OT: More competition on Transpac - DL
 

Post on Airliners suggest DL is ready for a 1-Jul-09 start.
Using 777-200LR
Flying ATL-LAX-SYD-LAX-ATL
DL17/DL16


http://www.airliners.net/aviation-fo....main/4250377/

Schedule and prices are loaded in http://www.nwa.com -- LAX-SYD-LAX on DL is bookable today on NW; rather ironically not yet loaded on http://www.delta.com so you cannot buy it from DL, only from "Delta North". Great news for me as I have mega status on DL (even though I rarely fly them). Their 772LR config is very nice, not at all like the rest of their fleet; will give QF a big run for their money. DL has a lot of feed at LAX and nice terminal facilities (left over from when they had a mini-hub for Asia there, with flights to NRT/SIN/TPE/SEL/BKK).

Not exactly great launch fares US$2000 for LAX-SYD-LAX, not bookable the other way.

Compared to the current VA A$1200 (US$800) return fares on SYD-LAX-SYD

This must vary by date, I am getting USD 1600 for random dates 8/09 but typically the regular discount fares are loaded first, and deep discount fares come later when marketing and revenue management have done analysis for the route. I wouldn't expect low fares from DL until 2Q09. Fares have never been symmetrical between Australia and US, for lots of reasons, and the recent decline of the AUD this year has made ex-Aus fares a bargain for the time being.

Unless DL significantly undercut QF prices, I think that if I plan on heading to North America, I will continue to stick with QF on the route. With DL entering the route however, this probably reduces the chance of SQ or EK starting a SYD-East Coast operation. Decent amount of competition now

QF
VA
NZ
DL
HA
FJ
AC
UA
TN (to a lesser degree)
....and JL/KE/OZ/CX for those willing to stop in Asia.

TN are stopping their SYD flights and will be terminating at AKL in favour of the QF codeshare.

I wonder how much traffic NZ is going to lose with all this new competition. They seem to have picked up a few pax from SYD/BNE/MEL at a lesser cost than the direct flights. Now VA is doing BNE and SYD with some great deals it must hurt them and their Pacific ops a little.

Actually, the Asia min-hub was out of PDX, not LAX. The LAX facility was aquired with the Western Airlines purchase in in 1986 and fully merged into Delta in 1987.

I for one don't see great things for this DL route. The A380 is a much better ride and DL doesn't not have huge feed into LAX. We'll see. It will be a very expesnsive route for them to operate.

Not saying that it will be an easy ride for them, but they will have some AS help on the LAX end with the feed, as well as feed on the ATL end. The flight is a one-stop ATL-LAX-SYD (no change of aircraft), and even though small markets on the U.S. East Coast don't amount to much individually (for traffic to Oz), pooling those connecting pax together would certainly help. These passengers need to double-connect today anyway (either on UA or on AA/QF) to get to SYD.
It would also be the only decent option on the SkyTeam carriers to go between the U.S. and Australia (unless one needs the extra miles for going through ICN via KE).

I thought AC had canceled their planned LAX-SYD service (replaced with codeshare on UA). This route has made the list year after year of the highest yield route in the world -- so it has been attractive for a lot of airlines. Even AA had plans to operate LAX-SYD many years ago (prior to Oneworld). The high operating costs along with govt restrictions have served to keep some out, despite the profits to be made. DL is planning to cut up to 20% of domestic US capacity so it is choosing new international routes that are high profit and which it knows can work. Given their situation a lot of thought has gone into these expansion plans and route selection. I don't think they plan to try it for a few months and see what happens; rather it is part of a long-term strategy. If they need more capacity quickly, they can swing a dozen 744s (from NWA) onto the route, if need be -- very few other airlines in the world, much less the US, can do that. Of course their current route authority is for 7 flights per week, but that can change quickly.

As for feed at LAX, DL has decent feed of their own (from SLC and CVG) which actually gives excellent coverage to all of the US, albeit with an extra stop. But all of the Skyteam options are worse, so for Skyteam loyalists this counts as a convenient connection; and as pointed out, Oneworld doesn't do much better for much of the US, requiring connections through ORD or DFW instead.

Thus it is perplexing that so few airlines actually do it, or have done it. There must be a story to be told here.

If the economic crisis lasts well into 2010 as some have suggested then DL might find it tough. No doubt their plan would be to subsidize it for a period to see if it will support itself.

It also no doubt hopes to draw some significant traffic to its domestic network from the SYD-LAX leg.

If it starts to take some significant traffic from SYD then that can only benefit us although it does seem to need to review its pricing at the moment to achieve any significant effect.

Last time there were hearings on Transpac capacity (Sept 2008), the Australian gov't estimated that an additonal 51,000 tourists would arrive there and spend AUD 150 million if there was an additional daily service; so that is the background to DL's daily 777 service. Flying from LAX should allow the 772LR to carry quite a bit of cargo, which was always a high-profit element of this route. I don't think DL would start a route which required subsidy for more than a month; they have lots of other uses for their (very scarce) 772LRs. I'm sure DL expects to be profitable from day 1; and to do so as a premium product, not competing on fares alone. So you will never find the lowest price on DL (or QF); however the extra capacity should lower fares overall, or at least keep them from climbing further. DL will try to attack the QF J product on price, though (so there might be some bargains at the high end).

Let's see; both US and Australian gov'ts must approve any entrant, and have prohibited daily service for any new entrant until recently (I think DL is the first to get more than 3/week to start). This has been a highly protected route, and all the players have tried to keep it monopolistic while espousing Open Skies. Lots of history about free trade and how to subvert it on this route.

Wasn't NZ allowed (and actually operating) a daily service?

Sure; NZ and Australia have an EU type arrangement (their citizens can work etc. in the other country, for example) and this has long extended to airlines. Just as QF operates LAX-AKL, NZ has operated LAX-SYD in the past (I think they stopped last year due to UA complaining about Star brotherliness). The feed problem at SYD and LAX is dire for airlines that don't have hubs there or partner well (NZ falls into that category, unfortunately). O/D traffic is something like 10% (still impressive, but it shows the need for good connections). I'm guessing that the DL business plan is for cargo/F/J sales covering the cost of the route, and any Y sales are the profit. They should be easily able to generate enough FF loyalty and corporate contracts to fill the F/J cabin. But on US-Australia it is still only a couple of seats per month available, instead of the thousands TATL. What a difference a route makes (and why DL wants to add this route to complement their many TATL and Asian routes).

By way of perspective, for most US domestic flights the profit is the highest 2 or 3 seats sold (out of 130 average capacity). The other 127 cover the cost of operating the flight. International routes are a lot more lucrative (when the demand is there, and it is hard to see the US-Australia traffic declining).

As an aside, I noticed that on the kangaroo route QF has FF seats in F/J available now every week (and about every other day); and BA on trans-Atlantic has FF seats available every single day for the next 6 months (I didn't look further). Astonishing change from even a few months ago. Looks like F/J travel has dropped a lot on some routes as this economy crashes.