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Topic: How Will The DL-VS Deal Affect BA?
Username: Gonzalo
Posted 2012-12-13 09:55:35 and read 8322 times.

Is there a chance of the deal between DL and VS affecting BA revenue ? I tend to think that a lot of passengers could see a better option for connecting flights inside USA flying VS-DL instead BA-AA or similar....
And despite BA numbers are blue, the IAG group will be really unhappy if the "strong" carrier of the group starts to loose market share...

Thoughts ?

Rgds.
G.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: STT757
Posted 2012-12-13 10:07:55 and read 8295 times.

Quoting Gonzalo (Thread starter):
tend to think that a lot of passengers could see a better option for connecting flights inside USA flying VS-DL instead BA-AA or similar....



If you believe the value is in the US connections then the DL deal is more lucrative, however I think the value is the beyond connections from London on BA. Which means the AA/BA deal will remain mostly unopposed as VS has very little beyond London.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: anstar
Posted 2012-12-13 10:15:24 and read 8256 times.

Quoting Gonzalo (Thread starter):
Is there a chance of the deal between DL and VS affecting BA revenue ?

It will definately affect BA in a negative way... If your main hub comeptitor gets stronger then that will have an impact.

Quoting STT757 (Reply 1):
VS has very little beyond London.

Well if you mean connecting from US flights they have

Dubai,
J'burg
Cape Town
Accra
Lagos
Delhi
Mumbai

Not quite up there with BA, but not insignificant and likely to get a boost with the new DL partnershi and the extra PAX that will bring to VS

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: pnwtraveler
Posted 2012-12-13 10:23:26 and read 8199 times.

If you look at the volume of slots that the BA/AA has across the Atlantic compared to DL/VS the difference will be felt but minimal. And as the poster has said above onward links are also key. It however is a good move for DL in that it allows them to increase capacity between NYC and LHR, rationalize the flights, and add volume to secondary markets. One would have to crunch the numbers very carefully to determine how good a deal the cost will be, but they certainly paid substantially less than Singapore.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: by738
Posted 2012-12-13 10:25:12 and read 8183 times.

All the transfer options were previously available in some shape or form and so Im not quite sure what this adds. The BA Miles hunters will never be swayed.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: migair54
Posted 2012-12-13 10:42:22 and read 8102 times.

I don´t think this will affect to BA much, as it has said previously the issue with AA-BA is that connectivity in both ends is huge and that´s the main advantage, something like DL-AF has.

The issue with DL-VS now is that they will be able to work out the schedules from NYC-LON so they can offer a more competitive product against BA-AA, and they will be able to steal some pax and don´t do competence between them (VS-DL).

Quoting anstar (Reply 2):
Dubai,
J'burg
Cape Town
Accra
Lagos
Delhi
Mumbai

Destinations in few cases already served by DL, so no much advantage here.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: BlueShamu330s
Posted 2012-12-13 11:20:48 and read 7981 times.

Oh dear, the usual suspects relishing the possibility this will have a negative impact on British Airways, thanks to their poster child Virgin Atlantic.

I'm of the opinion that in the bigger picture of this year's events, in which Virgin have lost out cataclysmically to British Airways' advance, snatching bmi from under Beardy's nose, securing a massive increase in their slot portfolio, BA will barely blink at this deal.

No change on the farm, IMO.

Rgds

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: anstar
Posted 2012-12-13 11:30:35 and read 7916 times.

Quoting BlueShamu330s (Reply 6):
I'm of the opinion that in the bigger picture of this year's events, in which Virgin have lost out cataclysmically to British Airways' advance, snatching bmi from under Beardy's nose, securing a massive increase in their slot portfolio, BA will barely blink at this deal.

I'd say VS have done well out of the deal by securing slots @ LHR that BA have had to pay for.

BA now also have to face a competitor at their home base that is half owned by the world's #2 carrier... so I would say it will have some effect on BA at LHR...Jusy look at Willie Walsh's bet to Branson... seems to rile WW at some level.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: rwy04lga
Posted 2012-12-13 11:35:28 and read 7890 times.

Quoting anstar (Reply 7):
Just look at Willie Walsh's bet to Branson... seems to rile WW at some level.

Wasn't it the other way around? Branson bet Walsh?

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: jfk777
Posted 2012-12-13 11:46:45 and read 7825 times.

Quoting anstar (Reply 2):
Dubai,
J'burg
Cape Town
Accra
Lagos
Delhi
Mumbai

Delta already flies to many of these cities using their 777-200LR fleet. Some are flown to by 767 or A330.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: mayor
Posted 2012-12-13 11:52:34 and read 7798 times.

What made London and LHR in particular, the largest transatlantic market in the first place? From the states, was it just pax travelling TO London or was it connecting pax, too? If it was the former (and still might be the reason) that may be why this is still lucrative for DL. Of course, travelling westbound from LHR, obviously, connecting pax are in the mix.

For years, DL flew to LGW, flying, overwhelmingly, terminating pax. I'm guessing most were leisure pax. Now, being able to fly to LHR, they can go after the business traveler, too.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: IrishAyes
Posted 2012-12-13 12:00:07 and read 7756 times.

It really depends on how you look at it. It will matter in certain cases moreso than others.

For instance, let's analyze the impact on BA at LHR as a whole:

If we play devil's advocate here and assume VS joins SkyTeam. Even with its market presence at LHR, VS would only double SkyTeam's share of the traffic at Heathrow from 6.5 to 12%, according to sources. Star would still lead SkyTeam at #2 with a 19.5% capacity share, and OneWorld would be leaps and bounds ahead at 53.6%.

Individually, at present, BA maintains 47.5% of the capacity share at LHR and VS represents 5.6%.

So, while still significant, I don't think the VS-DL partnership would have a huge impact on BA and OneWorld at LHR.

However, if you look at it from a different angle, let's observe the NYC-LON market instead.

Right now, the breakdown is as follows:

UA: 12.6%
DL: 9.2%
AA: 16.3%
VS: 26.2%
BA: 33.8%
KU: 1.9%

That means that right now, OneWorld has 50.1% of the market share, whereas SkyTeam only holds 9.2%. With VS participating in metal neutrality with Delta, SkyTeam's share jumps to 35.4%.

Now THAT in an of itself is a BIG force for OneWorld and BA to contend with, so the impact is significant there.

In summary, the relative "impact" of the VS-DL partnership as it relates to BA has to be viewed more on a case-by-case basis rather than as a whole. However, if I were to guess in terms of big picture, I don't think it would have a huge ripple effect.

[Edited 2012-12-13 12:02:36]

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: BlueShamu330s
Posted 2012-12-13 12:04:15 and read 7725 times.

Beardy was the one who was riled and had his feathers ruffled. It was Beardy who placed the bet challenge.

It is the ultimate plus ca change; huge media hype, talk of a takeover, internet gossip and speculation even on whether this will increase the chance of Virgin taking A380s, yet when all is said, done and analysed, the only change is that the 49% stakeholder is now Delta instead of Singapore. Beardy still has his 51% and when ribbed by Willy Walsh that this deal spelt the end of Virgin and Beardy's involvement, Branson reacted like a dog who'd just had electrodes attached to its balls.

Branson still has 51%, has controlling share and has power of veto over anything he doesn't want or like.

BA concerned? I'm not so sure.

Rgds

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: bluesky73
Posted 2012-12-13 12:04:47 and read 7725 times.

Probably good for BA, keeps them on toes and not too complacent at LHR since taking over BMI. Competition is a good thing and DL/VS link up is good for UK/US generally and passengers.

BA/IB/IAG now need to strengthen links with AA or the possible future AA/US airways (sorry separate subject   ).

Also good to see some positive news from a US carrier looking at growing links abroad, recently been the middle eastern trio expanding networks around world, or at least it feels like it.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: migair54
Posted 2012-12-13 12:19:11 and read 7660 times.

Quoting mayor (Reply 10):
What made London and LHR in particular, the largest transatlantic market in the first place? From the states, was it just pax travelling TO London or was it connecting pax, too?

Delta flying to London terminating pax is the same example that BA flying to ATL with only terminating pax, however DL can offer something beyond ATL, the same BA offers something beyond LHR.

I understand your point, London is not like flying to other hubs like DXB, AUH or DOH where the biggest part are connecting, London is terminating poing for much of the pax.

Quoting BlueShamu330s (Reply 12):
BA concerned? I'm not so sure.

I´m sure they are concerned but the situation is not so bad.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: LDVAviation
Posted 2012-12-13 12:21:24 and read 7648 times.

Quoting IrishAyes (Reply 11):
Now THAT in an of itself is a BIG force for OneWorld and BA to contend with, so the impact is significant there.

But is that 35.4% sustainable? Has Branson's ego been the only thing that has been keeping Virgin from cutting unprofitable flying between the US and LHR?

From this deal, Branson is clearly hoping that he might be able pick up traffic flows on the US side to correct the margins on the unprofitable routes. Still, I don't see that helping him much in markets such as LAX, Miami, Chicago, all markets where AA/BA could still double down on the VS/DL JV because they are not Delta hubs.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: BD338
Posted 2012-12-13 12:22:52 and read 7631 times.

Quoting migair54 (Reply 5):

Quoting anstar (Reply 2):
Dubai,
J'burg
Cape Town
Accra
Lagos
Delhi
Mumbai

Destinations in few cases already served by DL, so no much advantage here.

zero advantage as the proposed JV only allows connections to UK destinations beyond LHR.

I don't see any negative impacts to BA, they may have some slightly stronger competition but (according to the DL Investor Day presentation) BA/AA still control 59% of LHR seat capacity and a combined DL/VS would be a somewhat distant second at 24%.

The deal is all about DL being able to get more revenue into/out of LHR to/from more US destinations and specifically NYC. DL gets revenue from the JV plus the ability to feed more passengers (i.e revenue) via connecting hubs into LHR. What I can't figure out is what do VS really get out of this? They share some costs with DL but also the revenue, how can a tie up with DL add more revenue when all slots are used and flights are already very full?

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: migair54
Posted 2012-12-13 12:32:06 and read 7562 times.

Quoting BD338 (Reply 16):
What I can't figure out is what do VS really get out of this? They share some costs with DL but also the revenue, how can a tie up with DL add more revenue when all slots are used and flights are already very full?

Exactly, if they were planning to do this, why they don´t fight more for BD, they could have done a good domestic network and some european destinations with that planes and slots and then be able to offer something more out of LHR to even make the planes more full and get better yields.

Can VS reduce a bit NYC now and add some other destinations or more freqs to places where BA is dominating now?? IAH, ORD or MIA for example...

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: IrishAyes
Posted 2012-12-13 12:41:20 and read 7506 times.

Quoting migair54 (Reply 14):
Delta flying to London terminating pax is the same example that BA flying to ATL with only terminating pax, however DL can offer something beyond ATL, the same BA offers something beyond LHR.

Umm, WHAT? Absolutely not the case. DL flies to LHR from MULTIPLE US gateways: ATL, BOS, DTW, JFK, MSP, with several of those offering multiple daily frequencies on a year-round basis, whereas BA flies a SINGLE daily flight to ATL.

Quoting LDVAviation (Reply 15):
Still, I don't see that helping him much in markets such as LAX, Miami, Chicago, all markets where AA/BA could still double down on the VS/DL JV because they are not Delta hubs.

The competition is actually much more fragmented than that. In Chicago, UA flies 3x daily flights between ORD and LHR. At LAX, you have UA+ANZ. In MIA, there's a high enough volume of O&D between So.Fla and London to merit VS's market presence (as do LAX and ORD). At the end of the day, it's not just about tapping into the partner airline in a hub-to-hub route; it's the market size, the nature of the yields, and cargo which can serve as contributing factors to justify a route.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: skipness1E
Posted 2012-12-13 12:47:51 and read 7471 times.

Quoting IrishAyes (Reply 11):
UA: 12.6%
DL: 9.2%
AA: 16.3%
VS: 26.2%
BA: 33.8%
KU: 1.9%

How do the VS and BA numbers make any sense when the rotations are :

VS 4 JFK
VS 2 EWR
Total 6

BA 8 JFK
BA 3 EWR
Total 11

Summer scheds btw

Yet you have VS at 79% of BA?? You need to quote a source for your stats I think.

[Edited 2012-12-13 12:49:15] Those numbers are well off.

[Edited 2012-12-13 12:51:36]

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: steve6666
Posted 2012-12-13 12:52:03 and read 7430 times.

Quoting migair54 (Reply 17):
Exactly, if they were planning to do this, why they don´t fight more for BD, they could have done a good domestic network and some european destinations with that planes and slots and then be able to offer something more out of LHR to even make the planes more full and get better yields.

Being cynical, VS actually getting BD would have been very risky for them - look at the size of the BD losses BA has absorbed this year. It is questionable whether VS would have wanted to or been able to risk turning BD around from a financial perspective - it would have not been short of betting the company. Equally, the way the domestic ops are to be operated minimises risk to VS - if they turn out to be a drag on cash, then they can be terminated in the least cost way possible (doubtless some early termination penalty but still very different to having to return leased/purchased aircraft, dismiss staff etc).

Anyway, if I were a route planner/strategist at BA, I would be getting ready to have some fun. Let's see, Virgin running an A319 from Manchester/Edinburgh at XX.XX, let's put a fully depreciated newly refurbished B767 on at just about the same time and price it to fill the aircraft, see what happens. Or hmmm, Virgin and Delta to NYC, let's run an A380 with this enhanced First product on to compete with it at just that time. Could be very amusing.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: Pu
Posted 2012-12-13 13:40:52 and read 7240 times.

Quoting IrishAyes (Reply 11):

Now THAT in an of itself is a BIG force for OneWorld and BA to contend with, so the impact is significant there

The increased share between NY and London is critical, and thanks for adding some numbers about that.

BA's European network is a stand-alone loss maker and only works when paired with overseas, largely TATL, connection options. More specifically, for every premium passenger Delta grabs, the BA hub is weakened and the more a lot of marginal cities (esp. those priced to compete with easyJet etc) become unviable. LHR is an expensive hub that subtracts ~£400 off each connection fare collected in direct tax, in addition to its other high costs.

Delta and VS have everything to gain, its all gravy to them, but BA/AA are facing an increased threat in not merely the additional competition TATL but also a threat to the viability of the LHR hub which subsidises a lot of onward connections from London with high margin premium service fliers from the states (and especially NY.)


Pu

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: IrishAyes
Posted 2012-12-13 13:53:36 and read 7191 times.

Quoting skipness1E (Reply 19):
How do the VS and BA numbers make any sense when the rotations are :

VS 4 JFK
VS 2 EWR
Total 6

BA 8 JFK
BA 3 EWR
Total 11

No, the numbers are 100% accurate. They are for this week. This is what I am seeing:

VS 4 JFK
VS 2 EWR

BA 7 JFK
BA 3 EWR

The reason why VS' overall seat share seems disproportional/overly high relative to their lower level of frequencies is because VS deploys higher-density configured aircraft to both JFK and EWR, whereas BA deploys LOWER density configured planes.

For example, VS 2x flights to EWR are on 1x 346 (seating 316) and 1x 744 (seating 425). Whereas BA's flights are a mix of 777s and 767s offering 250 total seats and 209 total seats, respectively.

The situation is the same at JFK: VS uses a mix of A333/A346/744 aircraft which are high-density in Y (314/316/425). BA utilizes lower-density configured 744s and 772s (312/250).

Thanks to metal neutrality with the JV agreement with AA, BA doesn't have t worry about sending Y-heavy planes to JFK because combined with AA, they offer convenient schedules and frequencies operating as one airline across the Atlantic. Virgin, on the other hand, does not have that luxury - so they send the largest aircraft possible in order to capture as much market share as they can given the number of frequencies they're allocated.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: sevenheavy
Posted 2012-12-13 14:15:10 and read 7093 times.

Quoting IrishAyes (Reply 22):

Hate to break it to you but VS's aircraft configs are;

A333 - 33/48/185 - total 266
A343 - 34/35/171 - total 240
A346 - 45/38/225 - total 308
B744 - 44/62/261 - total 367

Not far out on the A346, but I wouldn't fancy flying on a 314 seat A333. BA would be laughing all the way to the bank  

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: skipness1E
Posted 2012-12-13 14:26:02 and read 7035 times.

Can you link to the numbers you're using or are you just going on a random weeks off season capacity? Mind you I was using the standard summer sched!

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: LDVAviation
Posted 2012-12-13 14:42:32 and read 7245 times.

Quoting Pu (Reply 21):
Delta and VS have everything to gain, its all gravy to them, but BA/AA are facing an increased threat in not merely the additional competition TATL but also a threat to the viability of the LHR hub which subsidises a lot of onward connections from London with high margin premium service fliers from the states (and especially NY.)

Simply not the case anymore. Aviation Week wrote an article about this, some months back. What you are describing is the situation at CDG and FRA, not BA at LHR.

Indeed, in order to cut its losses, Lufthansa is now following BA's example.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: DeltaMD90
Posted 2012-12-13 16:34:55 and read 6987 times.

I think it will feel like a punch to the stomach... annoying, kinda hurts, rather not have had it happen, but it's FAR from killing BA. I'm sure VS will get stronger and it will negatively affect BA, but just a little bit. BA/AA will always be #1 (for the foreseeable future) but I don't think DL/VS is trying to be #1 and chase off BA... LHR is a big enough market to be successful as a distant 2nd. More importantly, it's a big blow to Star I would think. Not the end of the world, but kinda pushes them to a far 3rd

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: Pu
Posted 2012-12-13 16:37:11 and read 7068 times.

Quoting LDVAviation (Reply 25):

I usually read the airline-related AW&ST articles, and don't remember one that talks much about BA, LHR and its European network; perhaps you can find a link?

CDG and AMS are, in European terms, low-cost hubs already optimised by the entrenched hubbing carrier for the unlimited competition they face from fellow legacies and LCCs alike. Delta, KL and the old NW built their European strategy with little reliance on premium fliers. AA/BA's model at LHR is quite different: its based on the restricted capacity which they themselves largely control which boosts revenue, but which also must pay for the high-cost LHR hubbing operation with its largely fixed costs.

LHR is AFAIK the most expensive hub in Europe and while stand-alone TATL flights are always profitable in almost any scenario, the European spokes are really only there to capture the TATL (and other longhaul) premium fliers. In other words, if it comes down to competing on fares for coach fliers, BA/AA lose because they are taxed so much at LHR that a hub doesn't really work unless there are a lot of front cabin customers (mainly TATL) to average out the revenue across the whole network.

A legacy-style hub may not exactly be a house of cards, but (especially at LHR) it is a complicated mesh of interdependant revenue and cost streams. DL/VS do nothing to help BA/AA with costs, but they do a boatload to threaten AA/BA with revenue on by far the most important city pair for the London hub, LHR-NYC.

In sum, DL/VS are mainly interested in flying people to London, which is simple enough and routinely profitable, but since AA/BA require a much higher unit revenue figure to make the LHR hub work, they are especially vulnerable to anyone who can come in and chip away at their premium fliers, who are largely NYC-LON customers.

Also, what is meant by LH imitating BA: how, specifically?

Pu

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: commavia
Posted 2012-12-13 16:58:44 and read 7039 times.

Quoting anstar (Reply 2):
Well if you mean connecting from US flights they have

Dubai,
J'burg
Cape Town
Accra
Lagos
Delhi
Mumbai

Not really. Look at Virgin's schedules in those markets. Heading outbound from LHR, not a single one of those offers logical connections from the U.S. without substantial layovers, with the possible exception of the late LAX-LHR flight. Back inbound to LHR, it's even worse, with most connections not only requiring a long layover, but an overnight. It's awful connectivity.

Quoting migair54 (Reply 5):
Destinations in few cases already served by DL, so no much advantage here.

... not to mention also already served by Delta's partners Air France and KLM, generally with better schedule connectivity.

Quoting mayor (Reply 10):
What made London and LHR in particular, the largest transatlantic market in the first place? From the states, was it just pax travelling TO London or was it connecting pax, too? If it was the former (and still might be the reason) that may be why this is still lucrative for DL. Of course, travelling westbound from LHR, obviously, connecting pax are in the mix.

LON is the largest European market for the U.S. because of the vast economic, cultural, political and linguistic ties between the two countries. As of last year, the U.S. and U.K. were each other's largest sources of foreign direct investment, trade between the two totals nearly $200B annually, they share a common language, history, and some might say social affinity, and on and on. As such, it is true that the U.K. has often been a natural connecting and jumping off point for U.S. travelers going to Europe, but it's also true that the local market itself between the two countries is substantially larger than any other U.S.-Europe market.

Quoting LDVAviation (Reply 15):
From this deal, Branson is clearly hoping that he might be able pick up traffic flows on the US side to correct the margins on the unprofitable routes. Still, I don't see that helping him much in markets such as LAX, Miami, Chicago, all markets where AA/BA could still double down on the VS/DL JV because they are not Delta hubs.

Agreed - that is what Branson is hoping. And it will probably work. The online connectivity beyond JFK alone is going to be a huge boost to Virgin there (although that's probably one of the markets where Virgin needs relatively less help). This will also help Virgin's U.K. POS by broadening the U.S.-bound offering to U.K. FFs to also include the Delta flights ex-LHR/MAN, and the connections beyond JFK and ATL. Plus, I'm sure that by combining their sales efforts and coordinating their schedules, this will probably also boost Virgin's showing in U.S. POS, too, in places you mentioned - LAX, MIA, ORD, etc. Nonetheless, I also agree with you that this boost is not going to be tectonic - it is going to help, but it's not going to be anything earth-shattering.

Quoting BD338 (Reply 16):
zero advantage as the proposed JV only allows connections to UK destinations beyond LHR.

It's not that only domestic U.K. connections will be "allowed." It is just that Delta and Virgin will only legally collude on the domestic U.K. flights beyond LHR in addition to the Trans-Atlantic flights, and no other beyond-LHR flights.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: mayor
Posted 2012-12-13 17:13:40 and read 6966 times.

Quoting commavia (Reply 28):
but it's also true that the local market itself between the two countries is substantially larger than any other U.S.-Europe market.

That was the point of my statement. I doubt if DL is going after those pax that are connecting beyond, whether it is on their metal or VS'. They've been very successful over the years to LGW for the same reason....they're picking up those pax that are going TO London for business or leasure. It would be foolish of DL (and they are NOT that) to go into this, expecting to compete with AA/BA for the same kind of pax. They know there's virtually no network beyond LHR.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: LDVAviation
Posted 2012-12-13 17:55:49 and read 6871 times.

Quoting Pu (Reply 27):
CDG and AMS are, in European terms, low-cost hubs already optimised by the entrenched hubbing carrier for the unlimited competition they face from fellow legacies and LCCs alike. Delta, KL and the old NW built their European strategy with little reliance on premium fliers. AA/BA's model at LHR is quite different: its based on the restricted capacity which they themselves largely control which boosts revenue, but which also must pay for the high-cost LHR hubbing operation with its largely fixed costs.

Yes, AF built its business at CDG on the back of connecting traffic, BUT as they've bled more and more of that traffic to the European LCC's and the Gulf carriers those economics no longer make sense. CDG is not a premium enough hub to allow AF to retrench as BA did at LHR.

And, yes, BA has built its business at LHR on the back of the premium O&D traffic, BUT the VS/DL joint venture does nothing to really challenge that as it does not result in another hub operation at LHR and it does not add any capacity on transatlantic routes.

In short, capacity is still restricted. Indeed, this joint venture might actually result in less capacity as its implementation will bring greater scrutiny on the unprofitable US/UK routes Virgin has been flying. It is also usually the case that the elimination of a competitor results in higher fares. All of this bodes well for BA whose premium position at LHR is still secured by the size of its growing network at LHR and not just in theory on some strategic proposition.

Quoting Pu (Reply 27):
Also, what is meant by LH imitating BA: how, specifically?

LH's long haul flights from FRA have historically subsidized their short-haul European network. When LH controlled its home market to points beyond, that wasn't a problem. But with the influx of Gulf airlines, LH has made the decision to do what BA did long ago. LH will cut service from FRA to many small European markets. LH from FRA will more or less become a premium long haul carrier with one brand connections only to top European business centers. Those centers will be served with only as many frequencies as required to serve the onward connections required by its long haul traffic.

[Edited 2012-12-13 18:17:19]

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: jfk777
Posted 2012-12-13 18:12:43 and read 6825 times.

Quoting mayor (Reply 10):
at made London and LHR in particular, the largest transatlantic market in the first place? From the states, was it just pax travelling TO London or was it connecting pax, too? If it was the former (and still might be the reason) that may be why this is still lucrative for DL. Of course, travelling westbound from LHR, obviously, connecting pax are in the mix.

What makes London and LHR the largest Atlantic market is the same reason Australians go to London. We all speak English so there are many commercials ties along with the common culture.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: Pu
Posted 2012-12-13 18:40:41 and read 6746 times.

Quoting LDVAviation (Reply 30):

And, yes, BA has built its business at LHR on the back of the premium O&D traffic, BUT the VS/DL joint venture does nothing to really challenge that as it does not result in another hub operation at LHR and it does not add any capacity on transatlantic routes.

At least we agree that LHR is especially reliant on premium traffic.

But, it is incorrect we feel, (and hopelessly devoted to BA/AA) to say VS/DL does "nothing to challenge" BA/AA since LHR will have not another hub operation and "not add any capacity." Here is the reason the LHR hub is challenged:

................ Delta Air Lines in New York City..............

VS/DL challenges the LHR hub because of Delta's constantly growing NYC market share.

Delta is capturing more NY fliers and can squeeze LHR by offering more profitable (cheaper to operate) connections at CDG and AMS, as well as pressuring BA/AA's premium market between LHR/NYC. AA and BA must send all pax across LHR most anywhere they're going in Europe....while Delta can either fly them nonstop from JFK to many more destinations or connect them across cheaper hubs in Europe, AMS and CDG.

You're acting as if evryone has to connect in Heathrow and also ignoring Delta's commitment to one day soon lead in NYC. AA/BA charging $1000 to connect in LHR gets them $400 after LHR fees, Delta charging $900 to connect in AMS gets them $700. Delta can squeeze directly at LHR o&d now AND squeeze connections going elsewhere in Europe.

Quoting LDVAviation (Reply 30):

Indeed, this joint venture might actually result in less capacity as its implementation will bring greater scrutiny on the unprofitable US/UK routes Virgin has been flying.

Or, they could drop those secondary VS markets and use their LHR slots to focus in on NYC even more.
Delta can dump capacity between Ny and London simply to damage the Heathrow hub; Delta need only break even in this market to seriously damage AA/BA's hub at LHR.


Pu

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: LDVAviation
Posted 2012-12-13 20:33:01 and read 6585 times.

Quoting Pu (Reply 32):
................ Delta Air Lines in New York City..............

VS/DL challenges the LHR hub because of Delta's constantly growing NYC market share.

Delta is capturing more NY fliers and can squeeze LHR by offering more profitable (cheaper to operate) connections at CDG and AMS, as well as pressuring BA/AA's premium market between LHR/NYC. AA and BA must send all pax across LHR most anywhere they're going in Europe....while Delta can either fly them nonstop from JFK to many more destinations or connect them across cheaper hubs in Europe, AMS and CDG.

You're acting as if evryone has to connect in Heathrow and also ignoring Delta's commitment to one day soon lead in NYC. AA/BA charging $1000 to connect in LHR gets them $400 after LHR fees, Delta charging $900 to connect in AMS gets them $700. Delta can squeeze directly at LHR o&d now AND squeeze connections going elsewhere in Europe.

Constantly growing? If that were enough to influence buying patterns, you would have a strong argument.

But apparently it has not been enough. According to Delta, at their recent investor conference, corporate customers in NY continue to show a preference for AA on the basis of AA's larger network to LHR. Delta thinks that will change once it can offer 9 flights a day from NY through this joint venture. This all begs the question, What effect has the LGA expansion had on those buying patterns? Apparently none.

As to price, why do you assume that AA/BA are not as competitive on price over LHR as Delta/AF are on price over CDG/AMS? My partner works for a company that uses both joint ventures as its preferred vendors and the bulk of their business goes to AA/BA because both on price and network AA/BA wins out. What that tells me is that your math and reasoning is much too simplistic. There are other formulas that determine the true cost of a ticket to a corporate customer.

Here is the other problem I see with both your reasoning and Delta's bet that 6 more frequencies from NY to London will finally make the difference, when so far the LGA expansion has not. Delta hasn't made it easier for corporate customers to chose it over AA; on the contrary, it has made things much more complex. With two joint ventures to juggle over the Atlantic, each with their own pricing formulas and array of eligible connections, Delta will still have to convince those corporate customers that their entire European network (including both joint ventures) is more convenient than AA/BA's one-stop shop.

On an employee level, the solution Delta will be offering is often very hard to administer because employees don't want to abide by the cumbersome rules of what constitutes an eligible flight in accordance with the conditions of some joint venture. Employees become unhappy they cannot take a direct flight; cost savings per the contract become difficult to achieve.

So, it is easy to see how AA/BA will counter Delta's enhanced proposal. AA/BA will still be the only joint venture that can get you to London and points beyond all within the same contract. As such, It is not that everyone wants to connect over LHR. It is just that that has proven to be a very convenient way for people to conduct business.

Having said this, there does exist some preference at a deeper level. Commavia summarized what the economic and cultural ties are between the US and UK. My partner's company sends many of its executives through LHR because it is usually a stop in the intinerary. Those executives are not just connecting. They have meetings in London and then they are flying from London to some other city in India, the Middle East, and Europe. All of this is done quite seamlessly on AA/BA. If the same corporate customer tries to do this on VS/DL, they will end up buying tickets that are more expensive because they are not fully covered by the pricing formulas in the joint venture.

Quoting Pu (Reply 32):
Or, they could drop those secondary VS markets and use their LHR slots to focus in on NYC even more.
Delta can dump capacity between Ny and London simply to damage the Heathrow hub; Delta need only break even in this market to seriously damage AA/BA's hub at LHR.

You do realize that in joint ventures both partners share the risk. As it is, VS is losing money and if some of those losses are coming from its US/UK flights that will mean in the very near future that Delta will be losing money. The most certain way of grounding the DL/VS joint venture is to do exactly what you are proposing.

Whatever the case, VS does not have the resources to dump capacity. They have no additional peak slots at either JFK or LHR. In fact, aren't they still leasing two such slot pairs from United? Given this development, I would think that United would want those slots back. LOL.

Plus, VS is already operating its largest planes on these routes. Short of some A380's, what capacity do they have to dump? BA will be taking delivery of a number of A380's before VS ever declares its final intentions on its A380 order. If anybody wanted to put the hurt over the transatlantic, it would be BA which has the slots and will have the capacity shortly.

Having said that, I don't think that BA is that threatened by this joint venture to play the Airliners.net game.

[Edited 2012-12-13 20:34:36]

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: lucky777
Posted 2012-12-13 21:10:05 and read 6534 times.

Quoting LDVAviation (Reply 33):
Having said that, I don't think that BA is that threatened by this joint venture to play the Airliners.net game.

I would hope the upper echelon at BA don't suffer from the same GOD complex about their airline as you seem to. Looking at their most recent few quarters, IAG group isn't exactly firing on all cylinders, and Delta has the resources and management to keep the boys at BA awake at night for sure.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: steffenbn
Posted 2012-12-13 22:49:25 and read 6255 times.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: anstar
Posted 2012-12-13 23:18:49 and read 6138 times.

Quoting rwy04lga (Reply 8):
Wasn't it the other way around? Branson bet Walsh?
Quoting BlueShamu330s (Reply 12):
Beardy was the one who was riled and had his feathers ruffled. It was Beardy who placed the bet challenge.

It is the ultimate plus ca change; huge media hype, talk of a takeover, internet gossip and speculation even on whether this will increase the chance of Virgin taking A380s, yet when all is said, done and analysed, the only change is that the 49% stakeholder is now Delta instead of Singapore. Beardy still has his 51% and when ribbed by Willy Walsh that this deal spelt the end of Virgin and Beardy's involvement, Branson reacted like a dog who'd just had electrodes attached to its balls.

Actually Branson bet Willie $1M.... Willie turned around and said he would offer another bet - A kick in the groin rather than $1M.... Branson then responded and said done deal lol

Quoting commavia (Reply 28):
Not really. Look at Virgin's schedules in those markets. Heading outbound from LHR, not a single one of those offers logical connections from the U.S. without substantial layovers, with the possible exception of the late LAX-LHR flight. Back inbound to LHR, it's even worse, with most connections not only requiring a long layover, but an overnight. It's awful connectivity.

The day flight JFK/EWR work well for connecting with those flights. Hence why they started the second NYC-LHR day flight in OCT.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: sevenheavy
Posted 2012-12-14 00:18:57 and read 5903 times.

Quoting commavia (Reply 28):
Quoting anstar (Reply 2):
Well if you mean connecting from US flights they have

Dubai,
J'burg
Cape Town
Accra
Lagos
Delhi
Mumbai

Not really. Look at Virgin's schedules in those markets. Heading outbound from LHR, not a single one of those offers logical connections from the U.S. without substantial layovers, with the possible exception of the late LAX-LHR flight. Back inbound to LHR, it's even worse, with most connections not only requiring a long layover, but an overnight. It's awful connectivity.

I would disagree. VS carry hundreds of passengers through LHR that are transferring to/from the USA to these destinations with very favourable connecting times.

for example;

DEL - EWR/JFK - DEL, connections both ways within 3 hours
BOM - JFK/IAD/BOS(+ORD seasonally) - BOM, connections both ways within 3 hours
LOS/ACC - JFK/EWR - LOS/ACC, connections both ways within 3 hours
DXB - JFK(+EWR but with a tight connection at certain times of the year DXB-EWR) - DXB, connections both ways within 3 hours
JNB - JFK - JNB, connections both ways within 3 hours
CPT - JFK - CPT, JFK-CPT connection within 2 hours, CPT-JFK connection within 4 hours.

Most of these in fact have connections that are closer to 2 hours and the times stated are the maximums. How are these not "logical" connections?

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: sevenheavy
Posted 2012-12-14 00:37:11 and read 5788 times.

Quoting BlueShamu330s (Reply 6):
Oh dear, the usual suspects relishing the possibility this will have a negative impact on British Airways, thanks to their poster child Virgin Atlantic.

I'm of the opinion that in the bigger picture of this year's events, in which Virgin have lost out cataclysmically to British Airways' advance, snatching bmi from under Beardy's nose, securing a massive increase in their slot portfolio, BA will barely blink at this deal.

No change on the farm, IMO.

Rgds

I didnt detect any bias from the thread starter, and I find no evidence of them viewing VS as a "poster child"

Its a fair question, and when the BA/AA JV was announced a few years back this very forum had plenty to say (some more objectively than others) about how this would affect other airlines in the same market. They (largely correctly) summised that the other carriers, and in particular VS, would find it harder to compete. I'm pretty sure that VS themselves said the same thing, and objected to the JV for those very reasons.

So, on that basis, are you really saying that this will have NO impact whatsoever on BA? It's far to early to speculate on the level of impact, and in the majority of cases BA/AA will still be the major carrier, but I find it very hard to believe that the clever people at BA are refusing to even consider that they will have to work a bit harder on their core competing routes. Its not going to bankrupt them by any stretch, but any time your major rival becomes more competitive you have to work harder just to keep your market share.

Quoting BlueShamu330s (Reply 12):
when all is said, done and analysed, the only change is that the 49% stakeholder is now Delta instead of Singapore

Right, apart from the huge JV/metal neutral/revenue sharing tie up, VS's access to DL's massive USA/Canada/Mexico network, DL's access to all of VS's transatlantic flights, and a huge loyalty tie up  

Every "analyzer" I have come across has come to the opposite conclusion. That is, the huge difference between the involvement of SQ over the last 13 years, and the level of involvement from DL in just the last 3 days!

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: slinky09
Posted 2012-12-14 01:50:19 and read 5520 times.

Quoting commavia (Reply 28):
Not really. Look at Virgin's schedules in those markets. Heading outbound from LHR, not a single one of those offers logical connections from the U.S. without substantial layovers, with the possible exception of the late LAX-LHR flight. Back inbound to LHR, it's even worse, with most connections not only requiring a long layover, but an overnight. It's awful connectivity.

Wrong unfortunately, BOM is clearly timed for the morning connections but you're also excluding the VS18 and VS26 from EWR and JFK during the day that connect well with VS's evening flights to Asia.

Quoting commavia (Reply 28):
LON is the largest European market for the U.S.

Something to do with the world's two largest financial centres perhaps.

Quoting sevenheavy (Reply 23):
A346 - 45/38/225 - total 308

Oh dear, let's try 316.

Quoting Pu (Reply 32):
At least we agree that LHR is especially reliant on premium traffic.

Heathrow has 8 og the global top 10 intercontinental routes - amazing in itself, and I'm sure that I read someone on the Heathrow web site that there are at least double the number of daily J and F seats from LHR to the US over FRA with CDG further behind. So yes, Heathrow is a very key market and if DL believe this will pursuade more corporates to do business with them, great for VS.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: sevenheavy
Posted 2012-12-14 03:05:05 and read 5219 times.

Quoting slinky09 (Reply 39):
Quoting sevenheavy (Reply 23):
A346 - 45/38/225 - total 308

Oh dear, let's try 316.

Well, you can try as many times as you like, but 45 + 38 + 225 will still equal 308. Try it if you still dont believe me.

What am I missing?  

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: commavia
Posted 2012-12-14 05:01:13 and read 4718 times.

Quoting LDVAviation (Reply 30):
Yes, AF built its business at CDG on the back of connecting traffic, BUT as they've bled more and more of that traffic to the European LCC's and the Gulf carriers those economics no longer make sense. CDG is not a premium enough hub to allow AF to retrench as BA did at LHR.

And, yes, BA has built its business at LHR on the back of the premium O&D traffic, BUT the VS/DL joint venture does nothing to really challenge that as it does not result in another hub operation at LHR and it does not add any capacity on transatlantic routes.

And let us, of course, not forget how the two airlines' respective strategies have worked out. While BA may have some issues to address, it is unquestionably in a better strategic and financial position right now than AF.

Quoting LDVAviation (Reply 33):
But apparently it has not been enough. According to Delta, at their recent investor conference, corporate customers in NY continue to show a preference for AA on the basis of AA's larger network to LHR. Delta thinks that will change once it can offer 9 flights a day from NY through this joint venture. This all begs the question, What effect has the LGA expansion had on those buying patterns? Apparently none.

I don't think that is what DL said. Unless I missed it, DL's investor day presentation highlighted a not-inconsequential share shift - according to them - towards DL and away from other airlines. And I don't doubt that - it's obvious. When you pour tons of new capacity into a market in such a relatively short span of time, something would have to be really wrong to not see a boost in local business O&D share.

Quoting LDVAviation (Reply 33):
With two joint ventures to juggle over the Atlantic, each with their own pricing formulas and array of eligible connections, Delta will still have to convince those corporate customers that their entire European network (including both joint ventures) is more convenient than AA/BA's one-stop shop.

It will, likely everything, depend on the individual customer. For those who need nonstop flights to lots and lots of markets, DL may be the better offering. For those who still require frequency and flexibility but who need a narrower set of most of the larger business markets, AA will be a viable option. It will just depend.

As I said, I have no doubt that DL's growth at LGA/JFK has helped their corporate traffic share ex-NYC. However I do not subscribe to the notion - perpetuated here but some - but AA has now somehow been "locked out" of the NYC market. AA is still a huge presence in the region, and I think AA can and should continue to focus post-bankruptcy - merger or no merger - on growing their presence in NYC in the targeted set of key O&D/business markets they do not already serve nonstop (examples: LGA-IND/MCI/IAH, JFK-FRA, etc.).

Quoting anstar (Reply 36):
The day flight JFK/EWR work well for connecting with those flights. Hence why they started the second NYC-LHR day flight in OCT.
Quoting slinky09 (Reply 39):
Wrong unfortunately, BOM is clearly timed for the morning connections but you're also excluding the VS18 and VS26 from EWR and JFK during the day that connect well with VS's evening flights to Asia.

My apologies - I forgot the morning JFK/EWR-LHR. Nonetheless, my earlier point is still generally valid - the connectivity over LHR on VS is miniscule compared with what AF/KL offer over CDG/AMS. That won't be changing with this ATI/JV.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: bobnwa
Posted 2012-12-14 05:25:23 and read 4557 times.

Quoting IrishAyes (Reply 11):
Individually, at present, BA maintains 47.5% of the capacity share at LHR and VS represents 5.6%.

Please back up that statement.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: AAIL86
Posted 2012-12-14 05:48:30 and read 4433 times.

Quoting bobnwa (Reply 42):
Quoting IrishAyes (Reply 11):
Individually, at present, BA maintains 47.5% of the capacity share at LHR and VS represents 5.6%.

Please back up that statement.

I don't think that's a shocking statistic, just think intuitively about what we know about the relative sizes of both BA and VS...

I'm not sure where he got that capacity statistic from, but according to the report linked below, the passenger share in 2010 at LHR was BA 39% vs VS 5% (Add 5% for BMI, plus throw in AA with an additional 3%). Keep in mind that capacity share and passenger share are two different categories. View the chart on page 23 ...

http://www.caa.co.uk/docs/5/HeathrowMarketPowerAssessment.pdf

[Edited 2012-12-14 05:50:16]

[Edited 2012-12-14 05:50:52]

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: mayor
Posted 2012-12-14 08:10:27 and read 3743 times.

Quoting LDVAviation (Reply 33):
Having said that, I don't think that BA is that threatened by this joint venture to play the Airliners.net game.

Let us hope that BA/AA aren't arrogant enough to ignore this tie up, much as DL ignored the coming of WN in the 90s and we know what happened there. I'm sure that BA won't be shaking in their boots, but they have to be just a little concerned with this deal.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: IrishAyes
Posted 2012-12-14 08:10:42 and read 3739 times.

Quoting sevenheavy (Reply 23):
Hate to break it to you but VS's aircraft configs are;

A333 - 33/48/185 - total 266
A343 - 34/35/171 - total 240
A346 - 45/38/225 - total 308
B744 - 44/62/261 - total 367

Not far out on the A346, but I wouldn't fancy flying on a 314 seat A333. BA would be laughing all the way to the bank  

Hmmm, I'm not so sure. Remember, VS has multiple cabin configurations for their widebody fleet. There are two configurations for the A333: the 2-class cabin (59/255) and 3-class (33/48/185) as you mentioned yourself. My sources are showing VS deploys the 2-cabin configured plane to JFK.

The 744 also has several variants: Version one with F/Y+/Y (14/58/368), version two (44/32/318) and version 3 (56/62/228).

My numbers could be off though.

Quoting skipness1E (Reply 24):

Can you link to the numbers you're using or are you just going on a random weeks off season capacity? Mind you I was using the standard summer sched!

I use CAPA - which issourced through Innovata. It's usually pretty reliable, but obviously pales in comparison to OAG schedules. Enilria, you there?

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: sevenheavy
Posted 2012-12-14 08:24:11 and read 3642 times.

Quoting IrishAyes (Reply 45):

I guarantee 100% that the numbers I gave are exactly correct. I also guarantee that a two class A333 has never operated to JFK, even as a sub. Even if it has, that wouldn't represent an accurate reflection of the schedule. They've operated to DEL a couple if times, and once to ACC and NBO, but VS would never send one to JFK

As for the B744 configs, none of them even exist. Two of them are years out of date and never operated concurrently, and one never existed. It's close to the leisure fleet config (that doesn't operate out of LHR anyway) but not correct.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: LHRFlyer
Posted 2012-12-14 08:24:27 and read 3637 times.

Any change in the competitive landscape has an impact but BA has been dealing with increased competition at LHR for decades, from Virgin gaining access to the airport and gradually growing its presence to Open Skies in 2008 which gave DL, CO and US access to the airport.

The AA joint-venture is working very well and still has a long way to develop. Once BA has a critical mass of 787s we should expect about 4-5 new transatlantic routes.

Now if DL had acquired a stake in VS three years ago and been willing to bankroll the purchase of bmi, that really would have heralded a radical shake-up at LHR.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: Viscount724
Posted 2012-12-14 08:36:00 and read 3579 times.

Quoting commavia (Reply 28):
As of last year, the U.S. and U.K. were each other's largest sources of foreign direct investment, trade between the two totals nearly $200B annually

I thought Canada was the largest U.S. trading partner.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: doug_Or
Posted 2012-12-14 08:57:07 and read 3443 times.

Quoting Viscount724 (Reply 48):
I thought Canada was the largest U.S. trading partner.

I believe you are correct. Trade =/=direct investment, however.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: anstar
Posted 2012-12-14 09:05:16 and read 3403 times.

Quoting IrishAyes (Reply 45):

Hmmm, I'm not so sure. Remember, VS has multiple cabin configurations for their widebody fleet. There are two configurations for the A333: the 2-class cabin (59/255) and 3-class (33/48/185) as you mentioned yourself.

And you will also probably know that the 2 class A330's will all be converted to 3 class to match the rest of the A330 fleet starting in March next year and being complete by October. Therefore there will only be 1 A330 config.

Quoting IrishAyes (Reply 45):
My sources are showing VS deploys the 2-cabin configured plane to JFK.

The 2 class has NEVER operated to New York.

Topic: RE: How Will The DL-VS Deal Affect BA?
Username: IrishAyes
Posted 2012-12-14 12:16:01 and read 2943 times.

Quoting sevenheavy (Reply 46):
I guarantee 100% that the numbers I gave are exactly correct. I also guarantee that a two class A333 has never operated to JFK, even as a sub. Even if it has, that wouldn't represent an accurate reflection of the schedule. They've operated to DEL a couple if times, and once to ACC and NBO, but VS would never send one to JFK

As for the B744 configs, none of them even exist. Two of them are years out of date and never operated concurrently, and one never existed. It's close to the leisure fleet config (that doesn't operate out of LHR anyway) but not correct.
Quoting anstar (Reply 50):
And you will also probably know that the 2 class A330's will all be converted to 3 class to match the rest of the A330 fleet starting in March next year and being complete by October. Therefore there will only be 1 A330 config.

Quoting IrishAyes (Reply 45):
My sources are showing VS deploys the 2-cabin configured plane to JFK.

The 2 class has NEVER operated to New York.

Ok. Thanks for the clarifications. My apologies.


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