Realistically there is no competitive response necessary from DL to this. DL's strategy for the West Coast is already pretty much know:
- Grow LAX where they are in the midst of terminal re-construction and consolidation;
LAX is a fragmented market they have to be in, but there is no chance for them to be anything more than they are now unless some outrageous merger happens
- Grow and defend SLC where they have a great connecting hub and are by far the dominant carrier;
Due to not adding much to their core hubs in recent years, SLC is going to soon be dominated by UA at DEN. That's going to be terrible for its PnL. And instead of being able to dedicate resource for that, now they have to deal with this AA retaliation situation.
- Grow SEA as the airport allows.
Again, they could've taken a larger loss in the past years to utilize their gates more aggressively and get more capacity, but they chose to take on more projects. At the same time, AS rededicated all their resources to go through Seattle. You would to go from LAX/SFO/PDX to CMH/TPA/PIT/RDU? You are going to have route through Seattle if you want to fly AS. DL can never dedicate that level of attention to SEA as long as it commits to SLC/LAX or even MSP. That level of single minded dedication to SEA will ensure that AS continues to have dominant share of SEA gates. And as long as they have that, DL is drawing an inside straight. And now that big accounts with SEA base have more reason to pick AS due to their membership into OW, what is DL's plan?
Those, along with their already pretty sizeable ops in California including p2p routes and their operations in Portland, constitute DL's West Coast strategy. All this deal does is bring AA up to par to compete with what DL has already built and with what UA has in SFO and LAX. So DL doesn't need to respond here becuase the strategy they are executing is a great one, its profitable and it gives them plenty of growth options.
What DL has is not as sustainable as what UA has in west coast. UA has 2 great partners in the west coast (AC and NH) that allow them to dominate traffic to Asia. SEA is at best marginally profitable. Probably a lot worse than that actually. LAX is below system average in margins. SLC is really profitable. But we will see how the continued DEN buildup affects that.
For AA, this gives them the North - South network on the West Coast that they need at a lower cost than they could ever build it themselves with. And I'd make 3 other points:
1) AA has JFK slots to burn and a nice terminal there for AS to move into. So I think that nicely solves where AS is going to end up at JFK;
2) What happens at SFO will now be interesting because both AA and AS will have upcoming access to a whole lot more real estate in SFO;
3) AS, with its announcements over the last 6 months, is now doing what I thought they should have started with when they did the VX deal. They shouldn't have been worried about mid-continent stuff from SAN and what they should have been doing is connecting all of their places of strength in the PNW into SFO / LAX etc. That's what is finally happening with GEG, BOI and others. So I think the strategy that AS rolled out to grow in California was in the wrong order. They needed to build on their focus cities and get them locked down before they threw darts to the Midwest so I'm glad that is happening.
This deal also makes AA alot more competitive in California as well. So overall a great deal for both AA and AS and gives both more relevnance in growth markets.
Yes, great deal for AS, good deal for AA, bad everyone else, especially DL.