AA and TLV

[MAH4546]

Just for gits and shiggles, I was pulling some O&D data, and the numbers are a little more skewed than I thought they'd be:

One month can't account for seasonal traffic variations, but the market is heavily leaning towards New York, California and Florida. But still, it's more than Jewish communities. Miami, LA and New York all have large Jewish communities, but large Israeli communities as well. Plus, there is a lot of biotech traffic from Boston and San Francisco that has nothing to do with religion; plus a variety of telecom, biotech, banking and real estate companies from Israel that run out of Miami (Ivax, Africa Israel Corp., ECI, Talla-Com), as Israeli companies have always been attracted to basing U.S. ops out of South Florida.

There's also this that skews the numbers heavily towards New York: the tourism market is insanely skewed towards packaged vacations - such as the government-sponsored birthright trips - which are often organized with El Al, and require that people find their own way to New York or Los Angeles on seperate ticket.

FY2011

NYCTLV: 1,250 PDEW
LAXTLV: 202 PDEW
MIATLV: 111 PDEW
SFOTLV: 100 PDEW
CHITLV: 80 PDEW
BOSTLV: 74 PDEW
PHLTLV: 46 PDEW

MIATLV and SFOTLV are two of very few trans-Atlantic markets with 100 PDEW+ not served non-stop; but El Al is probably coming back to South Florida now that the FAA restrictions have been lifted.

 

[eolesen]

One month can't account for seasonal traffic variations

True, but I ran the same report over a number of different months, and got more or less the same results give or take a couple hundred...

The reason I illustrated the summer month is to address the earlier comment from FWAAA about Christian pilgrimages making up half the market; those tend to take place over the summer months.

There's also this that skews the numbers heavily towards New York: the tourism market is insanely skewed towards packaged vacations - such as the government-sponsored birthright trips - which are often organized with El Al, and require that people find their own way to New York or Los Angeles on seperate ticket.

Fair enough. And that's not something that any data source is going to be able to filter out, but it still doesn't explain the huge variance between local and connect traffic that you see at EWR, ATL, and PHL.

 

[WorldTraveler]

... it still doesn't explain the huge variance between local and connect traffic that you see at EWR, ATL, and PHL.

it just says that service is most concentrated in the largest local market for US-Israel traffic, whether it is a real local market or one that is derived because tourists go there to pick up flights. DL's percentage of local traffic on JFK-TLV is the highest of any of the US carrier flights even though the use the largest aircraft (744); DL's ATL-TLV flight had the lowest percentage of local traffic and did predominantly pull from medium sized cities in the middle of the country such as FWAAA mentioned. US and UA both now carry a lot more "middle of the country" type traffic than DL does, who probably shifted (or pushed) some of that traffic over European hubs.
Given that TLV is probably not a make or break destination for a US carrier, its role for DL is probably more in helping build brand preference in NYC although it is doubtful that it loses money. It doesn't hurt that JFK-TLV for DL can be operated using essentially just one additional airframe since the aircraft comes from NRT and would sit for more than 20 hours if it weren't sent to some other destination. UA also has the ability to rotate aircraft across their Pacific and Atlantic networks at EWR but US essentially only operates an Atlantic network from PHL so the aircraft cost is higher for US than it is for DL or UA.

 

[robbedagain]

I would imagine that the cost would go down when US adds a second tlv flight from phl correct? i have long heard that that plane alone is a huge huge money maker as for pax we always have a ton of pax flyin bwi to phl to tlv the vast majority taking the 230p the 436p and the 640pm jet esp that last flight connectin to the tlv flight

 

[eolesen]

No argument on WT's responses, but I still say the profitability of all that connecting traffic is suspect. You don't get revenue premiums when you're moving >65% of your traffic on a route as a connection.

And, to Robbed's point above, the costs won't necessarily go down with a second flight, since US probably isn't hiring their own staff at the outstation, but using a ground handler. It just means that there will be that many more seats to try and fill. A daytime flight might make sense if there's local demand, but it doesn't appear that there is.

This same issue was being brought up on another forum, and I'll share a comment from that discussion. US's international network is a bit of an oddity -- it does rely on connecting traffic from the rest of the network, some of it double-connecting over PHX and PHL or PHX and CLT.... And there's no way connecting traffic at those levels is generating a premium; the premium traffic is flying on other Star Alliance partners with shorter journey times.

It's also a perfect example of how Star Alliance has negatively impacted US... Their existing route map to Europe, with the exception of FRA/MUC/LIS and ZRH, is to places where Star partners aren't based, or to places where a partner carrier is based that is too small/weak to be able to operate their own nonstops into the US.
Living in UA and LH's shadow can't have been that rewarding, especially when they had the benefits of ATI, and US didn't.

It's possible that moving US into oneworld will result in the smaller/less obviously profitable markets like TLV and VCE being trimmed, and nonstop service being added in markets where UA or one of the dozen or so European Star members are currently operating.

I seem to recall a lot of discussions in the past on US's floor for equipment, and how they've been at the contractual floor for a while. I don't recall if that was pre- or post- merger with US, nor do I care to go searching thru 10 years of posts to find out.

How many of their international network decisions were being driven by the actual revenue potential, versus needing to:

(1) use airplanes they can't get rid of (all of the widebodies are either leased or encumbered) into
(2) cities that they have the range for (which pretty much has ruled out Asia) and
(3) weren't already dominated by another carrier in the alliance...

What I do know is that their widebody fleet plan hasn't changed materially in 8 years, unless you count delaying the A350 orders. If these oddball picks into second and third tier destinations were indeed a rousing success, you'd think they would have accelerated some of those widebody replacements into growth aircraft.

 

[WorldTraveler]

There is no reason to think US' TLV flight is not profitable... but the same factors exist on that flight as do in much of US' network... it is heavily dependent on connections, including picking up lower yielding traffic that other carriers might not be interested in taking. And the 2nd part is that they can afford to do that based on labor costs that are below average for network carriers.
Crew costs make up a much larger portion of the cost of an international flight than they do for a domestic flight. It makes little difference if US' mechanics and ground staff are paid comparable wages as other network carriers for domestic flying but it makes a big difference for int'l flights where crew costs are a much higher percentage of total costs for the flight.

US has built its route network over looking for places where there is sufficient demand for them to start service and use their lower costs in order to find niche markets to fly. US has been able to use this strategy free from the effects of other carriers because it has reduced its network to its fortress hubs.

As AA/US move back into competing in large, highly competitive markets outside of fortress hubs (which AA's network does far more than US') and as the costs of the combined airline increase as a price for the merger, then US cannot continue to fill its planes with fares that are below what other carriers will take.

Markets like TLV likely will continue to work in part because PHL is a large enough market that it can collect enough reasonably priced traffic. US' will likely get a benefit in not being under UA's thumb; US has had to compete alongside UA for a lot of NE US int'l traffic and that will all change. AA clearly has passengers even outside of NYC that have lost because they have not had a TLV option. The same thing can be said for other markets. Conversely, US has probably lost some traffic because they didn't serve much of Latin America or any of E. Asia... and AA can help build in both of those areas. That is what mergers are supposed to do.

What won't change is that the economics of the way US' network has worked in the past will change as they move from being a niche, low cost network carrier to having costs and revenue generating capabilities similar to DL and UA. US/AA will gain in some aspects because of the merger but it will also lose in other aspects.

For every action, there is an equal and opposite reaction.

 

[robbedagain]

While true about the equal n opposite id have to ask how do companies such as swa who dont have interline agreements with anyone and dont go intl destinations vs the major carriers
they dont offer first class but of course that could change as they absorb fl

 

[WorldTraveler]

not sure I understand your question ... are you asking how WN makes money since they don't go to int'l destinations, offer first class etc?

If that is your question, the answers are both cost and revenue driven. From the cost side, WN has long been a highly efficient airline... very productive workforce which works well w/ mgmt. They also have been steadily growing for 40 years and growth helps keep costs down because new hires come in at the bottom of the scale.

On the revenue side, WN has strong revenue measures because they concentrate on point to point traffic; connecting traffic is not only expensive to handle (because you have to handle the passenger several times) but you also have to divide the revenue between several flights. Also, WN is masterful at matching capacity to demand so that they can keep fares up; the network carriers have been trying to all be nationwide carriers and that has created a lot of excess capacity.
Even though AA and US don't have the same hubs, they do compete for the same MCO-SEA passenger as DL and UA (and WN) and thus the merger will help reduce capacity, force fares up, and help all carriers. The reason the creditors are supporting a merger between AA and US is because it promises to reduce excess capacity and eliminate one pricing entity, esp. important if US is the low fare carrier in many connecting markets, which it often is now.

Domestic first class largely supports loyalty program in the US; the network carriers use first class as an incentive for their best customers to buy coach travel.

 

[eolesen]

Your question is pretty cryptic... try paragraphs instead of tweets.

Southwest makes their money by focusing on markets where there's local demand... They specifically avoid small markets. If you're not big enough to support four 24 hour Walmart stores, you won't see Southwest there.

 

[Frank Szabo]

Whenever El Al is mentioned, I always see the bearded 707 from "Airplane!" in the mind's eye ...

 

[robbedagain]

e lets use abe for an example... there are numerous 24hr walmarts all around and one being close to the airport.. i dont know how it is now compared to mid 2000s but i was there when swa was lookin at serving pa... they were told the landing fees were too high.... and they told then george doughty that they could serve pit phl and anthr station far cheaper than the landing fees that abe charges... which is probably why us pulled the jet out and now uses rjs.. then swa went to pit phlly basically the point is even though you can have 24hr wally worlds doesnt mean swa is going to swoop in ... wt you actually answered my question thanks sorry about mis typin it..

 

[FWAAA]

Just for gits and shiggles, I was pulling some O&D data, and the numbers are a little more skewed than I thought they'd be:

With >70% of the traffic originating at either EWR, JFK, or LAX, it's pretty clear that it's a market pretty tightly tied to religion.

True, but I ran the same report over a number of different months, and got more or less the same results give or take a couple hundred...

The reason I illustrated the summer month is to address the earlier comment from FWAAA about Christian pilgrimages making up half the market; those tend to take place over the summer months.

Thanks for the numbers; an excellent example of data trumping anecdote. When I see my source for the faulty assertion tomorrow, I'll let them know the reality. 🙂

Looks to me like it would make sense to fly that second flight (or maybe even both flights) from JFK.

 

[700UW]

US wouldnt fly to TLV if they werent making a profit, it was one of the first routes for the A330-200, US has been quick to trim or cut international flying that isnt profitable.

 

[eolesen]

basically the point is even though you can have 24hr wally worlds doesnt mean swa is going to swoop in ...

That's not what I said, and you're missing the point.

WN and Walmart both go where they can make money. They don't waste their time trying to serve communities that can't support the volume they need to turn a profit on low margins.

Walmart also won't open a store where the community will limit their ability to do business, or where the cost of building is prohibitive. They'll move a mile or three down the road to the next municipality who gives them a permanent tax break, knowing that customers will drive there.

Southwest is no different, which is why your comment on landing fees isn't at all surprising.

There are a dozen or so small airports around the country who decided to follow a strategy of "build a palace and they will come" just to find out that the airlines had no interest in footing the bill for a local monument to some former politician or local hero.

 

[robbedagain]

ok i see now what youre sayin e i knew that at the time abe was trying to get a low cost carrier for nonstop to fla... allegiant stepped up to the plate and received 3 yrs free landing rights every day or every couple of days to go abe to sfb and since then i belive they also do myr runs too on select days but i see what youre saying and it makes sense