NW/DL Merger "Real Possibility"

[TechBoy]

And you somehow forget that the airline industry was regulated for its first 50 or so years of existence. The backbone of AA’s route system under the regulated era was the transcontinental markets via Chicago. AA had a 50 year running head start in serving those markets.

But this isn’t just about AA. It’s about any responsible business that has had a 50 year head start on its competitors. AA has and should have a revenue premium in the markets which it pioneered. Just as DL has and does have a revenue premium in its core markets. No legacy airline has grown to a dominant position in another airline’s key markets without an acquisition.

I'm sorry, but that is one of the weakest arguments I'm seen in this thread. You mean to tell me that just because AA held route authorities in 1978 that DL isn't competing on a level playing field ex-JFK? Let's get real.

The reality is that despite having a hub at JFK, DL was unable to command a revenue premium on key routes like JFK-LAX/SFO. In fact, DL couldn't handle the B6 competition and went downmarket to try to compete like a LCC. In the meantime, BOTH AA and UA have stayed upmarket and command a substantial revenue premium over DL. In an apples to apples situation, DL couldn't keep up with the other two.

 

[jbguppy]

I'm sorry, but that is one of the weakest arguments I'm seen in this thread. You mean to tell me that just because AA held route authorities in 1978 that DL isn't competing on a level playing field ex-JFK? Let's get real.

The reality is that despite having a hub at JFK, DL was unable to command a revenue premium on key routes like JFK-LAX/SFO. In fact, DL couldn't handle the B6 competition and went downmarket to try to compete like a LCC. In the meantime, BOTH AA and UA have stayed upmarket and command a substantial revenue premium over DL. In an apples to apples situation, DL couldn't keep up with the other two.

Once again reality doesn't fit your dreamworld WT. I have to reiterate that Simplifares was one of the stupidest management moves every by a US based air carrier.

That quick trip in BK just isn't materializing like you predicted either.

JBG

 

[WorldTraveler]

DL has never had a hub at JFK until this year... they never called it as such.

And if you don't think a company's presence in a market is a major competitive advantage, you are seriously out of touch w/ reality yourself. Why do you think Delta dominates ATL-NYC or AA-DFW-LAX or UA CHI-SFO? Those airlines have flown those markets for decades, rightfully own them, and don't give them up to anyone? If AA is so damn good at invading other people's markets, why the heck to they fly regional jets against DL and US' Shuttle flights in/out of LGA? and why does UA continue to shrink its presence at JFK despite having substantial routes to/from that airport? and don't tell me they are going just for the premium passengers since they are cutting food service on the transcons in coach just like AA and DL have done... and still have the smallest share among the 3.

 

[flyhigh]

...actually, I wouldn't use Eagle LGA-BOS/DCA as a good example. DL & US have a slot and operational advantage in LGA. Additionally, AE has garnered 5-10% (and growing) of the market with that product.

As for market presence, that matters more for business traffic than leisure as evidenced by the mere existence of JetBlue. Both AA & DL, along with US and TW previously had more presence than B6 in JFK-FLL yet B6 is clearly the leisure leader from JFK these days.

 

[WorldTraveler]

And AA has not tried to go after every passenger that flies to the Caribbean either. There is a price for being the dominant carrier and it is usually not worth beating every other competitor to the pulp in a leisure market. But it may be worth it in DFW-LAX, a heavily business market where AA has fought powerfully to remain a near monopoly.

I don’t know why you want to exclude LGA markets just because they are slot controlled. AA has 8 pairs of LGA slots tied up for its LGABOS service and provides exactly half of the flights DL provides. Do you not think that if AA wanted to compete in the LGABOS market it would come up w/ 8 more sets of flights from the dozens it holds to fly other markets?

AA and UA used slot controls to lock up the Chicago market and no one at DL or NW or CO is saying that AA and UA don’t really have a valid market leadership position because there are slots. AA and UA invested the money and built the market over time and now enjoy the fruits of their efforts. Similarly, DL built its presence in ATL and LGA and continues to dramatically build its presence at JFK while AA maintains status quo, leaving DL in the position to reap the fruits of its labors in the future. Remember that AA has served or considered serving many of the markets from JFK that DL is serving now or has talked about serving. Why should anyone be surprised if AA pulls out of markets only to watch DL grow in them. Did DL expect AA to sit on its hands when DL pulled down its DFW hub? Heck no. AA has taken most of the local traffic DL carried and has picked up many of the connecting flows such as from cities like SHV to the west which DL cannot competitively carry on its network any longer. Companies protect the markets that are of value to them and aren’t surprised if someone else steps into markets they abandon. And market value for one company is not necessarily the same as it is for another.

 

[flyhigh]

RJ's are using different slots. Additionally, DL & US use what are rolling call signs. It gives them SIGNIFICANT operational advantages in times of delays/bad weather. Nobody else is able to enjoy those without A. building a terminal, B. branding a portion of their fleet & facilities, etc. There has been talk of taking that authority from US because they flow the aircraft through the system now, but the FAA takes into consideration their marketing of the product as well.