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Analysis: American and Delta Vie for Coveted Los Angeles-Beijing Route

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Analysis: American and Delta Vie for Coveted Los Angeles-Beijing Route

Analysis: American and Delta Vie for Coveted Los Angeles-Beijing Route
September 14
09:36 2016

MIAMI — Back in March, Delta Air Lines announced its intentions to launch service between Los Angeles International Airport (LAX) and Beijing Capital International Airport (PEK). It said at the time it planned to launch the route on December 16, pending Department of Transportation (DOT) approval.

But American Airlines had other plans. Just a few weeks later, American announced that it had applied with the DOT to serve the very same route. The intended start date: December 16.

The American filing was critical, because the DOT only has one award to distribute. This means that either American or Delta will ultimately win the authority to serve the route – but not both. Indeed, the American application launched the two carriers into direct competition for the right to fly to the Chinese capital from LAX.

The DOT is still reviewing the two applications at the present time. According to Caitlin Harvey, public affairs specialist at the DOT, they are “continuing to review the record but do not yet have an identifiable time frame for reaching a decision.”

It is not the first high profile case this summer to face the DOT, fresh off its decision regarding day time slot distributions to Tokyo’s Haneda Airport (HND).

With the verdict still up in the air, what are some factors that are likely to influence the DOT’s decision? What does each carrier bring to the table, and which carrier (if either) has the edge?

American and Delta Lay Out Very Similar Proposals


On the surface, the two airlines lay out proposals that match each others quite nicely. This is, of course, very intentional, to remove any obvious reasons that would sway the DOT one way or the other.

Delta plans to serve the route with a Boeing 777-200ER aircraft, configured with a total of 291 seats (37 first class, 36 premium economy, and 218 economy). The flight timings Delta proposes are below, courtesy of its press release:1Delta touted that the new route would facilitate “convenient connections to more than 39 cities in China, including – Chengdu, Shenyang, Qingdao, Xian and Hangzhou on SkyTeam partners China Eastern and China Southern, while the Los Angeles-bound Beijing flight will offer key connections to Denver, Las Vegas, Portland, San Diego and Phoenix as well as 35 other markets throughout the U.S., Canada and Latin America.”

It also marks Delta’s “fifth daily non-stop flight to the Asia-Pacific region” from Los Angeles. The new flight would complement Delta’s existing service (which includes Tokyo-Narita, Tokyo-Haneda, Shanghai, and Sydney), and speaks to the airline’s recent investments at the airport, including a “$229-million facilities enhancement of Terminal 5 at LAX that features a remodeled Delta Sky Club, a renovated Sky Priority lobby, and a brand new premium check-in experience, Delta ONE at LAX.”

American’s proposal is almost identical to Delta’s in terms of capacity and flight timings. The airline likewise plans to operate the route with a Boeing 777-200, featuring a 289-seat configuration (37 first class, 48 premium economy, and 204 economy). It is unlikely that the DOT will take the two fewer seats into account very seriously in making its decision.

American’s flight timings (which slightly differ seasonally) are below, taken from its publicly available filing with the DOT:2

The slight difference in timings between American and Delta is also unlikely to weigh very heavily in the decision, so we can remove that as a factor.

American makes the case in its press release that it has the most to offer LAX, including seven Asia-Pacific destinations, which are Tokyo-Haneda, Tokyo-Narita, Hong Kong, Shanghai, Sydney, Auckland, and New Zealand.

 

Andrew Nocella, chief marketing officer for American Airlines, underscored the importance of gaining access to Beijing from the western United States: “This new route would solidify Los Angeles as American’s West Coast gateway to Asia and it would be our only Beijing access from the western United States, creating new connections to one of Asia’s major business and leisure destinations,” he said.

American is the only carrier of the Big Three currently lacking an entry point to Beijing from the western United States.

American Offers Better Connectivity Due to Larger Operation at LAX


A primary concern of the DOT in its route allocation decision should be connectivity with the rest of the United States. Although both airlines will make the case that they are investing in the Los Angeles community with this move, the route is clearly about more than just Los Angeles.

Although Los Angeles is important due to the strong local demand to travel to China, whichever airline wins the route will undoubtedly fill the aircraft with more flow passengers than local passengers. It’s important for the DOT to make a decision that will offer the greatest benefit to the most amount of people. Particularly considering the scarcity of routes to China available to U.S. carriers, this decision cannot be just about Los Angeles.

As noted previously, American offers more total daily departures from Los Angeles than does Delta. Over 220 American flights operate from Los Angeles on a daily basis whereas Delta only reaches 168 on peak departure days. It is this difference in operational size that allows American to connect more cities domestically to the Beijing flight – even given that the flight it proposes is scheduled to depart over an hour earlier than Delta’s.

If we consider all flights arriving into LAX after 06:00 as possible connecting opportunities, and simply apply a one hour minimum connect time, schedule data from Diio show that American can potentially connect forty unique domestic cities with the Beijing flight. Delta, by contrast, is only able to potentially connect up to thirty-two domestic cities. These figures are sourced from only the December 16 schedules, and may vary seasonally to some degree.

In reality, the number of connections the two airlines would actually sell is likely to be less. For example, American says in its DOT filing that it plans on connecting only twenty-six domestic cities with the Beijing departure. Some of the arrivals included in the data – such as from New York’s JFK Airport – might make more sense to flow via the airline’s Dallas/Fort Worth or Chicago O’Hare hubs.

But the point is clear. American has the capability to connect more points across the country to Beijing via Los Angeles. The connectivity angle is something the DOT should not ignore in issuing its decision.

Could the Strength of SkyTeam in China Come Back to Hurt Delta?


Another factor that should not be ignored is the potential impact of airline partnerships on the DOT’s decision. Alliances are likely to play a factor, with the DOT likely to give more consideration to the carrier with less ability to get customers to Beijing on their partners. That airline is clearly American.

American is a member of the oneworld alliance. While oneworld does have some prominent East Asian allies, such as Japan Airlines, it notably lacks any Chinese partners whatsoever. By contrast, the SkyTeam alliance (of which Delta is a member), is relatively strong in the Chinese market. It has both China Eastern and China Southern on its side.

Delta is likely to spin this as a plus to the DOT, arguing it gives them the ability to connect customers throughout China as well. However, while Chinese officials may view this highly, the DOT may not be very receptive to this line of thinking.

One only needs to look back a few months at their verdict on the Tokyo Haneda slots. American’s joint venture with Japan Airlines was likely a strong reason why Delta was awarded a second daytime slot from Minneapolis/St. Paul. As a result, American and Dallas/Fort Worth lost out.

The same logic might work against Delta in Beijing.

It would seem inconsistent of the DOT to suddenly change its position. Rather, the DOT is interested in facilitating access to airlines without another reasonable option already on the table.

Admittedly, the present case is a little different than Haneda, since American has a joint venture with Japan Airlines, which is a deeper level of cooperation. But if the DOT will consider joint ventures as a factor in its decision, it is probable it will take alliances into account to some degree as well.

The precedent is set. In this respect, American has somewhat of an edge over Delta.

Could Delta’s Seattle Hub Undermine its Case at LAX?


Another strike against Delta could be a particular airport north of Los Angeles. The DOT may view Delta’s strong transpacific position at Seattle/Tacoma as justification to grant the Los Angeles-Beijing route to American.

Over the past several years, Delta has aggressively challenged Alaska Airlines in its hometown, injecting a substantial amount of capacity into the market. A primary motive of Delta’s in doing this has been to establish a west coast hub in which it could feed transpacific traffic.

The move has largely paid off for Delta, which now flies to a plethora of East Asian destinations from Seattle – including Beijing. American, while strong in terms of market share at LAX, does not have an especially strong transpacific presence anywhere on the west coast.

The DOT may see Delta’s strength in Seattle, compared to American’s relative weakness in Los Angeles as far as East Asian access is concerned, as another point on the board for American.

It is in no way Delta’s fault that it has built such a strong operation in Seattle, but the fact of the matter is that the DOT may interpret that to mean Delta does not need more access.

New Route Manifests Broader Trend of Increasing Liberalized US-China Skies


The new Los Angeles-Beijing route for which American and Delta are competing is the latest representation of a broader trend within the airline industry: an increasingly softening relationship between the U.S. and China aviation authorities, characterized by liberalized skies.

Currently, only one carrier flies non-stop between Los Angeles and Beijing: Air China (with three daily frequencies). Whatever the DOT’s decision, December 16 will mark the first time a U.S. carrier will serve the route.

It also means the DOT has no choice but to get this call right.

Over the past several years, efforts made by Chinese and American aviation leaders have allowed more U.S. carriers the right to serve China, in exchange for more access to the U.S. by Chinese carriers. When the government takes a less protectionist, more free trade stance, there are many winners. That includes everyday consumers, who enjoy the benefits of more travel options.

Credit where credit is due: this is a very positive step forward for the U.S. aviation market, something we should remember as that historic flight (whatever colors are on its tail) departs on December 16.

The DOT is on the clock, and the heat is on between American and Delta. We should expect a decision sometime in the near future, to allow the winning airline enough lead time to start the route by the December 16 date.

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About Author

Alex McIntyre

Alex McIntyre

Texan. Airways Business Analyst. Emory University student, and lifelong AvGeek. Favorite airport and aircraft are: Dallas/Fort Worth International Airport and the Boeing 787. Passionate about all things commercial in the airline business, including route networks and hub operations. I love the window seat.

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6 Comments

  1. R Canales
    R Canales September 15, 16:36

    The proposed schedule you show for Delta includes the caption “(next day)” in return flight (DL8) but it’s incorrect. The arrival time of 3:45pm at LAX will be on the same date as the departure from PEK at 7:30pm. The AA example does correctly omit the “+1” on the return leg’s arrival time.

  2. Bill
    Bill September 15, 23:39

    Which carrier has more nonstop authority to China (or specifically Beijing) presently? This is another factor that may be weighed by the DOT.

  3. USBT
    USBT September 17, 01:09

    Bill,
    It’s a tie. Both have 35 weekly frequencies to China, and 14 to Beijing.

    American serves PEK daily from Dallas Fort Worth and Chicago, and Delta flies daily from Detroit and Seattle.

  4. USBT
    USBT September 17, 01:29

    I’d have thought Delta citing key connections to Denver, Las Vegas and Portland would count against them. They already connect those cities to Seattle for the existing PEK service. If they tout the same passengers for the LAX service wouldn’t that compromise the SEA-PEK flight? And especially as SEA-PEK is flown by a much lower capacity 767-300ER, any compromising of yields could put that service at risk and lead to reduction in service and not utilizing the authority to its full potential.

  5. Jordan
    Jordan September 17, 18:37

    DL does not have FIRST class on the 777-200. Their international premium cabin, is business class, DeltaONE

    AA still has some First class 777-200’s, but will all be remolded by the end of the year, so their proposal is clearly a Business Class cabin as their premium offering at 37 seats.

    NEITHER airline offers Premium Economy within their fleets…they both have their own branded version of Economy + which is MUCH MUCH different!

    AA just received their first plane which features a REAL premium economy cabin (a 787-9 series aircraft) not the same as a 777-200…which has yet to enter service.

    How on earth can anyone take this website or the author of this article (clearly not a journalist) seriously, when they cannot even report accurate information. This is an airline site after all!

    I know fact checking stories and specs is no longer in fashion…so maybe the article is factual for this site even if not the truth, which it is not.

  6. John
    John September 19, 01:21

    Well, Well, Well… the two dogs are going at it again.

    First it was LAX-HND, which was awarded to Delta who failed to live up to it’s obligations so it was flipped to AA. Next, DFW HND vs MSP HND and for stated reasons DL got the MSP HND. Like a runner up in a beauty pageant AA got “should DL not be able to fulfill” etc., etc.

    Make no mistake AA and DOJ are watching the performance of DL on the route. AA should get LAX PEK because DL already holds SEA PEK and DOJ has kinda set a president. I think DOJ should set up a condition for AA to get the route by requiring AA to also service BKK since Thai pulled out and get creative LAX BKK SGN BKK LAX.. Show DOJ you mean business AA.

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