Seeking Alpha: DL has a Japan Problem

[eolesen]

http://seekingalpha.com/news/1514441-delta-air-lines-has-a-japan-problem?source=email_rt_mc_readmore

For a long time [Delta Air Lines'] hub at Narita (~40 miles outside Tokyo) was a competitive advantage. But in 2010 the Japanese government started allowing U.S. airlines to fly to downtown Tokyo via Haneda, lessening Naritas value. [United Continental and American Airlines] have also implemented JVs with Japanese airline partners while [Delta Air Lines] seems to be in some sort of commercial spat with its Asian partner, Korean Air. [Delta Air Lines] has gone to great lengths to organically compete in Asia in part by building up Seattle (to [Alaska Air's] detriment), but we believe some of the new flights might not be working as well as planned.

[Delta Air Lines] is still a compelling story because of its cash flow and robust network outside of Asia, but we expect the Asian strategy to change in the coming quarters given many challenges (which of course may reverse if the Japanese Yen rallies, too). This could be a positive for [Alaska Air].

 

[robbedagain]

Uh oh E I think u may upset wt with this!

 

[WorldTraveler]

no I am not upset....

- somehow DL managed to call its NRT operation its highest margin hub in the 2nd quarter.

- DL remains the largest carrier in the US-Tokyo local market

- DL commands a revenue premium over its US carrier competitors, including at least 50% more in average fares between key markets like NYC and LAX to NRT. DOT data for the third quarter 2013 will be out within a couple weeks so we can update the numbers.

- DL has successfully added new overflight markets from the US mainland to China and Korea making DL's network less and less reliant on NRT as the only way to carrier DL passengers to interior Asia cities from the US.

- DL's Asia network was the only profitable TPAC network among US carriers in the 1st quarter. AA's TPAC network lost 1 in 5 dollars in revenue.

If that is a problem, then most companies would love to have it.