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PlanesNTrains
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Wed Dec 04, 2013 6:32 pm

Quoting joeman (Reply 22):
This and other threads since those days not so long ago certainly prove otherwise and that those other "little" city types often sustain our big brother ops at their expense of P2P service.

Perhaps, but I'd imagine that the bigger picture goal is to garner corporate travel contracts. For the ones that AA desires, they need the LAX-JFK premium options. You go where the money is, and for airlines it is often the corporate contracts.

Quoting commavia (Reply 44):
That would be like someone predicting upon the Delta-Northwest merger in 2007 that the MEM hub was toast. Yeah, obviously - that doesn't prove you're a genius!

There's a bunch of bruised egos right now after reading that statement.  

-Dave
 
a380787
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Wed Dec 04, 2013 6:35 pm

Quoting EricR (Reply 48):
With the exception of MIA-EZE, I could easily see each of the routes he listed as losing money. JFK-LHR and NYC-CA has an extremely high number of competitors, so margins were/are probably weak. ORD-DEL was cut and ORD-PVG/PEK have gone through capacity reductions which indicates weak financial performance or lack of demand.

EZE has been problematic for others too, so I can easily imagine the same tidal waves hitting AA, even though they're going to MIA

DL cancelled JFK-EZE in 09
MAS dropped CPT-EZE (that's a money losing tag from day 1 anyway) circa 2011
QF gave up SYD-EZE to switch to SCL
SAA cut JNB-EZE recently
UA cut EWR-EZE 2013
AR cancelling EZE-SYD 2014 (but restarting JFK)

Tons of old guards are gone, replaced by the ME3+1 :

TK EZE-GRU-IST
EK EZE-GIG-DXB
QR EZE-GRU-DOH
 
commavia
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Wed Dec 04, 2013 6:39 pm

Quoting EricR (Reply 48):
Out of curiosity, which of the routes that McAdoo lists do you find highly questionable?

In addition to MIA-EZE, I - personally - suspect JFK-LHR and JFK-LAX/SFO were generally profitable on a standalone basis, if marginally so in some cases. Either way, I still contend both were grossly positive net contributors on a network basis - which, I think, is what ultimately matters - and remain so.

I obviously don't know any more, and probably less, than Bob McAdoo, but I guess the larger point I would make is that either way, none of this is at all earth-shattering. All airlines operate some flights that lose money in isolation but make up for it by what they add to the larger equation. And yet Bob McAdoo doesn't seem to feel the need to give Ted Reed quotes about how much money United is losing in such markets, despite the fact that most agree that United today has a larger revenue underperformance problem than AA.

Quoting EricR (Reply 48):
JFK-LHR and NYC-CA has an extremely high number of competitors, so margins were/are probably weak.

Agreed, at least in the case of JFK-LAX/SFO.

Quoting EricR (Reply 48):
ORD-DEL was cut and ORD-PVG/PEK have gone through capacity reductions which indicates weak financial performance or lack of demand.

Again, after oil spiked and AI entered, it was obvious ORD-DEL wasn't printing money. Duh. I'm not so much arguing that ORD-DEL lost money by the end, but rather that his pointing out the obvious somehow indicates a keen insight on his part.

However - that being said - where I do think he is right (although, again, hardly unique or sharing anything not already known) is that AA's 777s as currently configured were not the right jets for any of these missions (ORD-DEL or ORD-China). They need less F, better J, and more Y. Thankfully, AA now - finally - is making those changes, and I suspect it will, indeed, have quite a positive impact in these and other markets where AA has been flying inappropriately configured airplanes for years.

Quoting PlanesNTrains (Reply 50):
There's a bunch of bruised egos right now after reading that statement.

I meant no offense.

[Edited 2013-12-04 10:44:51]
 
travelin man
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Wed Dec 04, 2013 6:45 pm

Quoting jayunited (Reply 31):
On JFK-Heathrow, American suffers from "its quantity of slots and its ego-driven tendency to virtually always fly each London flight with its largest B777 aircraft, (and) finds itself unable to always profitably operate to each of its hubs." Furthermore, American's hub in Chicago competes with its hub in Dallas and Los Angeles for London traffic, with the Chicago one-stop undercutting the non-stops. The solution? Cut flights.

This seems like very lazy "analysis" in the age of Trans-Atlantic Joint Ventures, where BA and AA are sharing revenues and costs across the Atlantic. You can't look at AA in a vacuum when analyzing these types of routes.

And given the plethora of non-stop options from LAX to LHR, I highly doubt ORD is competing with that traffic except in the case of the MOST price-sensitive (i.e. lowest yielding) traffic. The highest yielding traffic will fly non-stop, hence why AA and BA are flying their largest premium-heavy planes on the route now (77W and A380 respectively).
 
AA94
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Wed Dec 04, 2013 7:50 pm

Quoting ecamactions (Reply 42):
This is why it was so important for Parker to oust that loony Horton. This is why AA would have failed stand alone. It's stuck in the mindset of "we're AA, we're too big to fail, we are americas flag airline. So what if we lose money it's our destiny to fly the biggest airplane on all routes" This minds makes me happy the merger is going to happen and all of the horton style lunacy will be ousted with him.


And charging for inflight water is sane? Please.

[Edited 2013-12-04 11:51:44]
 
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lightsaber
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Wed Dec 04, 2013 8:00 pm

I cannot believe AA was still flying 762s... I don't know how to make a profit on a run that competes with 738s, 739s, or A320/A321s.

Quoting MaverickM11 (Reply 29):
I don't think there's enough cargo in the world to offset the cost disadvantage AA had on transcon 762s.

  

Even 763s will have it tough versus the new sharkleted A321s.

Quoting RDH3E (Reply 39):
That's losing around 10k per flight over the course of the year. I'd bet that is reasonable considering the CASM of a 762.

Agreed.

Quoting catiii (Reply 49):
B6 is adding only 9 more seats on the transcon 321s than they have on the 320.

B6 is adding a premium cabin and entering a whole new market. The issue for B6 is the 190 seat A321s do not have the range to go TCON until the A321NEO. Losing 3 tons of fuel is quite a bit for the A321 with V2500s sharklets or not.

Lightsaber
 
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Wed Dec 04, 2013 8:03 pm

Quoting AA94 (Reply 54):
And charging for inflight water is sane? Please.

US does not currently charge for any drinks and has not for a few years now. IIRC, Even when they did I don't believe they charged for water. Don't forget that was also at a time or more cuts and fees airlines were kind of experimenting what they could cut/charge for, and US quickly found out they should not charge for drinks.
 
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Wed Dec 04, 2013 8:37 pm

Quoting EricR (Reply 48):
He listed the following routes as money losing routes in his 2011 article:
ORD-DEL
ORD-PEK
ORD-PVG
JFK-LHR
NYC-CA
MIA-EZE

With the exception of MIA-EZE, I could easily see each of the routes he listed as losing money. JFK-LHR and NYC-CA has an extremely high number of competitors, so margins were/are probably weak. ORD-DEL was cut and ORD-PVG/PEK have gone through capacity reductions which indicates weak financial performance or lack of demand.

I was under the impression that AA's ORD-PVG route was performing extremely well both load factor wise and financially which was one of the reasons why AA is proposing to start DFW-PVG next year. Now if their ORD-PVG route wasn't meeting expectation why launch DFW-PVG.
As far as ORD-PEK AA has reduced capacity and according to some AA is struggling on this route but as it has been stated many times before a better time slot could help AA better compete along with reducing the number of premium seats on their 772ER.
 
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Wed Dec 04, 2013 11:50 pm

Quoting jayunited (Reply 57):
Now if their ORD-PVG route wasn't meeting expectation why launch DFW-PVG.

Unlike ORD-PVG, DFW-PVG has no competition. Was AA's intent to add DFW-PVG and keep ORD-PVG or were they simply moving the PVG route from ORD to DFW?
 
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 12:55 am

If these numbers are correct, this just goes to show what everyone has known all along, that average fare in a market is just one part of the equation in spite of the efforts of a couple of fanboys over the last several years to focus on that metric to the exclusion of others. AA certainly garners a high average fare in the market, but that doesn't stop it from losing money in the market. Of course, this situation will likely change as the A321's enter the market. Given how much more efficient the A321 is over the 762, AA is bound to see improved results.

Quoting MaverickM11 (Reply 32):
They should be, but I think it's clear that parts of the network weren't working as well as perhaps expected: BOSLHR was cut completely and JFKLHR reduced. Sure JV partner BA a) is better equipped to handle these markets with a stronger LHR hub (vs AA's presence in JFK or BOS) and b) ensures an AA "metal neutral" presence in the markets, but at the end of the day, even with JV's, airlines don't cut profitable flying.

  
 
PlanesNTrains
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 9:33 am

Quoting commavia (Reply 52):
Quoting PlanesNTrains (Reply 50):There's a bunch of bruised egos right now after reading that statement.
I meant no offense.

Of course not, and I didn't mean to imply you meant to. I just thought it was funny seeing people say that MEM would have a role to play at the new DL. On what planet?

-Dave
 
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United_fan
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 1:16 pm

If they are losing $10k a flight with a 762,using a A321 would most likely make up the difference . At least on the fuel bill-side. Obviously , there is more to consider such as the price of the newer plane.
 
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calpsafltskeds
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 1:52 pm

While I'm sure the 321 is more efficient, the AA 762 has higher density than the AA321. This seems to run counter to McAdoo's claim that the loss is due to low seat density. How can AA make money if the A321 is much less dense than the current 762?

Compared to US units, the AA762 at 168 seats has 82% of the US762's seat count while the AA321 has only 55% of the US321 seat count. Sure the AA321 has a higher percentage of premium seats, but the AA762 has the same number of F seats and 10 more Business seats. The 321 has more MCE seats, but that shouldn't move the RASM's up that much. The loss of 56 Y seats on the 321 vs. the 762 will take a revenue hit.

Based on 8 found trips per day with the AA762, at a $70 million dollar loss (presume it's annually), AA is losing $12,000 per flight.

Quoting osubuckeyes (Reply 41):
The ownership costs of the A321 are higher and frequency is increasing so lower costs will be marginal. As far as having this route to make others profitable. To some extent that is true, but again there is no need to lose $70 million.

UA did an analysis on the 739ER vs. 752 and found each 739ER saves $2/year vs. the 752. This includes ownership cost, maintenance costs, fuel costs, revenue hit, landing fee costs. For AA to break even it would need to save $7million per aircraft. A vastly different comparison vs. the 739ER/752 analysis, but I doubt the A321 will save $12k per flight, especially with revenue loss of 66 Y seats and 10 Business seats.
 
Osubuckeyes
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 2:39 pm

Something that has not been discussed is there a possibility that the mass influx in premium capacity on the route could galvanize premiums even more. The biggest difference on the route is that there is more premium capacity, ignoring contracts for the moment wouldn't the basic increase in premium product dilute premium revenues. I would find it very hard to believe that there is not a premium seat over capacity with VX, B6, UA, AA, and DL all offering increases in product and capacity.
 
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 2:45 pm

Its difficult to believe AA is loosing money to LAX from JFK as they are the only airline offering both First and Business Class, even United dumped First from its "PS" 757 service. Delta and JB(soon) offer Business Class in the market. AA's new A321 has about 110 seats with much less in Y then the 762 they are replacing but they have 10 F and 30 J seats selling a thousands of $$$ per seat. This is a medium haul flight using short haul airplanes, between the yield of the route and the economics of the plane, new or old, you would have to be a moron to loose money between JFK and LAX, AA's managers are among th best in the industry.
 
Cubsrule
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 2:46 pm

Quoting osubuckeyes (Reply 56):
IIRC, Even when they did I don't believe they charged for water.

US absolutely charged for water, though IIRC it was cheaper than soda.
 
EricR
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 2:52 pm

Quoting osubuckeyes (Reply 63):
I would find it very hard to believe that there is not a premium seat over capacity with VX, B6, UA, AA, and DL all offering increases in product and capacity.



I would agree. Even after lower costs assocaited with the BK reorg, the route would still be a marginal performer. It is certainly an important route to fly, but one has to question AA's current strategy on the route (combination of high frequency and low desity A321 aircraft). I would not be surprised to see Parker make some changes such as add seats and/or reduce a frequency or two.
 
a380787
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 3:14 pm

Quoting jfk777 (Reply 64):
Its difficult to believe AA is loosing money to LAX from JFK as they are the only airline offering both First and Business Class, even United dumped First from its "PS" 757 service. Delta and JB(soon) offer Business Class in the market. AA's new A321 has about 110 seats with much less in Y then the 762 they are replacing but they have 10 F and 30 J seats selling a thousands of $$$ per seat. This is a medium haul flight using short haul airplanes, between the yield of the route and the economics of the plane, new or old, you would have to be a moron to loose money between JFK and LAX, AA's managers are among th best in the industry.

He only said AA is losing money in the 762 days, but didn't give any prediction whether A321T will be profitable or not.

The A321T has 10F+20J not 30J. But many people also forgot that even though per trip cost is much lower, they're adding 30% frequencies just to make up the capacity drop (resulting in a 30% increase in F space on the LAX route - assuming they're filling them)

AA also has the loosest upgrade policy - UA require instruments, VX/B6 has no upgrade at all, while DL give complimentary but always at the gate, but AA EXP could have confirmed upgrades months in advance, with ease. That doesn't bode well for actual F/J revenue.

With 5 airlines offering a premium transcon product (and B6 has the best J seat), the good ole days of AA being the king of transcon with UA being the ugly-stepsister is long gone.
 
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United_fan
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 3:51 pm

Landing fees will be less with the A321,not to mention less crew due to less seats.
 
Cubsrule
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 3:54 pm

Quoting United_fan (Reply 68):
Landing fees will be less with the A321,not to mention less crew due to less seats.

More frequencies on smaller aircraft can INCREASE crew costs, as it increases the number of pilots (and, frequently, the number of f/as) needed.
 
jayunited
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 4:29 pm

Quoting a380787 (Reply 67):
AA also has the loosest upgrade policy - UA require instruments, VX/B6 has no upgrade at all, while DL give complimentary but always at the gate, but AA EXP could have confirmed upgrades months in advance, with ease. That doesn't bode well for actual F/J revenue.

This is an extremely valid point, many UA employees and people on this website myself included thought UA was crazy for getting rid of first class on the JFK-LAX/SFO routes. Many months ago UA responded by saying they were seeing to many upgrades into first class on these route. There was an acknowledgement that UA was selling some first class seats but not enough to justify keeping first class on these routes although first class would go out full on many flights most of the people sitting up there had purchased business class seats and were upgrade into first. Now that UA has completed the p.s. fleet reconfiguration they are not awarding as many upgrades as they were before because they are actually able to fill most of business class with customers who actually bought a business class seat and not upgrades. Hopefully as AA roles out their spectacularly beautiful A321 product on the JFK-LAX/SFO routes we will see AA change their policy on upgrades into first class on these particular routes. In the beginning it probably will be hard to get an upgrade into first as I'm sure AA will probably sell most seats as the product is brand new. However as time goes on and the excitement of the new product wears off AA can't afford to allow customers to slip back into their old habits of buying a business class seat and getting upgraded for free into first class. With 1/3 of the A321 dedicated to first class for revenue purposes AA has to make sure that most of those 10 seats are filled with paying customers not upgrades. And with AA adding additional frequencies on these route to make up for the lost capacity in coach selling a majority of those first class seat becomes increasingly difficult.
Now I don't think AA will ever get rid of first class on these routes but down the road if AA fails to consistently (day in and day out) sell a majority of those 10 first class seats I think there might be a reduction in the number of first class seats and an increase in the number of business class seats.
 
Flighty
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 4:41 pm

Quoting EricR (Thread starter):
I do not think this is any surprise, but it does reinforce the idea that capacity cuts across the network will occur post merger. Some hubs will definitely feel impacts.

Money-losing flights will be cut. Absolutely. That's one of the top rules in Doug Parker and friends' playbook. It's just as important as flying profitable routes. If not more important.

Quoting jfk777 (Reply 64):
This is a medium haul flight using short haul airplanes, between the yield of the route and the economics of the plane, new or old, you would have to be a moron to loose money between JFK and LAX, AA's managers are among th best in the industry.

AA's sales profile requires serving JFK-LAX whether it makes money or not. So actually, smart people could lose money on the route. But you can't operate an entire airline that way.
 
commavia
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 4:59 pm

Quoting jayunited (Reply 70):
There was an acknowledgement that UA was selling some first class seats but not enough to justify keeping first class on these routes although first class would go out full on many flights most of the people sitting up there had purchased business class seats and were upgrade into first. Now that UA has completed the p.s. fleet reconfiguration they are not awarding as many upgrades as they were before because they are actually able to fill most of business class with customers who actually bought a business class seat and not upgrades. Hopefully as AA roles out their spectacularly beautiful A321 product on the JFK-LAX/SFO routes we will see AA change their policy on upgrades into first class on these particular routes. In the beginning it probably will be hard to get an upgrade into first as I'm sure AA will probably sell most seats as the product is brand new. However as time goes on and the excitement of the new product wears off AA can't afford to allow customers to slip back into their old habits of buying a business class seat and getting upgraded for free into first class. With 1/3 of the A321 dedicated to first class for revenue purposes AA has to make sure that most of those 10 seats are filled with paying customers not upgrades. And with AA adding additional frequencies on these route to make up for the lost capacity in coach selling a majority of those first class seat becomes increasingly difficult.

Okay, but in my view, all of the above is predicated on the potentially false assumptions that AA is in much the same boat as United was with it's 3-class product, and that it is so in as much as it is failing to actually sell for revenue (not just upgrades/nonrevs) its F cabins today.

I'm not sure it's a 1-for-1 comparison, especially in the JFK-LAX market where AA has always been the leader. AA does sell F seats, and I would be willing to guess they sell more of them than United. It's not all just upgrades, so I really don't see why there's much need to radically change AA's expansive upgrade policy - which is an incredibly popular value for AA's top customers.

AA is likely betting on its new premier transcon 3-class product picking up some incremental level of the paid F traffic United used to carry - and United definitely did carry some of it. Some premium customers transiting JFK or LAX on/off longhaul international flights do demand, and will pay for, true F, and some local customers most definitely will to. In addition, given that AA is cutting the J cabin by 1/3, AA obviously feels its sales force stands a good chance of upselling at least some portion of the existing J market flying with AA into F. They may well be right.

So if AA can even pick up a relatively small portion of the paid F traffic United previously carried, and get even a small portion of the paid J traffic AA itself previously carried, and then combine those two with the paid F demand AA already handled, that may well be enough to support the true F cabin. After all - it's on 10 seats on each flight, and again, AA was likely on average already filling some portion of that cabin with paid flyers to begin with.

Quoting jayunited (Reply 70):
Now I don't think AA will ever get rid of first class on these routes but down the road if AA fails to consistently (day in and day out) sell a majority of those 10 first class seats I think there might be a reduction in the number of first class seats and an increase in the number of business class seats.

Don't think so - at least not on the A321. The cabin layout is predicated on the A321 door configuration, and I don't know if they could expand the J cabin further forward into F. From what I've been told, as long as they use A321s in this market, it's got to either be 10F or 0F - nothing in between.
 
AADC10
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 5:33 pm

Quoting EricR (Thread starter):
He believes part of this problem is attributed to the low density configuration of the 767 compared to the higher density planes that competitors fly on this route. He believes this problem will be resolved with the A321, but I am not quite clear how he is coming to this conclusion considering AA's A321's have lower capacity than their 767's.
Quoting CALPSAFltSkeds (Reply 62):
Compared to US units, the AA762 at 168 seats has 82% of the US762's seat count while the AA321 has only 55% of the US321 seat count. Sure the AA321 has a higher percentage of premium seats, but the AA762 has the same number of F seats and 10 more Business seats. The 321 has more MCE seats, but that shouldn't move the RASM's up that much. The loss of 56 Y seats on the 321 vs. the 762 will take a revenue hit.

A better way to figure density is probably to compare floor space relative to the number of seats. However, any three class service is going to have a lower density than the two class service offered by all of the others. While going to the A321 will probably be close to equal of UA's CASM in their p.s. 757s they will almost certainly still be behind the others. Perhaps only UA matters.

Quoting kcrwflyer (Reply 26):
My question: what's the difference in ownership cost and hows that factored into the equation? I would think a brand new 321 costs significantly more to own than a "seasoned" 762.

Maintenance is another major factor. UA retired their 762s that primarily operated JFK-SFO/LAX in part because they were approaching their D checks and gambled on going to 3-class narrowbodies. Instead of doing the checks and sending the 762s out for another 7 years, they were parked. The other part of this was that UA has always been a minor player at JFK and the 110 seat 757s were closer to right sized.
 
a380787
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 5:35 pm

Quoting commavia (Reply 73):
all of the above is predicated on the potentially false assumptions that AA

So you're dismissing his post because of "false assumptions" ....

Quoting commavia (Reply 73):
AA is likely betting
Quoting commavia (Reply 73):
if AA can even pick up
Quoting commavia (Reply 73):
likely on average already filling
Quoting commavia (Reply 73):
They may well be right.

Then you explain your justification full of your own assumptions ?
 
commavia
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 6:13 pm

Quoting a380787 (Reply 75):
So you're dismissing his post because of "false assumptions" ....

Not dismissing it, just saying that some of AA's strategy and recent moves appear to bely some of his assumptions, which leads me to conclude that they may be false.

Quoting a380787 (Reply 75):
Then you explain your justification full of your own assumptions ?

I think I did. Based on the fact that AA is keeping 10 F seats on all 14 of its daily JFK-LAX flights, my assumption is that they're banking on getting some of the ex-UA flyers and upselling some of their own existing J flyers.
 
jetblueguy22
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Thu Dec 05, 2013 7:58 pm

Quoting enilria (Reply 20):
My guess is that VX is the only airline that is/was making money on the route, but that is going to change with all these super-premium products.

Are we talking about the VX that has cut transcons because they were losing money? I'm not sure I buy that VX is making money and these massive network carriers with huge feed are losing money.

Quoting jfk777 (Reply 23):
How can AA be loosing $ 70 million yearly on its flagship domestic route with First and Business Class on a flight which is only 5 hours ? These are not flights using 30,000 gallons per flight, more like 8,000 gallons per flight which is still thirty thousand dollars per flight. Ho w much does AA sell a First Class seat for to LAX from JFK, $5,000 roundtrip ?

Very rarely do companies with corporate contracts pay street rates. I know a contract with a previous employer had huge discounts for Asia travel. J would be advertised as 3500 but they'd only pay 2200. Plus they threw in a bunch of free J upgrades once a certain dollar mark was reached.

Quoting Mainliner (Reply 37):
Isn't there some sort of screen actors guild contract on this route? I thought I read on here somewhere that many entertainment industry executives, as well as support staff and actors themselves, travel mostly on AA and very frequently on LAX-JFK.

There may be a deal but how many people are realistically flying on these flights everyday? AA has a ton of seats to fill. They need a lot of corporations with business at both ends to have contracts with them to fill all those seats.

Quoting ecamactions (Reply 42):
This is why it was so important for Parker to oust that loony Horton. This is why AA would have failed stand alone. It's stuck in the mindset of "we're AA, we're too big to fail, we are americas flag airline. So what if we lose money it's our destiny to fly the biggest airplane on all routes" This mindset makes me happy the merger is going to happen and all of the horton style lunacy will be ousted with him.

I don't understand all the Horton hate. If anybody should get the blame it is Arpey. Horton through bankruptcy completed turned the airline around and reinvented it. The airline makes a massive profit last quarter and yet he's still hated for doing what every other CEO did in bankruptcy.

Quoting osubuckeyes (Reply 63):
Something that has not been discussed is there a possibility that the mass influx in premium capacity on the route could galvanize premiums even more.

Should be quite that battle. Especially with B6 undercutting everybody. They may not poach many, but it will be enough to affect all the carriers with J.

Quoting jfk777 (Reply 64):
Its difficult to believe AA is loosing money to LAX from JFK as they are the only airline offering both First and Business Class, even United dumped First from its "PS" 757 service. Delta and JB(soon) offer Business Class in the market. AA's new A321 has about 110 seats with much less in Y then the 762 they are replacing but they have 10 F and 30 J seats selling a thousands of $$$ per seat. This is a medium haul flight using short haul airplanes, between the yield of the route and the economics of the plane, new or old, you would have to be a moron to loose money between JFK and LAX, AA's managers are among th best in the industry.

Just because they are offering doesn't mean people are buying them. It's tough to justify F on a transcon flight. A lot of businesses don't even let employees fly J to Europe. Sure the clientele on the flight may have a higher income than most routes, but it doesn't mean they are willing to pay F or J fares.
Pat
 
jayunited
Posts: 3608
Joined: Sat Jan 05, 2013 12:03 am

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 12:21 am

Quoting commavia (Reply 72):
Okay, but in my view, all of the above is predicated on the potentially false assumptions that AA is in much the same boat as United was with it's 3-class product, and that it is so in as much as it is failing to actually sell for revenue (not just upgrades/nonrevs) its F cabins today.

No one for sure is putting AA in the same boat as UA but one thing that is for sure is all 3 legacy carriers give out free upgrades and your status dictates when you are awarded that upgrade the higher your status the earlier your upgrade goes thru. What I was pointing out was most people assumed that UA because first class was consistently full was in fact selling a lot of first class seats and at one point that probably was true but as a result of these free upgrades more and more people started to buy business class tickets and as a result of their status they knew they would be automatically upgraded into first class.

Who is to say AA is not in facing the same situation? After reading your response you can't say in absolute certainty that AA is in fact selling more seats in first than they are handing out free upgrades all you know is first class goes out full. Without access to those concrete numbers (number of seats sold v.s. number of upgrades) your point is based on an assumption as well, an assumption that could very well be wrong? Because it comes down to this why pay full price for a product when if you have the status you are almost guaranteed to get for free? And this was UA's problem business class would be sold out and in some cases over sold because certain customers knew they would get the upgrade so they chose to buy a business class seat knowing full well they would be upgraded. UA employees were surprised to learn the truth as it pertains to our p.s. routes and now I'm making an assumption that AA is probably in the same situation although first goes out full its probably a the very least a 50/50 ratio, 50% of the people paid for a seat while the other 50% were upgraded for free. And that is just my opinion it could be a more or less the point being most people really don't know and just because no one is being upgraded at the gate does not mean that all the seats in first are filled with customers who actually bought a first class seat, because if you have a high enough status your upgrade goes through days before your flight is scheduled to leave. Without concrete numbers on one knows if AA is in fact selling out first class on these routes or if they are in the same position UA was in; having the illusion of selling out first class when the facts were first class was being filled with high status customers who actually bought a seat in business class.

As I said before I'm glad AA is keeping first class but only time will tell as the new product is rolled out whether or not AA is in fact selling more first class seats or if they are giving out more upgrades.
 
commavia
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RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 12:49 am

Quoting jayunited (Reply 77):

And what I'm saying is that it's entirely plausible that not only was AA actually selling more F seats than UA (at least in the JFK-LAX market) to begin with, but AA plans on selling more in the future for the reasons I described. There absolutely is some level of paid F demand on these routes. I've seen it myself firsthand many times and know people that interact with these flights often - both as employees and customers - and can attest to the fact that a decent number of people fly F every day between JFK and LAX and aren't upgrading to do it.

Again - AA's actions indicate that they believe they have at least a reasonable chance at filling those F cabins, as evidenced by the fact that they still have them even after UA abandoned the 3-class market between these cities. I have deduced that this is likely driven by two assumptions on the part of AA: (1) that whatever level of discerning, true-F-demanding traffic UA was carrying may now switch to AA, and (2) that AA will be able to use its vastly upgraded true F product to upsell some level of its existing J demand into the higher cabin.

And based on what I've seen, experienced, and heard, I don't think AA's aims seem all that unreasonable. Changes in the market and competitive landscape may mean the JFK-LAX/SFO markets could no longer profitably support two carriers with 3-class products, but I personally suspect the markets may still be able to support at least one.
 
MAH4546
Posts: 26678
Joined: Wed Jan 24, 2001 1:44 pm

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 12:56 am

Quoting jayunited (Reply 77):
Who is to say AA is not in facing the same situation?

AA does not give out free upgrades to F unless there is an oversell situation.

AA was close to killing off F - it had intense discussions with it's corporate clients and they changed AA's minds.
 
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calpsafltskeds
Posts: 3366
Joined: Tue Dec 19, 2006 1:29 am

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 1:10 am

I just pulled up availability on Thursday 1/9/14 and found some interesting prices.
Business is $2950 on all non-stops
First ranges from 5 flights at $2931 to one flight at $3435 and one flight at $3874.

Why would the price for F be less than Business?
If you look at the seat map, AA could install 2 Business seats for each F seat on the A321. Shouldn't you expect the price to be closer to double for using up twice the space?

FYI: UA is charging $2187 for all business seats on the same day.

AA could convert the aircraft to 40 Business vs. 10F and 20 Business. This would have more revenue potential, but the question is what is the demand for premium seats and where will the F traffic go if F is removed from the market?
 
oc2dc
Posts: 469
Joined: Mon Feb 04, 2013 4:38 am

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 3:19 am

Quoting LAXdude1023 (Reply 2):
3) By reducing the seats, but keeping a premium capacity profit per seat will increase.

That's assuming they can fill those seats.....I've seen multiple AA flights between JFK-LAX go out with only 2ish people in F. Can you imagine how big of a blow that would be day in and day out...Especially with the large increase in F capacity...
Both Y and J won't have trouble filling up, but that only makes up part of the revenue.

Quoting EK413 (Reply 15):
Interesting indeed and I'm curious how QF is performing on the route considering they've experimented A332's on the route only to reintroduce the B744.

I believe they pulled the A332 from LAX-JFK around the time they cancelled the AKL-LAX flight....No more A332's to LAX for QF, hence the return of the 744 to JFK.

Quoting CALPSAFltSkeds (Reply 62):
UA did an analysis on the 739ER vs. 752 and found each 739ER saves $2/year vs. the 752. This includes ownership cost, maintenance costs, fuel costs, revenue hit, landing fee costs.

Just to be very clear....You are saying UA only saw a $2 dollar savings per year, 20 dimes, 8 quarters, 200 pennies per year? That seems dramatically low.

Quoting CALPSAFltSkeds (Reply 80):
First ranges from 5 flights at $2931 to one flight at $3435 and one flight at $3874.

I looked at flights around the same time in January a couple of weeks ago and I was shocked to see F was being sold for as much or less than J. How on Earth do they expect to make money like that? Perhaps demand is much lower than they originally thought...
 
miaami
Posts: 983
Joined: Thu Jul 12, 2007 2:27 am

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 3:42 am

A little AA Nostalgia for the JFK-LAX route.
 
User avatar
calpsafltskeds
Posts: 3366
Joined: Tue Dec 19, 2006 1:29 am

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 4:33 am

Quoting oc2dc (Reply 81):
Quoting CALPSAFltSkeds (Reply 62):
UA did an analysis on the 739ER vs. 752 and found each 739ER saves $2/year vs. the 752. This includes ownership cost, maintenance costs, fuel costs, revenue hit, landing fee costs.

Just to be very clear....You are saying UA only saw a $2 dollar savings per year, 20 dimes, 8 quarters, 200 pennies per year? That seems dramatically low.

Oops, Forgot the word Million.
 
KD5MDK
Posts: 834
Joined: Wed Mar 13, 2013 4:05 am

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 6:15 am

That makes a bit of a difference.

Quoting CALPSAFltSkeds (Reply 80):
Why would the price for F be less than Business?

Because people either are required to buy Business, or their company gets a flat discount at which point J is still cheaper than F (if the discount is J only) and keeping J prices high minimizes the loss from the discount.
 
mhkansan
Posts: 901
Joined: Sun Jan 17, 2010 9:02 pm

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 7:02 am

Just as a clarification for upgrades, AA only allows it's EXPs complimentary one cabin upgrades. The idea that AA is handing out F class upgrades on the JFK-LAX/SFO is baseless - the customers whom AA provide the service for probably guaranteed a certain level of traffic. AA's 32B configuration matches that demand - simple as that.
 
Cubsrule
Posts: 15352
Joined: Sat May 15, 2004 12:13 pm

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 1:39 pm

Quoting KD5MDK (Reply 84):
Because people either are required to buy Business,

This. It's the same reason that restricted F tickets are routinely cheaper than refundable coach tickets on many (most?) domestic routes on all of the legacies.
 
tommy1808
Posts: 14686
Joined: Thu Nov 21, 2013 3:24 pm

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 2:00 pm

Quoting oc2dc (Reply 81):
How on Earth do they expect to make money like that? Perhaps demand is much lower than they originally thought...

How much money does it cost AA to fly a A321 to LAX and back? 60.000 US$? With F being a marketing tool for J (upgrade when ever miles allow) AA probably sees them more or less like 30J with extra special treatment for up to 10 very important flyer's and a few paying ones.

best regards
Thomas
 
oc2dc
Posts: 469
Joined: Mon Feb 04, 2013 4:38 am

RE: McAdoo: AA Loses $70 Million On JFK-LAX Route

Fri Dec 06, 2013 7:11 pm

Quoting CALPSAFltSkeds (Reply 83):
Quoting oc2dc (Reply 81):
Quoting CALPSAFltSkeds (Reply 62):
UA did an analysis on the 739ER vs. 752 and found each 739ER saves $2/year vs. the 752. This includes ownership cost, maintenance costs, fuel costs, revenue hit, landing fee costs.

Just to be very clear....You are saying UA only saw a $2 dollar savings per year, 20 dimes, 8 quarters, 200 pennies per year? That seems dramatically low.

Oops, Forgot the word Million.

That makes a lot more sense... That is relatively nice amount of savings for UA.

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