There are a couple of very striking things I notice about the world’s powerhouse airlines and particularly those who are not only surviving but thriving:  They are heavily engaged in building global networks and constantly tweaking their domestic and/or regional networks to support these global networks.

Witness these airlines:  Delta Airlines (who is arguably doing it better than anyone else at present), Emirates, British Airways, Air France | KLM, Lufthansa.

These airlines in one form or another have acknowledged that change in their regional networks is a constant process and that reaching around the globe is necessary.

What the US Airways / AA merger won’t have is a truly global network.

American Airlines has relied upon its Oneworld partners to provide this to them and that has reflected poorly on American Airlines.  Domestically, it makes them appear to *need* these partners rather than being the case of providing a seemless service product around the globe.  The only routes in which AA works on itself are to Europe and those routes involving the UK have been half maintained by British Airways still.

Consider that British Airways supplies almost half the seats between DFW and London Heathrow and this is on a route to and from AA’s most valuable hub.   Chicago to London sees British Airways supply more than half the seats.  In the New York to London market, British Airways supplies 7 of the 12 flights and even a greater proportion of the seats.

On the Pacific routes that AA does have, the partnerships of flights and capacity with Oneworld partners is a bit more equitable.  Partners do about half of the capacity from my look into things.   But it is notable that it took QANTAS to put a 747-400ER on a route between Dallas and Australia and that it is QANTAS who is enjoying that revenue far more than American Airlines is.

AA has some good core strength to Europe and South America.  US Airways has the same strengths.  There will be consolidation in this area.  Expect New York, Philadelphia and Miami to be the gateway cities in this merger.

Expect Charlotte, NC to be downgraded to a domestic hub.  Charlotte’s few European routes will transfer to Philadelphia and/or New York and/or Miami.  Charlotte’s Caribbean and South American flights will transfer to Miami (and rightly so) and a some to DFW.

Expect Los Angeles to be the West Coast gateway city and Phoenix will be downgraded to a domestic hub with passengers route to Dallas for flights over the Atlantic and to Los Angeles for Pacific flights.

But that is what I expect them to do with the resources they have today.  What they will also need to do is build core strength to new destinations with aircraft freed up from consolidation.  USAmerican Airlines will need to deploy more strength to Asia and it should strongly consider operating flights to the Middle East and Africa.  They will even have an opportunity to perhaps explore South Africa as an opportunity through its South American flights.

And whoever gets the 787 first, QANTAS or USAmerican, direct routes to Sydney and Melbourne need to be established from DFW.  There should be multiple frequencies here.

Make no mistake, I do think Parker & Company is the right management team but they need to find a risk taker on the AA side to do strong business development in the above named areas.  This is a weakness on both sides but much more so among the US Airways team.   If the entrepreneurial spirit for this business development does not exist on either team, they need to hire it as soon as possible.  I would hire a senior level executive from a multi-national airline as fast as possible and give him or her a budget of resources and money significant enough to build a strong revenue stream from these weak spots.

And I wouldn’t wait to do it.  The longer USAmerican waits to address these core foreign route weaknesses, the more Delta will capitalize on them and the more chance there is that United will regain momentum.

Consolidate these foreign strengths quickly and immediately go to work on route development to destinations outside my core strengths.  I would also stop relying upon Oneworld partners to give me circuitous and service unequal routes to these places.

Filed under: Airline Service, Mergers and Bankruptcy by ajax