atl100million wrote:klakzky123 wrote:compensateme wrote:
It really isn't surprising AA left LAX/MSP; over the past year, while loads remained strong, its average fare was around $170 -- similar to UA and SY's performance, but AA likely felt it could use its LAX resources elsewhere. The good news is that AA's withdrawal should help stabilize the market, which was clearly hurt from the level of competition (against demand) as well as NK upgauging to the 321. For comparison's sake, over the last four quarters, SY averaged higher fares to MCO, and NK FLL, than they did to LAX.
DL's clearly the 800 lb. gorilla in the market, commanding greater than a 40% premium over AA, UA & SY.
Yeah something had to give. Fares to LAX have been absurdly low. Its not that difficult to find $200 round trip fares on DL either. LAX has been a bloodbath and DL has been committed to matching fares indefinitely. I guess AA wasn't getting enough connecting traffic to justify the flight. If it was just transporting passengers paying for rock bottom MSP-LAX itineraries, there's no point to the flight. That plane can be used somewhere else. I suppose they could've switched to a regional jet like they did with Miami but again that requires a solid level of connection traffic which may or may not exist. Leisure markets from MSP can get brutally competitive with both DL, SY, NK (and sometimes WN and F9). Plus AS expanded to several cities in the west so they're bound to keep fares relatively low.
Its great for consumers though. As much as MSP remains a fortress hub, DL has ceded quite a bit of the leisure market to others.
The ultra low fare environment was in LAX-MSP before AA chose to show up. They simply decided to jump into a market in which DL doesn't chase every last ULCC passenger but the economics do work of adding larger and larger aircraft and selling a certain amount of seats at economy basic/ULCC competitive fares on top of operating the most frequency in the market.
AA doesn't have the market strength to compete in other carrier hubs against the legacy carrier and one or more ULCCs.
The same principle applies to just about any other legacy carrier hub market.
I agree. As I mentioned, AA needs a minimum level of connections via LAX in order to make the math on this flight work. O&D fares are just rock bottom right now so those have to be minimized. DL has the benefit of connections with feed from both ends so they're able to keep the O&D to an appropriate level and DL gets some absurd premiums regionally. The MSP-LAX flight might cost $200 but FAR-MSP-LAX might cost $700. I'm guessing AA just didn't get enough passengers from MSP connecting through LAX (and vice versa) and got caught with too many O&D passengers which made the economics of the flight fail.