Yup. American was losing millions every day operating ORD-PEK/PVG. It got worse when some Chinese airlines began introducing service to secondary cities out of LAX and caused fares to plummet further. I’m guessing they were receiving incentives from the government?
AA stopped 777 service to China a few years ago and completely switched to the 787s. ORD-PEK/PVG were both 772s but eventually switched to the 788s before being discontinued. DFW/LAX-PEK were both 787-9s at one point until they switched to 788s.
As for United, they’re way more confident in China and Asia overall compared to AA. At one point a few years ago, they had service to secondary cities such as Hangzhou, Xi’An, and Chengdu, but the first two ended quickly. Both Delta and United had partners in China for several years which allowed them to be strong and use larger aircraft on their routes. AA was lacking but eventually started its partnership with China Southern, which likely helped fill some of its flights with connections, but COVID-19 caused the downfall of LAX-PEK/PVG.
I’m rather surprised LAX-HKG was cut instead of reducing frequencies or downgauging aircraft, but it makes sense when Cathay’s continuing to operate the route. If it was losing money before COVID-19, it is what it is.
American even had better load factors on LAX-HKG than DFW-HKG, but it sounds like the fares weren’t able to make up for it.
United and Delta still have LAX-PVG but both are suspended for now.
All these airlines are dropping routes like it was a fashion trend from 1998, but when things come roaring back (which they almost certainly will) there will be a huge lack in aircraft and routes and airlines will struggle since they will order all new aircraft and once it dies back down a little, they will have a lot of orders to dispose of. No matter what people say, people want to travel! As soon as people can, they will be traveling many more times then they would have before
I am surprised they removed them from LAX, I think there might be something more and this is the cover for them, from SEA they wouldn’t have much competition whereas LAX has almost every airline from Asia that flies to the USA using LAX as their main hub
@Ishrion, I always enjoy your thoughtful analysis especially when it’s in response to my hearsay.
The notion of capital and where the business ends and the state begins is difficult to define in China especially when it comes to airlines. The demand was there, the yields were not.
I took a quick skim of MU’s financial statements and it appeared that they received “Co-operation routes income” of RMB 5,436,000,000 (769,270,000 USD) in 2019. “Co-operation routes income” is defined in Note 6 of their financial statements as:
In conclusion, there appears to be incentives received in some way shape or form, but we don’t know if it relates to the routes being flown to the United States.
They are still Y-heavy aircraft. They are trying to develop a market that may or may not exist. Even if the market exists, the yields are nowhere close to where they need it to be. AA didn’t develop their Asia market until recently and their lack of success reflects that fact. People know about United more than American.
United and Delta had a stronger foothold, but United’s foothold was far stronger. Codeshare partners aside, you need strong demand for your product in Asia. North American carriers have less name-recognition in Asia compared to native carriers, now the market is difficult to break into without enduring years upon years of low yields.
UA is comparably immune to this phenomena as they have better name recognition, so they will survive better compared to its peers.
I recall stories of AA never having upgrade space on their DFW-HKG route (even with SWUs), the DFW route is quite profitable from what I can gather. The LAX route has strong competition from UA, JL, NH, KE, OZ, CX, BR, among others. There is very little money in the LAX route especially when AA prefers to funnel people through DFW.
DL tried SEA-HKG with their AS partnership a few years back, it did not last long at all. I’m not sure what AA will do differently, but they are going to need to figure something out. The “tech” crowd seems to favour DL and it’s going to take some work for AA to convince the SEA market to switch to them and ditch DL
United’s out here having fun with its $150 million contract with Apple and them buying 50 Business Class seats daily on SFO-PVG.
Definitely, though with American launching SEA-BLR, could they have already secured some sort of corporate contract? I feel like they would’ve dropped this route in response to COVID-19, but it’s still pulling through.
It is possible that AA secured a contract with Amazon & Microsoft for the SEA-BLR, although it is possible they may have partnered with a few companies in LAX (I think you already know the flight originates from there).
I believe part of why the route is important for AA is because not only is it AA’s return to India, but it also connect South India to the U.S. for the first time. (Mumbai is not part of North or South India).
Another thing I noticed is that Bengaluru is currently constructing Terminal 2, expected completion in Feb/Mar 2021. That will expand the capacity of passengers and should give AA a somewhat good base.
Of course, that’s until unless UA or Vistara ends up using their 787s to indirectly compete by flying to San Francisco, but I don’t think UA or Vistara will be flying that route anytime soon.
It’s still unclear how the results are going to be, especially with COVID-19 going on. Not to mention, a G4 strain supposedly going on.