FlyBoeingJets
YES, that's NICE
- Joined
- Mar 20, 2003
- Posts
- 1,802
We all make fun of the "poor" business model of the hub and spoke. But for an international route network, it is the way to go. International revenue is superior to domestic and barriers to entry seem to be higher. The seeming implosion of DAL, NWA and UAL is partly about cutting domestic and expanding international flying. The hub and spoke model just needs tweeking. Alaska seems to get a great benefit out of their regional.
Is the tweeking done at CAL and AA? If not, what remains to happen to wages and the number of pilots employeed?
For domestic flying, what will carriers other than JetBlue getting 100 seaters do to the LCC growth story??
So there you have it--If you trust in the JetBlue growth story, go there.
If you think international flying is safe from LCCs and continued restructuring won't cause new furloughs, go to Continental.
Northwest, Delta Eye Overseas for Profits
Friday October 7, 6:28 pm ET
By Joshua Freed, AP Business Writer
Northwest and Delta Look to International Flying for Profits During Bankruptcy Makeovers
MINNEAPOLIS (AP) -- Northwest Airlines' daily Amsterdam-to-Bombay run fetches $1,400 a ticket, the airplane flies nearly full, and JetBlue doesn't go there. Which is why international flying is a moneymaker for most U.S. carriers -- and why Northwest and Delta Air Lines Inc. are both making international flying a big part of their bankruptcy makeovers.
Delta says it will increase international flying by 25 percent while cutting domestic flying as much as 20 percent, and this week it announced new nonstop service from Atlanta to Tel Aviv beginning in March. Northwest increased international capacity 5.1 percent last month while domestic capacity stayed flat, and it says it will cut domestic capacity at least 10 percent. It's adding nonstop service from Amsterdam to Bangalore, India.
In Northwest Airlines Corp.'s bankruptcy filing, Chief Financial Officer Neal Cohen went so far as to call the carrier's Pacific routes one of its "most valuable assets," adding, "I believe that (Northwest's) viability as a going concern is dependent upon the maintenance of these foreign operations."
Northwest and Delta are following the lead of UAL Corp.'s United Airlines. Before bankruptcy, United got a third of its passenger revenue from overseas flying. Now it's half.
Overseas routes "are the brightest spot for the U.S. airlines at the moment," said Morgan Stanley airline analyst Douglas Runte. "International has been the place for (legacy) U.S. carriers to hide from low-cost competition."
Adding flights to Europe, where Delta has a strong presence, is easiest because of relatively relaxed rules about who can fly there. Not so in much of Asia.
Agreements between the U.S. and China limit the number of flights there. Northwest and United are the only American carriers with the right to pick up passengers in Japan for flights further into Asia, a huge advantage over other U.S. carriers trying to do business in that booming region. The now-defunct Pan Am and Northwest -- which used to call itself Northwest Orient -- won that valuable privilege in a 1952 aviation treaty between the U.S. and Japan, and United bought Pan Am's rights under the treaty in 1985. Northwest is now the largest carrier between the U.S. and Japan.
"Low-cost carriers are reluctant to jump into the international arena. It requires long planning horizons, sometimes years of diplomacy," said Joseph Schwieterman, a transportation expert and economics professor at DePaul University in Chicago.
He also said the international routes require larger planes than most discounters fly.
Relatively small 737s are "a dime a dozen, long-range 767s are not," Schwieterman said. "The barriers to entry can be enormous, ranging from gate space at key airports, to landing rights in certain countries."
Carriers will soon have more opportunity to fly to China. An aviation agreement with the U.S. signed in July 2004 will increase weekly flights between those two countries from 54 to 249 over six years. Under the agreement, AMR Corp.'s American Airlines won permission to fly from Chicago to Shanghai beginning April 3, 2006. It's also adding a nonstop Chicago-to-New Delhi flight Nov. 15.
American, which has historically had a large Latin American network, has increased its international capacity 9.5 percent this year, including a 29 percent jump in flying across the Pacific. Domestic capacity is down 1.8 percent.
Rising fuel prices play havoc with the profitability of those routes, though. Even as Northwest adds its new flight to Bangalore, it recently cut its New York-Tokyo nonstop, blaming fuel prices. American is dropping its flight between Chicago and Nagoya, Japan for the same reason, spokesman Tim Wagner said.
Airlines are studying the profitability of their routes like never before, said Stuart Klaskin, a partner at KKC Aviation Consulting in Miami.
Airlines are saying, "'If it turns out we can't make money from London to Minneapolis, or Tokyo to New York, we're out of there,'" Klaskin said.
Eagan-based Northwest and Atlanta-based Delta face overseas competition from Continental Airlines Inc., which claims to fly to more international destinations than any other U.S. carrier.
"Quietly, Continental has become this incredibly organized, well-run globe-spanning carrier that's got a real brand," Klaskin said.
And by keeping amenities like hot meals for domestic coach passengers, Continental has retained a reputation for service that has suffered at other airlines.
Klaskin said that appeals "to the guy who's sitting back in 64F who used to be able to go nonstop from Minny to London and now is on his way to Amsterdam for his connection, who got cold cuts and a flat Coke for dinner."
And just because discount carriers aren't flying from the U.S. to India yet, they might someday. The Caribbean and Mexico are seen as likely destinations for discounters in coming years. Jetblue Airways is already flying to Puerto Rico and the Dominican Republic from New York.
Low-cost carriers already exist in Asia and Europe. EasyJet, a British airline, and RyanAir, an Irish budget carrier, have expanded throughout Europe and are drawing competition, and budget airlines such as Malaysia's AirAsia are growing fast in the Pacific Rim.
They're not crossing oceans yet, said Doug Abbey, a partner at the Washington-based aviation consulting firm The Velocity Group. But you can bet there's a demand for them, he said: "Somebody will try to fill that vacuum."
Is the tweeking done at CAL and AA? If not, what remains to happen to wages and the number of pilots employeed?
For domestic flying, what will carriers other than JetBlue getting 100 seaters do to the LCC growth story??
So there you have it--If you trust in the JetBlue growth story, go there.
If you think international flying is safe from LCCs and continued restructuring won't cause new furloughs, go to Continental.
Northwest, Delta Eye Overseas for Profits
Friday October 7, 6:28 pm ET
By Joshua Freed, AP Business Writer
Northwest and Delta Look to International Flying for Profits During Bankruptcy Makeovers
MINNEAPOLIS (AP) -- Northwest Airlines' daily Amsterdam-to-Bombay run fetches $1,400 a ticket, the airplane flies nearly full, and JetBlue doesn't go there. Which is why international flying is a moneymaker for most U.S. carriers -- and why Northwest and Delta Air Lines Inc. are both making international flying a big part of their bankruptcy makeovers.
Delta says it will increase international flying by 25 percent while cutting domestic flying as much as 20 percent, and this week it announced new nonstop service from Atlanta to Tel Aviv beginning in March. Northwest increased international capacity 5.1 percent last month while domestic capacity stayed flat, and it says it will cut domestic capacity at least 10 percent. It's adding nonstop service from Amsterdam to Bangalore, India.
In Northwest Airlines Corp.'s bankruptcy filing, Chief Financial Officer Neal Cohen went so far as to call the carrier's Pacific routes one of its "most valuable assets," adding, "I believe that (Northwest's) viability as a going concern is dependent upon the maintenance of these foreign operations."
Northwest and Delta are following the lead of UAL Corp.'s United Airlines. Before bankruptcy, United got a third of its passenger revenue from overseas flying. Now it's half.
Overseas routes "are the brightest spot for the U.S. airlines at the moment," said Morgan Stanley airline analyst Douglas Runte. "International has been the place for (legacy) U.S. carriers to hide from low-cost competition."
Adding flights to Europe, where Delta has a strong presence, is easiest because of relatively relaxed rules about who can fly there. Not so in much of Asia.
Agreements between the U.S. and China limit the number of flights there. Northwest and United are the only American carriers with the right to pick up passengers in Japan for flights further into Asia, a huge advantage over other U.S. carriers trying to do business in that booming region. The now-defunct Pan Am and Northwest -- which used to call itself Northwest Orient -- won that valuable privilege in a 1952 aviation treaty between the U.S. and Japan, and United bought Pan Am's rights under the treaty in 1985. Northwest is now the largest carrier between the U.S. and Japan.
"Low-cost carriers are reluctant to jump into the international arena. It requires long planning horizons, sometimes years of diplomacy," said Joseph Schwieterman, a transportation expert and economics professor at DePaul University in Chicago.
He also said the international routes require larger planes than most discounters fly.
Relatively small 737s are "a dime a dozen, long-range 767s are not," Schwieterman said. "The barriers to entry can be enormous, ranging from gate space at key airports, to landing rights in certain countries."
Carriers will soon have more opportunity to fly to China. An aviation agreement with the U.S. signed in July 2004 will increase weekly flights between those two countries from 54 to 249 over six years. Under the agreement, AMR Corp.'s American Airlines won permission to fly from Chicago to Shanghai beginning April 3, 2006. It's also adding a nonstop Chicago-to-New Delhi flight Nov. 15.
American, which has historically had a large Latin American network, has increased its international capacity 9.5 percent this year, including a 29 percent jump in flying across the Pacific. Domestic capacity is down 1.8 percent.
Rising fuel prices play havoc with the profitability of those routes, though. Even as Northwest adds its new flight to Bangalore, it recently cut its New York-Tokyo nonstop, blaming fuel prices. American is dropping its flight between Chicago and Nagoya, Japan for the same reason, spokesman Tim Wagner said.
Airlines are studying the profitability of their routes like never before, said Stuart Klaskin, a partner at KKC Aviation Consulting in Miami.
Airlines are saying, "'If it turns out we can't make money from London to Minneapolis, or Tokyo to New York, we're out of there,'" Klaskin said.
Eagan-based Northwest and Atlanta-based Delta face overseas competition from Continental Airlines Inc., which claims to fly to more international destinations than any other U.S. carrier.
"Quietly, Continental has become this incredibly organized, well-run globe-spanning carrier that's got a real brand," Klaskin said.
And by keeping amenities like hot meals for domestic coach passengers, Continental has retained a reputation for service that has suffered at other airlines.
Klaskin said that appeals "to the guy who's sitting back in 64F who used to be able to go nonstop from Minny to London and now is on his way to Amsterdam for his connection, who got cold cuts and a flat Coke for dinner."
And just because discount carriers aren't flying from the U.S. to India yet, they might someday. The Caribbean and Mexico are seen as likely destinations for discounters in coming years. Jetblue Airways is already flying to Puerto Rico and the Dominican Republic from New York.
Low-cost carriers already exist in Asia and Europe. EasyJet, a British airline, and RyanAir, an Irish budget carrier, have expanded throughout Europe and are drawing competition, and budget airlines such as Malaysia's AirAsia are growing fast in the Pacific Rim.
They're not crossing oceans yet, said Doug Abbey, a partner at the Washington-based aviation consulting firm The Velocity Group. But you can bet there's a demand for them, he said: "Somebody will try to fill that vacuum."
