Delta's New World Order

[WorldTraveler]

AA and UA have fewer flights, but hold the lions share of the premium markets, LHR, LAX, SFO, EZE, GRU and NRT.

You’re looking for strange bedfellows, aren’t you, Mikey?

UA has managed to slip from #2 to #4 in Latin America behind CO and DL despite UA having purchased some of the choicest routes in Latin America. And DL and CO have both been able to convince the US DOT to take grandfathered routes away from UA and turn them over to better utilize America's scarce aviation resources. I guess the DOT isn't so convinced that UA is doing such a great job of utilizing its premier route network.

And UA is now behind DL, AA, and CO to Europe and it’s entirely possible the ordered could be rearranged by next year to put CO ahead of AA. And as for UA, their LHR service is so premium that DL and CO get better revenues on their services to LGW than UA does from JFK and its hometown of ORD to LHR. Incredible.

I have never said that AA hasn’t done a good job of maintaining its premium revenue markets but lumping them in the same camp as UA is tantamount to heresy. And thinking that AA can hold onto its premium position when it slips to #3 among just legacy carriers in NYC is problematic at best.

 

[JFK777]

AA has always had a strong share of certain NYC marlets like San Juan, Los Angeles, and SFO. Since TWA and Pan Am left us, AA by brutal evolution and finances has taken a strong share to LHR, 6 777 daily.

Delta in their most optimistic forecast could not operate to Europe with 6 flights daily from JFK to one market, no market they serve is big enough. Paris is Delta biggest market to Europe. Delta should get kudos for serving places, profitably where others dare not go, like Moscow and Kiev. Delta is getting bold with serving India nonstop and now Africa with Accra, Ghana in the fall. But AA serves India too from ORD. AA has MIami, DFW, JFK, ORD, LAX and BOS to spread its routes around. Delta has only Atlanta and JFK, CVG is a shadow of its former self. Once AA's new terminal is finished then they could become bolder, space is tight at Terminal 8 at JFK,

 

[WorldTraveler]

CVG still supports 5 transatlantic flights in the summer and they continue to be estimated to have some of the highest revenue on DL's system.

I don't slight AA for what it has or what it's done. My only point is that AA will not be able to maintain its market position if it serves 20 cities (hypothetical) by DL serves 40 (also hypothetical) at the same time that CO is doing as much if not more than DL is doing. Remember that it wasn't long that DL folded up its tent at DFW because AA so overshadowed DL that DL couldn't assert itself in the marketplace.

I agree that there is no int'l city that DL could serve with the frequency that AA serves London. That is both the blessing and curse of the UK. It is the US strongest partner and biggest aviation market but the size of the US-UK market AS A PERCENTAGE of TOTAL US int'l capacity is falling as DL and CO add more and more new markets. CO and DL don't have the access to London that AA and UA has so they have to develop other markets but they also have the ability to make AA's dominance to London look less and less important when they each serve 25 additional cities in Europe and beyond. And my issue is not w/ AA as a whole (thus no consideration of ORD-India) but with the NYC market. AA still has a powerful spell cast over Texas and S. Florida and has very competitive positions in Chicago and the west coast that do not appear to be threatened. My statements are regarding AA's position in NYC.

 

[JFK777]

AA & Delta have two different strategies with JFK. Delta's is a hub and international gateway to exotic places like Istanbul, Kiev and Moscow with the commonly served cities of Rome, Paris etc. India now nonstop(soon)with service to Sao Paulo(a major AA market by 777 from JFK) and Ghana.

AA serves the biggest markets from JFK: San Juan, LAX, SFO, NRT & LHR with most trafiic originating and terminating in New York. They do get some connections just due to the tremendous amounts of flights to the above destinations but Delta's focus is much more on the connecting passenger. Delta gets many local apssenger too but, they do focus on the feed much more then AA a JFK. AA does fly from JFK to Paris, Rome, Zurich and other European cities. With their terminal still under construction they will have more flights when its finished. AA's interest is more on serving the major cities of the world, not blanketing every city in Europe that could support a 757 daily like Oslo or Bonn. Serving Newcastle, Birmingham, Glasgow, and other Uk cities with 757's would remove those airplanes from other market(757 are out of production).

AA uses 757 very profitably from Miami to Latin America because of the frequency, range and size they provide for that market. They fly from Miami daily nonstop as far south as La Paz, Bolivia; would you want to be on that 757 for 7 hours? I wouldn't. Since AA has Miami to itself, whatever Delta, UA and CAL have to Latin America isn't the biggest gateway, Miami.

 

[WorldTraveler]

The strategy difference is exactly my point. DL and CO have more of a “blanket the world†strategy rather than serving a handful of destinations with a lot of frequencies which is what AA, NW, and UA do in their int’l operations. It’s sort of the 787 vs A380 debate (although w/ earlier generation aircraft) w/ CO and DL on Boeing’s side that new markets around the world are growing to the size that they can be served while the other big 3 are still largely focusing on hub and large markets. While CO doesn’t serve LHR, they do fly to just about every other destination AA flies to out of JFK and DL is hot on CO’s tail. At some point when CO and DL serve the same list of markets that AA serves plus a bunch more, AA will have a much harder time competing in NYC.

It is sad that the 757 is being put to more uses than ever just at the time that it is no longer built. I don’t think there is any doubt that the 757 will have a prominent role in US carriers’ fleets for many years and will see more and more international duty. It is to AA’s credit that they have used every available aircraft in its fleet to operate such a huge Latin presence. However, MIA is not invincible, both because of the very high costs associated with the new terminal and the easier and more abundant connections that ATL and IAH both offer. The Latin market is growing fast enough that AA is not losing passengers but CO and DL are increasingly horning their way into the Latin market and doing it by exploiting AA’s vulnerabilities, including MIA terminal costs and the larger number of connections available through their gateways. Ultimately, I have to believe AA has an advantage in serving the Florida – Latin America market which CO and DL will independently each have to address in order to be considered dominant airlines to Latin America – if that’s a title they want.

 

[flyhigh]

World,

Just serving more destinations isn't what makes an airline #1...not in the customer's eyes at least. The only thing of value Delta has in NY according to the business community is the Shuttle. They use that to buy people onto their transatlantic service. Conversely, AA owns corporate NYC...with UA close behind. Of course CO has the hub advantage, but AA serves all the prime markets. Why do you think AA operates the LGA Wal-Mart run...because the people who want that route want AA on it. Delta's good for one thing...Florida. All those old Pan Am routes are nice, but they're not that good. And if you think MIA terminal costs are high...try guessing what DL pays for the albatross in JFK???

 

[JFK777]

Continental has all those routes with 757's to Europe because they already flew to the big 3: Paris, LGW and FRA. They also fly to Dehli, Sao Paulo, Tokyo, Peking and Hong Kong from Newark. The only two routes they don't serve are Sydney, Australia and South Afrca. Dubai can't be too far away either. Newark is Cal's Atlanta, their biggest airport and since New York is so big and diverse there is demand for flights to every country, say even Bangladesh. Cal's Newark hub is unique in its diversity but could only exist in New York.

 

[SoftLanding]

The strategy difference is exactly my point. DL and CO

The CAL CEO mentioned (May CC) Delta's huge int'l build-up, with negative implications for not only Delta, but for the industry.

The last time too many seats were added into the overseas markets, I don't think the industry did all that well.

These days all the legacy carriers are adding seats into the Atlantic like it's a gold mine for eternity. It might be for a short time, but how about in 12'ish months, after a weaker economy shows up, and the yields starts to soften?

There are only so many cities that can support the B767-300 and bigger aircraft. The B757 is being flown by just about all airlines, US Airways (my employer) being one of the last to offer B757 in several markets. These smaller markets cannot be served by all airlines, well certainly not if they want to become/stay profitable.

(Re. paragraph above, just draw the parallel to the Caribbean Islands. When US Airways started non-stop to some of these smaller islands, we where the only non-stop. These days, everybody serve these same islands, non-stop from their primary East Coast hub. And more to come, as JetBlue is about to announce a string of islands. BTW, not complaining, just stating the facts.)

And across the Atlantic, the European airlines surely will not give up market-share?!

South America is a potential goldmine, with Varig gone (or almost), but AMR and CAL certainly will not willingly loose share to DAL. CPA/GOL/TAM also will have something to say about competition between North- and South America. Agree that UAL has stumbled badly in this market. (Still rumors about US Airways flying from South Florida to Central/South America, from a city other than FLL).

What is most likely needed is mergers/condolidations. Any economic downturn will effect the airlines, pension or no pension.


SoftLanding

 

[Bear96]

I wonder how profitable WT thinks all those tertiary European markets will be come February with the seasonal slump in transatlantic travel.

 

[JFK777]

With Varig dead(almost) Sao Paulo and Rio will get some new blood, More from Tam then USA airlines though. Look at what the USA already serves in Brazil. AA from Miami, JFk and DFW; UA from ORD and Dulles; Cal from Newark and IAD; DElta from Atlanta and JFK. The only ones missing are Usair and NW. I don't see them coming this far south, for two reasons. They don't have the spare international range aircraft & Detroit and PHL are poor geographically for such service.

Tam will be the biggest beneficiary of Varig's death, GOL has only 737's, they could replace some routes regionally but they alraedy fly to Buenos Aires and regional capitols. Tam just got routes to London, I would see their European portfolio expanding. They however have 10 A330-200 with some leased out, their schedule of double daily to Miami and daily to Paris from GRU already utilizes much of the A330 capacity. Tam would have to lease a new type, perhaps some A340's or even 777. Varig flew to Japan, if Tam were to fly to Tokyo this would influence their decision too. I love Tam, its a great story on Brazil and I hope it becomes another Lan Chile.