Yes, my estimate would equal $114,000 per flight each way, or about $228,000 of revenue for each round trip. You doubt that AA's revenue per flight is at least $114,000 each way? My half billion dollar revenue estimate for those six flights was very conservative. The actual revenue for those six flights is probably closer to a billion dollars. A typical flight to NRT burns about 20 million gallons of fuel per year which is about $60 million at current prices. That means the fuel bill per flight alone is about $82,000 each way.
According to the annual 10K filings with the SEC for AMR, DAL, and UAL, AMR carried about $1.1B in revenue across the Pacific last year which comes out to about $3B per day, making your numbers per flight fairly reasonable.
The Pacific (which does not include Hawaii and only those flights to Asia that transit the Pacific – ie Japan and China for AA, amounted to 4.9% of AMR’s 2010 revenue.
DAL’s Pacific revenue in 2010 was 10.3% of its total revenue while UAL (including CO) was 17.3%.
Once again, UA reported double digit RASM gains on the Pacific for the first quarter on a Japanese system that was 75% of the size of the COMBINED AA plus JL or twice the size of AA’s Japan system alone.
For comparison, DL’s transpac Japanese system is 3.3X larger than AA’s alone and 88% of DL’s transpacific capacity to all markets is to/from Japan. IN other words, how DL fared on its transpacific network which is highly dependent on Japan will be far more telling about how much impact Japan has had on US carriers – because we won’t get the level of detailed information from JAL or NH than we will from US carriers who must report in more detail due to SEC regulations.
If DL manages to remain RASM positive across the Pacific, then the notion that the Japanese events were solely responsible for AA’s poor performance on the Pacific will have to be questioned.
Remember that the Japan earthquake and tsunami occurred on March 11 (?) and the nuclear situation which has created more global concern didn’t become fully known for several more days.
If you look at AA’s schedule for the first quarter of 2011 vs the first quarter of 2010, AA added two new transpac flights – ORDPEK which is just now becoming year over year and JFKHND.
AA’s LF on ORDPEK according to US DOT data has been running 9-12 LF points lower than UA’s even though AA uses a less densely configured 777 (which should make it easier to fill up).
DOT revenue also shows that even last summer (several months after AA launched ORD-PEK) UA was carrying about 30% more revenue per passenger than AA.
HND has clearly not delivered what was promised for any airlines but AA’s persistence in keeping its HND flights running might seem feeble if it is costing AA millions of dollars.
I suspect as more detailed data becomes available, we will see that it wasn’t AA’s core NRT routes that were as much of a problem as its low yields on its new JFKHND and ORDPEK flights.
I'm not blaming outside sources for AA's losses. I'm merely repeating the various excuses AA has put forth that help explain the revenue difficulties faced by AA in the first three months of the year. You compared the six AA flights to Japan with Cancun (where AA has more flights). I'd be willing to bet that AA's annual revenue from one daily flight to Japan exceeds the annual revenue from all AA flights to Cancun.
According to DOT data, AA generates more revenue to/from CUN than on any NRT route except for DFW where it operated more than one flight/day.
But what was the excuse for AA’s revenue performance across the Atlantic? We haven’t heard from DL or US but the growth in AA’s yields across the Atlantic was one-third of what UA reported.
Justifications are fine but when a company continually underperforms its peers quarter after quarter and in market group after market group, you have to recognize it is not just external events.
Given that AA was able to keep up w/ the industry on Latin revenue where AA is the dominant player and has been able to for the past several quarters, it is apparent that AA mgmt’s decision not to pursue a merger is costing them revenue as AA’s ability to price its markets and its share of key domestic, Atlantic, and Pacific markets shrinks. Given that there is no foreseeable way for AA to gain the mass necessary to compete in these regions, you have to wonder when AA will turn the revenue part of its problems around – and those have nothing to do with employees.
Jersey, go ahead and doubt if you must, but the impact for AA isn't just on those six flights now that the JV with JAL is in effect.
Just with the oneworld affiliation, AA was already getting significant connecting revenue from customers flying on JAL to the US, and connecting onward with AA.
Given DL's estimate of losses and the public statements made about how much incremental revenue the JAL/AA antitrust JV was supposed to generate, the $100M guess may not be too far off.
While AA may have had the misfortune of jumping into a JV just before the Japanese economy hit major crises, the losses were divided between JL and AA as well. Besides JL was still 30% larger than AA and the revenue sharing/loss agreement undoubtedly shares profits and losses on a proportional basis; JL wouldn’t agree to give AA more than the share of profits AA helped bring in and AA wouldn’t accept responsibility for more than the share of losses it could contribute.
Further, all of the connecting flows were still largely intact over NRT and still are… JL is reducing capacity at NRT but that largely affects the 2nd or 3rd flights per day (where they exist) or by using smaller aircraft rather than undoing the connecting capacity of the NRT hub. I haven’t seen any significant evidence published anywhere that says connecting passengers are avoiding connecting through Japan.
IN so much as other regions or Asia continue relatively strong, AA’s ability to connect passengers at NRT is unchanged.
It just bugs me how there is always an excuse that seems to be outside of AA's control every quarter they lose money. The point is that there are so many things that are in their control that they don't seem to be able to capitalize on. In the past it has been labor costs. I think it is interesting how they didn't go into this issue at all during their earnings call. What is going to be the excuse for the rest of the year? Fuel? Sars? Earthquakes? Fires? Weather? If these things are not available then you are going to hear them whine about labor costs again. Whatever they have to use at their disposal at the time is the excuses they use. I never see any accountability for things that are within their control.
Those of us who have known AA for decades are equally mystified at how an airline that was so much at the front of the industry has now been reduced to making excuses and putting off dealing with its problems.
The airline industry has ALWAYS been full of risks and will continue to be a difficult place to make money.
Yet there are airlines that have figured out how to work within a pretty screwed up industry.
Instead of pointing the finger of blAAme at everyone else, it is time for AA AAnd its people to take responsibility for their own challenges and figure out how to win in spite of them.
Wrong! only the employees get it.....we see first hand the waste and idiotic decisions from management. Accountability? Bingo! Can't keep using excuses for their mis-management. At some point analysts will see that Arpey and Horton need to go, and all the other idiots that call themselves "managers", and there's lots!
The question is whether AA can recover from that point. The only way AA will be able to fix many of its problems are to dramatically reduce costs which many employees say they will never allow tohappen. Even if AMR brings in tough management to just “get it done,” AA will still have to regain its revenue advantage which continues to be eroded by competitors.
In just four years, AA’s revenue share in NYC has fallen from 22% to 17%. Meanwhile, DL’s revenue share of the 3 main NYC airports has grown from under 16% to more than 25% while UA post-merger now takes in nearly 1 in 3 dollars in air revenue that flows through NYC.
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No city is more indicative of the challenges facing AA than NYC.
