Delta Looking at US Airways

[Wings]

Hopefully a US Air FA can answer a quick question for me... thanks! 🙂

How many FAs do you currently have on your respective seniority lists (US Air and America West)?

 

[ebwgs]

Around 6700 total

 

[usa1]

Another "it's the biggest east coast O&D hub US has so it must be awesome" believer. Did you know that PHL has less O&D than PHX? Than NYC to the north? Than Wash to the south?

Jim

Didn't know that .... but I believe you, because you're a good numbers guy. For years I've just noticed that PHL flights have "A LOT" more O&D passengers than any other flights.

 

[wings396]

I can see CLT, but why take on PHL to pretty much duplicate what they already have? Just fly bigger planes from JFK. Besides, a hub is nothing but gate leases. The DCA stuff - more Express than mainline and no additional slots over what US has after the slot swap leaves some people out on the street.

Jim

I know that the PHL vs JFK debate has been gone thru several times here, and I still say that there is enough traffic to support both cities.
People who live in the JFK/NYC area don't go the PHL for international flights, and the PHL crowd doesn't go to JFK for theirs. I could see this logic applied if we were comparing JFK to EWR given they both can draw off the same traffic base, but PHL doesn't.

 

[BoeingBoy]

There's not enough O&D international traffic in PHL to support PHL. It depends on connecting traffic to survive.

Jim

 

[bigbusboy]

I know that the PHL vs JFK debate has been gone thru several times here, and I still say that there is enough traffic to support both cities.
People who live in the JFK/NYC area don't go the PHL for international flights, and the PHL crowd doesn't go to JFK for theirs. I could see this logic applied if we were comparing JFK to EWR given they both can draw off the same traffic base, but PHL doesn't.

Both PHL and JFK markets are sufficiently independent of each other to be kept and operated seperately, just like EWR and IAD for UA. I wouldn't consider PHL's O&D to be "awesome;" however, it supports the operation at its current size with potential for growth. Facilities are the contraint for growth in PHL, not the O&D traffic. Combine this with a potentially AA controled CLT and MIA added in and you begin to see the real value US brings to AA and the threat to DL. Will it put DL out of business? Absolutely not!!! Will it be formidable competition? Darn tootin'.

There's way too much overlap between DL and US for any reasonable consideration of a merger. So why then did DP's merger attempt with DL make so much sense several years ago? The answer is the difference between two reasons for merging: competition back then (competitors) vs. revenue now. A competitor would have been eliminated (capacity reduction). Back then, the airline industry was suffering from too much capacity (too much supply and not enough demand). The overlap of flights betwen DL/US would have taken a tremendous amount of capacity out of the market, but at the expense of labor/jobs. This, I believe, was the real reason for not getting creditor approval at the time...too many jobs lost, too much capacity dumped, and way too quickly.

Today, capacity reduction is almost complete; as evidenced by healthy load factors industry wide and growing profit margins. However, this is a mature industry; meaning there's little room for growth. Investors demand year-over-year growth in the returns on their investments. To acheive this expectation, companies need to grow profits. Cutting costs and growing revenues are, basically, the only two ways to do this. Cost cutting for airlines has been done using the bankruptcy process. Growing revenues has been done through all of the new ancillary fees, but that revenue stream is basically maxed out. What's left? The only real solution left in this business is to buy up another competitor and their revenue stream. Of course this only works if the two cost structures are compatible (AA in bankruptcy and I'm betting DP is working hard to ensure the numbers are right and he's a part of AA's POR).

Could AA grow on its own? Absolutely and it would be the most labor friendly way to do it, but that's about it. Just exactly how is AA going to grow sufficiently (on par with UA and DL) without putting capacity back into the market and returning the industry to its original troubles? How is AA going to overcome the constraints of facility aqusitions (gates), slots (NE), and many other barriers to entry needed to do this? Some say at the expense and demise of US and AA is the one to do it. Ok, maybe so, but to do this AA still needs to overcome the barriers to entry inherrent to this industry to be succesful. Airplanes aren't the only asset necessary to put a competitor out of business. I know AA has a gazillion on order, but AA would also need gates airport facilities, and slots up and down the east coast. There's also a time factor before AA could claim victory. US now has "some" staying power in this industry and growth along the east coast will also meet resistance from DL. It's their backyard too...not to mention SW. Combining AA and US combines revenues more quickly while avoiding more capacity into the industry. Wouldn't it be quicker and easier to combine two "turn key" franchises and merge the operations? I know from a labor perspective the answer is a resounding no. And, most posters here are labor. ('nuff said about that) However, from the boardroom perspective and so long as the numbers work, the answer is yes, it is easier and is why so many "interested parties" are hiring investment bankers to do due dilligence on all the options.

 

[Travelpro72]

I'm not a numbers person but if the PHL market had such great O&D why do we not see more foreign carriers serving the market? I'd venture to say that US does well with their international destinations out of PHL due to relatively large O&D numbers compared to their other hubs coupled with connection traffic. In a combined AA/US I don't see PHL and JFK fighting over each other for traffic. They seem like two seperate markets to me.

 

[FWAAA]

I'm not a numbers person but if the PHL market had such great O&D why do we not see more foreign carriers serving the market? I'd venture to say that US does well with their international destinations out of PHL due to relatively large O&D numbers compared to their other hubs coupled with connection traffic. In a combined AA/US I don't see PHL and JFK fighting over each other for traffic. They seem like two seperate markets to me.

Might depend on where those PHL international passengers orginate. If a lot of them originate in NYC and fly from LGA to PHL to fly overseas, that would indicate that they do compete for passengers. If you fly US to South America, that means flying to CLT. How many of those GIG passengers originate in NYC?

The first question in your post is key: If PHL has great international O&D, where are the foreign carriers? Did US drive them out when it moved its international flights from PIT to PHL?

 

[zethya]

There's not enough O&D international traffic in PHL to support PHL. It depends on connecting traffic to survive.

Jim

What is your source for that statement?
PHL has more International O&D than BOS, HNL, DTW, SEA, CLT (Mostly Caribbean/Central America), MSP, PHX, DEN and others.

And what % of DL JFK international passengers do you think Originate in the NYC region (O of O&D)?

BA's 2 daily flights survive on essentially 100% O&D. Some markets would likely become seasonal if US left, but you can pretty much forecast that LY, EI and AZ would start services from PHL - just based on US's performance history in these markets.

 

[FWAAA]

What is your source for that statement?
PHL has more International O&D than BOS, HNL, DTW, SEA, CLT (Mostly Caribbean/Central America), MSP, PHX, DEN and others.

And what % of DL JFK international passengers do you think Originate in the NYC region (O of O&D)?

BA's 2 daily flights survive on essentially 100% O&D. Some markets would likely become seasonal if US left, but you can pretty much forecast that LY, EI and AZ would start services from PHL - just based on US's performance history in these markets.

I'm curious about your source for the bolded portion. If you're talking about number of passengers from gateway cities, then I certainly agree, as it matches the DOT summary of gateway passengers:

http://ostpxweb.dot.gov/aviation/international-series/sept2011.pdf (Table 6; page 36 of .pdf)

I don't believe that the numbers in this report reflect O&D, but I could be mistaken. Of course PHL has more international passengers traveling thru PHL because of the large number of US international flights at PHL, but that doesn't mean PHL has high international O&D.

 

[UPNAWAY]

This reporting thinks JFK & PHL compliment each other.

Some might argue that the JFK and Philadelphia hubs are incompatible, but this is not necessarily true. Due to slot constraints, American has basically limited its JFK flying

http://seekingalpha.com/article/329...rican-airlines-merger-make-sense?source=yahoo

 

[Zone5]

I'm curious about your source for the bolded portion. If you're talking about number of passengers from gateway cities, then I certainly agree, as it matches the DOT summary of gateway passengers:

http://ostpxweb.dot.gov/aviation/international-series/sept2011.pdf (Table 6; page 36 of .pdf)

I don't believe that the numbers in this report reflect O&D, but I could be mistaken. Of course PHL has more international passengers traveling thru PHL because of the large number of US international flights at PHL, but that doesn't mean PHL has high international O&D.

The international flights out of PHL are running very high load factors. I suspect the same can be said for flights out of JFK and EWR. Logic would have it then, that there is enough demand to go around. There will not be any significant reduction in PHL international flights under any M&A scenario.

seajay

 

[FWAAA]

The international flights out of PHL are running very high load factors. I suspect the same can be said for flights out of JFK and EWR. Logic would have it then, that there is enough demand to go around. There will not be any significant reduction in PHL international flights under any M&A scenario.

seajay

You may be right, but what if a substantial percentage of them are being bussed (via dozens of small commuter planes) into PHL from NYC or BOS or WAS or other cities? Sure, load factors are high, but how many of them are originating in other big cities and not PHL?

 

[BoeingBoy]

What is your source for that statement?
PHL has more International O&D than BOS, HNL, DTW, SEA, CLT (Mostly Caribbean/Central America), MSP, PHX, DEN and others.

And what % of DL JFK international passengers do you think Originate in the NYC region (O of O&D)?

If we were talking about PHL vs BOS/HNL/DTW/etc that might mean something, but we're talking about PHL vs JFK/Wash.

With vastly more O&D than PHL, comparing percentages doesn't mean much does it? NYC is the largest O&D market in the country - PHL, not so much. Unless, of course, you're claiming that NYC has only a small fraction of the O&D that PHL does...but that would mean that there are almost no connecting passengers that use PHL.

Jim

 

[BoeingBoy]

This reporting thinks JFK & PHL compliment each other.

"Adam Levine-Weinberg is a graduate student by day, but also follows the stock market obsessively. He is an amateur investor always looking for good value stocks, and generally aims to profit from the market's irrationality."

Need I say more...

Jim