AA/JAL Joint business approved

[damajagua]

With the approval of the joint business between AA and JAL by the DOT;
Any thoughts about possible new routes to Asia?

 

[FWAAA]

Now that Open Skies has replaced the old bilateral agreement, I'd expect AA to add some more flights to Japan. IMO, HND will supplant NRT within a couple of years as more HND slots are opened for US-based airlines.

 

[eolesen]

They need airplanes first. Oh, wait, it appears that may already be addressed.... 😉

 

[WorldTraveler]

Just curious what gateways you think AA can add service in where they have strong potential to succeed? Remember that there is an overall increase in Japan overflights by other carriers which weakens the overall value of Japan as a connecting hub.
Also, HND does have the potential to surpass NRT as a major international hub in addition to its current role as a domestic hub, but doing so will likely significantly devalue NRT, something the Japanese government and a number of other parties will resist. If HND gains more value as an international gateway without providing something for NRT, then NRT's value diminishes significantly. For now, the US-HND slots are far from being ideal for international connecting operations and it isn't likely that there will ever be enough HND slots created to replace the level of int'l service that exists at NRT.
Even though AA and JL have a joint venture, AA/JL is still the number 3 alliance between the US and Japan.

 

[eolesen]

Even though AA and JL have a joint venture, AA/JL is still the number 3 alliance between the US and Japan.

Yes, and that means DL is the one with the most to lose from all this.

Existing gateways to NRT & HND, who knows. But the real power of Open Skies will come outside of the existing gateways. Maybe with ATI, operating/resuming services to FUK, NGO, KIX, etc. start to make sense because you can capture the local market from both sides.

 

[WorldTraveler]

Yes, and that means DL is the one with the most to lose from all this.

Existing gateways to NRT & HND, who knows. But the real power of Open Skies will come outside of the existing gateways. Maybe with ATI, operating/resuming services to FUK, NGO, KIX, etc. start to make sense because you can capture the local market from both sides.

except that alot of people predicted that DL would cave in Japan as soon as the AA/JL announcement was made and yet DL's US-Japan capacity is growing by 15% next year, partly as a result of the HND awards, where DL will be the single largest carrier across the Pacific from HND, just as it is at NRT.
Further, DL has a 20% CASM advantage over AA and who knows what over JL as they try to stabilize their finances.

And... DL IS growing its non-Japan Asia presence as well. We haven't heard their 2011 plans but I fully expect it to be another year of multiple new flights in the same vein that occurred in 2010.

DL is also adding a host of new partners to Skyteam in Asia which only increases the strength of its Japan operations as part of an alliance; further, it does provide the opportunity for DL to potentially drop some shorter haul intra-Asia flying such as to TPE but replace it with partner alliance service as well as new DL metal service to other parts of Asia or the Pacific.

DL is the largest slot holder at NRT and of any US airline at any foreign airport anywhere. That is a huge advantage that DL is not about to give up.

and again, you argue that NRT will become obsolete and that will impact DL the most - but no one has yet to explain where all the slots are coming from in order to move all that connecting traffic to HND.


That doesn't stop AA from expanding its presence in Japan and I fully expect they will... but oneworld is still the smallest alliance across the Pacific and from Japan; they will have to fight hard to take share from larger and financially stronger airlines and alliances.

 

[eolesen]

I know it's hard to see the world thru your widget shaped glasses at times, but I never said that NRT would become obsolete, WT. It's less relevant as a connecting point when the 787 finally shows up, but Japan is still a huge market.

When I said it will be easier for JL/AA and NH/UA to exploit the lack of slots at places like FUK, NGO, and KIX, it's because they already have people loyal to NH and JL to pull from. They have that domestic point of presence. DL has loyalty, but how much of it is ex-Japan, and how much of it is ex-US? Gaijin don't win very often when there's a comparable Japanese brand available.

And I think you probably need to remember that there's only one way out of the #1 spot. Nobody stays on top forever, and I think DL's quickly approaching the point to where continued growth isn't going to be sustainable.

 

[WorldTraveler]

I know it's hard to see the world thru your widget shaped glasses at times, but I never said that NRT would become obsolete, WT. It's less relevant as a connecting point when the 787 finally shows up, but Japan is still a huge market.

When I said it will be easier for JL/AA and NH/UA to exploit the lack of slots at places like FUK, NGO, and KIX, it's because they already have people loyal to NH and JL to pull from. They have that domestic point of presence. DL has loyalty, but how much of it is ex-Japan, and how much of it is ex-US? Gaijin don't win very often when there's a comparable Japanese brand available.

And I think you probably need to remember that there's only one way out of the #1 spot. Nobody stays on top forever, and I think DL's quickly approaching the point to where continued growth isn't going to be sustainable.

your statement "DL has the most to lose" sets your mindset that in order for AA/JL to win, DL must lose. I find that problematic at best based on every piece of evidence regarding the market.
I know full well the power of ATI and joint ventures and I fully expect that AA/JL will make the most of it. But you also fail to acknowledge that even combined, AA/JL is 40% smaller than DL alone between the US and Japan, serves far less gateways, and will end up with less capacity between the US and HND. oneworld also has no presence in LAX-HND, the largest Tokyo market and JL which won the best coast award is using an aircraft from SFO far smaller than DL - and they chose to place one of their valuable HND flights in Star's hub where AA's ability to help feed the flight is limited compared with other gateways.
I do not doubt that AA/JL will improve their position in Japan but they are competing against DL plus Star, both of which are much larger than AA/JL.

What has not changed is that the Japan market is very unique in that NW - and now DL - enjoy a larger portion of the market than Japan's own carriers. Do you realize that based on published schedule by next spring when JL's restructuring appears to be complete, DL will be within a couple percent of total international capacity from Japan as JAL? That type of situation is unheard of in any other country in which US carriers operate and I doubt if there is a a similar equivalent in any large aviation market.
That is not a rose colored view of the situation but simply the reality that DL is the largest single carrier across the Pacific from Japan and that is true in every Japanese market.

Yes, I do think that there is potential to develop service from additional cities but JAL is shrinking its presence in secondary Japanese markets which makes it even less likely they will be able to add service across the Pacific while also defending their hubs in Toikyo.

When you add on the fact that DL has a cost advantage over both AA and UA, it makes it even less likely that those two are going to get into a market share battle in which they are likely to lose more than DL.

Remember that it was AA's CEO who very publicly argued that DL was too large to become a viable partner for JL w/o a lengthy ATI review - which JL cannot afford. AA now has to compete against DL. When you consider that DL and UA are already expanding their presence in Asia outside of Japan, which effectively makes Japan less important as a connecting point for all US carriers, it makes AA's job even harder. AA has to compete against larger carriers/alliances not only in Japan but also in the rest of Asia.

The JL win simply kept AA from being completely pushed out of the Pacific but AA still does not have the size in Japan or in other countries in Asia to compete against Skyteam and Star which are larger.

From that perspective, I have no doubt that AA will do what it can to make JL a key part of its strategy in the Pacific. Expecting other carriers to lose in order for AA to win is a long stretch at best.

 

[eolesen]

Are you hooked up to the DL koolaid via IV drip?...

There's no doubt that DL controls way too much of the Japan capacity. But they also got to control an inordinate amount of the capacity at FRA and TXL back in 1991. How much of that do they control today?...

 

[WorldTraveler]

Are you hooked up to the DL koolaid via IV drip?...

There's no doubt that DL controls way too much of the Japan capacity. But they also got to control an inordinate amount of the capacity at FRA and TXL back in 1991. How much of that do they control today?...

It has nothing to do with DL.. it could be any carrier. The simple fact is that AA/JL is the 3rd largest airline between the US and Japan, the largest Japanese market segment and the one which most matters to AA. There are very significant reasons why DL now holds the position it does but it doesn't change the fact that there is NO evidence that DL is walking away from its position as the largest airline across the Pacific -largely due to its TATL position from Japan, or that Open Skies is ultimately going to change DL's strategy in Japan - or that anyone else is going to be able to significantly challenge DL's position.

Trying to argue that it is DL loyalty that "clouds' my ability to see the truth fails to recognize that AA has structural advantages in other markets such as Latin America that it is not going to be challenged by other carriers.
My point simply is that AA waited far longer to develop joint ventures with its alliance partners and now is in the position in the Pacific of having the smallest alliance and of having JAL as its key partner being the 3rd smallest across the Pacific.

Germany was a quite different story - not the least of which is the much shorter distance between markets which meant that the PA/DL intra-European fleet was significantly underutilized relative to what can be done at Tokyo. Further, the FRA hub worked because it was part of Pan Am's Berlin operation, another WWII era event that had significant aviation implications. Once Germany reunified and German carriers were able to fly to TXL, the synergies between FRA and TXL were lost. Further, PA was not the dominant airline at FRA by a long shot. In contrast, DL's TPAC hub at NRT is far larger than the comparable TPAC complexes of JL and NH. The only reason those carriers are larger overall at NRT is because they offer flights throughout the day, something that DL largely does not do now - but certainly could because Open Skies gives DL opportunities as well (remember those slots which the NW freighter operation used to use and which are largely at opposite times of the day than the passenger flights?)

The fact is that DL's Tokyo operation is the largest foreign carrier operation at a major international airport, that isn't likely to change, and AA/JL have to compete against that reality - as unusual as it is.