wasn’t successful at the time, it did show that even a midsized city could support some type of hub/ focus city operation.

            As the metro area has continued to grow thanks to all the research & university activity, it maybe time to explore that once again. Since Delta retreated to Atlanta (sorry Tim,) American is in Charlotte & United is at Dulles, it would be natural for JetBlue to jump at the opportunity to set up shop & play halfback. Plus there was already an established route to London on British Airways & if that route no longer operates, JetBlue could fill the void once they have the right aircraft.

          2. “I think not serving middle of the country is their problem. I guess we will see where this AA partnership goes.”

            That is JetBlue’s biggest issue, but it can be solved as there are cities that were former hubs such as STL that can be reestablished. Also AUS & RDU are metros that are large enough to support some level of focus city/ hub operation & don’t have the congestion of a ORD, dfw or iah.

  9. With the CDC telling people to NOT travel, and the knowledge that travel is a great way to spread SARS-CoV-2; adding routes is a terrible idea. I will not fly again until I get the vaccine, unless it’s an emergency.

    But, I did fly out over the summer and it wasn’t so bad on Delta because I had the entire row of F to myself on all four flights. To me, that was the only way to fly in these times. Flying was nerve wracking because of the pandemic.

    I think airlines should stay in survival mode until this summer when we will (hopefully) have herd immunity via vaccines. The airlines have enough time to still prepare for the post-pandemic world where business travel might never totally recover and people will have less money overall. To me, Delta’s retreat strategy was the correct one.

    1. Southbay – To be clear, I’m not saying that Delta’s retreat strategy WAS wrong. I’m just saying it’s time to shift. In the beginning, sure. It was unclear how they’d get money, how long this would go on, etc. My point is that the time for that is over, and others are realizing that.

  10. With respect to Delta and its steadfastness, I think we are seeing the company’s culture in spades. Delta has always been a well-run, conservative company. It’s two primary business tactics have been patience and acquisition, not boldness and creativity.

    Delta waited years for Eastern to fail and they were rewarded handsomely. That opened up Boston and New York and handed them essentially all of Atlanta on a platter. Sure, ValueJet/AirTran popped up there, but that was perfect for Delta, so much better than United or American moving in there. TWA gave ATL a try, and failed. The old airline adage that “If you must have superfortress hub competition, it’s best if it’s weak competition” played out perfectly for Delta in Atlanta.

    Delta’s other historical growth vehicle has been acquisition. Southern. Northeast. Western. Pan Am’s Europe. Northwest (including Republic and Hughes). If you look at everything that Delta has bought over the years, they truly should have been much more dominant than they were pre-Covid.

    In its recent past, Delta’s latest “acquisition” program has been via Joint Venture. We have hashed out those lost investments several times here. No need to do it again.

    The ONE area that Delta has really trailed the industry over the years is Creativity. I think Delta’s last truly successful creative idea was to apply aerial spraying to cotton fields for insect control. That was in the 1920s, I believe. It’s most notable recent failures on the creative side of the business were Song and Delta Express. So why should we expect anything new from Delta now? They don’t have a culture of nimbleness or imagination because they’ve never really needed one. Patience and Purchase have always worked in the past for them. It would be foolish on our part to expect (or, perhaps, to hope for) anything different now.

    1. Sure, it is so dull, but making money IS the goal of every US airline; all of the large jet US airlines except for Frontier are publicly traded so they have responsibilities to their public shareholders.

      As long as Delta figures out how to be at the top end of the list of profitability, creativity – whatever that means – doesn’t matter.

      again, let’s re-evaluate the industry in six months, a year, 18 months and 5 years and see how well each of the carriers fared.

      I have a feeling that a whole lot of the things that some people thought were important will have been shown to have only slowed the return to profitability.

      and Eastern – like TWA and Pan Am and others – is a perfect example of a company that couldn’t quite figure out how to stay on the positive side of the profit column – and they aren’t with us anymore.

      first, last and everything in between, all US airlines are for-profit businesses.

      1. My post was not meant as a criticism of Delta. It has been so successful over the years (other than its bankruptcy, the ultimate sign of business failure) that it has never been forced to innovate. Delta studies what the others are doing, and then improves it. The Delta SkyMiles card is a great example of this. Also, no one has ever run a better hub-and-spoke operation than Delta did in Atlanta, pre-Covid. And not only was it successful, it was huge. Kudos to them for that.

        I agree with you that Delta will formulate a post-Covid reply to JetBlue. But I don’t blame JetBlue for trying. As ever-giddy FC stated, JetBlue must try to gain more nationwide relevancy and this may be their best opportunity. So it will be interesting to see how that plays out.

        Southwest, conversely, is a different animal. It has the resources, data, patience and experience to take new markets from loss leaders to profitability. It has a profound network and it will tweak it. And when its strategies fail, as in PHL, it learns. I think the lessons it learned in PHL helped it to avoid a bloodbath in ATL (disclaimer: I have no proof of that). As far as its capitulation in EWR is concerned, I believe Gary Kelly stated they had 24 hours to decide to go in there or not. So they decided to take the shot. No harm, no foul. The point being that Southwest takes risks. It knows all the other carriers hate Southwest, so they have to go it alone. They had to elbow their way into the club. They are fighters and are still outsiders in the minds of many. So they HAVE to innovate. They HAVE to change to be successful and maintain their success.

        As you recently wrote, past performance is no guarantee of future success. I think Southwest’s covid moves indicate they completely get your point. They ARE innovating. They are going into markets they have eschewed for years. They realize the strength of their existing network will sustain a 737 in a smaller market. They have learned from the small markets that they kept from AirTran (DSM, PWM) that they CAN be successful in the second 50 largest markets. And they are also revisiting AirTran markets (MIA, SRQ) that they never even serviced. So yes, they ARE innovating. They ARE nimble.

        Interesting times ahead for the entire industry as it transitions from a medical crisis to a financial crisis. I’m rooting for all the airlines. As a Delta employee wrote after the Thanksgiving mess, airlines are run by people. The vast majority of them, across all the carriers, are good people. I wish them all nothing but blue skies in 2021. In the spirit of the Season, I wish you the same in 2021, Mr. Dunn.

        Merry Christmas to all!!!

        1. WN learned in EWR that it could not take on legacy carriers in their strength markets/hubs unless it plays heavily on its own strengths.

          WN is considerably smaller than it was in ATL at the time of the AirTran merger.

          Both its experience in EWR and ATL is likely why it went to ORD, IAH and MIA and are flying to their own bases and not other carrier hubs.

          The fact that Delta is the only legacy carrier that has managed to open and sustain new hubs since deregulation and those happen to be in low cost carrier markets is innovative; if it isn’t innovative, then executing better than their peers seems to be what they do better than anyone else (obviously minus their pilot staffing during the post-covid recovery).

          Again, Delta and Southwest had net income margins that were within one-tenth of a percent of either in 2019 and Delta’s labor costs fell more than any other big 4 airline in Q3. Let’s see about Q4 and beyond but Delta, like Southwest has a very strong track record of adapting and succeeding.

          As I have repeatedly noted, I see those two as the winners coming out of this alongside AS – although AS is and will be a smaller, more regional player vs. Delta’s global and WN’s almost entirely domestic position.

          Merry Christmas to you as well.

          1. Wait….what??? What new hubs has Delta opened and sustained since Deregulation??? Their hubs are ATL, DTW, SLC, MSP, LAX, SEA, and JFK. ATL was already a hub for them prior to deregulation. LAX and SLC were ACQUIRED via Western. DTW, MSP, and SEA were ACQUIRED via Northwest. JFK was ACQUIRED via PanAm.

            So, factually speaking, Delta has had ZERO organic hub openings since Deregulation. In fact, it has actually closed hubs since Deregulation. Have you forgotten the huge DFW surrender? And the aborted organic hub attempts in CVG and MEM?

            As others have noted, you do twist factoids on here to suit your purposes. And, like a lawyer with a weak case, we have all come to expect that of you. But to in any way suggest that Delta has innovated organic hub growth in the last 40 years is entirely false.

            As Varsity wrote a few months ago (in what is without question the single best commentary on Delta ever written, anywhere), Delta’s sole Deregulation strategy has been to leverage the profits it makes in Atlanta to buy its growth, worldwide. In recent years, that “buying” has been in the form of Joint Ventures. It’s really the same game, under different rules, with somewhat predictable outcomes.

            I still wish you a Merry Christmas. If you look under your tree, I’ve gifted you LGA as the closest thing to a hub Delta has truly organically built in the past 40 years.

            1. uh, SEA and BOS are both new hubs since deregulation.

              NW did not have a hub in SEA. They had a Pacific gateway. More importantly, they did not operate a hub at SEA on December 2008, the quarter the DL/NW merger closed. As of December 2008, NW operated from SEA to AMS DTW HNL LHR MEM MSP NRT OGG. NW at #5 had fewer flights than DL but more seats for the #4 ranking.

              United was the largest global airline in Seattle for years. As DL grew, UA and WN shrunk the greatest.

              And Delta bought 1/4 of the slots at LGA from USAirways; its presence at JFK was from Pan Am. Neither can be considered organic hubs. And BOS was pulled down and rebuilt in the post NW merger period.

              But even if you use your definition, how many hubs do AA and UA have that were hubs acquired via mergers, dehubbed and then rebuilt to be larger than they were before.

              I’m not a lawyer. I know airline history and data.

              And if Delta does so well in Atlanta that it can fund all of its losses everywhere else, why hasn’t ANY other airline figured out how to do what DL does in Atlanta?
              Or is ATL so unique geographically , as a local market, and operationally that it can’t be duplicated and so nobody else should even try?

              We are 40 years past deregulation. Surely someone could duplicate what DL has in Atlanta if it were that simple.

              And maybe, DL’s success is just as much due to DTW and MSP which give DL a much larger share of the Midwest than any other airline by a long shot – with much higher revenue from those two hubs than any single airline gets or could get from Chicago plus SLC is a powerhouse that DL also dominates and delivers higher average fares.

              And maybe, DL’s transatlantic strategy really does give it the highest margins and the largest size in seat miles and DL managed to make money in 2019 flying across the Pacific while AA lost money (as it has for most of a decade) and UA just broke even.

              No, DL is not successful just because of ATL.

              take the night off and get back w/ us before the New Year so you can check w Varsity and explain why DL has done in ATL what no one else has figured out how to duplicate. And if DL really is that good just because of ATL, why does anyone else even try.

              Go drink some eggnog.

            2. The only argument to make there is you need to realize that over the last few years since the mergers delta has added the profits from atl, with msp, dtw, slc, to the buy growth to add to the list strategy that’s worked so well, but I’m not sure what cranky’s confusion with the focus cities is they were born to die to protect the core hubs when the downturn arrived they would take the brunt of seat loss to flow people through hubs and enhance loyalty to delta from people in those markets.

            3. uh, SEA and BOS are both new hubs since deregulation.

              Correct. In fact the SEA hub is only a few years old as I remember Cranky posting about it.

    2. Airlines is one of those places where innovation isn’t all that important. There aren’t a lot of choices on what to buy since airplane making has come down to two airplane makers. It isn’t tech, where if you don’t innovate, you will go away.

  11. I’m not clairvoyant, so I’ll skip making predictions. The only observation I will make (playing Captain Obvious) is that this whole situation won’t be fully resolved until enough revenue is generated consistently. And no one can guarantee when that will happen.

    The other thing I’d like to write is this: I wish all of you the best for whichever holidays you celebrate, and that the new year brings all of you happiness.

  12. Re: seat blocking, will be very interesting to see Q4 financials, and specifically, to see whether Q4 is a continuation of Q3 – when DL blocked seats and therefore effectively sold far less capacity than AA, and yet still produced a PRASM lower than AA. Hmm …

  13. Stop with the sniping, all of you. This is not adding to the conversation in any way. We all know (or at least, some of you have told us, I have no idea personally) that Tim has been kicked out of a.net. I don’t care. All I care about is what gets posted here. Tim posts his thoughts, and yes, there is always a pro-Delta slant to it. It is very easy to ignore it and not respond. If you do respond, you know where it’s going to go. That’s fine if it’s on topic, but just sniping at each other does nothing for anyone’s benefit. All it does is create more work for me, so stop it.

  14. I think DL is taking a long term approach to restarting its focus cities. They were built on the premise that business O&D from those cities would support and drive growth there. Now that business travel is severely reduced it doesn’t make sense to continue that plan at the moment. Right now all focus is on regaining profitability as quickly as they can. Retiring the 777 fleet (MD80/90 fleet too but to a lesser extent) really created a massive headache in the training department as pilots rebid aircraft types. While DL may be somewhat short staffed at the beginning of the recovery they will most likely come out ahead as the recovery gains momentum.

    I also think DL isn’t expecting any meaningful business travel to return until late spring/ summer. With that expectation they are managing their network appropriately and extending the middle seat block until 3/30/21. They’re not expecting to fill the seats so at least they’ll gain mindshare and good PR in the meantime.

    I’d wager DL is minimizing its losses now so they can be better positioned to take advantage of opportunities when they arise during the recovery. I’d assume they’d take advantage of the large amount of lightly used 737-800s hitting the market to bulk up lost capacity at minimal cost. I can also see them accelerating deliveries of A220/321NEOs as the recovery gains momentum and other carriers defer orders to shore up their balance sheets. Why make money losing moves now when you can do them later and actually make money on them?

Leave a Reply to Gary Leff Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Cranky Flier