Virgin Atlantic - DL tie up?

[metopower]

Thanks Meto. I do enjoy following the US network industry.
I am not even certain that DL has any desire to fly to AKL but I would imagine DL could figure out a way to make it work.
According to the Great Circle Mapper, LAX-AKL is right on the edge of the 180 min ETOPS no fly zone.
UA has flown LAX-SYD and LAX-AKL with 772ERs (PW engines); DL's have higher TOW - although UA's dispatch rules are different.
One of the merger items that was brought to light was that DL had "stricter" dispatch rules than NW; as with many operational items, DL chose to accept largely one set of standards or the other in order to get the single ops certificate issued. It is possible that DL could choose to relax its dispatch requirements once the operational aspects of the merger are settled, esp. if the fleet could be used more efficiently.
I would consider the 767 to AKL to be not terribly likely because that route would be close to the limits of that plane even aside from ETOPS restrictions but DL has said they plan to convert the 332s at least (not sure if the 333s can be done) to the higher TOW package which includes about an hour add'l flying time (or equivalent) in TOW. It is possible that the 332s do become viable to do more 12+ hr flying although there aren't a lot of routes being operated that way now. As I'm sure you know, DL is using the 333 on LAX-NRT this summer so they do want to push the 330s where they can.
I believe the LRs and 330s are being used more for the onboard product right now since the LR has had the best product in the DL fleet; now that the 772ERs and the 764ERs will also have lie flat seats by next summer. Since the 330s have a very good angled business class product and a competitive coach product but few 767s do (other than the 764s which are being used heavily to LHR), the 332 is being used largely where a higher quality onboard product is needed even though the 332 should be capable of longer routes, esp. once the performance improvement package is installed.
As the lie flat product is extended to a larger portion of the fleet and as the PIP is added to the 332s, I expect they will be flying longer haul routes than they are now.
Of course, there have been rumors that DL is looking to acquire more used 772ERs since winglets should be available on those planes before too long; for now, the 777 market is still fairly tight but the expectations are that it will open up when 787 deliveries ramp up to carriers that could begin replacing 777s.

You are right about most of the things that Dal is doing with the fleet. The 772er is really not a player because the LR is such an improvement over the ER . Now maybe some cheap aircraft with winglets might be attractive I never thought of that. The other thing that you have to take into consideration on ETOPS besides the 180 or 120 rules are alternates . In the south pac because of the rules divert fields for two engine aircraft on a specific route are limited. The rule is that with a loss of one engine the airport has to be available WITHOUT dumping fuel. Many times we are routed over HNL just so on the next leg the routing will take us on a route that allows us to use Fiji. It also cause us to burn more fuel . I think the whole reason for the Virgin Australia deal is for Akl .

 

[WorldTraveler]

You are right about most of the things that Dal is doing with the fleet. The 772er is really not a player because the LR is such an improvement over the ER . Now maybe some cheap aircraft with winglets might be attractive I never thought of that. The other thing that you have to take into consideration on ETOPS besides the 180 or 120 rules are alternates . In the south pac because of the rules divert fields for two engine aircraft on a specific route are limited. The rule is that with a loss of one engine the airport has to be available WITHOUT dumping fuel. Many times we are routed over HNL just so on the next leg the routing will take us on a route that allows us to use Fiji. It also cause us to burn more fuel . I think the whole reason for the Virgin Australia deal is for Akl .

Meto,
There are twin vs quad schedules in both LAX-SYD and LAX-AKL. IN both markets, the fastest twin is anywhere from 15-20 minutes slower than the fast quad. That amount of time difference is not sufficient for the twin operators to not use that aircraft even though it does take longer and perhaps makes for more complicated flight planning.
On the LAX-NRT market we cited above, the 330 is the slowest aircraft in the market - 40 minutes longer westbound but NW/DL still has consistently used the 330 in that market. Of course, the 333 is an ultra-low CASM aircraft for that route so DL can potentially incur a revenue penalty and still make more money than its peers - but in fact, DL had a 12% revenue premium in the LAX-NRT market and still had the largest local market share and total local revenue despite using the smallest and slowest aircraft (the 332)... given that the 332 is also the lowest CASM aircraft in a market that has lots of 744s and 777s, DL's profitability is probably also enhanced by using a lighter aircraft. So there isn't necessarily a correlation between revenue and aircraft choice.

As for the 772ER, it is a great plane and while the 777LR is an incredible machine, I still have all the admiration for a plane that can fly 275 people for 16 hrs - which the ER can do. The LR just does with even more performance. Perhaps you heard the story of the LR's entry into service in the JFK-BOM market with DL.... I was told that DL rec'd its first LR just weeks before BOM closed 2000 ft of its 11K ft main runway for construction. The ER remarkably could still fly the route but with a 50 pax payload restriction. The LR was able to operate the flight WITH NO PAYLOAD RESTRICTIONS and WITH 20K of cargo... off of a 9K ft runway on a flight that would be in the air for more than 16 hrs. Because there was only one LR, the LR operated every other day. Quite incredible to see the difference but both are still incredible aircraft. Adding winglets to the 772ER and potentially adding another 400 miles of range makes that plane even more valuable and it will still be a lot cheaper to acquire a used 772ER than an LR.

DL has said that they have healthy cargo loads on LAX-SYD so the use of the LR might be as much about being able to carry maximum cargo.

I still think DL and DJ will have a partnership for Australia; how New Zealand fits in given the DJ-NZ relationship that eoleson notes will be interesting to watch... but I wouldn't be surprised if a DL 332 ends up on LAX-AKL.

 

[metopower]

Meto,
There are twin vs quad schedules in both LAX-SYD and LAX-AKL. IN both markets, the fastest twin is anywhere from 15-20 minutes slower than the fast quad. That amount of time difference is not sufficient for the twin operators to not use that aircraft even though it does take longer and perhaps makes for more complicated flight planning.
On the LAX-NRT market we cited above, the 330 is the slowest aircraft in the market - 40 minutes longer westbound but NW/DL still has consistently used the 330 in that market. Of course, the 333 is an ultra-low CASM aircraft for that route so DL can potentially incur a revenue penalty and still make more money than its peers - but in fact, DL had a 12% revenue premium in the LAX-NRT market and still had the largest local market share and total local revenue despite using the smallest and slowest aircraft (the 332)... given that the 332 is also the lowest CASM aircraft in a market that has lots of 744s and 777s, DL's profitability is probably also enhanced by using a lighter aircraft. So there isn't necessarily a correlation between revenue and aircraft choice.

As for the 772ER, it is a great plane and while the 777LR is an incredible machine, I still have all the admiration for a plane that can fly 275 people for 16 hrs - which the ER can do. The LR just does with even more performance. Perhaps you heard the story of the LR's entry into service in the JFK-BOM market with DL.... I was told that DL rec'd its first LR just weeks before BOM closed 2000 ft of its 11K ft main runway for construction. The ER remarkably could still fly the route but with a 50 pax payload restriction. The LR was able to operate the flight WITH NO PAYLOAD RESTRICTIONS and WITH 20K of cargo... off of a 9K ft runway on a flight that would be in the air for more than 16 hrs. Because there was only one LR, the LR operated every other day. Quite incredible to see the difference but both are still incredible aircraft. Adding winglets to the 772ER and potentially adding another 400 miles of range makes that plane even more valuable and it will still be a lot cheaper to acquire a used 772ER than an LR.

DL has said that they have healthy cargo loads on LAX-SYD so the use of the LR might be as much about being able to carry maximum cargo.

I still think DL and DJ will have a partnership for Australia; how New Zealand fits in given the DJ-NZ relationship that eoleson notes will be interesting to watch... but I wouldn't be surprised if a DL 332 ends up on LAX-AKL.

WT There are other reasons that will prevent the A330 from flying routes beyond 12yrs at Dal. 1 being that there are other options in the fleet that are available that would not require a major MOD. The requirement for a rest facility that is lie flat for both flight/cabin crew is one.Only place for that area is below deck. It is available and has been discussed but turned down for now. I believe the plan is to remove the 330 from asia and move it to the african and europe theater. Los starts in june with the 777 going out to the Pacific .

 

[WorldTraveler]

WT There are other reasons that will prevent the A330 from flying routes beyond 12yrs at Dal. 1 being that there are other options in the fleet that are available that would not require a major MOD. The requirement for a rest facility that is lie flat for both flight/cabin crew is one.Only place for that area is below deck. It is available and has been discussed but turned down for now. I believe the plan is to remove the 330 from asia and move it to the african and europe theater. Los starts in june with the 777 going out to the Pacific .

thanks for the update... I was not aware that the decision had been made not to push the 330 beyond 12 hrs. I was aware of the requirements regarding the lie flat pilot facilities but thought that DL was doing something like what was done on the 763ERs for over 12 hr flights.
Has the decision been tabled to not increase the MTOW since it isn't necessary if the 330 is not used beyond 12 hrs?
It would seem that DL's need for more 777s only increases if they don't equip the 330s for flights beyond 12 hrs... it may not be needed by summer 2011 but it seems at some point the 332 with the PIP is probably the most inexpensive option for a 13-14 hr airplane... unless DL has plans to buy more 777s. Maybe 18 777s, a handful of 767s, and 16 744s is enough but it seems a bit insufficient to me considering the number of flights over 12 hrs.... thoughts?

 

[metopower]

thanks for the update... I was not aware that the decision had been made not to push the 330 beyond 12 hrs. I was aware of the requirements regarding the lie flat pilot facilities but thought that DL was doing something like what was done on the 763ERs for over 12 hr flights.
Has the decision been tabled to not increase the MTOW since it isn't necessary if the 330 is not used beyond 12 hrs?
It would seem that DL's need for more 777s only increases if they don't equip the 330s for flights beyond 12 hrs... it may not be needed by summer 2011 but it seems at some point the 332 with the PIP is probably the most inexpensive option for a 13-14 hr airplane... unless DL has plans to buy more 777s. Maybe 18 777s, a handful of 767s, and 16 744s is enough but it seems a bit insufficient to me considering the number of flights over 12 hrs.... thoughts?

WT ..This may sound crazy but wait until the B787 is delivered. The plan has been to wait until they start to be delivered and the price of fairly new used 777 are available. The B777-300er is the one they want. Dal already has the simulator. It was converted back to a 777-200Lr but is only a software change back to a 300Er.That is the plan but thing are changing all the time.... There are a few white tail 747-400 in NRT ..you never know.

 

[WorldTraveler]

Press reports say that DL along w/ AF-KL are preparing a bid with the help of Goldman Sachs while Etihad is also preparing a bid.

It would seem that the Skyteam airlines would have an advantage since AF-KL are EU citizens and should not be limited by ownership restrictions while DL and Etihad are foreign citizens and would have to work w/in ownersihp limits. If DL and AF/KL each bid equal amounts, they could submit a higher bid - and percentage of control than Etihad.

Of course there could be other bidders and Etihad could have an EU "citizen" join its bid.

It is worth noting that as of this summer DL will have almost as seats and the same number of flights from LHR as UA operates on its own metal.

 

[FutureUScapt]

It is worth noting that as of this summer DL will have almost as seats and the same number of flights from LHR as UA operates on its own metal.

Not even close. UA will have nearly 66% more weekly seats to/from LHR than DL will this summer.

 

[WorldTraveler]

Not even close. UA will have nearly 66% more weekly seats to/from LHR than DL will this summer.

check again.... based on schedules for July, DL and UA (on its own metal) will each have 10 flights per day. UA will offer 17,300 seats per week from LHR while DL will offer 16,000. CO (on its own metal) will fly 7 flts/day with just under 10,800 seats/week.
According to published schedules, UA will operate from LHR with a combination of 763, 777, and one 744 flight.
DL will use almost all 764s with less than 2 763/day. But DL's 764s capacity is closer to UA's 777 capacity while DL's 763s seat quite a bit more than UA's 763s.

Just as in Asia, UA is looking in its rear view mirror and seeing DL close in and had no choice but to engage in a merger in order to preserve its market share.

Based on its own metal, DL flew more capacity on its own metal to Asia than CO and likely would pass UA in revenue in the near future.

UA once was the 2nd largest US airline in South America but gave that up to DL - and to CO in the larger Latin America category - who have grown their networks.

My point simply is that UA has had positions of great advantage in the past and has lost many of them. Despite being the #2 airline in LHR for years, DL is quickly building its presence at LHR and if a VS tie-up of some sort occurs, DL could end up as #2 US airline at LHR in the same way that AA maintains its #1 presence at LHR through its BA alliance.

 

[eolesen]

Uh, isn't it just a bit specious to say there is "UA metal" and "CO metal" when their earnings are reported as a single corporation and they are traded as a single stock symbol?

It's like trying to argue that Jeep is a larger auto manufacturer than Buick. Sure, you'd be correct on a technicality, but it doesn't change the fact that GM is considerably larger than Chrysler...

They are separate operating entities within the same corporate shell, but the financial merger is complete. They have full schedule integration in that there are no longer supposed to be departures at the same time in the same market, and increasingly they are wearing the same name on the side of the plane. Policies are being consolidated as quickly as they can get the underlying systems consolidated, and the loyalty program will be

I do agree that UA is a carrier with a long history of squandered opportunity. But spinning the technicality that they still operate under separate IATA codes is meaningless.

 

[WorldTraveler]

We could stop at your agreement that UA has squandered opportunities because that is the crux of the issue.

Of course UA and CO are one company from a financial perspective but I was also quite clear in making that distinction from the first post that included the comparison.

But UA and CO are not - to my knowledge - swapping metal in any LHR markets (correct me if I am wrong). Therefore, UA's presence at LHR is indicative of what UA has had for years.

CO, DL, and NW didn't even fly to LHR until 2 years ago (this month, I believe?). One truly has to scratch one's head at how a carrier that at one time had more LHR access than any other US carrier now has to merge with another carrier in order to maintain its position.
My point about UA in Latin America and Asia points out the same thing.

It would also be accurate that based on the corporate structures, UA/CO is now larger at LHR than AA and highlights the challenges to the incumbents- and changes that have taken place in the market.

It also highlights that it is alliances that are now playing the deciding role in terms of size and market access at LHR; it is AA's JV w/ BA that allows it to remain the largest carrier but it is also DL's interest in VS that could displace UA/CO's position - unless other changes take place.

 

[eolesen]

It would also be accurate that based on the corporate structures, UA/CO is now larger at LHR than AA and highlights the challenges to the incumbents- and changes that have taken place in the market.

Are they? AA still is sitting at 17 flights a day from what I can tell (4-ORD 4-JFK 3-BOS 3-DFW MIA RDU LAX) but perhaps on a seat basis you are correct. I don't really pay attention to seats as much as I do departures.

Don't over-estimate what could happen if VS goes to Skyteam or is bought out by AF/KL.

VS is high stature, but the overall contribution is more emotional than anything else, and probably doesn't materially add anything to the network as much as it eliminates a high-touch competitor.

It also begs the question of what ultimately happens with BMI. They don't have the long-haul reach, but they do have the local traffic and some decent slot holdings. And LH is still firmly in control there.

 

[FWAAA]

Litigation can sometimes make for strange bedfellows:

Delta Must Face Virgin on Upper-Class Seating Patent, Court Says

Delta Air Lines Inc., the world’s second-biggest carrier, should go to trial over Virgin Atlantic Airways Ltd.’s claims it infringed a patent for its upper-class seating system, a U.K. appeals court ruled.

A November 2010 ruling in Delta’s favor erred because the patent covering the seating system applies to seats assembled off the aircraft, not just those on board, Justice Robin Jacob wrote at the Court of Appeal in London today.

http://www.bloomberg.com/news/2011-02-23/delta-must-face-virgin-on-upper-class-seating-patent-court-says.html?cmpid=yhoo

 

[FWAAA]

CO, DL, and NW didn't even fly to LHR until 2 years ago (this month, I believe?). One truly has to scratch one's head at how a carrier that at one time had more LHR access than any other US carrier now has to merge with another carrier in order to maintain its position.
My point about UA in Latin America and Asia points out the same thing.

It would also be accurate that based on the corporate structures, UA/CO is now larger at LHR than AA and highlights the challenges to the incumbents- and changes that have taken place in the market.

LHR opened to DL, NW and CO three years ago next month:

http://www.boston.com/business/articles/2008/03/31/us_airlines_head_to_heathrow/

Funny how on the one hand we keep hearing impressive stats about how much new service DL and CO have added to LHR over the past three years yet on the other hand we keep hearing how unimpressive AA has been because of its focus over the years on LHR instead of various second-tier European destinations.

 

[WorldTraveler]

LHR opened to DL, NW and CO three years ago next month:

http://www.boston.com/business/articles/2008/03/31/us_airlines_head_to_heathrow/

Funny how on the one hand we keep hearing impressive stats about how much new service DL and CO have added to LHR over the past three years yet on the other hand we keep hearing how unimpressive AA has been because of its focus over the years on LHR instead of various second-tier European destinations.

If AA could generate the same level of revenues it once did flying just to LHR, then it really wouldn't matter if they flew to BUD or DME at all, now would it?

The point once again is that the industry and individual markets can change VERY quickly and unless all major players in a market are aggressive in responding to changes, then market balance can quickly change.
Even if you choose to look at DL's LHR presence on the merit of AA and UA/CO as merged companies, then the fact that DL offers more than half of the seats that either AA or UA have even though the latter two have been at LHR for 20 years or more says something about how quickly things change.

But the reality is that AA isn't getting the same kind of revenue that it once did from LHR or the transcons or even Latin America relative to the total pie... if others are taking parts of the pie that AA once had as its own and AA isn't expanding its network, then it stands to reason that AA's revenue isn't going to grow where others is.

And you are right time does fly when we are having fun.... but I'm not sure that 2 or 3 years makes a big difference... UA bought PA's LHR operation more than 20 years ago and AA has built its LHR operation over that long.....and as I have noted before, in many contests between AA and UA, AA has come out in better shape than UA.

As for the seat issue, it might be an issue but the amount in question could easily become insignificant in the total price of a potential transaction. It also is not uncommon for litigation to remain unresolved in a merger or asset acquisition and for that issue to become subordinated to other larger business interests. Further, unless DL can be shown to have directly obtained the information necessary to copy the seat, DL didn't make the seats but rather a seat manufacturer did.

As for a comparison between AA and UA/CO at LHR, AA has schedule for July 117 flights/week compared to UA/CO's 119... total seats offered is not only very close w/ a slight edge by UA/CO but AA and VS and AA offer very similar amounts of seats although AA has about 30 more departures/week to the US.

I wouldn't say for a minute that VS is insignificant or emotional; it has the potential to add major markets competitive with AA and UA to Skyteam's LHR network inculding IAD, ORD, LAX, and SFO plus strengthen DL's position to Florida while pulling some of that connecting traffic off of DL's flights - increasing the value of DL's LHR operations.

The real challenge in DL/VS would be in finding the right balance between VS' historical independence (which has created loyalty through their unique products) and the connections they would have to have with DL and AF/KL in order for an acquisition to work. I'm betting that VS will become more like another network airline at the cost of some of its own independence.

Yes, BMI would fall under the category of "other changes" that I noted could take place. I honestly DO expect that LH will do something to strengthen its role at BD - but everything I have seen says that could likely result in major labor problems at BD which LH is apparently not willing to tackle.

 

[FutureUScapt]

check again.... based on schedules for July, DL and UA (on its own metal) will each have 10 flights per day. UA will offer 17,300 seats per week from LHR while DL will offer 16,000. CO (on its own metal) will fly 7 flts/day with just under 10,800 seats/week.

Just as in Asia, UA is looking in its rear view mirror and seeing DL close in and had no choice but to engage in a merger in order to preserve its market share.

Based on its own metal, DL flew more capacity on its own metal to Asia than CO and likely would pass UA in revenue in the near future.

UA once was the 2nd largest US airline in South America but gave that up to DL - and to CO in the larger Latin America category - who have grown their networks.

My point simply is that UA has had positions of great advantage in the past and has lost many of them.

Yes, but what an absolutely asinine distinction. UA/CO are ONE airline now.

Perhaps you would also find it interesting that US will have more seats from PHL-CDG this summer than DL will on its own metal from both DTW and JFK combined? True, absolutely. Utterly meaningless, you bet.

I've read your posts on this forum as well as others and I think in general you provide a great analysis of what is happening in the industry. But if you wonder why people doubt your analysis, you don't have to look far - it's because at every opportunity you downplay an OA advantage (vs DL) and up-play every last DL advantage (vs OA), even to the point where it means citing meaningless statistics like this or conveniently leaving behind or not telling half the story. It's unfortunate that is the case because, like I said, I think you provide excellent analysis on the whole and I believe that DL is very well positioned for the future, which is why I don't really see the need for these extraneous "facts."