American Air to increase regional fleet
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However, Frontier's modus operandi is to fly Denver to somewhere and back to Denver. Just how much TTN-DEN traffic can there be?
WorldTraveler
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I don't think there is any doubt that AA and Republic could come up w/ a deal to do what both need - get Republic out of the large jet scheduled business and help AA restructure its regional operations and gain access to more larger RJs. Where AA redeploys F9's assets is not the key issue.
But the question still remains if AA would be shooting itself in the foot by doing a deal w/ Republic that would end up helping UA and WN by eliminating F9 at DEN, an almost certainty of the transaction.
IF there is another way for AA to achieve its goals w/o potentially helping out UA and WN, it would sure seem that the Republic option would have to include a hefty cost for helping out UA and WN.
But the question still remains if AA would be shooting itself in the foot by doing a deal w/ Republic that would end up helping UA and WN by eliminating F9 at DEN, an almost certainty of the transaction.
IF there is another way for AA to achieve its goals w/o potentially helping out UA and WN, it would sure seem that the Republic option would have to include a hefty cost for helping out UA and WN.
eolesen
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The devil is in the details, Jim. They don't plan to fly to DEN, unless you consider a one-stop over MDW... About 18 months ago, they hired one of the guys who did Allegiant's route planning, and just about all of their recent route adds have been done outside of the DEN bubble.
The Trenton expansion will be flying TTN-MDW/RDU/MCO/RSW/TPA/MSY/RDU/ATL/CMH and possibly DTW.
It almost looks like an early PeoplExpress route map, only it is ~30 miles south of EWR.
As for "helping out UA and WN" -- right now, UA and WN hold all the pricing power at DEN. There are a few routes where F9 is the only one serving (i.e. Mexico), and bunch of routes where F9 is the only competition to UA. The rest? They are either #3 or #4 in the market.
They've survived by being the alternative to UA, which can be an interesting position, but you still have no pricing power in that situation. You're getting spill traffic more than anything else.
WorldTraveler
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but you know that if F9 leaves DEN, UA and WN can raise prices based on less capacity in the market which will increase their profitability.
Even if F9 succeeds at TTN, they likely will do so based on low fares. Does AA/US really want a secondary minihub just up the road from PHL? They might pull some traffic away from EWR but they probably cannibalize some of their own traffic as well.
And if AA acquires F9 which is TTN based, they would likely have to fold them into AA/US at some point which means increasing F9 employees to AA/US pay rates - plus dealing w/ the integration issues.
Or AA could just take the jets, make the promise they will keep the TTN hub, and then decide a few months down the road it is not viable, and then close the operation.
Even if F9 succeeds at TTN, they likely will do so based on low fares. Does AA/US really want a secondary minihub just up the road from PHL? They might pull some traffic away from EWR but they probably cannibalize some of their own traffic as well.
And if AA acquires F9 which is TTN based, they would likely have to fold them into AA/US at some point which means increasing F9 employees to AA/US pay rates - plus dealing w/ the integration issues.
Or AA could just take the jets, make the promise they will keep the TTN hub, and then decide a few months down the road it is not viable, and then close the operation.
WorldTraveler
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eolesen
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Dunno. I don't see as much risk there as you apparently do.
It's my opinion that DEN is over-served. It's one out of several regulation era hubs that existed because of geography and poor aircraft performance. Just like STL, MCI, SLC, DAY, CMH, IND.
As a metro area, with 2.6M people, it's smaller than MSP, STL or BOS.
Certainly big enough for a fair degree of nonstop service, but has never really been able to justify 300+ flights a day with two hub carriers, much less three.
If a deal happened, there's very little connecting traffic that couldn't just as easily move via PHX or DFW. Keep the codeshare with Great Lakes, and pretty much all the same bases are covered.
It's my opinion that DEN is over-served. It's one out of several regulation era hubs that existed because of geography and poor aircraft performance. Just like STL, MCI, SLC, DAY, CMH, IND.
As a metro area, with 2.6M people, it's smaller than MSP, STL or BOS.
Certainly big enough for a fair degree of nonstop service, but has never really been able to justify 300+ flights a day with two hub carriers, much less three.
If a deal happened, there's very little connecting traffic that couldn't just as easily move via PHX or DFW. Keep the codeshare with Great Lakes, and pretty much all the same bases are covered.
WorldTraveler
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it's simply a matter of recognizing the competitive implications of strategic moves..... pilots at other competitors have long had concerns about Republic and Frontier's business connections and some pilot contracts forbid cooperation with regional carriers that have large jet operations in the same corporate structure - or impose tough restrictions to eliminate the possibility of transferring wealth from one subsidiary to another.
The same principle applies to DEN as a hub. DEN is a mess and has been for years; CO decided to close its DEN operation because the city wasn't large enough to support two hubs plus Frontier's presence which was much smaller and complementary at the time. WN's decision to enter the market accelerated the problem.
AA and DL should do nothing to help WN and UA solve the problem. The sooner DEN improves for UA and WN, the sooner WN and UA can use their improved finances to target DL an AA elsewhere.
There are other ways for DL and AA to obtain regional jet services.
The same principle applies to DEN as a hub. DEN is a mess and has been for years; CO decided to close its DEN operation because the city wasn't large enough to support two hubs plus Frontier's presence which was much smaller and complementary at the time. WN's decision to enter the market accelerated the problem.
AA and DL should do nothing to help WN and UA solve the problem. The sooner DEN improves for UA and WN, the sooner WN and UA can use their improved finances to target DL an AA elsewhere.
There are other ways for DL and AA to obtain regional jet services.
eolesen
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Sure, there may be other ways for DL and AA to obtain RJ services, but the exact same "where does the money flow" ownership issue is in large part what has prevented Eagle from being able to secure contracts for feed flying with other majors.
The only viable regional operator other than Republic is Skywest. Mesa's a financial basket case. Neither of them wanted to buy Eagle.
A deal between RJET and AMR is a "unique corporate transaction" can only be done between these two companies. Short of a three-way, there's not too many other options which help RJET and AMR escape the common ownership conundrum.
- Thread Starter
- #102
American Eagle Sees Room for Consolidation
http://online.wsj.com/article/SB10001424127887324162304578306342691646754.html
http://online.wsj.com/article/SB10001424127887324162304578306342691646754.html
