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CactusA319
Topic Author
Posts: 2822
Joined: Fri Jan 21, 2000 1:51 am

American Outslicks United

Wed Feb 07, 2001 4:41 am


Check this out:

Monday Morning, January 15, 2001
American Out-Slicks United. Big Time.
Now, let's be clear. You heard it here first. American Airlines just
implemented the most brilliant piece of tactical airline strategy since
the onset of deregulation.
United, busy with its merger with US Airways, just got nuked.
And they don't even realize it yet. Neither does Wall Street, which was
just too eager to downgrade American's stock. Big mistake. Big
opportunity for investors who have a planning horizon longer than a
re-run of Roseanne.
Again, you heard it here first: Within three years, American Airlines -
not United - will be the dominant revenue airline at every major East
Coast city. Boston. New York. Philadelphia. Washington. And United will
be stuck trying to make duplicative hubs work while AA becomes the main
carrier of choice at all - yes - all those big O&D cities.
In one stroke (actually set of strokes) Don Carty has not only guaranteed
enormous high-yield traffic growth for AA, but he also left his major
competitor in what may be an eventually dangerous strategic position. You
heard it here first.
Bear with us. This will take a bit of time, but it will illuminate what
most of Wall Street and the aviation media have completely missed. Stuff
they'll all be spouting only after it appears in their rearview mirrors.
United: Getting Led Down the Path. The past week, there were several
important decisions that, according to the mainline and aviation media,
were great victories for United Airlines in its quest to get its paws on
US Airways.
The European Union "approved" the US/UA deal, with just a couple of
"little" changes. (Little changes, as we'll see, that are not so little
in American's grand scheme.)
American Airlines agreed to buy a whole bunch of US Airways assets from
United, thereby reducing fears among regulators about United's potential
"dominance" - there will be competition aplenty, the media implied.
United and US Airways management just whooped it up. The deal is now
assured. And the aviation trendies cheered, too.
Wrong. When all these events are taken from a long term tactical view,
United just torpedoed the long-term benefits of its own merger, and may
have outsmarted itself into a colossal black hole. Let us count the ways.
Meanwhile, In St.Louis. First, separate from the US/UA deal, American
just picked up the assets - cheap - of TWA. What that means is that AA
will get a highly efficient mid-continent connecting hub, along with a
dominant position at a major O&D market at St.Louis. What that means to
United is that its major competitor will have far more capacity - and far
more efficient capacity - to increase East-West traffic, and to gain more
share in long-haul, higher yield markets.
See, United and AA both are stuck with congested and expensive O'Hare for
East-West traffic flows. But United only has Denver as an alternative
reliever to expand these flows. Plenty of room at DEN, but it's obscenely
expensive. Worse, when the snow flies (which tends to happen in Colorado)
DIA becomes a major bottleneck due to an incredibly inefficient remote
de-icing system. Major delays. Major expense.
Compare and contrast this with AA, which will now have both DFW and STL
(along with all the airplanes, crews, and facilities already in place) to
flow passengers across the nation. A lot more efficient capacity than
United, by the way. And, unlike United, AA will need to do a lot less
rationalizing of route systems.
(NOTE: In response to those who've nearly choked when they hear the words
"efficient" and "St.Louis" in the same sentence, let's understand that
this is in the context of the AA system, and how AA can be expected to
utilize these facilities. AA will likely not need to cram as many banks
through STL or as many flights. Therefore, less congestion. Unlike the
TWA operation, AA will engineer it to be compatible with their DFW and
ORD operations, not competitive with them. Also, bet your frequent flyer
miles that AA will move after the deal is done to eliminate some or most
of the small-airport feed operations, particularly with 19-seater
aircraft, again freeing up airside "capacity." Another efficiency gain is
the alternative capacity AA will have when one of its E-W hubs is down
due to weather or the idiot ATC system. Traditional consultants and the
aviation trendies think the STL "hub" is some sort of natural phenomena.
They are, as usual, wrong. It is merely a set of facilities that an
airline uses as it sees fit. AA will use it differently than TWA, and the
results will be different, too.)
So, while United is busy monkeying around trying to merge into a high
cost East Coast conglomerate, American just laid the groundwork to blow
United away in the rest of the nation. And even if the UA/US merger is
deep-sixed, AA will still be miles ahead of United.
(In tennis parlance, that's called "Game" - for American)
Doing The Deal At Any Cost. But it gets worse for our friends at United.
AA also has just cut another deal that will blow United away in the key
markets they are trying to buy into with this US Airways merger.
Deliciously for Mr. Carty, United is willingly assisting AA in the
endeavor.
See, the stuff that United is so eagerly selling to AA are hard assets,
like gates and slots that are a) largely insulated from the effects of
competition, and b) will give AA the ability to essentially torpedo
United's intent to be the dominant carrier on the East Coast.
American gets 36 slots at LGA. (Can you say "ka-ching?") It get five
gates there, too.
American gets half of the US Airways Shuttle market, which means United
has given away a chunk of what would have been a large part of its new
identity in the region.
United doesn't know it, but this transaction is neck and neck with the
one the Indians cut for Manhattan. AA gets a dominant role at BOS, LGA,
and DCA. Not low-yield markets, these. And for the most part, there's no
pesky Southwest airplanes anywhere in sight.
American also gets 49% of DC Air. Yes, as Air Transport World put it, DC
Air is a transparently cynical deal. But AA has the right to buy the rest
of the airline. Remember, Robert Johnson did not become a gazillionaire
by doing dumb deals. Chances are he'll eventually sell DC Air for a good
dollar. And that means AA will be the dominant carrier in Washington,
with a very large presence at LGA and Boston, too. Guess what that could
mean to United's half of the east coast shuttle.
(In tennis parlance, that's called "set" for American.)
On The Whole, AA'd Rather Be In Philadelphia. Also critical in
understanding this chess game is Philadelphia. As part of the deal, AA
agreed to operate at least two daily flights between PHL and Denver, San
Jose, and LAX. Markets that on the surface don't seem to have that great
a fit with AA's core route system. But, as we'll see below, there is
method - brilliant method - to Mr. Carty's madness.
Enter here the annoying interlopers at the European Union, who grandly
approved the United takeover of US Airways. (Like, big deal. It isn't
these guys in Brussels that are losing a major competitor.) But they
demanded a couple of concessions, which apparently United was only too
eager to give. Like getting a new competitor in trans-Atlantic markets
from PHL, PIT, and CLT. The last two will be problematic, as any such
airline will likely need a connecting hub at either end to make it work.
But Philadelphia. Now there's the story. Its a big market. And again,
it's American that has probably again out-slicked our friends at United.
Remember, AA has already agreed to operate several markets from PHL.
Guess who might be in line to take those EU-ordered international markets
from PHL? You guessed it - probably American. Result: AA will have a
major operation at PHL, one that directly competes with United's IAD
system.
(In tennis parlance, that's called "Game, Set, and Match") AA takes the
trophy:
Nationally, they will end up with a far larger and more efficient hub
network. When the dust settles, AA will be bigger than United.
In the East, AA will dominate BOS, LGA, PHL, and DCA. Big revenues.
United will be stuck trying to integrate high-cost US Airways into its
system while American will be making hay where the revenue is.
Tale of Two Mergers. This doesn't make the UA/US merger any better. It's
still anti-consumer and anti-competitive. It still should be stopped and
opposed by any airport that cares about its future. But the AA piece of
it will at least provide some offset for the consumer. The sweet justice
is that in trying to make the merger work, United has just given away the
store.
The AA/TWA deal, by the way, is very different from the UA/US merger.
American is simply buying assets from a carrier that really is going out
of business anyway. United is gobbling up a perfectly viable competitor.
The first deal is unfortunate, but unavoidable. The United/US Air deal is
a conscious attempt to reduce competition.
Stay tuned.
 
JAL
Posts: 3876
Joined: Sun Apr 30, 2000 12:37 pm

RE: American Outslicks United

Wed Feb 07, 2001 5:07 am

I have no doubt about AA ability to be the # 1 carrier in the world!!!!!!!!!!!!!!!!!!
Work Hard But Play Harder
 
Ryefly
Posts: 1328
Joined: Wed Jun 21, 2000 7:56 am

RE: American Outslicks United

Wed Feb 07, 2001 5:07 am

I wonder what airline that aurthor works for? Delta?  Smile It seems to me that he/she is underestimating the new United. Its not to say AA won't be a powerful presence but jeez why doesn't it just say I love AA, I just got hired there and their planes are so pretty and shiney. United doesn't have a chance!! GOOOOO, American!!
 
JAL
Posts: 3876
Joined: Sun Apr 30, 2000 12:37 pm

RE: American Outslicks United

Wed Feb 07, 2001 5:14 am

I have no doubt about AA ability to be the #1 carrier in the US.
Work Hard But Play Harder
 
imkeww
Posts: 676
Joined: Sat Apr 28, 2001 1:48 am

RE: American Outslicks United

Wed Feb 07, 2001 5:38 am

I posted this when it came out 01/15...

The author is David Boyd, of aviationsys.com

For some reason, this guy has long had an axe to grind with UA. Perhaps it's because his aviation consultancy is based in Denver, CO.

Anyway, the company website is very unprofessional for such a "prestigious group of consultancy", and Boyd usually has negative things to say about the air industry as a whole.

Visit their website. http://www.aviationsys.com

Sift through it, sift through the articles, and you'll see what I'm talking about. The guy is worthless, and although he hinds behind a "reputable" facade, methinks he and his co. are not legit.

-imk
 
imkeww
Posts: 676
Joined: Sat Apr 28, 2001 1:48 am

RE: American Outslicks United

Wed Feb 07, 2001 5:41 am

BTW, as an advisory, just so you don't get a lawsuit and some evil lawyers getting medieval on your ass, I would advise on putting up your sources and related copyright info...

I realize it is a very slim risk, but it don't hurt.

-imk
 
QantasA330
Posts: 304
Joined: Tue Dec 05, 2000 1:57 am

RE: American Outslicks United

Wed Feb 07, 2001 6:02 am

OMG THIS IS THE BIGGEST LOAD OF BULL$HIT I HAVE EVER HEARD!

: : :QantasA330: : :
 
CactusA319
Topic Author
Posts: 2822
Joined: Fri Jan 21, 2000 1:51 am

RE: American Outslicks United

Wed Feb 07, 2001 7:57 am


imk,

Sorry, I got this in an email and it didn't have the copyright info. on it so I posted it as is. I didn't realize you had already posted it, sorry.

As for David Boyd, I've heard of him and his consultancy. He is frequently quoted in articles that relate to airlines and/or the airline industry. So he has to have some credibility, even if he tends to have a biased opinion. Still, it is an interesting viewpoint and that's what I wanted to share with youz guyz  Smile/happy/getting dizzy

 
johnnybgoode
Posts: 2144
Joined: Wed Jan 03, 2001 8:47 pm

RE: American Outslicks United

Wed Feb 07, 2001 8:19 am

was it taking from the AA inflight magazine???
sounds like!
David Boyd, he??? keep that name in mind.
in my eyes, this is not an objective view of the situation. i´m not calling this article totally incorrect, it certainly has some true points.
but this make it seem that the bosses behind AA are the brains of the industry and UA is headed by beginners.
if this article would become reality what i don´t think because there are certain things that sound unrealistic (AA hub in PHL...) then the beople behind UA must be stupid. but hey, they´re running the biggest airline in the world, and i´d say no one who´s running such an airline can be called a greenhorn, and that´s what this article definitively does.
i think that all the AA thing with TW, US and the shuttle, yeah, that´s more than brilliant. but i don´t think that´s it got something to do with out-smarting UA.
and if anyone complained the UA/US merger being anticompetitive, then what do you call the AA thing, as it is stated in this article? i doesn´t seem more consumer friendly to me!

rgds
daniel
If only pure sweetness was offered, why's this bitter taste left in my mouth.
 
DeltaSFO
Posts: 2407
Joined: Fri Nov 03, 2000 11:22 am

RE: American Outslicks United

Wed Feb 07, 2001 9:52 am

He's obviously never heard of a company called Delta Air Lines.

DeltaSFO
It's a new day. Every moment matters. Now, more than ever.
 
travelin man
Posts: 3263
Joined: Tue Mar 14, 2000 10:04 am

RE: American Outslicks United

Wed Feb 07, 2001 10:07 am

While I agree that this article is one-sided, I happen to agree with many of its points. Face it: AA comes in, gets lucrative USAirways landings slots, gates, and a 50% stake in the NE Shuttle (one of its most valuable assets), in addition to scooping up all of TWA (a profitable carrier minus Karabu).

For all of this AA is hailed as a savior (of jobs), and UA is basically labelled an anticompetitive giant and demonized.

You guys may not like AA, but they pulled off a heck of a move.

In my opinion, AA got a great deal with little negative PR. Suddenly the things UA was buying appear somewhat less valuable, given the slots, gates, and 50% of the Shuttle they are giving up. Does anybody know if they reduced their purchase price because of this? Or will they be paying the same thing (stock purchase price) and making it up with the AA payments to UA?
 
Shawn Patrick
Posts: 2465
Joined: Tue Jan 11, 2000 7:30 am

RE: American Outslicks United

Wed Feb 07, 2001 10:36 am

OK... so if this TRULY DOES happen, fine then. AA can have the east coast. But the big piss-off about the east coast is it can't fit any more people in!

What United will do is build up the WEST COAST! Tell David Boyd that America stretches from sea to shining sea.

The west coast can grow. More people can move to the west coast. That means gradually increased profits for UAL in the long run.

Another major asset that UAL has its paws on is Denver. Believe it or not, Denver will be the new economic center of America in 20-30 years.

Bottom line: American can have the east coast. United can have the rest.

-Shawn
 
blink182
Posts: 5370
Joined: Mon Oct 18, 1999 3:09 am

RE: American Outslicks United

Wed Feb 07, 2001 12:07 pm

AA will be #1!! They are headquartered at my home airport!! They are my favorite airline!! I AM SOO HAPPY!!! YAHOOO!!! Once again, Carty and Crew outsmart the rest!!
rgds,
a happy blink182!!
Give me a break, I created this username when I was a kid...
 
AerLingus
Posts: 2280
Joined: Wed Mar 08, 2000 9:22 am

RE: American Outslicks United

Wed Feb 07, 2001 12:10 pm

Hey CactusA319, are you an America West fan?
(Hence Cactus)
Get your patchouli stink outta my store!
 
imkeww
Posts: 676
Joined: Sat Apr 28, 2001 1:48 am

RE: American Outslicks United

Wed Feb 07, 2001 2:09 pm

Sorry all, I made several wrong impressions:

First of all, I said the goon was David Boyd; his name's actually Michael Boyd.

Cactus319, I'm sorry if it sounded like I was scolding you! By all means, I wasn't mad at all about the re-post, and just wanted to give you a friendly tip. I do NOT have a stick up my ass! lol...

Re: AA PR. Yes, Travelin' man. True dat. AA has historically had a wonderful (read: sneaky) PR department, and it has been able to downplay bad publicity with a snap, and glorify its new initiatives in the eyes of many.

Many think AA is the true leader of the pack when it comes to initiating moves, and while AA has superb management, PR, and excellent aftermath strategies, it is for the most part a shaker, not a mover. But a brilliant (read: worthy adversary) shaker at that.

-imk
 
lymanm
Posts: 1102
Joined: Tue Jan 23, 2001 2:30 pm

RE: American Outslicks United

Wed Feb 07, 2001 2:32 pm

Not a bad article. Mr. Boyd raises some good points. But I think he underestimates UA. UA is part of the *very* influencial Star Alliance. Not that One World is awful, but simply put, it isn't as powerful as Star.

Less importantly, with the Feds being more supportive of Star carriers (UA and BM) operating the LHR-NYcity than AA/BA, UA has better growth potential than AA on what is perhaps the world's most lucrative city pairs.
buhh bye
 
admluvs2fly
Posts: 146
Joined: Fri Jan 19, 2001 6:13 pm

RE: American Outslicks United

Wed Feb 07, 2001 2:40 pm

i have to agree with the writer , what a move. by the way what does O&D stand for.
 
CactusA319
Topic Author
Posts: 2822
Joined: Fri Jan 21, 2000 1:51 am

RE: American Outslicks United

Thu Feb 08, 2001 4:06 am


imkeww:

I know you're trying to be anal or anything. You cool. I just know people can get kind of pissy when stuff gets reposted here so I apologized.

Aer Lingus:
Yeah you can say I'm an AmWest fan. Former employee of them too.

Adam:
O&D stands for Origin and Destination traffic. Basically, passengers that are starting and ending their journey in that particular city and are not just connecting to another flight.

 
[email protected]
Posts: 392
Joined: Sat Sep 09, 2000 8:06 pm

RE: American Outslicks United

Thu Feb 08, 2001 4:23 am

Carty's cartel has risen again!

AA = Absolutley Amazing!

Good for TWA, Good for American, Good for the world.

American ~ rising

Keep it up Mr. Carty, we're all behind you!

[email protected]
 
ord
Posts: 1408
Joined: Tue Jul 20, 1999 10:34 pm

Nothing But Garbage

Thu Feb 08, 2001 4:31 am

Let's take some of the author's points and see how wrong he is:

1. "American...will be the dominant revenue airline at every major East Coast city. Boston. New York. Philadelphia. Washington."

Hard to see since UA will be significantly larger at Boston, Hartford, LaGuardia, Philadelphia and Dulles. What the hell is this guy talking about? How can AA be dominant in PHL will UA will practically own the airport?

2. What UA gave up are things they will have no use for after the merger (duplicate things). Like the slots at LGA. Even giving up the 36 slots, UA will have about double the number of mainline flights as AA.

3. "AA gets a dominant role at BOS, LGA and DCA."

Well, yes, but UA will have an even MORE dominant role (except at DCA of course).

4. "AA will have a major operation at PHL, one that directly competes with United's IAD system."

Sure, if AA adds over 100 flights and a ton of feeder flights. Like that's going to happen. Get real.

5. "AA will dominate BOS, LGA, PHL and DCA."

Simply impossible (except, again, at DCA). UA will have twice the flights and many more gates at BOS, same with LGA (and with the slot controls AA will not catch up anytime soon), and UA as I said will own PHL.

This article is so ridiculous that I don't know whether to laugh or feel sorry for this idiot.
 
User avatar
flashmeister
Posts: 2686
Joined: Fri Apr 28, 2000 4:32 am

RE: American Outslicks United

Thu Feb 08, 2001 5:20 am

Michael Boyd is on the record as being totally against US-UA and has taken UA to issue on everything from customer service to the amount of salt on the peanuts that they serve.

It's true that AA scored one helluva deal, but don't start thinking that Goodwin is a moron. AA does have one up on UA with their PR, but look at the deal closely.

There are provisions in the deal for assets between UA and AA which restrict AA's growth. AA can't grow larger than UA, or they have to start giving back assets, and I believe, pilots.

As for the interhub ops, AA is only obligated to serve those markets for 10 years, and only while there are no other nonstop flights. PHL-DEN, for instance, is a prime candidate for Frontier, who competes against UA on a number of markets out of DEN and is doing a great job at it. If F9 enters PHL-DEN, AA is no longer obligated as long as F9 stays in it. I'd bet that if F9 enters the market, AA will do what the can (codeshare, etc.) to make sure they stay there to get AA off the hook for that one.

As for most of the other interhub flights, they'll go from major AA centers anyway - DCA and ORD. That's no biggie for them. I believe that one of the flights also involves CLT, which perhaps AA can nudge Midway into doing for them.

While UA may move to strengthen the West coast, they're already so dominant out there that the only real growth would be RJ flying at smaller cities (Eugene, Medford, Sacramento, Boise, Spokane, Fresno, etc.).

This is a great deal... and in the shadows of the giants, the newbies will flourish. The real winners here, if they take the opporunity, will be the likes of Frontier, AirTran, jetBlue, and even perhaps Alaska/Horizon.

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