- Dec 5, 2003
- 21,709
- 10,721
With all of the talk about DL’s international expansion and assertions that it is just low yielding capacity dumping, I felt it was necessary to do some sound, numbers based analysis. Some UA posters assert that UA’s transatlantic routes are worth much more than DL’s so I thought that was worth a look. I looked at performance of some of AA, CO, DL, and UA’s markets which are known to be particularly strong compared with the most similar markets at other of the three airlines. I did not sample every market for every carrier since I couldn’t pull all data for every carrier.
DOT data shows in fact that DL has a number of routes such as JFKSVO, JFKNCE, ATLSTR, ATLZRH and ATHJFK (and ATL when it was flown) have higher average segment fares (average of all passengers on the flight) than do UA’s average fares on UA’s LHR routes from JFK and even ORD. In fact, AA has a premium in most east coast/midwest LHR markets (ORD included). It is also significant that CO gets better fares on EWRLGW than UA gets on JFKLHR so LHR isn’t the end all and be all for getting high fares, although it certainly helps. In fact, DL gets better revenue on ATLLGW than UA does on ORDLHR or JFKLHR. UA’s advantage relative to DL and AA is in its flights to Germany and DL’s advantage relative to AA and UA is on flights to France and Italy (all cities) making it apparent that the US carrier who has a partner in the destination country enjoys a revenue advantage over its competitors. UA only enjoys a revenue premium to Germany (at least the cities it serves). In non-partner, non-LHR western Europe markets, DL and AA have fairly comparable performance.
However, most importantly and to debunk the assertions that DL’s scattered international routes are worthless (which only the uninformed would state anyway), DL obtains better revenue from its Eastern Europe and unique Western Europe routes than AA or DL does in Western Europe, even when adjusted for mileage. In short, DL’s strategy of adding routes to Eastern Europe and beyond is perfectly valid and, based on historical data, is very likely to yield revenue premiums relative to many Western European routes flown by DL or other airlines. Further, UA doesn’t have a revenue premium for their entire transatlantic system and AA and DL generate substantial revenue at very respectable average fares in Europe outside of the limited scope not served by UA.
CO is an interesting case study in that they have a large European hub at EWR that serves most of the top cities. DL’s ATL hub is really only the only comparable comparison in the number of cities served and the inclusion of London service. CO generally doesn’t have a lot of high average fare markets although some such as ZRH and MXP do perform well relative to other industry markets. CO generates a lot of revenue by flying to lots of places even though they don’t get particularly high fares. CO also has relatively low costs so those markets can be profitable.
On another point, UA and CO rely to a great extent on their local markets (IAD, EWR, ORD, IAH) to generate international premiums. DL and AA (outside of LHR) get better fares than UA and CO from the whole country rather than just the gateway city. CO in particular has a lot of markets outside of EWR and IAH that have low average fares which seem to be necessary to fill capacity.
Airlines with low costs can indeed be profitable, esp. if developing new routes where there is little competition as CO has done from EWR and DL has done and will be doing from JFK. There are a number of key markets in western Europe that have to be served in order to have a well-rounded portfolio which DL and CO serve and AA to a lesser extent but which UA does not. Because market dominance to a region is more important than to a particular city in getting revenue premiums, UA is significantly threatened if other carriers gain increased access to London, even if its LGW since UA’s only consistent premiums are to Germany.
So, DL folks, don’t believe those people that try to tell you that DL’s route system is worthless. It’s simply not true. You generate a lot of good revenue flying to places other carriers don’t fly. And you generate higher average fares across your system because of your dominance across the Atlantic. CO has shown that low costs can be a strong platform for growth. AA people, tell your management to figure out how to grow. CO and DL are taking NYC in international presence and it is very obvious from these statistics that the dominant carrier in a market does enjoy a revenue premium. AA’s 757s might be part of the solution but you’ll have to butt up against CO who flies many of the same potential routes. NW’s A330s might be the answer to facilitate transatlantic and transpacific growth.
And while I didn't look at many transpacific flights, DL's sole ATL-NRT route does deliver very strong revenue performance.
DOT data shows in fact that DL has a number of routes such as JFKSVO, JFKNCE, ATLSTR, ATLZRH and ATHJFK (and ATL when it was flown) have higher average segment fares (average of all passengers on the flight) than do UA’s average fares on UA’s LHR routes from JFK and even ORD. In fact, AA has a premium in most east coast/midwest LHR markets (ORD included). It is also significant that CO gets better fares on EWRLGW than UA gets on JFKLHR so LHR isn’t the end all and be all for getting high fares, although it certainly helps. In fact, DL gets better revenue on ATLLGW than UA does on ORDLHR or JFKLHR. UA’s advantage relative to DL and AA is in its flights to Germany and DL’s advantage relative to AA and UA is on flights to France and Italy (all cities) making it apparent that the US carrier who has a partner in the destination country enjoys a revenue advantage over its competitors. UA only enjoys a revenue premium to Germany (at least the cities it serves). In non-partner, non-LHR western Europe markets, DL and AA have fairly comparable performance.
However, most importantly and to debunk the assertions that DL’s scattered international routes are worthless (which only the uninformed would state anyway), DL obtains better revenue from its Eastern Europe and unique Western Europe routes than AA or DL does in Western Europe, even when adjusted for mileage. In short, DL’s strategy of adding routes to Eastern Europe and beyond is perfectly valid and, based on historical data, is very likely to yield revenue premiums relative to many Western European routes flown by DL or other airlines. Further, UA doesn’t have a revenue premium for their entire transatlantic system and AA and DL generate substantial revenue at very respectable average fares in Europe outside of the limited scope not served by UA.
CO is an interesting case study in that they have a large European hub at EWR that serves most of the top cities. DL’s ATL hub is really only the only comparable comparison in the number of cities served and the inclusion of London service. CO generally doesn’t have a lot of high average fare markets although some such as ZRH and MXP do perform well relative to other industry markets. CO generates a lot of revenue by flying to lots of places even though they don’t get particularly high fares. CO also has relatively low costs so those markets can be profitable.
On another point, UA and CO rely to a great extent on their local markets (IAD, EWR, ORD, IAH) to generate international premiums. DL and AA (outside of LHR) get better fares than UA and CO from the whole country rather than just the gateway city. CO in particular has a lot of markets outside of EWR and IAH that have low average fares which seem to be necessary to fill capacity.
Airlines with low costs can indeed be profitable, esp. if developing new routes where there is little competition as CO has done from EWR and DL has done and will be doing from JFK. There are a number of key markets in western Europe that have to be served in order to have a well-rounded portfolio which DL and CO serve and AA to a lesser extent but which UA does not. Because market dominance to a region is more important than to a particular city in getting revenue premiums, UA is significantly threatened if other carriers gain increased access to London, even if its LGW since UA’s only consistent premiums are to Germany.
So, DL folks, don’t believe those people that try to tell you that DL’s route system is worthless. It’s simply not true. You generate a lot of good revenue flying to places other carriers don’t fly. And you generate higher average fares across your system because of your dominance across the Atlantic. CO has shown that low costs can be a strong platform for growth. AA people, tell your management to figure out how to grow. CO and DL are taking NYC in international presence and it is very obvious from these statistics that the dominant carrier in a market does enjoy a revenue premium. AA’s 757s might be part of the solution but you’ll have to butt up against CO who flies many of the same potential routes. NW’s A330s might be the answer to facilitate transatlantic and transpacific growth.
And while I didn't look at many transpacific flights, DL's sole ATL-NRT route does deliver very strong revenue performance.
