Several good points to discuss here….
First, you are absolutely right that DL messed around in the transcon markets for nearly 20 years w/o being able to figure out what it takes to compete successfully. Post Pan Am, DL tried to ride whatever coattails PA had in the transcon markets, but PA did not have a reputation for quality and DL retreated to PA’s strength markets in southern Europe from NYC where it has done well since the PA acquisition, even if those markets are very seasonal. In the early 2000s, DL decided to focus on Song in NYC as a B6 copycat airline…. Might have worked to/from Florida but it was absolutely the wrong product on the transcons and the results for DL were just like they are now for B6. Post BK, DL realized it has had to invest in the product and compete aggressively with both network and low fare carriers and has succeeded, now providing a fairly high quality product, even if in far fewer numbers of seats than AA or UA. But DL’s decision to put the int’l 757s on the transcons has resulted in a significant increase in DL’s average fares and the decision to put lie flat seats in business class will result in a product that is not a whole lot different from what AA and UA will offer on their narrowbody aircraft. (I’m sure some would love to argue that point but remember that DL’s average fares in JFK-LHR have been close to what AA offers even though AA offers a higher quality product.) What will happen is that VX’s premium product will be inadequate compared to the big 3 and DL will be in a position to offer a premium product that is on par with AA and UA. For the first time, DL is playing in the transcons on a level close to what AA and UA are doing.
Second, the pressure will likely be on the low cost carriers w/ the upgraded product. Even though AA and UA are likely going to focus solely on the upper tier of the market, DL is willing to keep enough capacity in the market to compete for the total product base. There could be an argument about whether focusing on a single segment of a market can be successful, but DL has demonstrated that it believes that it has to compete for the whole market. UA tried for years to walk away from what they perceived as the low fare passenger in a number of markets, including DEN and the transcons, with the result that WN is now the largest airline in DEN by passenger boardings and UA is #3 or lower in passenger boardings in the JFK transcons. UA might get by with that because of its presence at EWR but UA is a distant number 4 at JFK with no international service on its own metal. Even if DL does not have average fares on the transcons comparable to AA and UA, they do have revenue per flight that is comparable to or superior to AA and UA because they are using larger aircraft and are leveraging their larger hub at JFK for connections. Considering that the operating costs per flight for all 3 carriers are/will be relatively comparable, I’m not sure that AA and UA’s strategy will necessarily be much more profitable. DL’s lower CASM also allows it to battle low fare carriers better and potentially regain some of that share – which isn’t necessarily junk fares. VX has very respectable average fares in their JFK transcon markets.
Third, I was specifically referring to the JFK-SFO market when I noted that AA’s position in the market is slipping… that is in part due to AA’s decision o focus on its cornerstones – of which SFO is not one just like BOS. It is possible that AA can function as a niche at JFK with a smaller operation than either B6 or DL but AA doesn’t have EWR to help boost its presence in NYC like UA has. The dynamics of the NYC market are changing dramatically and it is far from certain how it will shake out for each player.
Fourth, AA could put 777s on JFK-LAX to preserve its presence in that market, although I doubt they would ever do that to SFO. But given that AA has sized the premium cabins of its 321s specifically to duplicate the capacity it has on the 762s, the reason for adding capacity to go after the passengers which they are specifically walking away from is a stretch. They would be adding a very high cost aircraft to chase coach passengers; the 321 will be the lowest total operating cost aircraft on the transcons by the big 3.
Finally, the transcons are part of an airline’s total presence at both NYC and in California. NYC is very much in flux, but CA has been relatively stable. I still believe that DL will begin to shift its focus west now that it is achieving its objectives in NYC. DL is expanding into markets in LAX again… and lest people mention DL’s track record in LAX, remember that one of DL’s attempts in the last 10 years was to hold onto its gates at LAX when it flooded the facility w/ RJs. In yet another attempt, DL added a bunch of direct operating cost late night flying as well as flying with RJ operators, all obviously part of larger strategic plans. If DL adds LAX-LHR with its own aircraft as part of a slot rework w/ Virgin Atlantic, the market could change as well. AA still has a very loyal following of high value passengers in LAX and UA is clearly focusing its efforts on SFO… they don’t have the financial resources right now to do fight for all of the CA market… chances are high that AA will prevail if push comes to shove in LAX. AA is probably going to be ahead of UA in reworking its RJ system which will be an advantage, esp. in ORD where supposedly a lot of the large RJs are to be deployed.
The large RJs are the part of the puzzle that AA has to use in order to preserve what it has as well as grow where it an. AA is at a size disadvantage in NYC but could compete effectively, again winning traffic over from UA at EWR given that LGA and JFK are still the preferred short and long-haul airports in NYC and AA has a 20-25% of the slots at each airport, more than enough to focus on the top markets.
So, it is possible that AA could hold onto its premium passengers in the transcons and if so could help them stabilize if not grow their presence in both NYC and on the west coast… the battle for passengers will likely be against the low fare carriers as well as UA.
One more consideration is that UA has yet to resolve its finances in the wake of its merger w/ CO. They have blamed integration issues - just as B6 has managed to find reasons to justify o its underperformance for several quarters - but there simply are large portions of former CO's network that probably do not work based on UA's costs. Much of the 757 TATL flying to secondary cities, many of the longhaul 15-16 hour flights to destinations from EWR, don't work at costs such as the big 3 have at current fuel prices. Add in WN's expansion into Latin America from Houston and UA could be under significant financial pressure for several more years. UA is still holding onto a lot of capacity that isn't delivering revenues sufficient to cover costs.
AA could well have an opportunity to grow and regain lost share depending on what UA does.
