Delta To Acquire Stake In China Eastern

panamair · Mon Jul 27, 2015 12:10 pm

Delta to make a US$450m investment in China Eastern for a 3.55% stake and an observer seat on the MU BOD:

http://finance.yahoo.com/news/china-...-solidify-strategic-113000219.html

[Edited 2015-07-27 05:26:51]

a380787 · Mon Jul 27, 2015 12:19 pm

Let's see ?.. DL acquiring stake in MU and wanting another one in Skymark ... And people still think there's any chance in hell that DL/KE JV is coming soon ?

commavia · Mon Jul 27, 2015 12:20 pm

Very interesting. Probably another smart investment, in order to "lock in" yet another partner to Delta's orbit. It's notable, though not necessarily surprising, that unlike with Aeromexico and GOL, Delta will only get an "observer" seat on China Eastern's board, and that the investment is "conditioned upon achievement of a final marketing agreement" (will be curious to see what that means).

Delta obviously has the money, but I must admit that I find it absolutely incredible how much cash Delta has expended, and liabilities Delta has assumed, in order to lock in partners. And it's fascinating that Delta's primary competitors have not felt the need to do this to anywhere close to the same extent. The only two similar examples from the recent past that immediately come to mind (maybe I'm missing some) are United's investment in AZUL in AA's revenue guarantees to JAL. (We'd have to go back nearly two decades to include AA's investments in Canadian and Aerolineas Argentinas.)

sxf24 · Mon Jul 27, 2015 12:24 pm

This is starting to smell like Swissair... Investments in AM, G3 and VA made sense, but this is stating to seem liked DL is trying to figure out how to spend too much money.

MIflyer12 · Mon Jul 27, 2015 12:40 pm

Quoting commavia (Reply 2):
Delta obviously has the money, but I must admit that I find it absolutely incredible how much cash Delta has expended, and liabilities Delta has assumed, in order to lock in partners.

What liabilities has DL assumed to 'lock in' these partners?

Coal · Mon Jul 27, 2015 12:51 pm

Quoting sxf24 (Reply 3):

This is starting to smell like Swissair... Investments in AM, G3 and VA made sense, but this is stating to seem liked DL is trying to figure out how to spend too much money.

Why? I think the investment in MU makes a lot of sense. It gives DL/MU good opportunities in USA -> 2nd tier and beyond cities and also brings an opportunity for DL to expand its codeshare in China beyond the existing c.20 cities and for MU to do the same in the U.S. beyond its c.40 cities.

Rgds
Coal

DL747400 · Mon Jul 27, 2015 12:52 pm

Quoting sxf24 (Reply 3):
this is stating to seem liked DL is trying to figure out how to spend too much money.

Silly reactionary statement. It's not like there are not dozens of other valid ways to invest funds back into the business. Think about debt repayment, contributing to underfunded pension plans, continue to invest in product and technology upgrades, etc.

With today's announcement, DL is doing nothing more than solidifying a long-term business partnership in the world's most populous country. This should not come as a surprise to anyone, since DL has long said China is a strategic priority. Don't forget that DL is in the enviable position of having close marketing and FF ties ties with two of China's 3 powerhouse carriers in MU and CZ, who are also SkyTeam members. Yet another piece of DL's global puzzle dropping into place.

Expect more codesharing on transpac, more codesharing on China domestic and USA domestic flights, more DL service to China (especially PVG), and likely improved access to advantageous slot times.

Anyone smell an MRO JV in the longer term ala DL/AM?

How about a DL/MU ATI JV?

panamair · Mon Jul 27, 2015 12:54 pm

Quoting sxf24 (Reply 3):
Investments in AM, G3 and VA made sense, but this is stating to seem liked DL is trying to figure out how to spend too much money.

Believe you mean VS rather than VA...

Big difference with Swissair is that SR invested in all these basket cases with hardly any turnaround potential...all of the carriers DL has invested in to date, with the exception of GOL, are profitable (AM, VS, MU).
Etihad's investments in money-losing carriers such as AB and AZ are more akin to what SR got itself into, but then again, EY doesn't really have to worry that much about being dragged down by its investments...

Actually, I think the MU investment is a good long-term strategic one, especially given that Shanghai is probably the most important China market today and the forseeable future.
In addition, China alliances could be fickle. Remember the battle for China Eastern at one point between oneworld and Skyteam, and just about the only reason MU went with Skyteam was because MU's CEO or Chairman was closer to CZ's CEO/Chairman...
MU has been seeking a strategic investment partner lately (after the failed bid in 2007 by Singapore Airlines), so there was the potential that a non-Skyteam airline investing in MU may draw it away from Skyteam (and thus Delta)...

commavia · Mon Jul 27, 2015 12:56 pm

Quoting MIflyer12 (Reply 4):
What liabilities has DL assumed to 'lock in' these partners?

In the case of GOL, Delta's press release of 13 July 2015 stated that it would "guarantee third-party loans to GOL of up to $300 million."

Quoting DL747400 (Reply 6):
How about a DL/MU ATI JV?

I don't believe the requisite political or regulatory conditions are in place to allow such an alliance.

DL747400 · Mon Jul 27, 2015 1:03 pm

Quoting commavia (Reply 8):
I don't believe the requisite political or regulatory conditions are in place to allow such an alliance.

Don't limit your thinking to the possibilities imposed by the current environment. Politics and regulations change. DL is clearly thinking long term and looking to the future with today's announcement.

enilria · Mon Jul 27, 2015 1:04 pm

Quoting a380787 (Reply 1):
Let's see ?.. DL acquiring stake in MU and wanting another one in Skymark ... And people still think there's any chance in hell that DL/KE JV is coming soon ?

Yeah, that's dead. I'm starting to wonder whether DL will exit SkyTeam and just use these investments to lock in partners outside the alliance structure.

Quoting commavia (Reply 2):
Very interesting. Probably another smart investment, in order to "lock in" yet another partner to Delta's orbit. It's notable, though not necessarily surprising, that unlike with Aeromexico and GOL, Delta will only get an "observer" seat on China Eastern's board, and that the investment is "conditioned upon achievement of a final marketing agreement" (will be curious to see what that means).

I assume that is a JV.

Quoting commavia (Reply 2):
Delta obviously has the money, but I must admit that I find it absolutely incredible how much cash Delta has expended, and liabilities Delta has assumed, in order to lock in partners

Quoting sxf24 (Reply 3):
but this is stating to seem liked DL is trying to figure out how to spend too much money.

Starting to seem like it unless they are building a parallel alliance.

Quoting MIflyer12 (Reply 4):
What liabilities has DL assumed to 'lock in' these partners?

"Delta will also guarantee third-party loans to GOL of up to $300 million."
http://news.delta.com/alliance-strengthened-gol

Also, this money DL is spending could otherwise be used to pay down DL debt so that is another way.

bobnwa · Mon Jul 27, 2015 1:05 pm

Quoting sxf24 (Reply 3):
but this is stating to seem liked DL is trying to figure out how to spend too much money.

Are you in the financial field with info to prove that statement?

bunumuring · Mon Jul 27, 2015 1:14 pm

Hmmmm...
Qantas has been very friendly with China Eastern of late, and the two airlines attempted to set up Jetstar HK together...
Delta of course is very friendly with Virgin Australia, yet it doesn't have investment in it unlike Etihad, Singapore AL and Air New Zealand.... And Delta has been speculated to expand eventually in Australia, hand-in-hand with VA....
Wonder if Delta's move will see Qantas shift again towards China Southern, considering that the only other C3 available (Air China) is aligned with Cathay Pacific which in turn is very cold towards QF despite both being in OneWorld...
It seems to me that any potential move by Qantas to consolidate it's position wih China Eastern may have been thwarted by this Delta purchase.
Ah, the wheels of love!
cheers,
Bunumuring.

hiflyeras · Mon Jul 27, 2015 1:45 pm

It's genius really....buy a small stake in any airline that can further your interests, get a seat on their board, arrange for some loans (probably financed by the Ex-Im bank...talk about irony!) and you've built your own world-wide network of preferred carriers to steer business to when it's not on your own metal. At the same time it sounds like a hell of a lot to have to keep a finger on and a regulatory nightmare.

sxf24 · Mon Jul 27, 2015 1:51 pm

Quoting Coal (Reply 5):
Why? I think the investment in MU makes a lot of sense. It gives DL/MU good opportunities in USA -> 2nd tier and beyond cities and also brings an opportunity for DL to expand its codeshare in China beyond the existing c.20 cities and for MU to do the same in the U.S. beyond its c.40 cities.

I think all of this is possible without an investment. A marketing partnership makes sense. Spending $450 million does not.

Quoting DL747400 (Reply 6):
Silly reactionary statement. It's not like there are not dozens of other valid ways to invest funds back into the business. Think about debt repayment, contributing to underfunded pension plans, continue to invest in product and technology upgrades, etc.

There are other valid ways to allocate this cash. Funding underfunded pensions is one big one. Returning it to shareholders is another.

Quoting panamair (Reply 7):
Actually, I think the MU investment is a good long-term strategic one, especially given that Shanghai is probably the most important China market today and the forseeable future.
In addition, China alliances could be fickle. Remember the battle for China Eastern at one point between oneworld and Skyteam, and just about the only reason MU went with Skyteam was because MU's CEO or Chairman was closer to CZ's CEO/Chairman...
MU has been seeking a strategic investment partner lately (after the failed bid in 2007 by Singapore Airlines), so there was the potential that a non-Skyteam airline investing in MU may draw it away from Skyteam (and thus Delta)...

Chinese investments can be fickle too. Many economists and analysts feel we are approaching a Chinese downturn, which raises questions about whether it makes sense to invest in Chinese stocks at the peak of the market. With a minority ownership share and no voting presence on the board, it's not like Delta can actually control what's MU does. Even with a larger share, the Chinese government will always continue to set MU's strategy to some extent.

DL is throwing good money into the over-priced stock of an airline with mediocre management and hands-on owners. There are some strategic benefits, but I don't think they're worth the price. The cash should have been allocated to stakeholders with a higher priority, namely pensioners and shareholders.

Quoting bobnwa (Reply 11):
Are you in the financial field with info to prove that statement?

DL is fully transparent with its financial statements and anyone with a modicum of financial analysis skills can draw intelligent conclusions from the information.

sxf24 · Mon Jul 27, 2015 1:52 pm

Quoting HiflyerAS (Reply 13):

It's genius really....buy a small stake in any airline that can further your interests, get a seat on their board, arrange for some loans (probably financed by the Ex-Im bank...talk about irony!) and you've built your own world-wide network of preferred carriers to steer business to when it's not on your own metal. At the same time it sounds like a hell of a lot to have to keep a finger on and a regulatory nightmare.

It is ironic that AM, G3, and MU are big users of Ex-Im (KE too). G3 actually got Ex-Im loans to pay for engine overhauls at Delta TechOps. A bit hypocritical...

jbs2886 · Mon Jul 27, 2015 2:05 pm

Quoting sxf24 (Reply 14):
Many economists and analysts feel we are approaching a Chinese downturn, which raises questions about whether it makes sense to invest in Chinese stocks at the peak of the market. With a minority ownership share and no voting presence on the board, it's not like Delta can actually control what's MU does.

Delta management is certainly well aware of financial and economic conditions in China. In fact, it is likely China Eastern wants the influx of equity/cash in preparation for a slowdown in China.

[Edited 2015-07-27 07:33:39]

LAXintl · Mon Jul 27, 2015 2:19 pm

Quoting DL747400 (Reply 6):
How about a DL/MU ATI JV?

Not possible as the nations do not have open-skies and several other regulatory barriers preclude such relations.

CA-UA have long wanted to deepen their partnerships but until all the required changes are made its not possible.

Remember US-China relations are not only guided by regulatory requirements but political ones as well.

Quoting jbs2886 (Reply 17):
You are assuming Delta didn't get a "deal" on the stock or that it won't when finalized.

MU is a publicly traded company (even on NYSE), so no DL did not get a "deal" on the stock.

JAAlbert · Mon Jul 27, 2015 2:21 pm

How does one buy into a state owned airline? Isn't China Eastern owned by the Chinese govt?

jetblue1965 · Mon Jul 27, 2015 2:23 pm

Quoting JAAlbert (Reply 19):
How does one buy into a state owned airline? Isn't China Eastern owned by the Chinese govt?

I believe it's a publicly traded company, but the govt retain a majority of shares from the old CAAC days ?

But unlike other regular truly public airlines, one cannot just use a 3.55% share to "steer" the airline to do their bidding unless some hand greasing is done.

This investment makes partial sense that MU's PVG-USA network fills in a lot of gaps that SEA+DTW is inadequate in handling, namely, JFK and SFO.

[Edited 2015-07-27 07:27:04]

Polot · Mon Jul 27, 2015 2:37 pm

Quoting jetblue1965 (Reply 20):
I believe it's a publicly traded company, but the govt retain a majority of shares from the old CAAC days ?

Yes, the Chinese government owns a little less than 2/3rd of the airline, and I believe the rest of the shares are publicly traded (although not necessarily on foreign stock exchanges).

Air China's parent company also has a stake in MU, although I'm not sure if that is included in the government's share or not.

[Edited 2015-07-27 07:38:24]

LAXintl · Mon Jul 27, 2015 2:40 pm

Quoting JAAlbert (Reply 19):
How does one buy into a state owned airline? Isn't China Eastern owned by the Chinese govt?

MU, like CZ and CA are all publicly traded companies.

For MU specifically central state (via its SASAC investment commission) retains a ~40% ownership, while local regional governments have ~20% stake. Rest of company in traded on the open market in Shanghai, Hong Kong and New York.

mercure1 · Mon Jul 27, 2015 2:50 pm

Quoting sxf24 (Reply 3):
This is starting to smell like Swissair...

Quoting jetlanta (Reply 16):
One thing many people are not aware of is that Delta doesn't just buy into these carriers as-is. Delta is investing human resources and managerial expertise into all of them. That is one of the key benefits for these airlines, access to management resources they simply do not have on their own. Access to knowledge and experience is key to these deals.

Same exact thing Swissair did. After it all collapes the then CEO of Swissair said all these investments had been a terrible management distraction as too much internal resources were drawn to "assisting" these carriers including seconding staff into various areas.

jetblue1965 · Mon Jul 27, 2015 2:57 pm

Quoting jetlanta (Reply 16):
Or, conversely, KE might start feeling a little left out in the cold and spurred to action.

KE can retain Skyteam membership while forging a JV with AA. None of DL, JL, or CX has the veto power to stop that should they choose this nuclear option. That would probably be the best outcome for AA (strong partner hubs at NRT, ICN, and HKG) while possibly being the worst outcome for DL.

I'm not saying it *will* happen, but it's definitely a distinct possibility on the table. KE can JV with either DL or AA, but on the flip side, DL has very few partners to choose from. Things like Skymark, Hong Kong Air, or China Airlines aren't exactly aspirational partners to JV with.

sxf24 · Mon Jul 27, 2015 3:28 pm

Quoting jbs2886 (Reply 17):
Delta management is certainly well aware of financial and economic conditions in China. In fact, it is likely China Eastern wants the influx of equity/cash in preparation for a slowdown in China.

MU has plenty of cash and access to sufficient funding (plus an implicit guarantee from the government). Another reason why this doesn't make a lot of sense...

jetlanta · Mon Jul 27, 2015 3:31 pm

Quoting jetblue1965 (Reply 24):
KE can retain Skyteam membership while forging a JV with AA. None of DL, JL, or CX has the veto power to stop that should they choose this nuclear option. That would probably be the best outcome for AA (strong partner hubs at NRT, ICN, and HKG) while possibly being the worst outcome for DL.

I'm not saying it *will* happen, but it's definitely a distinct possibility on the table. KE can JV with either DL or AA, but on the flip side, DL has very few partners to choose from. Things like Skymark, Hong Kong Air, or China Airlines aren't exactly aspirational partners to JV with.

OMG...this again? There reason that KE doesn't have a JV with Delta yet is because it doesn't want a JV with ANYONE. It doesn't want to have to make joint capacity decisions. KE and Delta are still partners and still meet regularly to talk these thing through. When the day comes that KE changes its position on a JV, its partner will be Delta. It is an a.net fantasy to think that KE all the sudden is going to want to get into a JV with carrier that already has a JV with JAL. Its actually delusional.

Quoting mercure1 (Reply 23):
Same exact thing Swissair did. After it all collapes the then CEO of Swissair said all these investments had been a terrible management distraction as too much internal resources were drawn to "assisting" these carriers including seconding staff into various areas.

You can't compare $40+ billion dollar making record profits with Swissair after 9/11. I'm sorry, Delta is an industrial grade corporation that has deep pockets and deep resources. Delta can afford the distractions because the bulk of its business is highly efficient and productive. Swissair bought majority shares in unstable carriers in order to grow its scale to compete with the larger carriers. Delta has management resources to expend on expansion opportunities because its core business is very sound . It also has not bought a majority position in any of these carriers, each of which is far better positioned in its home market than Sabena or Austrian was. Delta's investments are very different than Swissair's.

Now, back to more serious matters...CAPA had a great piece last August that explains what is happening between DL and MU:

http://centreforaviation.com/analysi...ome-it-onto-the-world-stage-180939

Quote:
China Eastern GM Ma Xulun implied to the China Times that mixed ownership at the airline would allow it to distance itself (albeit slowly) from the regulator and start acting on a commercial basis. A private investor would bring cash, which the government is reluctant to again inject into China Eastern, but more importantly experience. “Money is an issue, but it is not a core issue,” Mr Ma said. “Our first consideration is the cooperation we can get from a partner and how the partner can boost our business. That is the pre-condition.”

flybry · Mon Jul 27, 2015 3:32 pm

I wonder if United will try something similar with Air China, taking a stake and investing in them like Delta is doing with China Eastern?

jetlanta · Mon Jul 27, 2015 3:32 pm

Quoting sxf24 (Reply 25):
MU has plenty of cash and access to sufficient funding (plus an implicit guarantee from the government). Another reason why this doesn't make a lot of sense...

No it doesn't. And the government doesn't want to give it more. Check out the piece from CAPA I posted above.

jetblue1965 · Mon Jul 27, 2015 3:44 pm

Quoting jetlanta (Reply 26):
KE and Delta are still partners and still meet regularly to talk these thing through.

And you know this because of ..... ? you're privy to those private conversations ?

Quoting jetlanta (Reply 26):
It is an a.net fantasy to think that KE all the sudden is going to want to get into a JV with carrier that already has a JV with JAL. Its actually delusional.

Nothing more delusional than thinking these actions will actually make KE think they're left out and will be "coerced" into striking a deal with DL.

And if you think AA has no desire to JV with someone other than JL, please look at how poor JL's coverage is of mainland China outside of the top few metros. The fact that AA has to code-share with so many HU CX KA flights to/within China speaks volumes to JAL's gap in their network. AA would much prefer that revenue stay within the JV than through a code-share.

ps : i just went to oneworld.com. From NRT, JL is only connected to PEK PVG CAN and DLC (Dalian) within mainland China. Compare that to like ..... ~25 mainland chinese destinations that KE serves ?? I sincerely hope you don't think 4 and 25 can be spoken in the same sentence.

sxf24 · Mon Jul 27, 2015 4:15 pm

Quoting jetlanta (Reply 28):
No it doesn't. And the government doesn't want to give it more. Check out the piece from CAPA I posted above.

I don't think the conclusions you're drawing are fully supported by the linked article.

I would note that MU has a market capitalization more than 4x larger than DL. Clearly, investors see it as having more value and potential. I don't think that's a position consistent with a company in need of additional liquidity.

mercure1 · Mon Jul 27, 2015 4:16 pm

Quoting jetlanta (Reply 26):
with Swissair after 9/11.

Why after 9/11 ?

SAirGroup acquired stakes in enterprises like Air Europe, Air Liberte/AOM, Austrian, Volare, LOT, Portugalia, LTU, SAA, Sabena, all before 9/11 when they wrongly pursued concept equity-based alliance strategy.

So while such strategy might have appeared sound in good times, its turned out to be a very resource intensive relationship as things went along and instead of creating longer stability it turned out to dilutive and a key factor the eventual collapse.

So yes, I can very much see parrallels here with Delta as it seeks to develop its own equity-based alliance strategy.
Will the outcome be different a decade or two from now, or will this also turn into a liability for Delta at the end. Time will tell.

jetblue1965 · Mon Jul 27, 2015 5:25 pm

Speaking of MU, they just crashed another 5.55% today (NYSE) along with the broader 8.5% one-day implosion of Shanghai-A

DL's stake of MU just lost $24.8m on paper today (to put that in perspective : they only earned ~$15.2m of net profit each day in Q2)

tlecam · Mon Jul 27, 2015 7:46 pm

I don't know how bilaterals and open skies (or lack thereof) work - I understand that since the US and China don't have OpenSkies they can't have a JV, but what can they do? Can they sell seats on each others' flights? What is China Eastern's reputation for service / flights? Is Shanghai a good connecting city for US based passengers who are trying to get to the Asia? Or is it too far west/south?

jetblue1965 · Mon Jul 27, 2015 7:56 pm

Quoting tlecam (Reply 61):
Can they sell seats on each others' flights?

Yes, as codeshare. Just no sharing of revenue/costs allowed.

Quoting tlecam (Reply 61):
What is China Eastern's reputation for service / flights?

3-star-ish, give or take, in line with CA and CZ. Definitely not a 4-star airline like VS or NZ.

Quoting tlecam (Reply 61):
Is Shanghai a good connecting city for US based passengers who are trying to get to the Asia? Or is it too far west/south?

It's not too bad other than overflying Japan, Korea, and PEK. Maybe it has improved a bit recently, but from my personal I-to-I connection a few years back, it's not the seamless level that NRT ICN HKG provides.

panamair · Mon Jul 27, 2015 9:41 pm

Quoting tlecam (Reply 61):
What is China Eastern's reputation for service / flights?

The hard product has improved leaps and bounds with the arrival of the 777-300ERs - with 1-2-1 J seats, etc. Quick promotional video of their 77Ws:

http://www.youtube.com/watch?v=CMXskS2CZF8

Think they also recently went through a rebranding exercise, with new front-line uniforms by Christian Lacroix (similar to AF uniforms, IIRC)

They still need to do some work on their medium/short haul flights though, with some old Shanghai Airlines (FM) planes still flying the domestic and regional routes...

[Edited 2015-07-27 14:48:46]

dank · Mon Jul 27, 2015 10:12 pm

Quoting panamair (Reply 71):

Quoting tlecam (Reply 61):
What is China Eastern's reputation for service / flights?

The hard product has improved leaps and bounds with the arrival of the 777-300ERs - with 1-2-1 J seats, etc. Quick promotional video of their 77Ws:

http://www.youtube.com/watch?v=CMXskS2CZF8

Think they also recently went through a rebranding exercise, with new front-line uniforms by Christian Lacroix (similar to AF uniforms, IIRC)

They still need to do some work on their medium/short haul flights though, with some old Shanghai Airlines (FM) planes still flying the domestic and regional routes...

Soft product at least on short and medium haul needs a bit of work. Though, I have generally found the mainland Chinese carriers that I have flown (Air China, China Eastern, Sichuan Airlines) to be more in line with the domestic US carriers (i've only flown sectors in the 3-6 hour range) than my experiences on JAL, Asiana, Cathay, Singapore, and Vietnam Airlines.

LAXintl · Mon Jul 27, 2015 11:12 pm

China Eastern and Delta today jointly applied with the DOT to expand code-share cities.

Display MU designator to following DL markets from MU US gateways:
AUS
BWI
CMH
CVG
DEN
DTW
HNL
JFK
KOA
MCI
OGG
PBI
RDU
SAT
SLC

Display DL designator tofollowing MU markets from China gateways:
Guiyan (KWE)
Haikou (HAK)
Tianjin (TSN)
Yanji (YNJ
Zhengshou (CGO)
Zhuhai (ZUH)

Codeshare on each others TransPacific services:
LAX-NKG operated by MU
LAX-PVG operated by DL

OST-2011-0065

B737900ER · Tue Jul 28, 2015 2:00 am

Quoting dank (Reply 75):

Domestically they need a lot of work. They are by far, IMO, the worst Chinese carrier.

Sydscott · Tue Jul 28, 2015 2:08 am

Quoting B737900ER (Reply 84):
Domestically they need a lot of work. They are by far, IMO, the worst Chinese carrier.

Interesting that MU's closest Partners are Delta and Qantas.........

Aither · Tue Jul 28, 2015 2:46 am

Excellent move. That kind of strategic thinking is really what is missing in our industry.

Delta (and other US carriers) do not have large enough hubs to open many transpac routes.
On transpac routes the vast majority of travelers are and will increasingly be Asian travelers.

> Unlike the transatlantic where you have 50/50% European/US carriers flights the transpac will be 80% Asian carriers routes & flights. United already well serve the American travelers flying to Asia. DL & AA have just no choice but to have solid JV with Asian carriers.

On the other side, Asian carriers don't need that much the US carriers. The traffic is from their backyard.

[Edited 2015-07-27 19:48:17]

Sightseer · Tue Jul 28, 2015 3:03 am

Quoting LAXintl (Reply 79):

Thanks for posting that list. However, does DTW's inclusion mean that MU hasn't been codesharing on DTW-PVG until now? Or does it just mean that now you can book an MU ticket for PVG-SEA-DTW (same for JFK)? Either way, I'm a little surprised by that.

[Edited 2015-07-27 20:05:46]

777Jet · Tue Jul 28, 2015 3:30 am

Quoting bunumuring (Reply 12):
Wonder if Delta's move will see Qantas shift again towards China Southern, considering that the only other C3 available (Air China) is aligned with Cathay Pacific which in turn is very cold towards QF despite both being in OneWorld...

Interesting how CA and CX have a warmer relationship, despite being in different alliances, than QF and CX who are both OneWorld members.

Quoting Aither (Reply 86):
On the other side, Asian carriers don't need that much the US carriers. The traffic is from their backyard.

The fraction of the pax on Asian carriers that have a final destination in the USA other than the dozen or so major cities that the Asian airlines fly non-stop into can just be fed by bus to their final destination

delimit · Tue Jul 28, 2015 3:38 am

Quoting delimit (Reply 90):
The fraction of the pax on Asian carriers that have a final destination in the USA other than the dozen or so major cities that the Asian airlines fly non-stop into can just be fed by bus to their final destination

I'd be interested in seeing those numbers. There's a lot of business destinations in the US where Asian companies have manufacturing concerns but lack direct flights.

Sydscott · Tue Jul 28, 2015 4:04 am

Quoting 777Jet (Reply 89):
Interesting how CA and CX have a warmer relationship, despite being in different alliances, than QF and CX who are both OneWorld members.

You realise that CA and CX have reciprocal shareholdings in each other? So it's not really that interesting.

It's also well known that QF and CX don't really like each other. They're both in Oneworld because of the other carriers they co-operate with.

LAXintl · Tue Jul 28, 2015 4:11 am

Quoting Sightseer (Reply 87):
However, does DTW's inclusion mean that MU hasn't been codesharing on DTW-PVG until now? Or does it just mean that now you can book an MU ticket for PVG-SEA-DTW (same for JFK)? Either way, I'm a little surprised by that.

DL/MU have been code-sharing on the DL PVG-DTW service since late 2011. Today's request adds domestic city-pairs to/from DTW to MU's U.S. gateways.

northwestEWR · Tue Jul 28, 2015 5:06 am

This should come as no surprise to those who follow Delta. They've been dying for an Asia partner and apparently it wasn't working out to be Korean and they've been wanting to expand at Shanghai. This does both. And an "observer seat" on the board--I can observe in the board room and make strong suggestions outside those doors. Anyone who thinks that's a near useless position is kidding themselves. Delta will be involved with China Eastern.

Expect an ATI JV as soon as they figure out how to do it under the bilaterals.

Quoting DL747400 (Reply 6):

You hit the nail on the head.

KaiGywer · Tue Jul 28, 2015 5:44 am

After a severe thread gutting due to childish name calling and personal insults, we are now back on track. Keep the thread on track, lay off the personal insults and discuss the topic at hand.

Any further bickering between users will cause this thread to be locked.

enilria · Tue Jul 28, 2015 4:01 pm

Quoting KaiGywer (Reply 46):

After a severe thread gutting due to childish name calling and personal insults

Thanks for putting a stop to that.

Quoting Aither (Reply 39):
Excellent move. That kind of strategic thinking is really what is missing in our industry.

Delta (and other US carriers) do not have large enough hubs to open many transpac routes.
On transpac routes the vast majority of travelers are and will increasingly be Asian travelers.

Quoting northwestEWR (Reply 45):

This should come as no surprise to those who follow Delta. They've been dying for an Asia partner

Quoting LAXintl (Reply 36):

China Eastern and Delta today jointly applied with the DOT to expand code-share cities.

So, here is my perhaps controversial view on this.

Since the whole ME3 debate broke out, there has been a lot of comparisons between the ASM growth of the ME3 and the Chinese carriers moving forward. In other words, the Chinese carriers are growing pretty aggressively now in long-haul.

DL seems to be employing a worldwide strategy to suppress ASM growth. In Europe they are using JVs and the like-minded JVs of others to suppress growth, in the MidEast they are trying to use the political process to suppress growth, and in Asia you really have Japan, Korea, and you have China which is the biggest growth risk. Japan isn't growing due to economic issues, plus the JVs are in place that naturally constrain capacity. DL wants a JV with KE probably to prevent them from deploying tons of 747-8 and A380 capacity into North America which will hurt yields. So far, they have been unable to corral KE. The Chinese carriers are another significant capacity risk. China Eastern is one of the largest capacity risk to Delta. My guess is that this investment is aimed at constraining MU capacity to the USA or at least constraining it to markets that DL cares the most about. Overall, it's a very smart financial strategy by Delta worldwide to maximize yields into the USA, although for consumers it isn't so good.

[Edited 2015-07-28 09:01:37]

tlecam · Tue Jul 28, 2015 5:04 pm

One of the other twists to this is that China Eastern is one of the airlines which receives the most subsidies from the party.

http://www.ch-aviation.com/portal/ne...-chinese-domestic-carriers-in-2014

"China Eastern received the biggest subsidy of CNY211million, followed by China Southern (CNY198million) and Air China (CNY62.1million). Hainan Airlines has been allocated CNY7.8million while its subsidiaries, among them Tianjin Airlines (GS, Tianjin), the country’s biggest regional carrier, and Capital Airlines (China) (JD, Beijing Capital), have secured a total of CNY200million in funding. Smaller carriers, such as Sichuan Airlines (3U, Chengdu), Okay Airways (BK, Tianjin) and Tibet Airlines (TV, Lhasa), were allocated over CNY10million each."

Which makes DL's argument against the ME3...peculiar.

TVNWZ · Tue Jul 28, 2015 5:40 pm

Quoting enilria (Reply 47):

Good take. We have discussed a lot about how it would be great if foreign airlines could have a majority interest in American airlines or be able to compete head to head in the US domestically. It could be DL is taking a page from that book--investing in foreign airlines to establish themselves for the future when they could have majority interests in these or other airlines.

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