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For American Airlines, the Gap in Asia May Be Less Than It Seems

Stocks in this article: AAMRQ.PKALKDALHAUAL

DALLAS ( TheStreet) -- Perhaps the perceived gap between American (AAMRQ.PK) and its competitors in Asia isn't quite as big as it looks.

Certainly Delta (DAL) and United (UAL) have advantages. Both operate Tokyo hubs. Both offer more flights to Asia and serve more cities. Both are in alliances that include Chinese partners. Both fly to China from cities on the northern portion of the U.S. West Coast, allowing for more direct flying to Northern Asia.

In general, American sees the problems as surmountable. While some experts envision dramatic solutions, American's view is that its disadvantages in Asia can diminish over time, abetted by factors that include American's large aircraft order, which will add Boeing (BA) 787s to the fleet, enabling flights involving secondary cities, and by the pending merger with US Airways (LCC), which will add passengers to American's domestic network, creating more demand for Asia flights.

When American looks at its Asia assets, it starts with two key Oneworld alliance partners: Japan Airlines and Cathay Pacific. (A third Oneworld member, Qantas, is the largest Australian carrier.) "If you look at partnerships in Asia, outside of China our portfolio is outstanding," said Don Casey, vice president for revenue management. "JAL is a great partner in Tokyo, a good hub for northern Asia. Cathay Pacific is our partner in Hong Kong, the best hub for southeast Asia. This gives us tremendous coverage in Asia."

JAL has a trans-Pacific joint venture with American, immunized against antitrust violations, enabling the carriers to share revenue on trans-Pacific flights. Delta and United operate hubs in Tokyo, resulting, respectively, from a 2010 merger with Northwest and the 1985 purchase of Pan American World Airways' Asian routes. The two predecessor carriers held rights due to Post-World War II treaty agreements. But JAL also has a Tokyo hub, as does United partner All Nippon Airways. In short, American trails nobody in offering connections from Tokyo.

In terms of flights to Asia, United serves 20 continental Asia destinations, while Delta has 13. Currently, American serves just four Asia destinations with seven routes: Dallas to Tokyo Narita; JFK to Tokyo Haneda; Los Angeles to Narita and Shanghai, and Chicago to Narita, Beijing and Shanghai. An eighth route, Dallas to Seoul, will begin May 9.

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