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x1234
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Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sat Jul 25, 2020 10:23 pm

I read on here a decade ago that Northwest's NRT and GMP hub before that was un-profitable quarter after quarter mostly. If it was un-profitable why did they continue with it with the B744/A330!? Mind you this was before the A350/B787 opening up direct Asia US routes so was it that they had no choice but to continue the NRT hub to serve customers before the age of immunized joint ventures and alliances? How profitable is the re-structuring and DL/KE's JV for Asia via ICN and also for China with MU (China Eastern) via PVG/PEK/PKX? How profitable is the current Pacific network for DL? I read that for DL Europe & South America are profitable due to the shorter stage length on fuel while Asia loses money but they need to serve it due to corporate contracts. Was DL's JFK-BOM (Mumbai, India) profitable in the time it was active? How has COVID-19 impacted the entire DL network?
 
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LAXintl
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sat Jul 25, 2020 11:17 pm

Northwest Pacific network was unprofitable for 8 of the 10 years leading up to the merger per the Delta history book "Glory Lost and Found".
NW also had used their Pacific network as collateral on debt which somewhat forced their hand to maintain the network. In many ways, they were hampered with their reliance of older DC10/747s to service the region via historic Tokyo hub instead of ever more direct nonstops to the regions capital cities that competitor UA pursued.
Also does not help due lack of investment in product and over-reliance on Japan, NW ended up becoming consolidator specialist selling tickets at very low fares to fill flights.

While Delta brought a much more meaningful domestic network to the merger, they did not do too much better in the region overcoming their inherited disadvantages.
DL simply slowly disassembled the remains of the NW network one destination at a time including ultimately walking away from NRT entirely.
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LCDFlight
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sat Jul 25, 2020 11:22 pm

Yes, this is another example of "high profile & international routes are not necessarily the most profitable markets." Northwest had a good business, and that business was basically steady middle-America domestic connecting routes. DL retained that business and to date, it has been a powerhouse. The Heathrow, Narita, JFK and LAX flying is not why DL had a lot of money in its treasury. Not even a little bit why. The middle America and Southeast flying, however, has been a gold mine.
 
simairlinenet
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 2:28 am

LAXintl wrote:
Northwest Pacific network was unprofitable for 8 of the 10 years leading up to the merger per the Delta history book "Glory Lost and Found".

This doesn't tell us much. US airlines were unprofitable for 7 of the 10 years prior to the merger.
 
PSU.DTW.SCE
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 3:09 am

NW did make money in the Pacific for various periods over the decades primarily due to a lot less competition, 5th freedom rights, and limited access at NRT.
However TPAC has always been very prone to economic recessions, currency fluctuations, and pandemic scares.

By the 90s DL was focusing on volume through NRT on 747, 742, 744 and beyond connections. Dc1030 did some of the West Coast-NRT at times. Y relied on a lot of consolidator fares to fill. They started to get into China nonstop from the US from DTW in 1999. I good economic times this was profitable.

Then the Japanese economy went into recession, then 9/11 and subsequent US recession, then SARS, then the NW Ch. 11 bankruptcy all happened. Didn’t make much profit in the 2000s.

Pre merger the plan was to use the A330 to cover WEst Coast, And the 787 to launch new routes to Asia or restart thinner routes like JFK, and the 744 to cover the denser routes. Intra Asia saw the 75P inter port flying take over some of the NRT beach markets and attempt to launch some new routes from NRT.

As the merger with DL happened the writing was on the wall that the NRT hub wasn’t going to sustain itself for the long term.

Who knows after that with so many factors from mergers, competition, economic factors, etc. what would happen by now
 
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 3:37 am

It's widely known that the interport operation was unprofitable in the years leading up to the DL merger.

What's less clear to me, however, is why DL continued the operation for so long after it was clear that the NRT hub simply wasn't profitable (even going as far as launching new routes, IIRC NRT-SGN started during the merger).
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PSU.DTW.SCE
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 3:46 am

Reasons why it stuck around was a variety of things

Restructuring by deploying 763 and 777 aircraft.
Keeping brand market recognition
Figuring out their JV alliance strategy
Attempting to move away from Nrt building up SEA.
Attempting to make HND flights work and wait for better slot times

They weren’t going to cut anything Drastically but instead restructuring over time.
 
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LAXintl
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 3:51 am

For an idea of the scale of losses, according to the book, JFK-NRT alone was losing $4mil/month when discontinued in 2005
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usflyer msp
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 4:28 am

x1234 wrote:
Mind you this was before the A350/B787 opening up direct Asia US routes so was it that they had no choice but to continue the NRT hub to serve customers before the age of immunized joint ventures and alliances?


Overflying Japan really came about with the 777/A340 not the 787/A350. NW, with its lack of a West Coast Hub, was way behind on adapting to the new reality so UA and the Asian carriers were kicking their butt. Much of their Asian operation, especially the intra-Asia routes, became very dependent upon selling bulk seats to Japanese tour groups,
 
Cointrin330
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 11:53 am

The Asian Financial Crisis in 1997 had a very significant impact on travel to the region and it was a very slow recovery only to be slammed again by SARS in 2002 (all after a global recession and 9/11). In the run up to the merger with DL, NW had a few problems with its TPAC network. It lacked a real west coast hub (it had gateways, but all to NRT). The NRT hub was beginning to become redundant as by 2008, when DL and NW announced they were merging, it was increasingly possible to overfly NRT on some routes, though not all. NW's product wasn't stellar either.
 
PSU.DTW.SCE
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 2:41 pm

NW actually had a very good product with their last generation WBC product on the A330 and B744.
 
PBADC3
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 3:45 pm

DIscussion about NW and the NRT/TYO operation can not be had without fully including the freighter network that centered on two cossload “hubs”, NRT for intra-Asia distribution and ANC for Asia to inside U.S. At it’s apex just prior to the merger announcement, the 74F fleet stood at 14 aircraft flying PEK, PVG, ICN, SIN, BKK, MNL, TPE, HKG via NRT primarily to ANC and then a U.S. network of JFK, CVG, ORD, SEA, SFO and LAX. The freighter network was able to utilize some of the legacy NRT slots that the NW passenger network held, and provided flexibility for the beach flying that was primarily focused on GUM/SPN/HNL and a post merger attempt at making ROR work. Beach flying was broadly profitable on the passenger network. Mention was made earlier about the 75P, however there were narrowbodies in the Pacific long before that. In the 2000’s this varied from 757 to A320 and back to 757 and enabled flying to markets like PUS that would never otherwise support widebodies

The overall NW slot portfolio at NRT was the second largest behind JL, and eclipsed NHs holdings and provided significant value to Northwest in various ways, sometimes as collateral to securitize debt. The mix of morning, peak passenger and evening times along with a mix of A & B runway slots gave NW substantial operational flexibility particularly as the smaller than 744 widebodies started to show up and that could perform off the short runway.
 
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 3:53 pm

PBADC3 wrote:
DIscussion about NW and the NRT/TYO operation can not be had without fully including the freighter network that centered on two cossload “hubs”, NRT for intra-Asia distribution and ANC for Asia to inside U.S. At it’s apex just prior to the merger announcement, the 74F fleet stood at 14 aircraft flying PEK, PVG, ICN, SIN, BKK, MNL, TPE, HKG via NRT primarily to ANC and then a U.S. network of JFK, CVG, ORD, SEA, SFO and LAX. The freighter network was able to utilize some of the legacy NRT slots that the NW passenger network held, and provided flexibility for the beach flying that was primarily focused on GUM/SPN/HNL and a post merger attempt at making ROR work. Beach flying was broadly profitable on the passenger network. Mention was made earlier about the 75P, however there were narrowbodies in the Pacific long before that. In the 2000’s this varied from 757 to A320 and back to 757 and enabled flying to markets like PUS that would never otherwise support widebodies

The overall NW slot portfolio at NRT was the second largest behind JL, and eclipsed NHs holdings and provided significant value to Northwest in various ways, sometimes as collateral to securitize debt. The mix of morning, peak passenger and evening times along with a mix of A & B runway slots gave NW substantial operational flexibility particularly as the smaller than 744 widebodies started to show up and that could perform off the short runway.


NW’s dedicated freight fleet was to have survived the DL merger and had DHL as its largest customer by far, hence CVG, but DHL pulled their US-Asia flying from NW and gave it to other cargo carriers after the merger. This was part of a broader reorganization of DHL US that included exiting domestic parcel shipping in the US (while retaining international and USPS consolidation) and making CVG an international shipping hub.
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bfitzflyer
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 3:59 pm

Cointrin330 wrote:
The Asian Financial Crisis in 1997 had a very significant impact on travel to the region and it was a very slow recovery only to be slammed again by SARS in 2002 (all after a global recession and 9/11). In the run up to the merger with DL, NW had a few problems with its TPAC network. It lacked a real west coast hub (it had gateways, but all to NRT). The NRT hub was beginning to become redundant as by 2008, when DL and NW announced they were merging, it was increasingly possible to overfly NRT on some routes, though not all. NW's product wasn't stellar either.


NW's product was on par at a minimum with other US carriers. Asian carriers not so much.
 
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OA412
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 4:01 pm

LAXintl wrote:
While Delta brought a much more meaningful domestic network to the merger, they did not do too much better in the region overcoming their inherited disadvantages.
DL simply slowly disassembled the remains of the NW network one destination at a time including ultimately walking away from NRT entirely.


I don't think DL merged with NW just to keep the NRT hub. Dismantling was the plan all along. In fact, NW was already moving in that direction with the 787 purchase. They obviously wanted to start nonstop flights to Asia and bypass Tokyo.
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Weatherwatcher1
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 4:48 pm

25 years ago there weren’t Chinese Airlines dumping cheap fares into the transpacific market. The first nonstop flight between China and the United States didn’t happen until 1996.

25 years ago UA and NW dominated transpacific flying. ANA, JAL, Korean, Asiana, Eva, China, Cathay Pacific and Singapore were the prime competitors. Nonstop point to point service was limited. The only cities In Asia with nonstop flights to the United States were Tokyo, Osaka, Seoul, Taipei and Hong Kong. A little known fact is that in 1990, United and Northwest only had to pay about 10% commission to travel agents due to brand recognition whereas Asian Airlines were paying about 26% commission for their flights sold through US travel agents. That is a big difference which allows for a less efficient network

One thing that may also be forgotten is that Narita only had one runway until 2002 and Haneda was limited to domestic traffic only. United and Northwest had double digit market share in the 1990s in Tokyo as well as having traffic rights beyond Japan. There was profit to be earned flying passengers originating in Tokyo back before the second runway increased competitions.

More runways, more traffic rights, more alliances, fewer travel agents and more competitors, led to the demise of the expensive Tokyo hub.
 
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UPlog
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Re: Northwest Airlines 1990/2000's NRT/GMP hub profitability and DL restructuring

Sun Jul 26, 2020 4:48 pm

PBADC3 wrote:
DIscussion about NW and the NRT/TYO operation can not be had without fully including the freighter network that centered on two cossload “hubs”, NRT for intra-Asia distribution and ANC for Asia to inside U.S. At it’s apex just prior to the merger announcement, the 74F fleet stood at 14 aircraft flying PEK, PVG, ICN, SIN, BKK, MNL, TPE, HKG via NRT primarily to ANC and then a U.S. network of JFK, CVG, ORD, SEA, SFO and LAX. The freighter network was able to utilize some of the legacy NRT slots that the NW passenger network held


NW Cargo and freighter network was losing lots of money itself and saw several rounds of cuts by the merger with DL pulling the plug on the last 8 frames in 2009.
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