International Route Development

[jcw]

From the earnings call - look it takes DL up to 24 months to get an international route to work.  Interesting that if another airline enters an international market they are accused of losing money - I guess it's OK to lose money up to 24 months but not others.
 
"As we mature that growth and lap that growth we will see certainly some improvements in our overall unit revenue performance. Any time you’re expanding in international markets it generally takes 12 to 24 months before the market starts to fully develop for you and you will see some natural improvements as we temper our capacity additions. The other factor is Venezuela which had an outsized level of unit revenue performance. With the currency changes we decided last year to pull down our frequencies and as we lap that there will also be a benefit to our Latin unit revenues in the second half of this year."

 

[WorldTraveler]

again, the difference is that DL isn't making comments about that its mgmt. team "underestimated" the impact of competition in its markets or that its growth is still not profitable year around year.

ALL BUSINESSES grow their revenues the longer they stay in a market or else they didn't make a good decision to enter that market in the first place.

speaking of Venezuela, it is interesting to note that DL has added back capacity to Venezuela and will serve the market about every other day, or so it appears, up from the once weekly it announced shortly after all US carriers cut service last summer.

in a typical kneejerk reaction, AA has also added capacity back in ALMOST IDENTICAL percentages to what DL added.

DL isn't sitting on $650 million in currency it can't get out of Venezuela. AA is.

Either DL has figured out a way to get that money out, can sale tickets from the US, can live with the results while making AA instinctively jump back into a market where AA will be forced to lose money just to protect market share.

AA has used the same excuse about lapping bad market performance - except that competitors continue to add capacity in key AA markets - with the latest rounds of LHR and DFW expansion being notable examples.

 

[MAH4546]

again, the difference is that DL isn't making comments about that its mgmt. team "underestimated" the impact of competition in its markets or that its growth is still not profitable year around year.

ALL BUSINESSES grow their revenues the longer they stay in a market or else they didn't make a good decision to enter that market in the first place.

speaking of Venezuela, it is interesting to note that DL has added back capacity to Venezuela and will serve the market about every other day, or so it appears, up from the once weekly it announced shortly after all US carriers cut service last summer.

in a typical kneejerk reaction, AA has also added capacity back in ALMOST IDENTICAL percentages to what DL added.

DL isn't sitting on $650 million in currency it can't get out of Venezuela. AA is.

Either DL has figured out a way to get that money out, can sale tickets from the US, can live with the results while making AA instinctively jump back into a market where AA will be forced to lose money just to protect market share.

AA has used the same excuse about lapping bad market performance - except that competitors continue to add capacity in key AA markets - with the latest rounds of LHR and DFW expansion being notable examples.

 
 
AA announced the added capacity to Venezuela a long time ago, back in the fall, way before anybody else. 
 
But keep believing in your fantasies. Every kid has dreams. 

 

[topDawg]

From the earnings call - look it takes DL up to 24 months to get an international route to work.  Interesting that if another airline enters an international market they are accused of losing money - I guess it's OK to lose money up to 24 months but not others.
 
"As we mature that growth and lap that growth we will see certainly some improvements in our overall unit revenue performance. Any time you’re expanding in international markets it generally takes 12 to 24 months before the market starts to fully develop for you and you will see some natural improvements as we temper our capacity additions. The other factor is Venezuela which had an outsized level of unit revenue performance. With the currency changes we decided last year to pull down our frequencies and as we lap that there will also be a benefit to our Latin unit revenues in the second half of this year."

I know this is directed at WT but my comments on some of AA's growth is it is growing in some markets that I question if they........well after 24 months......have even been profitable. I believe AA is very solidly in the red in China. While I know Delta has gone on the record as not only saying China is profitable for them but launching routes to PVG have been pretty much profitable right out of the gate. (both DTW and SEA....ATL not so much)  

 

[WorldTraveler]

you obviously missed the part that if AA has $650 million in revenue tied up in Venezuela that it can't get out, what makes those flights work now that didn't work before?

and even if DL and UA face the same issues, DL and UA can both afford to put more revenue at risk than AA merely on the basis of differences in the size of their operations in Venezuela since they are all very close to each other in total global size.

 

[700UW]

According to the GDS, Effective 07JUL15, Emirates will begin a second daily flight to Seattle using a B777-200LR. The schedules are:

EK 227 DXB SEA 0315 0655
EK 228 SEA DXB 0940 1055+1
 

 

[WorldTraveler]

the primary focus of DL's SEA int'l hub is to east Asia where a conx via DXB isn't going to be close to competitive.

DL's AMS and CDG flights almost entirely carry traffic to Europe and from SEA and the western US, neither of which DXB is a viable connecting hub.

I'm not sure that EK's flight really affects DL much....

this too is just part of a big battle of words.

Given that the EU and US are both taking comments about subsidies for the ME3 by Qatar and the UAE seriously, it isn't surprising that EK is trying to fight back .

 

[eolesen]

According to the GDS, Effective 07JUL15, Emirates will begin a second daily flight to Seattle using a B777-200LR. The schedules are:

EK 227 DXB SEA 0315 0655
EK 228 SEA DXB 0940 1055+1

A not-so-subtle reminder to Boeing that they need to stay neutral in the bun-toss over the ME3's subsidies.

DL's SEA hub will not, of course, be harmed in any way, but I can see EK will no doubt be pricing India very aggressively.

 

[WorldTraveler]

the ME3's philosophy that they can target EU and US airlines because they support airframe manufacturers is coming to an end.

The EU and the US governments are capable of thinking in terms of industries and requiring companies within each industry to abide by trade agreements.

it is only those who don't understand the way free trade agreements and the enforcement of them work that think that the US or the EU will pick and choose between airlines and manufacturers.

the answer is both.

the US government prosecutes trade violations affecting one company an not others from the same country all the time and it all depends on the industry and agreement governing that industry.

 

[FrugalFlyerv2.0]

From the earnings call - look it takes DL up to 24 months to get an international route to work.  Interesting that if another airline enters an international market they are accused of losing money - I guess it's OK to lose money up to 24 months but not others.
 

 
I'm not into conspiracies, but I think that the comment of the up-to 24 month time frame to develop a route is interesting.
Isn't 24 months the amount of time that a carrier has to serve a route like PHL-LHR for example - as a condition of the AA-US merger -  and then gets to keep the slot?

 

[WorldTraveler]

no it is not

 

[FrugalFlyerv2.0]

So what exactly were the conditions of the LHR slot divestitures for AA-US?

 

[WorldTraveler]

I believe it was longer than 24 months... 5 years perhaps. feel free to look it up and let me know.

and I never saw anything that DL is starting PHL-LHR because of a route divestiture. is that confirmed that they won a slot for that route or did they just decide to do it anyway?

 

[FrugalFlyerv2.0]

No idea where DL got the slot for PHL-LHR.  I thought maybe it was part of the AA-US approval, but I could be mistaken.

 

[700UW]

Looks like their SkyTeam partner AZ is ending FCO-CCS flights in April.
 
Yes AA/US had to give up a slot for PHL-LHR.