AA/US Merger Impact: Hubs (Part 2)

Fastphilly · Fri Mar 22, 2013 7:50 am

I can't understand how American (even with the US Air merger) has such a presence in Los Angeles as a western gateway when it lacks well behind Delta and United's Asian route networks. Does American depend on more foreign metal by way of partner/alliance to get their customers across the pacific than the other two?

HPRamper · Fri Mar 22, 2013 11:03 am

Quoting Caryjack (Reply 196):
So a net drop in AA's costs (possibly lower ticket prices) but some increase in US's cost with some higher ticket prices, at least in PHX...right?

Ticket prices probably won't change from station to station. The entire system will subsidize itself. Higher fares in PHX would be a disaster as WN would steal a lot of passengers.

EricR · Fri Mar 22, 2013 3:29 pm

Quoting Fastphilly (Reply 200):
I can't understand how American (even with the US Air merger) has such a presence in Los Angeles as a western gateway when it lacks well behind Delta and United's Asian route networks.

AA has the same LAX-Asia presence as UA and a larger LAX-Asia presence than DL. Both AA & UA fly LAX-NRT and LAX-PVG. DL flies only LAX-NRT.

9w748capt · Fri Mar 22, 2013 4:46 pm

Quoting EricR (Reply 202):

Not to mention AA has some pretty solid partners in JL, QF, CX, and now MH. Not too shabby at all.

LAXintl · Fri Mar 22, 2013 5:14 pm

Quoting commavia (Reply 197):
AA, which is already very close behind UA today,

Today - there is more than a 10% difference between AA and UA.

Here were the 2012 actual enplanements including regional partners.

AA = 11,022,509
AS = 3,245,643
DL = 8,279,484
UA = 12,233,047
US = 1,867,845
VX = 2,984,721
WN = 7,275,725

For the future, I would be careful at using schedule analysis such as what CAPA article as they are open to improperly accounting for regional partners. For example in past I have seen AE flights be double counted for both AA and DL (due codeshare). Also the AS/QX codeshare on AA/DL get apportioned wrong.

A much more accurate comparison is actual boardings, not simply future schedules that are open to miscounts.

Back to the point of AA @ LAX, I dont think its not right to simply add up AA+US totals and say they will exceed UA as a result.
US biggest market from LAX is PHX and its one where AA already overlaps. There clearly will be some capacity rationilazation which will drop seats. Also I don't know what has happened to US this year, but so far they are down about 12% from 2012 enplanements at the airport. I suppose they have trimmed flying further.

So ultimately, I think AA-UA will very much be neck and neck with no clear advantage over each other unless one or the other makes some major scheduling shifts at the airport.

p.s. - the one I would like to watch later this year and into 2014 is SWA. With 4 added gates at LAX, they are the ones that could potentially add the most capacity of the group.

AAIL86 · Fri Mar 22, 2013 5:47 pm

Quoting point2point (Reply 198):
May I ask about "among the lowest (if not the lowest) average fares" and what the source is? Maybe they are lower than some major airports in the U.S., but they also may be higher then some other major airports in the U.S.

Sure thing!

According to RITA - here's top 49 US air markets by average fare in Q3 2012 (the last quarter that they have data on).

UA and AA are raking it at the Texas megahubs ...

FLL 260.54
LAS 261.84
MCO 267.87
MDW 288.82
OAK 289.43
TPA 304.01
BUF 304.42
DEN 315.72
BWI 316.08
MKE 316.57
PHX 323.32
HOU 323.91
LGA 333.57
SJC 336.85
RDU 343.56
MCI 345.69
SMF 346.20
STL 346.71
HNL 346.75
ATL 347.97
MSY 349.38
SAN 352.58
PDX 356.78
DCA 358.57
MIA 359.38
BNA 360.17
SNA 360.25
PIT 362.46
BOS 363.63
CMH 366.03
SAT 374.95
IND 376.24
AUS 376.78
ORD 379.48
SLC 384.26
SEA 386.25
JFK 388.32
PHL 390.52
DTW 393.20
LAX 398.13
SFO 400.10
CLT 400.74
BDL 401.76
DFW 419.35
MSP 420.89
CLE 443.30
EWR 471.67
IAD 498.63
IAH 502.75

Source:

http://www.transtats.bts.gov/AverageFare/default.aspx

commavia · Fri Mar 22, 2013 5:49 pm

Quoting LAXintl (Reply 204):
there is more than a 10% difference between AA and UA.

... and thus they are extremely close in actual market share. Different numbers, slightly different result, true, but same basic idea. Both are very close now, and AA could quite possibly end up larger post-merger - the first time in decades, if ever, that that would be the case.

Quoting LAXintl (Reply 204):
its not right to simply add up AA+US totals and say they will exceed UA as a result.

... and notice how I never did that.

I specifically caveated my earlier statement that this did not include any rationalization.

Nonetheless, I would be willing to guess that even post-rationalization, AA may well still be slightly ahead of UA, at least for some time, since I don't realistically see much rationalization taking place specifically at LAX outside of the PHX route. Using your own numbers, pro forma, AA-US would be up on UA by around 650,000 boardings per year, or nearly 1,800 per day. AA today only schedules 200 seats per day LAX-PHX. That, not to mention that UA's long-term trajectory at LAX has been down for years, and at least some of the SkyWest EMB flying will be ending and is unlikely to be replaced by CRJs.

Quoting LAXintl (Reply 204):
So ultimately, I think AA-UA will very much be neck and neck with no clear advantage over each other unless one or the other makes some major scheduling shifts at the airport.

Nobody ever suggested differently - nobody is attacking UA.

[Edited 2013-03-22 10:49:56]

ldvaviation · Fri Mar 22, 2013 7:24 pm

Quoting commavia (Reply 206):
Nonetheless, I would be willing to guess that even post-rationalization, AA may well still be slightly ahead of UA, at least for some time, since I don't realistically see much rationalization taking place specifically at LAX outside of the PHX route. Using your own numbers, pro forma, AA-US would be up on UA by around 650,000 boardings per year, or nearly 1,800 per day. AA today only schedules 200 seats per day LAX-PHX. That, not to mention that UA's long-term trajectory at LAX has been down for years, and at least some of the SkyWest EMB flying will be ending and is unlikely to be replaced by CRJs.

Here's the more important question: At LAX, as a result of the merger, does AA end up in a better competitive position than UA?

I think they do, specifically on most of the transcon markets where they compete.

skedguy · Fri Mar 22, 2013 7:45 pm

Quoting AAIL86 (Reply 205):
Sure thing!

According to RITA - here's top 49 US air markets by average fare in Q3 2012 (the last quarter that they have data on).

UA and AA are raking it at the Texas megahubs ...

Thanks for the information. Just so we know whether we're comparing apples-to-apples, are these fares stage-length adjusted?

eaglepower83 · Fri Mar 22, 2013 8:03 pm

Quoting AAIL86 (Reply 205):
JFK 388.32
PHL 390.52
DTW 393.20
LAX 398.13
SFO 400.10
CLT 400.74
BDL 401.76
DFW 419.35
MSP 420.89
CLE 443.30
EWR 471.67
IAD 498.63
IAH 502.75

As a greater Hartford resident, I find it humorous/asinine to see BDL in this elite club of high fares.

PHX787 · Sun Mar 24, 2013 2:53 am

Quoting Austwin (Reply 159):
“We gave the people of Arizona more opportunities to fly more places,” he said. “The Phoenix hub is a critical piece of US Airways’ profitability and will be a critical piece of American’s profitability. We will be able to provide more service to the people of Arizona. I feel very good about that.”

I'm gonna sit back now with my Japanese tea and smirk at how the rumors and speculations...and sometimes, outlandish unwarranted attacks against PHX...are now being put to rest.

As I keep saying, the airline would be very stupid to leave PHX and seems like theyre making the right decisions.

I think I mentioned it before but after the merger was announced some people at the airport board were putting together plans to present AA/US with an opportunity to operate a flight, utilizing a slot they have at NRT.

And here's the icing on the cake for my argument and the argument of others who agree with me:

Quote:
He said the Dallas hub is far enough away from Phoenix to not interfere with operations and that American uses its hub in Los Angeles for different types of connections, many to Asia, than what the combined airline will do with Phoenix.

Jonathanxxxx · Sun Mar 24, 2013 3:26 am

Quoting PHX787 (Reply 210):

Alright, with all respect, how do we know those in leadership at AA and US are not giving out false promises? Delta and United said the same thing about MEM and CLE, how can we be so sure of PHX's future? I am still waiting for a PHX advocate to tell me that, and it is because they can't. I think it's too soon to be calling the complete closure of the hub but it's also too soon to say a hub will stay the same, especially when it has some negative things against it.

My opinion? PHX will see a decrease in flights as there will definitely be redundant traffic flows once combined with DFW and LAX. It will still be a hub, but will serve a niche role in the Southwest. I do not see the reason for growth though. PHX seems well served as it is.

flyguy89 · Sun Mar 24, 2013 6:07 am

Quoting PHX787 (Reply 210):
Quoting Austwin (Reply 159):
“We gave the people of Arizona more opportunities to fly more places,” he said. “The Phoenix hub is a critical piece of US Airways’ profitability and will be a critical piece of American’s profitability. We will be able to provide more service to the people of Arizona. I feel very good about that.”

I'm gonna sit back now with my Japanese tea and smirk at how the rumors and speculations...and sometimes, outlandish unwarranted attacks against PHX...are now being put to rest.

Now I know a fellow CVG fanboy wouldn't be as naive as this to think this puts questions about PHX "to rest". Remember when DL was saying that DTW wouldn't threaten CVG and that the two, in fact, "complemented" each other and that CVG and MEM might even get service to NRT? That was about 300 flights ago. I can't say for sure what PHX will ultimately look like after all is said and done, but going from precedent, airline executives will say whatever is needed to be said to get the merger approved.

commavia · Sun Mar 24, 2013 8:25 am

Quoting PHX787 (Reply 210):
I'm gonna sit back now with my Japanese tea and smirk at how the rumors and speculations...and sometimes, outlandish unwarranted attacks against PHX...are now being put to rest.

Quoting PHX787 (Reply 210):
And here's the icing on the cake for my argument and the argument of others who agree with me:

These are words - just like all the other words you've posted in thread after thread that you think supposedly "prove" your argument. And, as has been mentioned literally dozens of times in thread after thread, these are essentially the exact same words spoken by other airline CEOs to local leaders and employees in other hubs with similarly dubious rationales for continued major hub status.

If you want to continue to - in my opinion - delude yourself into thinking PHX can escape inherently inescapable economic reality, then so be it. But as I and many others have attempted (thus far unsuccessfully) to explain, the numbers - to many of us - just don't seem to add up to bridge the gap from mere words to reality.

As such, I am still looking for the "icing on the cake" of your argument that explains how a hub in a generally poor geographic position, with low yields and a competing hub by the largest low-cost airline in the country, and with other hubs in the same network that are as-well if not better-positioned to serve the same connecting flows, can remain a hub of its present stature. I just don't see it. And you have yet to post anything - any single thing - that answers that question for me.

Quoting jonathanxxxx (Reply 211):
PHX will see a decrease in flights as there will definitely be redundant traffic flows once combined with DFW and LAX.

[Edited 2013-03-24 01:32:57]

AAIL86 · Sun Mar 24, 2013 4:23 pm

Quoting Austwin (Reply 159):
Were promises made? No. Where flight schedules revealed? No. Does what they said squash all the reasoning posted on the forum about flights being shifted to DFW and LAX by the droves? Yes.

Quoting PHX787 (Reply 210):

I'm gonna sit back now with my Japanese tea and smirk at how the rumors and speculations...and sometimes, outlandish unwarranted attacks against PHX...are now being put to rest.

Are you guys interested in buying a landmark New York city bridge? Because I'm looking to offload one ....

Quoting commavia (Reply 213):
These are words - just like all the other words you've posted in thread after thread that you think supposedly "prove" your argument. And, as has been mentioned literally dozens of times in thread after thread, these are essentially the exact same words spoken by other airline CEOs to local leaders and employees in other hubs with similarly dubious rationales for continued major hub status.

So I've been thinking lately about how MIA is going to be affected by this merger. Currently AA/US operate about 350~ish flights from MIA. We don't know if MIA is going to end up siphoning traffic from CLT, so there are several variables in play here. Personally, I think a decline in flights at MIA is very unlikely. So the question is - how much growth happens there? What do you guys see happening? Are 500~ / 600~ flights a day in MIA's future? MIA-NRT/JNB etc have been talked about a lot as possible new routes. With AY being added to the TATL JV, I think there's a real chance that either AA or AY will start HEL-MIA. What other ones would be added as part of a growth scenario?

AeroWesty · Sun Mar 24, 2013 4:36 pm

Quoting commavia (Reply 213):
If you want to continue to - in my opinion - delude yourself into thinking PHX can escape inherently inescapable economic reality, then so be it. But as I and many others have attempted (thus far unsuccessfully) to explain, the numbers - to many of us - just don't seem to add up to bridge the gap from mere words to reality.

If one reads the arguments from the PHX supporters carefully, it goes like this:

General population: "The hub at PHX is at risk of being downsized to what O&D can support, plus connecting opportunities from within the region."

PHX supporters: "AA/US would be stupid to leave PHX."

There doesn't seem to be any grey area in there for PHX supporters to assess. It's an either/or situation. Either a full-fledged hub, or zero flights.

In reality, PHX might become something similar to a larger PDX. As described many a time, O&D flights as the market can support, plus commuter flights from around the region timed to hub with flights into other regions.

commavia · Sun Mar 24, 2013 4:36 pm

Quoting AAIL86 (Reply 214):
We don't know if MIA is going to end up siphoning traffic from CLT, so there are several variables in play here.

There will obviously be interaction between the two hubs, in my view primarily on the international side, and it's hard for me to imagine how that would be a negative for MIA. MIA is such a gleaming gem of a hub economically - I don't see anything in this merger harming the hub at all.

Quoting AAIL86 (Reply 214):
Personally, I think a decline in flights at MIA is very unlikely.

I agree. I think MIA is likely to continue on its steady growth path going forward - the economic trajectory of Latin America only helps MIA.

Quoting AAIL86 (Reply 214):
So the question is - how much growth happens there? What do you guys see happening? Are 500~ / 600~ flights a day in MIA's future?

I don't think 500-600 flights is realistic anytime soon, but I don't think it's at all out of the question to imagine 400+ daily departures in the relatively near future.

Quoting AAIL86 (Reply 214):
MIA-NRT/JNB etc have been talked about a lot as possible new routes.

I, personally, think nonstop AA flights from MIA to both Asia and South Africa are entirely plausible in the next few years.

BigGSFO · Sun Mar 24, 2013 4:36 pm

Quoting AAIL86 (Reply 214):
What other ones would be added as part of a growth scenario?

Milan, Zurich, South Africa, Tokyo, possibly Helsinki, Tel Aviv....definitely new domestic services (Austin comes to mind). I'd also expect some extra flights on current services, like a second to Seattle and a fourth to San Francisco, and more to Phoenix.

AAIL86 · Sun Mar 24, 2013 5:16 pm

Quoting commavia (Reply 216):
I don't think 500-600 flights is realistic anytime soon, but I don't think it's at all out of the question to imagine 400 daily departures in the relatively near future.

Let's play around with post merger rationalization - what if MIA 'steals' 50 flights/day from CLT, and adds 50 because of AA's improving sitution (as you seem to suggust)? Now were up to 450 in a snap of the fingers. How much traffic does MIA 'steal' from CLT, anyways?

[Edited 2013-03-24 10:17:13]

Cubsrule · Sun Mar 24, 2013 6:09 pm

Quoting commavia (Reply 216):
There will obviously be interaction between the two hubs, in my view primarily on the international side, and it's hard for me to imagine how that would be a negative for MIA. MIA is such a gleaming gem of a hub economically - I don't see anything in this merger harming the hub at all.

I agree, but I don't think it's going to help MIA too much either (not that, as you point out, MIA needs a whole lot of help). I see two primary "merger effects" for MIA:

1) Shift in some flying to secondary Caribbean markets from CLT (but perhaps offset somewhat by less traffic to bigger Caribbean markets that is shifted to CLT)

2) Added flying the stations in the northeast where the combination of US' historic strength and additional 70-90 seat lift will make flights viable (BUF, SYR, ALB, PVD, etc.).

Sydscott · Fri Mar 29, 2013 2:01 am

Quoting AeroWesty (Reply 215):
In reality, PHX might become something similar to a larger PDX. As described many a time, O&D flights as the market can support, plus commuter flights from around the region timed to hub with flights into other regions.

Lets not also forget that US currently has a fair number of services into Mexico all to itself that it doesn't have access to at LAX on its own metal. So PHX playing a downgraded, but still sizeable role as a regional hub, with decent West Coast service and high frequency shuttles to key US/AA hubs to the East makes alot of sense. The AA LAX hub can focus more on the O&D opportunities from the LA basin and connecting pax to International flights while PHX acts as a domestic & regional connecting station for the West covering smaller destinations with decent O&D from PHX along with some connections which won't work at DFW and aren't an effective use of scarce resources to run through a constrained LAX station. Both could work in tandem with the other given specific roles in the network.

AA/US Merger Impact: Hubs (Part 2)

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