eolesen said:
I've done paid work for MU, so can't go into too much detail, but I suspect it may have been a "pay to play" move on MU's part. MU is a diamond in the rough and they know it.
DL also knew that MU could easily leave Skyteam for oneworld, but the equity investment is of far more value to MU than whatever alliance feeds **them** some incremental traffic. And make no mistake -- both MU and CZ use Skyteam to give them stature, not to extend their global reach.
This may, ironically push CZ into changing alliance teams. They're clearly the uglier of the three sisters in terms of knowledge and quality, but they do have a larger footprint than MU.
within the legal requirements and allowances of each alliance, ANY partner can switch alliances... but those agreements have alot more teeth in them than you and other people acknowledge or carriers would be switching alliance partners all the time... but they don't.
DL said right off the bat that SEA-PVG was profitable and it was heavily driven by connections in PVG... and that was before colocation at PVG.
You have no idea whether the economics of DL's connections or relationship with MU is above the investment level.
And it is an investment... which means that DL could sell them..... it is not any different in that regarding that buying aircraft..... the investment has value in itself. and it could also be secured by assets which have not publicly been identified. Even if it is not, China is a growing market and MU has a very large position in the largest business market in China.
and since DL has repeatedly said in SEC filings that its equity investments in its current carriers result in 10s of millions of dollars of additional revenue that it couldn't get any other way, it is very likely that the economics really do work.
eolesen said:
LH's Anschluss Strategy was to buy up carriers that were within LH's sphere of influence, and that they **could** legally buy & merge or rebrand, but the name recognition and national pride attached to those carriers was great enough that they left the brands intact while taking control of what really mattered. They've engaged in considerable joint purchasing and negotiations with suppliers as well.
DL seems to be investing well outside their sphere of influence, and in carriers with a nominal franchise value.
Sure, VS is a strong brand, but marketing aside, not exactly a global player.
AM is strong only because they have no other major competitor, and arguably dodged the bullet that took out MX simply because MX's labor contracts expired first. (AM's agreements were mirror images of MX's, and it took MX's collapse and implosion for the unions to renegotiate with AM)
Gol? Jury is out there. They do OK, but TAM is the gorilla and Azul is the marketing genius. Gol sort of operates in both their respective shadows.
all of which fail to acknowledge that DL has investments in other airlines and yet no oher US carrier has any at all.
Given that DL has access to information and the strategic planning process that other carriers simply do not have, DL's investments do make sense.
DL has not tried to invest in global carriers but rather specialists in their region... in each case, those carriers are the top 1 or 2 carriers at their home bases.
Brazil is a mess all around. TAM has a larger int'l network but it is smaller than Gol within Brazil. TAM is also cutting its domestic network by high single digits. you don't do that if you can profitably fill the seats you are offering.
and it is not legal for a US carrier to own partial equity or partially control another US carrier. either you own it outright or there is a complete arms length relationship that is no different from that with any other competitior.
Feel free to let us know what other global carriers are using a strategy similar to DL's if LH isn't the best example - and it isn't because of the Euro/global comparison.
But just because airlines don't own refineries didn't make it a bad investment for DL to do so or right because other carriers didn't see a need to do it, despite howls of disapproval here