AA to begin DFW-HKG and DFW-PVG in 2014; cancels JFK-HND

[FWAAA]

Big announcements for DFW. I don't predict long-term success for HKG or PVG from DFW. If those very long-haul routes made sense, then that big ATL-based airline would be flying from its super-big hub in Georgia to HKG and PVG.

AA pulling the plug on JFK-HND in December of this year.

http://hub.aa.com/en/nr/pressrelease/american-airlines-responds-to-customer-demand-with-new-service-from-dallasfort-worth-to-hong-kong-and-shanghai

 

[Jacobin777]

Big announcements for DFW. I don't predict long-term success for HKG or PVG from DFW. If those very long-haul routes made sense, then that big ATL-based airline would be flying from its super-big hub in Georgia to HKG and PVG.

AA pulling the plug on JFK-HND in December of this year.

http://hub.aa.com/en...ng-and-shanghai

IMHO DFW-HKG will do well but I'm not so sure about DFW-PVG. Not surprised about JFK-HND. I would however like to see them restart JFK-NRT.

 

[WorldTraveler]

with all due respect, I've said for quite some time they should do all 3 of these things.

Methinks LAX-PVG and NRT are next on the hit list.

Interesting that both routes will be operated as part of the JBA with Japan Airlines but not with Cathay Pacific, even as AA pulls a route that is to JAL's home turf. AA will be competing to HKG with CX who has added new flights of its own to the US.


"While we are disappointed to end this route, our Tokyo/Haneda flight has been quite unprofitable, (true dat) largely because we are allowed to operate only during severely restricted hours, limiting our customers' options for connecting flights to and from other Asian markets. Our decision to finally cancel the service followed multiple unsuccessful attempts to persuade the U.S. and Japanese governments to reach an agreement to eliminate all schedule constraints at Tokyo/Haneda," the letter said.

Read more here: http://blogs.star-te...l#storylink=cpy

 

[MAH4546]

LAXPVG and LAXTYO aren't on any "hit list" and are not going anywhere. DFWPVG did end up being chosen over adding LAXPEK (as well as JFKPVG and MIANRT) this coming summer, though, likely in order to keep focusing on strengthen LAXPVG. Next long-haul from LA is looking more and more likely to be LAXAKL, operated under the JBA with Qantas with a 2-class 772. LAXICN is also being seriously looked at, while a decision on whether or not to apply for LAXHND (and then likely replace LAXNRT with JFKNRT) will be made in due time. LAX expansion will continue chugging along in 2014, focusing on connecting for domestic points. So far it has been performing quite well, with only one casualty - Boise - since the expansion launched three years ago to this month.

 

[WorldTraveler]

whether they are on a hit list or not doesn't change that AA isn't making money out of LAX to Asia and is not likely to do so anytime soon. Second quarter DOT data should be out in a couple weeks unless the US gov't slimdown pushes the process back; whenever it comes the data will show that AA's performance in LAX-Asia is far weaker than other carriers and AA is not receiving revenue sufficient to be profitable. The only reason AA remains on those routes is because they continue to view doing so as a strategic necessity - apparently because they have corporate contracts that they might lose if they don't serve those markets. Without a partner in Chinese and having just gotten a cold shoulder from CX on DFW-HKG, it doesn't appear that AA's chances of obtaining industry acceptable revenue on competitive routes to Asia is going to change.

We haven't seen the DOT results on DFW-ICN yet but I can absolutely assure you that it is not doing well. All of those who talked about all of the US gov't and military traffic between N. Texas and S. Korea might want to consider that the two warring Skyteam transpac powers apparently have cooperated enough to keep the US gov't contract out of AA's hands.

How long have we been reading predictions of MIA-NRT?

 

[Jacobin777]

How long have we been reading predictions of MIA-NRT?

While the B77E would be able to do MIA-NRT the B787 will be the perfect plane for the route.

 

[WorldTraveler]

Jacobin,
from a technical standpoint, the 787 could likely do MIA-NRT just fine.... but, as much as some people want to frame the discussion in technical terms, AA's route system won't be made or broken by one aircraft type of not and neither will anyone else's.

The problem with MIA-Asia and also will be that MIA is in the opposite corner of the US from Asia and AA has to fly across the entire US - competing against multiple other hubs from US and Asian carriers - in order to operate a flight for which the primary justification is the ability to connect Asia to Latin America. Other carriers can and do that including via the Middle East and many of the options don't have the visa problem which disadvantages US carriers trying to sell int'l to int'l connections thru the US.

Further, we still haven't seen that AA is able to make money to Asia with a route system that is built around far more competitive and strategically important markets such as from NYC, ORD, and LAX - cornerstones of AA's route network yet AA does very poorly to Asia from all 3 cities and DOT results show that.

AA might have decided to walk away from HND but AA could not have accumulated a -25% operating margin on its Asian network in the 1st quarter of this year based solely on one route. It is mathematically impossible. AA's Asian route system is still heavily driven by a perceived need to have a strategic presence in Asia without a demonstrated ability to make money doing so.

DFW is a much more "protected" hub for developing Asia but it is geographically far from ideal and AA's route system to Asia still won't compete successfully against UA and DL which have far larger presences on the west coast, the Midwest, and New York, markets which any US airline has to serve in order to be competitive. Again, it is noteworthy that AA's sole single partner in Asia is Japan Airlines even though it is eclipsed in size by DL and UA across the Pacific let alone by their partners. The odds of AA and JL making the Pacific work against significant advantages for the long-term are slim.

There is no assurance that Parker will maintain the same sense of strategic necessity for AA's Asian system once he is in charge, esp. in light of rising merger and labor costs that will pressure new AA's finances.

Finally, there is a subtheme regarding HND and NRT. AA gave up on HND apparently based on their expectation that there is no reasonable chance of retiming the JFK-HND flight to a reasonable schedule. If AA couldn't do it, then the chance is really high that US-Japan services from NRT will likely be unaffected by the opening of HND to more int'l flights - most of which have gone to new destinations in Asia and a few to Europe. If US-Japan flights are not retimed to HND, then AA/JL is in an even weaker position because DL and UA/ANA still have larger US-Japan operations PLUS they also have larger beyond operations. Add in that ANA won more slots at HND than JL and AA/JL's weakness in the core Japan market is weakened. Further, DL's hub at NRT is likely not threatened near to the extent it could have been if significant retimings were allowing to US-HND flights (including DL's who will now have half of US mainland to HND flights). DL has considerable capacity to reduce the gauge and CASM of its NRT hub operation but still maintain a larger footprint; the new 330s are capable of flying nearly all of DL's NRT operation at CASMs that are lower than any other aircraft AA or JL could use. UA is moving toward fragmenting the Pacific with the 787s - and UA does have partners or a strong presence in most countries of Asia.

AA clearly sees itself in a do or die situation with Asia and they have put their hopes on JAL to make it happen. But both AA and JL have significant strategic disadvantages that will not change and while AA is trying to find a way to make its Asian presence work, DL and UA are moving on to the next steps in developing their own Pacific strategies. DL has been profitable in Asia and UA has largely been which provides enormous strategic advantages to both over AA.

Again, in a couple weeks (now that the US gov't budget issues have been pushed forward a few months) we should see revenue numbers for the 2nd quarter and they should provide insight as to whether AA is really making progress in improving its revenues in Asia or simply making a last ditch strategic decision to not be completely marginalized in Asia.

 

[JFK Fleet Service]

Please sir, bludgeon us some more with the greatness that is Delta.


Another chorus of Delta Uber Alles!!

 

[Jacobin777]

Jacobin,
from a technical standpoint, the 787 could likely do MIA-NRT just fine.... but, as much as some people want to frame the discussion in technical terms, AA's route system won't be made or broken by one aircraft type of not and neither will anyone else's.

The problem with MIA-Asia and also will be that MIA is in the opposite corner of the US from Asia and AA has to fly across the entire US - competing against multiple other hubs from US and Asian carriers - in order to operate a flight for which the primary justification is the ability to connect Asia to Latin America. Other carriers can and do that including via the Middle East and many of the options don't have the visa problem which disadvantages US carriers trying to sell int'l to int'l connections thru the US.

Further, we still haven't seen that AA is able to make money to Asia with a route system that is built around far more competitive and strategically important markets such as from NYC, ORD, and LAX - cornerstones of AA's route network yet AA does very poorly to Asia from all 3 cities and DOT results show that.

AA might have decided to walk away from HND but AA could not have accumulated a -25% operating margin on its Asian network in the 1st quarter of this year based solely on one route. It is mathematically impossible. AA's Asian route system is still heavily driven by a perceived need to have a strategic presence in Asia without a demonstrated ability to make money doing so.

DFW is a much more "protected" hub for developing Asia but it is geographically far from ideal and AA's route system to Asia still won't compete successfully against UA and DL which have far larger presences on the west coast, the Midwest, and New York, markets which any US airline has to serve in order to be competitive. Again, it is noteworthy that AA's sole single partner in Asia is Japan Airlines even though it is eclipsed in size by DL and UA across the Pacific let alone by their partners. The odds of AA and JL making the Pacific work against significant advantages for the long-term are slim.

There is no assurance that Parker will maintain the same sense of strategic necessity for AA's Asian system once he is in charge, esp. in light of rising merger and labor costs that will pressure new AA's finances.

Finally, there is a subtheme regarding HND and NRT. AA gave up on HND apparently based on their expectation that there is no reasonable chance of retiming the JFK-HND flight to a reasonable schedule. If AA couldn't do it, then the chance is really high that US-Japan services from NRT will likely be unaffected by the opening of HND to more int'l flights - most of which have gone to new destinations in Asia and a few to Europe. If US-Japan flights are not retimed to HND, then AA/JL is in an even weaker position because DL and UA/ANA still have larger US-Japan operations PLUS they also have larger beyond operations. Add in that ANA won more slots at HND than JL and AA/JL's weakness in the core Japan market is weakened. Further, DL's hub at NRT is likely not threatened near to the extent it could have been if significant retimings were allowing to US-HND flights (including DL's who will now have half of US mainland to HND flights). DL has considerable capacity to reduce the gauge and CASM of its NRT hub operation but still maintain a larger footprint; the new 330s are capable of flying nearly all of DL's NRT operation at CASMs that are lower than any other aircraft AA or JL could use. UA is moving toward fragmenting the Pacific with the 787s - and UA does have partners or a strong presence in most countries of Asia.

AA clearly sees itself in a do or die situation with Asia and they have put their hopes on JAL to make it happen. But both AA and JL have significant strategic disadvantages that will not change and while AA is trying to find a way to make its Asian presence work, DL and UA are moving on to the next steps in developing their own Pacific strategies. DL has been profitable in Asia and UA has largely been which provides enormous strategic advantages to both over AA.

Again, in a couple weeks (now that the US gov't budget issues have been pushed forward a few months) we should see revenue numbers for the 2nd quarter and they should provide insight as to whether AA is really making progress in improving its revenues in Asia or simply making a last ditch strategic decision to not be completely marginalized in Asia.

I don't think anyone is saying AA doesn't have work to do with its Asian network and as you have stated a multiple amount of times, AA is quite week in Asia. Even one or two poorly-producing routes will wreak havoc on the numbers.

As you know AA has bad slot times at HND and China. AA also has the JV/ATI with JL so its probably better AA utilise its resources somewhere else.

Miami-Tokyo O&D numbers alone is big enough to sustain at the very least 1 nonstop flight. Add South America/Latin America and its easy to see how MIA can support 1 nonstop flight. I do understand DFW/IAH are great Central/South America-Japan connecting points but MIA is up there as well IMHO-again, not including the O&D alone.

As we have seen with AA and with the other legacies, cutting costs helps tremendously. Do you think DL would or could have been as aggessive as its been had it not cut its previous cost structure? I don't think so.

The "numbers" are there, but AA/JL need the proper-sized plane. Who knows, maybe JL will start the route sooner than later.

 

[WorldTraveler]

Please sir, bludgeon us some more with the greatness that is Delta.


Another chorus of Delta Uber Alles!!

since I have just represented information about UA as well as DL in comparison to AA, I'm not sure how anyone can logically say that I am singing DL's praises at the expense of anyone else.
The only conclusion that I can come to is that you and others would rather only know what makes you feel good, esp. if there is a comparison with someone else that is doing better. I don't know about you but I never want to live my life shut out from anything negative that anyone else has to say....

Jaconbin,

look at how many routes AA operates over the Pacific. IN order to come up with a -26% profit margin, AA has to have more than just one or two poorly-performing routes. For the size of AA's Pacific network, they would need to have every route making money except for two generating virtually no revenues in order to generate a profit (loss) margin of that size.

AA's Pacific network is not just weak.

I posted this morning just before AA released its quarterly earnings report and it validates exactly what I have said and what we have seen for several quarters. AA is adding capacity in the Pacific just as fast as unit revenues are increasing which means that AA's total revenue in the Pacific is not increasing but its costs most certainly are. AA's already weak position in the Pacific is being aggravated by a perceived need to grow to some sort of strategically necessary size at the expense of returning the Pacific to profitability.

AA's capacity and RASM in Latin America is doing the same thing, but AA is already making money there.

In contrast, AA's RASM in N. America and Europe is increasing.

AA is growing the Pacific even though it is losing money because AA has a perceived size necessity in order to survive while in Latin America they are adding capacity as fast as the market can absorb it, but on a profitable network.

AA's domestic and European networks are the source of AA's increased RASM and are subsidizing AA's Pacific network.

More significant, it is the cuts that other carriers have make that have allowed AA's domestic and European networks to see increased revenue.

I hope you don't doubt for even a minute that other carriers will not just quietly sit by and allow AA to gain the benefits of the cuts those carriers have made.

If you think that AA can make MIA-NRT work, convince them. Given that every other transpacific carrier can compete in that market and potentially undo any success that AA might have on the route, AA's chances of success are slim at best.

And the largest of the Latin America connections you note can also be served by other carriers via other gateways, many of which are also via hubs such as in the Middle East where transit is much cheaper and easier.

 

[Jacobin777]

since I have just represented information about UA as well as DL in comparison to AA, I'm not sure how anyone can logically say that I am singing DL's praises at the expense of anyone else.
The only conclusion that I can come to is that you and others would rather only know what makes you feel good, esp. if there is a comparison with someone else that is doing better. I don't know about you but I never want to live my life shut out from anything negative that anyone else has to say....

Jaconbin,

look at how many routes AA operates over the Pacific. IN order to come up with a -26% profit margin, AA has to have more than just one or two poorly-performing routes. For the size of AA's Pacific network, they would need to have every route making money except for two generating virtually no revenues in order to generate a profit (loss) margin of that size.

AA's Pacific network is not just weak.

I posted this morning just before AA released its quarterly earnings report and it validates exactly what I have said and what we have seen for several quarters. AA is adding capacity in the Pacific just as fast as unit revenues are increasing which means that AA's total revenue in the Pacific is not increasing but its costs most certainly are. AA's already weak position in the Pacific is being aggravated by a perceived need to grow to some sort of strategically necessary size at the expense of returning the Pacific to profitability.

AA's capacity and RASM in Latin America is doing the same thing, but AA is already making money there.

In contrast, AA's RASM in N. America and Europe is increasing.

AA is growing the Pacific even though it is losing money because AA has a perceived size necessity in order to survive while in Latin America they are adding capacity as fast as the market can absorb it, but on a profitable network.

AA's domestic and European networks are the source of AA's increased RASM and are subsidizing AA's Pacific network.

More significant, it is the cuts that other carriers have make that have allowed AA's domestic and European networks to see increased revenue.

I hope you don't doubt for even a minute that other carriers will not just quietly sit by and allow AA to gain the benefits of the cuts those carriers have made.

If you think that AA can make MIA-NRT work, convince them. Given that every other transpacific carrier can compete in that market and potentially undo any success that AA might have on the route, AA's chances of success are slim at best.

And the largest of the Latin America connections you note can also be served by other carriers via other gateways, many of which are also via hubs such as in the Middle East where transit is much cheaper and easier.

1)I would like to see AA's numbers before we can go further.
2)Not every carrier will be profitable to every location. Last I recall, DL wasn't really strong in South America/Latin America.

 

[WorldTraveler]

#1

http://finance.yahoo.com/news/amr-corporation-reports-third-quarter-130000192.html

#2

DL is the smallest of the big 3 to Latin America but they are profitable.

Here are the operating profit margins for Latin America by carrier as published in Aviation Daily with 1st quarter 2013 data from the DOT.

AA 11.8%
DL 3.8%
UA -1%
US 6.2%

Yes, DL's profits from Latin America are not as strong as from other regions including the Pacific or the Atlantic (where in both regions DL was the only US carrier to post a profit in the 1st quarter in each region).

But DL doesn't maintain flying where it can't make money.

My criticism of AA has never solely been that its route system has been weak but that they are maintaining service which is losing money. No other carrier has come out of BK throwing capacity into a particular region where they are already losing money. Their financial results today show that they are using the sacrifices of their employees and investors in order to subsidize their Pacific operation.

THAT is my concern and it should be the concern of AA employees and investors. I also don't believe Parker will hold onto routes such as LAX-Asia just because they are supposedly strategically necessary. Considering the JV with JL, LAX-PVG is the only route that AA would have to drop and not have their own presence or a joint venture presence in order to remain in the market.

I have my doubts that AA can make money on DFW-ICN against KE which is very aggressive and DL and UA who both have west coast-ICN flights but other than that I think they have the potential to have a robust DFW-Asia operation.

I would also imagine that US' increased presence in the NE can improve ORD-Asia as well as open up new flights from PHL-Asia. Thus, my focus is on LAX-Asia for which there is likely no reason to think that AA can effectively compete. If that means that AA doesn't operate its own metal in either NYC or LAX to Asia but does have a JV presence and has at least a breakeven presence in Asia from ORD, and a profitable presence from DFW and PHL to Asia, then AA will have a decent enough presence but won't be bleeding money just to maintain a strategic presence.

 

[Jacobin777]

#1

http://finance.yahoo...-130000192.html

#2

DL is the smallest of the big 3 to Latin America but they are profitable.

Here are the operating profit margins for Latin America by carrier as published in Aviation Daily with 1st quarter 2013 data from the DOT.

AA 11.8%
DL 3.8%
UA -1%
US 6.2%

Yes, DL's profits from Latin America are not as strong as from other regions including the Pacific or the Atlantic (where in both regions DL was the only US carrier to post a profit in the 1st quarter in each region).

But DL doesn't maintain flying where it can't make money.

My criticism of AA has never solely been that its route system has been weak but that they are maintaining service which is losing money. No other carrier has come out of BK throwing capacity into a particular region where they are already losing money. Their financial results today show that they are using the sacrifices of their employees and investors in order to subsidize their Pacific operation.

THAT is my concern and it should be the concern of AA employees and investors. I also don't believe Parker will hold onto routes such as LAX-Asia just because they are supposedly strategically necessary. Considering the JV with JL, LAX-PVG is the only route that AA would have to drop and not have their own presence or a joint venture presence in order to remain in the market.

I have my doubts that AA can make money on DFW-ICN against KE which is very aggressive and DL and UA who both have west coast-ICN flights but other than that I think they have the potential to have a robust DFW-Asia operation.

I would also imagine that US' increased presence in the NE can improve ORD-Asia as well as open up new flights from PHL-Asia. Thus, my focus is on LAX-Asia for which there is likely no reason to think that AA can effectively compete. If that means that AA doesn't operate its own metal in either NYC or LAX to Asia but does have a JV presence and has at least a breakeven presence in Asia from ORD, and a profitable presence from DFW and PHL to Asia, then AA will have a decent enough presence but won't be bleeding money just to maintain a strategic presence.

Thanks for the Yahoo! link. Looking at their Pacific Ops, it isn't as bad as one would think. Load factor is rather good and if they can imrove yields a little then they will become profitable. Add to the fact costs are decreasing as well. We'll probably get a better picture of AA's Asian/Pacific ops in the next 6-12 months.

 

[AdAstraPerAspera]

"American Isn't As Weak in Asia As You Might Think"
http://crankyflier.c...ou-might-think/

 

[WorldTraveler]

uh.... if "success" is the ability to launch planes into the sky, then there should be no doubt as to the potential to "win."
but since AA is a US carrier with a for-profit motive and it reports its financials to the public on one level and to the government on a deeper level, the question is about more than just creating lines on a route map.

We have yet to see AA generating profits in its Pacific operation which makes it not much different from airlines that no longer exist.

AA might be able to make enough money elsewhere to build its own presence in the Pacific but that doesn't mean it is making money now or will be able to in the future.

No one has seemed to be able to answer the question as to why CX has nothing to do with AA's new DFW-HKG flight.