MSPeconomist

Not at all enamored of that Dutch food, but these aren't aspects of LCCs. Nor are free drinks, etc.

I was basing my comments on anecdotal evidence from people I know who travel to SIN regularly on oneworld. They used to be routed through NRT and now they always seem to fly through HKG.

motytrah

NW was flying APAC O/Ds for a half century and you don't think they had an APAC customer base? Now that's a fantasy.


I would contend they inherit a lot of the same problems on the longer haul routes if they accommodate DLs current USA schedule. Like I said before I don't see many existing KE customers buying a SIN-ICN that checks in at 4:30am.

DL's going to have to give on their schedule or sweeten the JV pot (compared to say AF/KL intra Europe.) Maybe a bit of both. KE may really need the money, but if they see themselves having to do a lot of extra work for DL's table scraps the deal isn't going to happen. Since none of us are privy to the details AF/KL JV or a potential KE JV it's all speculation on what the stumbling block is. Hence back to, if it was easy it would be done already.

The failure was well before that. PMNW you could book domestic JL tickets as both revenue and award. That's just one more thing DL messed up post merger in APAC.


NRT may eek out staying a modest DL hub. Despite the claims of the demise of Japan there's a resurgence of western companies moving their APAC HQs into SIN and TYO. There has been a string of incidents between western companies and the Chinese gov't that has them scrambling to move APAC executives and data outside Chinese borders. I think that will have more of an effect for TYO than something like the 2020 Olympics.

pbarnette

No, NW was flying connecting flights to and from the US from a NRT base. A simple look at the schedule would show that to be the case. And no, I don't think they had any appreciable, loyal customer base within the APAC market. Most certainly, I don't think they have any appreciable, loyal customer base in Japan that is sizable enough and spends enough to have made a lick of difference in the overall profitability of the location.

Ask yourself this... If the Japanese customer base were so important, why was NW going all in on the 787 to overfly NRT? They didn't want to fly intra-Asia any more than DL does.

The problems I was referencing result from running a hub 5k miles and a country and culture apart from the vast majority of your operations. If doing so made sense, DL wouldn't have abandoned Pan Am's FRA hub, QF wouldn't have drawn down SIN, BA would still fly to OZ, and UA wouldn't have abandoned NRT. It is expensive and a waste of time to do so. Everybody in the industry knows it.

1) I think you overestimate the importance of HQ locations. That is doubly true of regional HQs. Many such locations actually have quite lean staffs.
2) Any company that would put their Asian principal in TYO must be so low margin that they don't care about taxes or they have a bunch of college dropouts running their tax department.
3) I would love to see where any of those incidents could have been avoided by moving the regional HQ. Heck, I'd love to see where any of those incidents related to a corporate HQ in China.
4) Companies have a big presence in China because it is a big, growing market and because that is where suppliers are. That hasn't changed and likely won't anytime soon.

moondog

Do a search for LAX-SIN on aa.com, and you'll note that TYO connections always come up first, even when they are more expensive than HKG connections. I'm guessing that your friends go with HKG because they prefer it to TYO.

motytrah

NW was going to use 787 to overfly because they served an APAC customer base, not just a Japanese customer base. They thought they could get a premium for the more direct and shorter duration routing because they knew what the O/D details were. That's not my speculation, that's what I was told directly by NW folks who were on the 787 program.

I feel like we might actually be agreeing on the overall themes here, but you're getting stuck on semantics.

These are perplexing conclusions. The tax one in particular is just odd and makes some pretty wild assumptions about how a company structure accounting.

As far as companies moving certain ops out of China, that's a real thing. Not just some speculation I'm throwing out there because of I knew a guy who moved or something. There have been news coverage about western companies moving office operations out of China all year. Sure keep the local sales and support staff there but place your executives, engineering, intellectual property and records at arms length. That doesn't mean you can't expand in the Chinese market either. Getting further into this is a bit OMNI, but it's big names moving and you can easily read about in at various financial news sources.

HongKonger

I LOLed.

I'm sure this JV, if it materializes, will be just as "seamless" and "metal-neutral" as the DL/AF/KL JV.

HongKonger

As someone who has also had to negotiate a JV with a Korean company, I completely agree. They also announced the JV to the press before it was a done deal and then expected us to conform to the terms they had announced to the press so they wouldn't lose face.

TerryK

What is imminent? The cited article was published on Sept 22. Does it mean a JV may materialize by the end of October? end of the year? end of this decade?

pbarnette

I'm not the one that argued DL made a grave mistake in ditching a Japanese credit card partnership.

I make a lot of money operationalizing international legal entity setups. Nobody sets up a foreign principal in Japan.

Cool. Offer some examples.

1) American companies dealing with China are not outsourcing executives, engineering, or intellectual property to China.
2) American companies that aren't run by idiots are not moving executives engineering, or intellectual property to Japan.
3) Corporate travel isn't driven by the legal domicile of corporate IP. If it were, then places like Luxembourg and the Isle of Man would have a lot more aircraft traffic. Heck, Ireland would see more traffic if that were the case.

moondog

Following are my thoughts on the China issue:

1) It is true that various types of manufacturing have been moving into SE Asia during the course of the past several years
2) It is also true that Xi Jinping's regime is determined --at least on paper-- to pursue a self-sufficiency focused agenda, which has put a number of foreign companies and prominent individuals in tight spots (I also don't have any specific examples off the top of my head, but they aren't especially hard to find on google)
3) But, in spite of 1 and 2, selling into China is BIG business, and getting bigger
4) My company and most of the companies we work with fall into #3 (much easier than dealing with Chinese companies)
5) It is impossible to fully engage the market without having a physical presence in the country (just ask any consumer or b2b facing brand)
6) I do spend a lot more time in HK now because
-we keep as much of our money and our IP as possible there
-executives at foreign companies are increasingly based in HK
-BUT, pretty much everyone in the business spends A LOT of time in China itself, and I don't expect this to change any time soon

FireEmblemPride

And DL was once in bankruptcy court, so I'm not sure why this is necessarily a disqualifying point. Moreover, from what I've read, Skymark was harmed by their A380 cancellation rather than running an unfeasible operation. Japan domestic is quite profitable for the legacy carriers and the LCCs should gain traction in coming years.

pbarnette

Does Japan have the equivalent of Chapter 11? And are there investors or creditors willing to finance them?

From DL's perspective, it calls into question whether they are a partner you can rely on and whether they can build enough of a network and infrastructure to be useful.

Skymark's A380 order was cancelled because nobody believed they could actually pay for the planes. My understanding is that they aren't even sure they can manage to pay for the remaining A330s they have on order.

If it is so profitable, why did JAL need a bailout? Why did ANA manage a 2013 profit margin of barely more than 1%? And why are all the Japanese LCCs having such a rough go? Assuming you are right and Japanese domestic service is "quite profitable", then ex-Japan international flights must be an absolute money pit, which kind of makes your arguments for a TYO hub questionable.

FireEmblemPride

Yes, the Corporate Rehabilitation Law, which JAL underwent.

We'll have to see if they can stay in business. Right now, even Skymark is more likely to tie up with NH, but DL would be prudent not to look into turning them into a viable longterm partner.

ANA's operating margin in FY2013 was 4.1%, and FY2013 was a record year for NH in terms of revenue.

Complete analysis about ANA here, including the title, which dispels your statement about international flights being a money pit:

All Nippon Airways expects stronger 2014 performance due to efficiency and more international flying

Here's another article that states that domestic is where NH will continue to perform:

All Nippon Airways to have more international than domestic capacity - but revenue still in Japan

Japan is a wonderfully resilient market, whether DL decides to stay or not.

jiburi

And despite its "imminent" remarks, still seems just a rumor. Probably time to closing this thread.

TerryK

+1.^ I was, and still am, skeptical when this rumor started early in 2014. I don't see it happening in the near future. If anything, DL is moving away from KE.