Pathfinder813

I definitely would agree with you here. Financially, it's clear that DL is doing a lot better.

The biggest plus for DL to join a JV with KE is that that KE has an extensive intra-Asia network. However, they do have competition against OZ for corporate contracts originating in Korea. A lot of times, the chaebols will stick with one airline and so it's clear that KE can use additional revenue. I think the sooner KE realizes that entering into a JV with DL, the better things will be for them.

KE has the network and DL can bring more corporate contracts and increase visibility for KE within the US. It's still amazing that not too many people know about the service standards of KE.

It's been a pain not being able to get MQMs on KE but I think DL probably sent a strong message that there are a lot of passengers that decided not to take KE (including me) because of the MQM issue. With KE looking at their books for the past year and noticing the impact that this has had, hopefully this will speed up talks for a JV.

It sucks that DL had to pull this sort of move but in the end money talks.

motytrah

So why didn't they have a JV years ago?

You're under the false assumption that NW planned on running the Interport forever or something. The primary goal of the NW 787 program was to overfly NRT. Smaller planes, easier to manage loads, convenient schedules for APAC-USA O/D. That's directly from folks on the 787 team. They were not planning on running a 744 fleet long this long. NRT was going to get down gauged, perhaps faster if NW was around. NW was well aware of the problems with the NRT Interport and had a plan to address it.

Would NW have gone so far as a JV with KE? Maybe. Certainly PMNW had tighter integration with KE than DL does now. Would they have irritated the APAC customer base the DL did along the way? No.

I don't think anyone doubts DL makes more money. There's no question DL will make money off this JV right out of the gate simply by reducing staff. The question is how does KE end up in a JV which also makes them money. If KE has to shift schedules around to accommodate DL they may end up with all the downsides of running an APAC Interport for a USA based carrier. The simple fact is it's a harder JV to schedule vs Europe just based on the clock. I'm going back to if it was that simple to do they would have already done it a long time ago.

ClipperDelta

Scheduling is far from a key reason for not having a JV. KE is the largest non-US based transpacific carrier - they simply thought they could go it alone.

pbarnette

In my experience, business tie-ups most commonly fall apart on questions of price. It is also my experience that business tie-ups of this magnitude are complex and take a while to come together.

In this specific instance, it would seem that KE overplayed their hand, probably looking for better terms to the deal. They'll come around.

Not in the least.

What APAC customer base? You mean the one in Japan that you claim they were going to abandon anyway?

This notion that NW had some large, loyal APAC customer base that DL has somehow frittered away is pure fantasy. DL can attract APAC customers the same way NW did, competitive pricing. Credit cards and lounge access is simply something for Flyertalkers to complain about.

1) The real question is how KE makes money without a JV, given how much of their strength is in their TPAC network.
2) Running an APAC Interport doesn't have the same downsides for a carrier based in Asia that it does for one based in the US.

FireEmblemPride

It won't be with the current time slot and departure/landing restrictions. We'll have a clearer picture when the U.S. and Japan finally negotiate their daytime slots. In the meantime, NH operates a flight to YVR at a reasonable time of day, while AC operates HND-YYZ close to the NRT timing. We'll see how those do in the long term.

Meanwhile, a majority of LHR/CDG/FRA flights, as well as all MUC flights, now go into HND instead of NRT. The only reason CDG/FRA still have NRT service is because the A380 can't fly into HND during the day time, so they exist to preserve capacity and offset the lack of A380.

The Gulf carriers seem to have no issues with HND at the moment; only Etihad hasn't flown there yet, but they might in the near future.

But your comment just proves my point: TYO cannot thrive solely on O&D traffic. There needs to be strong connections to the rest of Japan first, and then the rest of Asia second. And a DL-KE JV does not solve this issue. NRT still offers those connections and will thus be the preferred airport, on top of the better time slots.

pbarnette

DL currently has limited connections to the rest of the Japan, so that doesn't seem to be any sort of "need".

Which issue does it not solve? Does KE not fly to Asia from ICN?

Sorry, but you haven't proven your point, and I certainly haven't proven it for you. DL can readily compete in the TPAC market by maintaining O&D into Tokyo and switching their TPAC hubs to a combination of SEA and ICN. If it weren't possible, then NH and JL would dominate TPAC traffic, which they don't.

FireEmblemPride

But they do need it. That's why DL tried to spend $500million+ a few years ago to bring JL over to SkyTeam.

1. ICN is not NRT/HND. That's my entire point. There's still tremendous value in having a strong presence at NRT and turning it into an O&D airport will will be one step forward and two steps back.

To draw a parallel, look at Virgin Atlantic. Having CDG/AMS hubs didn't stop DL from needing a direct presence in LHR, and ICN certainly does not have the same clout in Asia that CDG and AMS have in Europe. Not only that, but unlike AMS/CDG where DL's partner clearly dominates, KE doesn't even dominate ICN with OZ around.

2. JL and NH don't dominate TPAC, but their JVs with AA/UA have put DL at a major disadvantage. DL has said this much in the past when applying for HND slots.

3. You're basically saying that DL can compete in NRT by offering one specific product (O&D traffic) in smaller planes. But at the end of the day, DL would be offering that one product, while the other two alliances offer the same, plus more routings, more capacity, more and better lounges (no ST lounge in HND), more localized products (always important for Japanese consumers), and probably better schedules thanks to two fully-developed airports.

KE doesn't help much for the above and DL would essentially trade one market for another. One step forward, perhaps one or two steps back.

pbarnette

You aren't under the impression that DL connects a lot of traffic at LHR or to VS, are you?


Actually, I'm saying that there is more to Asia than Japan. I know, I know, crazy talk, but last I checked it was true.

Speaking of "localization", you are aware that there are other localities in Asia beyond Japan? And that there are some countries that, well, ain't Japan's biggest fans? Those that think Japan is the future in Asia are about 30 years out of date.

FireEmblemPride

No, I wasn't. Unlike NRT, LHR is a self-sustaining O&D airport. DL wasn't satisfied with solely transporting people to LHR via CDG/AMS and formed a complimentary partnership as a result. They need a similar strategy in Asia.

No need for hyperbole, especially since in an earlier post, I emphasized the need for ST to create a stronger, more unified network across NRT/PVG/TPE/ICN with other partners besides KE.

More over, tourist arrivals into Japan are reaching records year after year. The 2020 Olympics will take place in Tokyo. There is little evidence that DL should actually dial down operations at NRT to the extent you seem to be describing.

These points are seriously irrelevant, not even true, and weren't even what I was talking about. The Chinese are making up a bulk of tourists to Japan. Seoul's tourist economy, like Hawaii's, is dependent on Japanese (and Chinese) tourist expenditures. Even if the Asian mainland became uninhabitable for Japanese visitors (a laughable thought), they'll just go elsewhere -- and they certainly will not want to do so via ICN if they can do so directly.

But let's say you are right and that Japan becomes so irrelevant that it's not worth maintaining a competitive presence there. You think ICN, which is neither Asia's premier business center nor leading tourist destination, will adequately replace NRT? Or maybe further down the line, PVG, with its slot congestions, closed visa policy, and other Chinese government restrictions? Or TPE, which would be circuitous to Korea/Japan/Northeast China and is probably even less prominent than ICN as a hub? No way.

kettle1

I could care less what DL does, but flying for the next 6 years to any airport because the Olympics are coming. The Olympics last maybe a month.

Every airline needs to do what is best for their customers, employees and shareholders. I am sure DL will do that.

moondog

I'm pretty sure his point was that Japan's role in the global economy is a shadow of what it was 30 years ago, and this trend is unlikely to reverse.

FireEmblemPride

But that's true for many countries, like most Western European ones, and to an extent, even the U.S. In the context of aviation, it's still a ridiculous point to make in favor of dialing down NRT in favor of ICN.

relangford

And, don't forget, Asiana/OZ is owned by Kumho, which has a lot of other companies. These would never go to KE. OTOH, Samsung seems to like KE (as do some other chaebols), so I don't see much changing of preferred carriers from Korean businesses.
Since this thread began with the rumor (continuing) of a JV between DL and KE, I suspect it is possible (maybe even likely) in the near future. Perhaps DL and KE could work out the bad feelings over ICN-ATL non-stop by alternating flights using each other's metal. KE would give DL at lot of onward Asia destinations. DL could change the SkyMiles program at any time to bring KE flight earnings back up to where they used to be.
As to the NRT/HND issues, while ICN might take some business from either, I suspect there will be a continuing need for TYO-USA at about the current level for some time. ICN is doing a lot to increase their ground products IMHO. I also note that GMP is adding flights, too.

MSPeconomist

It's not true that DL wasn't taking passengers TATL nonstop into London before the VS partnership. Indeed, PMNW had nonstops into LGW and LHR about twenty-five years ago and these were not connections through AMS (or CDG). AFAIK some of these nonstop routes USA-LON have continued without interruption, such as MSP-LGW which became MSP-LHR long before the merger.

pbarnette

How is it not the same strategy? Use your gates in Tokyo to support robust enough O&D and send connecting flows over ICN. Seems like the same exact strategy.

I said it would be de-hubbed. I did not say DL wouldn't continue to fly there. You are the one claiming that Japan doesn't have enough O&D to support operations.

1) Why did you bring up localization in the first place? Do you think it important only in Japan? Or that localizing for Japan = localizing for Asia? How do you choose which locale to localize to when connecting through Japan? Personally, I think localizing is largely irrelevant and that customers for whom this is critical wouldn't fly DL anyway. But you did bring it up, so figured I would respond.

2) It depends how you define "Chinese" and "bulk". The number one country of origin for inbound visitors to Japan is actually South Korea. China, proper is third, with Taiwan second. Even combined, "One China" doesn't make up a majority, so hard to say "bulk".

Again, who said DL wouldn't fly to Tokyo? And, yes, as a connecting point, I think ICN is very competitive. So did KE when they became the largest non-US TPAC carrier.

Last I checked, BTW, London was the premier business center in Europe and Paris the premier tourism center, yet LH manages to compete just fine. You are making too much of Tokyo and making silly assumptions about DL not serving it for the O/D it demands.