New Asia Route Rumors Gaining Strength

Discussion in 'American Airlines | AAdvantage' started by DestinationDavid, Oct 4, 2011.  |  Print Topic

  1. DestinationDavid
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    Rumors making the rounds on TravelingBetter (LINK) and Flyertalk (LINK) from traditionally reliable sources for AA information.

    Any routes you are looking forward to? Looks like a strong push toward MIA-NRT.

    LAX-PEK, DFW-ICN, and JFK-PVG also on the table.

    I'd be happy to see AA push further into Asia as that's my preferred travel destination. Another option to NRT is good for my travel patterns. Would be great to see ICN become a destination. Options to SIN would help with connecting to SE Asia and I'd also love to see BOM hit the AA map, though I doubt it.
     
  2. DeacFlyer1
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    MIA-NRT is surprising to me...it seems like this would just take away connecting traffic and possibly undercut fares on routes to NRT from other hubs.

    And also interesting on the Asia routes, especially in light of an analyst's report back in May that several of AA's Asian routes are the top money losers in the system (ORD-PEK losing $40 million annually, ORD-DEL also losing $40 million, and ORD-PVG losing $13 million). Granted, these rumored routes are from LAX/JFK, but that's still adding capacity to that destination within the AA system.
     
  3. MSPeconomist
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    I can imagine these ORD routes as perhaps not being especially lucrative, but if AA is a serious international airline, they should be able to run some profitable TPAC routes, although not necessarily from highly competitive hubs such as JFK, LAX, or ORD. DFW would be obvious as would MIA, especially if they can draw connections from Latin America, (However, for Latin American citizens to connect through the USA isn't so clear as visas are required. Business travellers are likely to have USA visas anyway, but for occasional/leisure travellers, the application process and fee even for a brief transit will be very off-putting. Nevertheless, it's the business travellers who pay the big fares, so this could work, especially on aircraft with a larger fraction of premium seats.)
     
  4. dayone
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    That analyst's report has never been confirmed or substantiated.
     
  5. DeacFlyer1
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    Nor has it been refuted, so it's worth considering until it's substantiated or disproved.
     
  6. joejones
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    DFW-HKG makes the most sense to me since it's a hub-to-hub connection that would open up many new destinations in SE Asia. I would love to see MIA-NRT but I think it's a 787 route, not a 77W route.

    I don't see ICN happening anytime soon, unless one of the Korean airlines decides to move to oneworld. OZ would bring some balance to the Force in this part of the world if it did so... but now I'm playing fantasy football.

    I could imagine some China/India flights moving to JFK or LAX where the O&D demand is higher, though I think AA would need to kill an existing ORD route in order to do that under current treaties.
     
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  7. Tenmoc
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    I think what I would prefer more is true metal neutrality. Not having to pay very high fare buckets or hundreds more for the AA code on partners.
     
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  8. dayone
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    Well, the report has been labeled "controversial" by several outlets and no other analyst has issued a similar report.

    Not all opinions are worthy of consideration.
     
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  9. DeacFlyer1
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    Was the report controversial because it used incorrect data? Or was it controversial because it recommended a course of action that went against the way AA typically thinks as an organization? I'm happy to discount it if the data or numbers used in the report were inaccurate, but I haven't seen that claim made anywhere. In some of the news articles I read concerning this, it was mentioned that other analysts disagreed with the analyst's assesment to downgrade AA's buy/hold/sell position, but nowhere was it mentioned that the analysis was based on false information.

    I would say his argument that AA could significantly improve financial performance just based on capacity adjustments on high profile routes is worthy of consideration, given the data I've seen to this point.
     
  10. DestinationDavid
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    I'm assuming you're referring to the McAdoo analysis from May? From what I know he collected public data and then used analysis and extrapolation to come to his conclusions and many have questioned whether that process resulted in accurate analysis. It's not as if he had concrete numbers in front of him, he had to play Sherlock Holmes and create it. Lots of room for error, misunderstanding, and false assumptions.
     
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  11. dayone
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    I'm certain that AA route planning analysts have access to better data than you (and the author) do so I'll respect their consideration.
     
  12. DeacFlyer1
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    Thanks for the further insight. I agree that some sort of third-hand interpretation probably has the potential to not be as accurate as it should be, although I have an honest question: wouldn't he as an analyst have access to the same information that other analysts have? It's not like an analyst at another firm who disputed his conclusion had some sort of additional or inside access to AA's books, or some sort of different financial information, right?

    Perhaps I didn't phrase my response well. I certainly didn't mean to imply that I have any access to route performance data. I simply meant that I hadn't seen anything written put forth that threw the McAdoo report into a controversial light (and still haven't seen something like that).

    Of course AA's route planning analysts have access to the best data...but I think it's interesting to discuss the possibility that AA would keep flying an unprofitable route because of other considerations besides money. JFK-LAX/SFO is a high profile, "Flagship" route...even if they were losing some money on it, it seems possible that AA might retain the route (and the level of service, i.e. 3-class 767's) in order to maintain brand recognition and market share on the busiest domestic route in the US, for example.

    Whether the McAdoo analysis is correct or not, I think it raises some interesting ideas that are worth discussing, instead of just assuming AA knows best...because regardless of the specific data points the AA route planners have, the airline is (and has been) losing a ton of money, and I think it's perfectly valid to throw around some alternative ideas as to why.
     
  13. HaveMilesWillTravel
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    I think, too, that for some routes it's too simplistic to maintain or kill them simply by looking at their portability in isolation. Killing them might lose the airline profitable customers on other routes.

    And then, while companies of course have the best data, that doesn't mean they always use it appropriately...
     
  14. joejones
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    To be nitpicky, while it is indeed the busiest transcon route, NYC to South Florida is the busiest city pair and SFO-LAX is the busiest airport pair.
     
  15. DestinationDavid
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    Well in a sense he did have "additional" information: the extrapolated information he created. I'd assume that other analysts might not have taken the leap he did in trying to isolate specific dollar amount profitability on routes. At the end of the day the only people who really know how close McAdoo was to being correct are AA's management team and those privy to that team's information. While I don't have much of a dog in this fight, I take any analysis that's not based on cold hard facts with a spoonful of salt. Not to mention the track record of many airline analyst's being equivalent to tarot card reading.

    Also keep in mind that it's been commonly discussed that one area where AA is fairly successful is securing corporate premium cabin contracts for their Flagship routes. That has nothing to do with whether those routes are profitable, but it's an incentive to keep the status quo.

    I think people would be hard pressed not to acknowledge that there is something wrong at AA. The most obvious targets are labor costs and fuel costs, but as you alluded to those are only parts of the puzzle.

    These other factors will continue to be debated from now until ..... bankruptcy? A new management team turns AA around?

    Who knows. :)
     

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