LAXintl
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Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 2:40 pm

Looks like Latin America is the place to be for US carriers as the region has continued to produce some of the strongest margins for US carriers across their networks last several years.

Quote:
Most U.S. Carriers Posting Solid Margins In Latin America

Flights to Latin America produced the highest operating margins of any region for U.S. carriers in 2011 and the first quarter of 2012, and the margin has continued to improve even as capacity rises.

Latin America services produced an 8% operating margin in 2011, based on quarterly financial data the airlines are required to file with the U.S. Transportation Department. That compared to a margin of 5% for domestic services, 3% for Pacific operations and negative 6% for transatlantic.

Story:
http://www.aviationweek.com/Article....d_07_17_2012_p01-02-477259.xml&p=1


Chart that goes along with the story shows operating profit margin for carriers in the region. All were positive in 2011 except Delta.

AA = 8%
B6 = 27%
CO = 27%
DL = (-5%)
UA = 6%
US = 5%

http://www.aviationweek.com/ad_pdf/2012/07/17/avd_07_17_2012_cht3.pdf

Delta blames its weak performance on the lack on frequencies it can offer, along with lack of brand awareness in the region.
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eastern023
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 3:01 pm

Shame on AA/UA &DL that have not capitalized on this market. United I think lacks of a good gateway IAH is kinda far out of the way. The best geografically situated is Miami so AA should be king, yet their international service on Y is terrible.
AA will Rise Again!
 
LAXintl
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 4:20 pm

Quoting eastern023 (Reply 1):
Shame on AA/UA &DL that have not capitalized on this market. United I think lacks of a good gateway IAH is kinda far out of the way.

   

Houston seems to be fantastic looking at the results which Continental generated. The merged United sits in a very strong position in Latin America.
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EricR
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 4:50 pm

Quoting LAXintl (Thread starter):
Delta blames its weak performance on the lack on frequencies it can offer, along with lack of brand awareness in the region.



I don't buy DL's excuse for their poor performance. The data is about margins and not total revenue, total profit, nor total capacity. Furthermore, DL blames this part of their poor performance on brand awareness. Perhaps this is partially true, but that doesn't seem to have stopped B6, which is a relatively new entrant, from posting solid results in the region.
 
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drerx7
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 5:30 pm

Quoting eastern023 (Reply 1):
United I think lacks of a good gateway IAH is kinda far out of the way.

To where? Latin America its fine.

Quoting eastern023 (Reply 1):
The best geografically situated is Miami so AA should be king, yet their international service on Y is terrible.

Well, judging by the counterintuitive results...you may be wrong.
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jfk777
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 5:42 pm

Quoting drerx7 (Reply 4):
Quoting eastern023 (Reply 1):
United I think lacks of a good gateway IAH is kinda far out of the way.

To where? Latin America its fine.

Houston is a bit out of the way if you are on the east coast. Newark- IAH- GRU is a bit out of the way. Newark and Dulles ar better Latin Gateways for United on the Atlantic coast.
 
eastern023
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 5:47 pm

Quoting drerx7 (Reply 4):
Well, judging by the counterintuitive results...you may be wrong.

Well are we judging the airline performance or the port of entry...exactly..!
AA will Rise Again!
 
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drerx7
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 5:49 pm

Quoting eastern023 (Reply 6):
Well are we judging the airline performance

That's the only measure that matters...

But yes for deep S. America IAH is out of the way for the Atlantic coast.
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avi8
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 5:50 pm

IAH is a gold mine for connecting Latin America with the US. If I'm not wrong, IAH is just behind MIA. AA hasn't been able to build a strong Latin American network from DFW. They only serve Mexico, BZE (not even daily), PTY (not daily), GUA, SJO, GRU, and EZE.


Furthermore, I believe UA has not taken full advantage of Latin America. Re-opening the defunct LAX-GUA and LAX-SJO aswell as ORD-GUA and ORD-SJO (they have never been operated) would further improve their domination in Latin America. If they could only get CM to open up a new frequency between PTY and ORD.
avi8

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XJetflyer
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 5:52 pm

WN will be expanding Hobby and flying very soon. Watch what they do...
 
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drerx7
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 5:55 pm

Quoting XJetflyer (Reply 9):
WN will be expanding Hobby and flying very soon. Watch what they do...

What are you suggesting? That they expand aggressively at IAH or the opposite?
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AVENSAB727
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 5:58 pm

They will expand aggressively.
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AADC10
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 6:13 pm

Quoting eastern023 (Reply 1):
Shame on AA/UA &DL that have not capitalized on this market.

The problem is that if they added more seats, then the margins would erode. We also do not know the passenger mix. If adding more seats would only add price sensitive vacationers and expats, then it would only be a liability. Latin America is also notorious for its boom/bust economic cycles. There is limited upside at the moment and decline is a stronger possibility.

Quoting EricR (Reply 3):
DL blames this part of their poor performance on brand awareness. Perhaps this is partially true, but that doesn't seem to have stopped B6, which is a relatively new entrant, from posting solid results in the region.

B6's operations are very different than DL's. B6 operates primarily to the Caribbean and a few other destinations near the Gulf of Mexico. DL goes throughout Latin America, serving many more destinations as well as longer haul routes to Brazil, Argentina and Chile.
 
LAXdude1023
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 6:20 pm

Quoting avi8 (Reply 8):
IAH is a gold mine for connecting Latin America with the US. If I'm not wrong, IAH is just behind MIA. AA hasn't been able to build a strong Latin American network from DFW. They only serve Mexico, BZE (not even daily), PTY (not daily), GUA, SJO, GRU, and EZE.

Wrong on a few counts. From DFW, AA serves multiple destinations in Mexico, BZE (daily except during hurricane season), GUA, SAL, SJO, LIR, PTY (3x weekly in the winter, spring, and early summer), CCS (weekly), SCL, EZE, GRU, and GIG (3x weekly).
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jfk777
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 6:21 pm

Quoting avi8 (Reply 8):
IAH is a gold mine for connecting Latin America with the US. If I'm not wrong, IAH is just behind MIA. AA hasn't been able to build a strong Latin American network from DFW. They only serve Mexico, BZE (not even daily), PTY (not daily), GUA, SJO, GRU, and EZE.

AA HAS NOT been able to build a strong Latin gateway at DFW ? Really ? They fly to all kinds of cities in Mexico, Buenos Aires & Sao Paulo , if that is NOT enough I am sorry but just because Houston is bigger to Latin America and flies 2 daily flights to Bogota, what makes that so GREAT ?

EZE and GRU all that count in Latin America, and United would love to fly as many times to GRI and EZE as AA does. The only two big Latin cities United(before CO) flew to were ? EZE and GRU from ORD and IAD. So even pre merger UA flew to the 2 big Latin cities.
 
IAHWorldflyer
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 6:30 pm

Quoting LAXintl (Thread starter):
operating profit margin for carriers in the region

Since we are talking operating profit margin here, I'm not surprised DL is squeezed more than the other carriers. Anecdotal evidence based on my own fare searches seem to indicate that DL has lower fares to LatAM over ATL than UA or AA. As they increase market share, perhaps those fares will rise.
Seeing that CO had a 27% profit margin makes you realize why WN wanted to come into HOU so bad they were willing to pony up $100 million to do so. They're going to be handing out a lot of peanuts starting in 2015!
 
mercure1
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 6:38 pm

Latin America is a strong region. With good economic growth, growing middle class looking to travel, and established ethnic and business links to the US, it seems this market will continue to grow and produce increasing opportunity for airlines.

I’ve read that as far as trade lanes, that Latin America could very well exceed size of that of Atlantic eventually.

So why the bad performance for Delta ?
Its not like they are novice in Latin America - they inherit a strong Mexico franchise from Western Airlines, got a few Latin routes from Pan Am and have operated to Spanish speaking countries for 20-years now. They also have long relationship with AeroMexico.
Seems strange they cannot capitalize on such.
 
aer
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 7:00 pm

Quoting jfk777 (Reply 14):
EZE and GRU all that count in Latin America

??? Please do expand.

Quoting mercure1 (Reply 16):
So why the bad performance for Delta ?

I'm not sure for other countries, but at GUA, DL fails in there scheduling. Their GUA-ATL flight has very poor connecting options, some even requiring an overnight stay at ATL. They used to have a different schedule witch even permitted smooth connections to Europe and other US destinations, but I guess they didn't want to have an aircraft RON at GUA.

Their LAX flight does do well to my knowledge.
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IrishAyes
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 7:05 pm

Quoting jfk777 (Reply 14):
EZE and GRU all that count in Latin America, and United would love to fly as many times to GRI and EZE as AA does.

That's a bit of a strong statement. EZE and GRU may be among the most important ones, but you're neglecting some other VERY important markets that have experienced intercontinental growth over the past few years (GIG, SCL, BOG, LIM, etc).

B6 doesn't even fly to EZE and GRU and they're boasting the largest profit margins!

Quoting mercure1 (Reply 16):
So why the bad performance for Delta ?
Its not like they are novice in Latin America - they inherit a strong Mexico franchise from Western Airlines, got a few Latin routes from Pan Am and have operated to Spanish speaking countries for 20-years now. They also have long relationship with AeroMexico.

I am going to take a few guesses here and perhaps suggest it COULD be because AA/MIA just simply walks away with the higher-yielding traffic, period, whereas DL/ATL provides mostly connecting?

Take Brasil as a case in point: DL has exited entirely from the non-GRU/GIG markets sans for BSB, whereas virtually every secondary Brasilian market AA has attempted from MIA has stuck: MAO, BSB, CNF, SSA, REC, etc.

Also, I know that DL's relationship with AM is long and entrenched, but there are also some bizarre things about it. They tend to be very flaky towards their ATLMEX services - I was surprised that they are just re-starting a daily flight this month. In their defense, however, ATLMEX is decently high-frequency and DL has a stake in AM....but still?
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LAXintl
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 7:11 pm

True – Delta is not a novice to Latin America.

I guess while ATL might be a great hub in many respects its disadvantaged in services to Latin America. I suppose problem might be that unlike other large US metros Atlanta also does not have the natural links to Latin America so virtually the entire plane must be connections due low local O&D component.
Also DL pretty much squandered away what Western had out of LAX by failing to build on it. Likewise at JFK, DL LatAm service has been more focused on Carrib beach destination then the large ethnic or business markets in the region.
Regarding Aeromexico, unfortunately I’m not sure how much benefit it provides DL also as its network is not exactly well designed for vast connection opportunities ala a COPA for instance, but instead more focused on serving the local Mexican clientele.

So yes it sure does seem like Latin America is a bit of an aberration at Delta which has spread its wings well across the Atlantic and Pacific over the same 20-years.
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IrishAyes
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 7:26 pm

Quoting LAXintl (Reply 19):
Regarding Aeromexico, unfortunately I’m not sure how much benefit it provides DL also as its network is not exactly well designed for vast connection opportunities ala a COPA for instance, but instead more focused on serving the local Mexican clientele.

Mexico is important but AM clearly has "AA-syndrome" in that they are a risk-averse carrier. While the DL-AM tie-up provides excellent coverage for US-Mexico, beyond that there is not much. AM has even forged codeshare agreements with non ST members including JJ and AV-TA.

While DL growing cozier with G3 and AR joining SkyTeam are separate matters, they do have some sort of implications here reflecting Delta's broader plans for deep South America beyond what gaps AM can fill.
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XJetflyer
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 7:58 pm

Quoting drerx7 (Reply 10):
What are you suggesting? That they expand aggressively at IAH or the opposite?

Aggressuvely is an understatement in my opinion. I think the door is open for them now and they have done well at running an airline in the positive cash flow in the United States.

Many know on here that I was never a fan of WN. CO and ExpressJet had all my business. The one thing WN has going for them is the business model that has run smoothly over the years and they make tweaks when needed.

Grab a bag of popcorn and sit back and watch the excitement!
 
mercure1
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 8:04 pm

So taking comments of Delta spokesman regarding weakness in Latin America

1) Lack of frequency
=Many countries have open-skies already with US, or available frequencies for award. As mentioned above DL even walked away from some markets.
Seems they can have as many frequency as they desire to many markets such as Central America for example.

2) Lack of brand awareness
= As with every foreign market in the world one needs to advertise, participate with community, get in good with travel agents, etc. Why should this be a challenge for an airline for who I see adverts in train station in Geneva a city they don’t even serve? I would think DL be experts at marketing and branding today operating in so many diverse nations.

So both DL responses seem a little strange for me.
 
ghifty
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 9:04 pm

Quoting mercure1 (Reply 22):
I would think DL be experts at marketing and branding today operating in so many diverse nations.

I know Delta's ads are not done in house, rather they are contracted to the well-known W+K ad firm. Who spreads these ads, though? An in-house market research team, or W+K themselves?

Quoting mercure1 (Reply 22):
So both DL responses seem a little strange for me.

  
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eastern023
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 9:16 pm

Quoting AADC10 (Reply 12):
The problem is that if they added more seats, then the margins would erode.

I think the comment was directed more on the on board service rather than the frequencies.

Quoting AADC10 (Reply 12):
Latin America is also notorious for its boom/bust economic cycles.

This is true in some econimies but the bigger countries have been in a growth path and political stability for the last thirty years (read Brazil, Chile, Uruguay and Argentina (to some extent))
AA will Rise Again!
 
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drerx7
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 9:35 pm

Quoting jfk777 (Reply 14):
AA HAS NOT been able to build a strong Latin gateway at DFW ? Really ?

Nope, they haven't. Why would they? No need to cannabilize MIA. AA would and probably has found the right balance of DFW vs. MIA traffic flows to Latin America. After a certain point there is no point - its like dancing with your own sister.
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LAXdude1023
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 9:38 pm

Quoting drerx7 (Reply 25):
Nope, they haven't. Why would they? No need to cannabilize MIA. AA would and probably has found the right balance of DFW vs. MIA traffic flows to Latin America. After a certain point there is no point - its like dancing with your own sister.

Yes they have. I dont know what your definition of strong is, but serving 11 non-Mexico destinations in Latin America is strong.
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jfk777
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 9:41 pm

Quoting IrishAyes (Reply 18):
B6 doesn't even fly to EZE and GRU and they're boasting the largest profit margins!

Jetblue flies many vactioners and VFR traffic to San Juan and the Domincan Republic, they can only fly as far as a320 go.

Quoting drerx7 (Reply 25):
Quoting jfk777 (Reply 14):AA HAS NOT been able to build a strong Latin gateway at DFW ? Really ?
Nope, they haven't. Why would they? No need to cannabilize MIA. AA would and probably has found the right balance of DFW vs. MIA traffic flows to Latin America. After a certain point there is no point - its like dancing with your own sister.

That is like saying there should be no flights to LHR from DFW and IAH since there are so many from JFK. DFW and MIA compliment each other, DFW captures much more western originating traffic. Doubtful that if DFW to GRU were cancelled Miami to GRU would go up by the same number of passengers.
 
nomorerjs
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 10:23 pm

CM does fly ORD-PTY daily. Not sure how they do on the route, but they've been flying this since December.
 
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yellowtail
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 10:23 pm

Quoting avi8 (Reply 8):
BZE (not even daily)

It is in fact 9Xweekly effective Dec.
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mogandoCI
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 10:38 pm

Anyone wonder it's the other way around - Latin America margins are high because local competition is relative weak ?

When faced against something like Air Jamaica, it's not tough to see how US carriers are actually competitive.

But when faced against proper airlines in Asia and Europe (NH, JL, LX, SQ, etc), it's obvious that US carriers are the bottom feeders.

I've flown on TAM A332 about a year ago. Nice decent airline, but nothing worth writing a trip report about either.
 
SCL767
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 10:48 pm

Quoting eastern023 (Reply 24):
This is true in some econimies but the bigger countries have been in a growth path and political stability for the last thirty years (read Brazil, Chile, Uruguay and Argentina (to some extent))

As well as Colombia and Perú. It's important to note that certain carrier(s) are adding even more flights from LIM to the U.S. this year. It's also interesting to note that there's more capacity between LIM and the U.S., than there is between BOG and the U.S.
 
EddieDude
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 11:22 pm

Quoting jfk777 (Reply 14):
EZE and GRU all that count in Latin America

This statement is wrong per se. Now, if you are not specifically excluding Mexico from your definition of Latin America, this is not only wrong, but completely ridiculous and asinine.

Quoting mercure1 (Reply 16):
So why the bad performance for Delta ?
Its not like they are novice in Latin America - they inherit a strong Mexico franchise from Western Airlines

DL sadly squandered many of the Western routes. For example, many of us were completely shocked when DL quit LAX-MEX and opened the door for AS to enter the market. True, DL may be able to funnel pax through both AM and AS, but that was a move difficult to understood.

Quoting IrishAyes (Reply 18):
I know that DL's relationship with AM is long and entrenched, but there are also some bizarre things about it. They tend to be very flaky towards their ATLMEX services - I was surprised that they are just re-starting a daily flight this month. In their defense, however, ATLMEX is decently high-frequency and DL has a stake in AM....but still?

AM is flaky about ATL indeed; I don't really understand why. This is the umpteenth time AM launches MEX-ATL. Hopefully this time around the service will last. Until very recently, AM did not have DL as a shareholder, and their "alliance" was little more than a glorified codesharing agreement, so it was hard to find a justification for AM to leave ATL so many times.

Quoting IrishAyes (Reply 20):
Mexico is important but AM clearly has "AA-syndrome" in that they are a risk-averse carrier. While the DL-AM tie-up provides excellent coverage for US-Mexico, beyond that there is not much.

That is right. AM has been quite risk averse since Citi and a bunch of Mexican investors acquired it from the government some years ago (before then they were just shooting in the dark when it came to new routes to the US). To their defense, their conservative behavior in the face of LCC competition, MX's last attempts to survive by slashing fares, the swine flu epidemic, the global financial crisis, etc. has paid off and they are a profitable and decently run company. Now that they have relaunched their partnership with DL, it is time to grow in the cross-border market. There are many, many point-to-point routes that AM and DL could develop by working together closely. They have after all the right planes for that in the form of regional jets, MD-90s and 717s (DL), and E-170s, E-190s and 737-700s (AM). Aside from that, I agree AM needs to take more chances in the Mexico - Canada/Caribbean/South America markets, but that is a whole other topic!  
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mercure1
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 11:26 pm

So what makes the Continental performance so strong?

Is it their large cadre of unique Mexico destinations from Houston along with oil link flights to places like Brazil and Venezuela along with ability to leverage COPA Panama hub?

Seems the new United is very well positioned now across Atlantic, Pacific and Latin America now. Congrats.
 
boeing773er
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 11:35 pm

Quoting eastern023 (Reply 1):

How is AA not leading in South America? I am pretty sure they are/planning on flying to every single country in the continent, besides three countries. I call that pretty well covered.

BA doesn't even have that kind of coverage in Europe, they aren't serving 8 countries.

So I think they are doing pretty well with coverage.

But other than that, those are pretty good numbers especially for CO and B6. I wonder what NK's numbers were like for the time.
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jfk777
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 11:43 pm

Quoting EddieDude (Reply 32):
Quoting jfk777 (Reply 14):EZE and GRU all that count in Latin America
This statement is wrong per se. Now, if you are not specifically excluding Mexico from your definition of Latin America, this is not only wrong, but completely ridiculous and asinine.

There is a big diference between a country bordering the USA and two which are 4000 to 5000 miles away. Mexico is culturally Latin American but geographically in North America.
 
EricR
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 11:49 pm

Quoting IAHworldflyer (Reply 15):
Anecdotal evidence based on my own fare searches seem to indicate that DL has lower fares to LatAM over ATL than UA or AA. As they increase market share, perhaps those fares will rise.


That sounds very counter-intuitive. Low fares is probably the most effective tool to build share. Granted, marketing and timing/frequency of flights helps. However, I don't see how DL would be able to raise fares & simultaneously increase share.
 
gigneil
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RE: Latin America: Most Profitable For US Airlines

Wed Jul 18, 2012 11:53 pm

Quoting jfk777 (Reply 14):
AA HAS NOT been able to build a strong Latin gateway at DFW ? Really ? They fly to all kinds of cities in Mexico, Buenos Aires & Sao Paulo , if that is NOT enough I am sorry but just because Houston is bigger to Latin America and flies 2 daily flights to Bogota, what makes that so GREAT ?

EZE and GRU all that count in Latin America, and United would love to fly as many times to GRI and EZE as AA does. The only two big Latin cities United(before CO) flew to were ? EZE and GRU from ORD and IAD. So even pre merger UA flew to the 2 big Latin cities.

Not a single word of that made sense.

NS
 
aer
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 12:26 am

Quoting jfk777 (Reply 35):
Mexico is culturally Latin American but geographically in North America.

Ok, this comment really lost me.
nice and spacious airports in need of new airlines and flights... GUA or FRS anyone?... anyone at all?
 
IAHWorldflyer
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 1:29 am

Quoting mercure1 (Reply 33):

I think one large factor is the high fares that CO , now UA is able to charge from IAH to most Latin American destinations. While the IAH hub has lots of connecting traffic, there is also a large amount of O&D traffic from Houston that pays some very high fares. This helps increase margins.

Quoting EricR (Reply 36):

I am not sure how you are reading what I wrote, but I was saying that DL is using low fares to gain market share, driving down margins, but once they gain market share, I would expect fares and margins to rise.
 
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IrishAyes
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 2:08 am

Quoting jfk777 (Reply 27):
Jetblue flies many vactioners and VFR traffic to San Juan and the Domincan Republic, they can only fly as far as a320 go.
Quoting jfk777 (Reply 35):
There is a big diference between a country bordering the USA and two which are 4000 to 5000 miles away. Mexico is culturally Latin American but geographically in North America.

Not to sound harsh here, but neither of these statements provide any clarification to your original point - that EZE and GRU are "all that matter."

Starting with B6: based on the data above, the VFR and vacationer traffic on B6, per your own claims, are still generating the largest profit margins. That says something.

Quoting boeing773ER (Reply 34):
How is AA not leading in South America? I am pretty sure they are/planning on flying to every single country in the continent, besides three countries. I call that pretty well covered.

Here are some data points: AA is the only US carrier serving Uruguay and Bolivia, and soon to be Paraguay. They make bank on the 2x DAILY MIA-LPB-VVI triangle. AA is also the only carrier serving MDE, CLO and GYE. I also mentioned above how AA has clearly successfully introduced SSA, REC, MAO, BSB, CNF while DL has only retained BSB.

AA is not only leading in Latin America, they are killing it, big time (cue: ANET cynics who love to claim I am employed by American).

Quoting EricR (Reply 36):
That sounds very counter-intuitive. Low fares is probably the most effective tool to build share. Granted, marketing and timing/frequency of flights helps. However, I don't see how DL would be able to raise fares & simultaneously increase share.

They can stimulate the market with lower fares and fill the planes, but that obviously does not help derive higher profit margins. Latin American travelers are also very price-sensitive travelers (hence the successes of NK and B6) so DL would have to offer something of significant value proposition to retain the same level of traffic if they were to increase fares.

If there is anything to laud AA for, it is their high visibility/brand awareness and overall distribution strength in Latin America that has sustained the same level of loyalty traffic in spite of increasing LCC competition from South Florida. I'm amazed by the number of people willing to pay the fares they charge to get stuck on a 757 or a 763 on an eight hour (sometimes red-eye) journey to and from MIA....just sounds like a nightmare to me.
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SCL767
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 2:20 am

Quoting IrishAyes (Reply 40):
Here are some data points: AA is the only US carrier serving Uruguay and Bolivia, and soon to be Paraguay. They make bank on the 2x DAILY MIA-LPB-VVI triangle. AA is also the only carrier serving MDE, CLO and GYE.

AA operates MIA-LPB-VVI-MIA as a DAILY service. Also, AA is not the only U.S. carrier operating into MDE. NK operates FLL-MDE 5x weekly (A-320).
 
EricR
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 2:39 am

Quoting IAHworldflyer (Reply 39):

I am not sure how you are reading what I wrote, but I was saying that DL is using low fares to gain market share, driving down margins, but once they gain market share, I would expect fares and margins to rise.

Yeah,....sorry I misread that.
 
757MDE
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 2:48 am

Quote:
Latin America: Most Profitable For US Airlines

No wonder. Paying 500 USD for a 3 hours flight when they have "unmissable rebates" has to be profitable. And that as the US carriers tend to be the cheapest. The likes of Avianca are even worse usually.

Quoting AADC10 (Reply 12):

B6's operations are very different than DL's. B6 operates primarily to the Caribbean and a few other destinations near the Gulf of Mexico.

They also fly to BOG (I have taken that flight myself)..

Quoting SCL767 (Reply 41):
AA operates MIA-LPB-VVI-MIA as a DAILY service. Also, AA is not the only U.S. carrier operating into MDE. NK operates FLL-MDE 5x weekly (A-320).

Avianca also flies from here MDE to JFK and MIA. Copa takes a decent chunk of US bound traffic via PTY.
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danild
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 4:27 am

Quoting mercure1 (Reply 22):
So taking comments of Delta spokesman regarding weakness in Latin America

1) Lack of frequency
=Many countries have open-skies already with US, or available frequencies for award. As mentioned above DL even walked away from some markets.
Seems they can have as many frequency as they desire to many markets such as Central America for example.

2) Lack of brand awareness
= As with every foreign market in the world one needs to advertise, participate with community, get in good with travel agents, etc. Why should this be a challenge for an airline for who I see adverts in train station in Geneva a city they don’t even serve? I would think DL be experts at marketing and branding today operating in so many diverse nations.

So both DL responses seem a little strange for me.

I work for a travel agency and we have a lot of spanish speaking customers, as far as the ethnic market goes I can guarantee that Delta is at a disadvantage because of the language barrier, Houston and Miami have a lot of spanish speaking staff while Atlanta does not compare well on that respect.
Danild
 
LipeGIG
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 4:37 am

Wow, that's very interesting.
Breaks many arguments about "high yield" markets in South America !

Quoting jfk777 (Reply 5):
Houston is a bit out of the way if you are on the east coast. Newark- IAH- GRU is a bit out of the way. Newark and Dulles ar better Latin Gateways for United on the Atlantic coast.

They make profits even with that... it is just the market. They have gold mines with the oil industry.

Quoting avi8 (Reply 8):
IAH is a gold mine for connecting Latin America with the US. If I'm not wrong, IAH is just behind MIA. AA hasn't been able to build a strong Latin American network from DFW. They only serve Mexico, BZE (not even daily), PTY (not daily), GUA, SJO, GRU, and EZE.

Just forget the potential number 1 route out of IAH to South America : Rio de Janeiro (GIG)

Quoting jfk777 (Reply 14):
EZE and GRU all that count in Latin America, and United would love to fly as many times to GRI and EZE as AA does.

Sorry. Numbers says it all.
The airline with LESS focus in EZE and GRU in fact got the highest margin ! How to explain as many here use to say that high yield (!!!!) goes to some markets while the one that have the less concentration on such markets, just got the biggest margin ?

Looking to CO... all they fly to GRU and EZE by the time of the sample...762 (EWR-GRU got upgraded this entire quarter to 764)
It makes me skeptical about the constant statement that those are the profitable stations!
CO knows how to make profit, 3 times more margin than AA or UA (with at least 4 times more seats to Sao Paulo and Buenos Aires). As for other markets, looks like they got the benefit for having a balanced network.
New York + Rio de Janeiro = One of the best combinations !
 
RCS763AV
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 10:07 am

Really no wonder here. Not only are fares high, latin americans are very frequent travelers to the US on business and leisure, and at least in Colombia tend not to buy their tickets that much in advance, not to mention the tons of extra revenue the airlines make due to the famous overweight baggages that people carry to and from the US to these stations.

BTW I'm glad to see B6 has these great margins to the region. They're flying 2x daily to BOG and will soon start flights to CTG. Kudos to them. DL's excuse is just plain business sweet talk.



Quoting jfk777 (Reply 14):
EZE and GRU all that count in Latin America, and United would love to fly as many times to GRI and EZE as AA does. The only two big Latin cities United(before CO) flew to were ? EZE and GRU from ORD and IAD. So even pre merger UA flew to the 2 big Latin cities.

That is just so out of context and really just factually wrong. What about MEX, a 22+ million metro area? GIG with 11 million people? What about BOG and LIM, both about to reach 9m? And SCL at 6? Or CCS and GDL at 5?

By no measure are any of those cities "small".
 
klwright69
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 11:03 am

I remember in the 90's when DL announced their intentions to almost exactly duplicate AA's Latin American presence in MIA, but in ATL of course...

The Wall Street Journal article at the time said DL was intending to fly to every city in Latin America, even in Paraguay and Bolivia.

I thought at the time that it was all fine and good, but I always had a hunch since that time, that Florida, New York, and Houston (and Dallas) airports would always do the best to the region, despite DL's global hub in ATL. It appears I may be right.

I think way too much attention here is paid to a connection point being geographically out of the way. I think people will do it for the right fares. When I worked in Denver airport, I saw all sorts of strange routings. While traveling, I have talked to plenty of other travelers that backtrack to get to their destination. For instance, EWR-IAH-GIG does go out of the way, but I am sure people do it everyday.
 
jfk777
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 11:08 am

Quoting LipeGIG (Reply 45):
Quoting jfk777 (Reply 5):Houston is a bit out of the way if you are on the east coast. Newark- IAH- GRU is a bit out of the way. Newark and Dulles ar better Latin Gateways for United on the Atlantic coast.
They make profits even with that... it is just the market. They have gold mines with the oil industry.

I don't doubt Houston to Brazil is a goldmine becaue of the oil industry, but if I am flying from Boston to GRU Miami is more direct then Houston. Houston to GRU probably has a large local O & D market.
 
xdlx
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RE: Latin America: Most Profitable For US Airlines

Thu Jul 19, 2012 12:00 pm

Quoting LAXintl (Reply 19):

The MCO hub SA)">DL intended to build in the 90's would have worked great for SA.
But instead the synergy that ATL created was too inviting to ignore. So SA)">DL chose to run SA from ATL.

SA)">DL has served Latin America well from ATL, but the O&D component is not there.
They have been told .... but no one will listen!