) -- Five years into a trans-Atlantic joint venture with European partners,
says the arrangement is just getting to exactly where it should be.
That is good news for Delta, of course, but isn't it also a slight positive for American Airlines parent
On two recent quarterly conference calls, American executives have said it's taking more time than anticipated to derive the expected benefits from its joint venture with
that was finally approved last year.
On Delta's conference call Tuesday, CEO Richard Anderson said the carrier now plans trans-Atlantic capacity in conjunction with partners
, but "it has taken a while to evolve to that, to really treat it as a single network."
A continued benefit to Delta, Anderson said, is that "when passengers do get to the U.S., all of that traffic is on Delta (because) we are the exclusive partner for all the feed that comes off those networks." As a result, Delta has seen improved revenue per available seat mile across the Atlantic.
In the third quarter, Delta trans-Atlantic revenue per available seat mile rose 10%, while United's rose 7.3% and American's rose 3%. United and Delta both benefited from having a bigger share of non-Europe trans-Atlantic than American does.
EVP Jim Compton said his carrier's JV with
and other partners also continues to evolve.
"There's a familiarity that's building within the JV both from understanding each other's systems," Compton said. "It's for making sure the right price products are out there for our customers and they're consistent, as well as communicating back and forth.
"I think you're seeing capacity discipline (from) all the carriers in the JV showing right now," he said. "(We're) quicker to react based on getting to know each other."
Recently, American has been whipsawed by a combination of high costs and insufficient revenue. Its response has generally been that its labor costs, over time, will converge with competitors' costs, while its revenues, particularly from its trans-Atlantic joint venture, will increase. These claims have been met with skepticism.
On the carrier's conference call last week, CFO Bella Goren said the joint venture is "starting to generate revenue benefits." She said American's share of trans-Atlantic premium passengers has increased in relationship to other carriers' shares. Additionally, she said, American and its partners have jointly implemented more than 100 corporate travel deals.
While it is reasonable to assume that American, given time, can better compete on the trans-Atlantic, it is well-known within the airline industry that, at ground level, airlines often have a tough time abandoning self-interest in favor of joint interest.
Airline consultant Robert Mann said British Airways may be a particularly difficult partner, because it views the joint venture differently than American does.
"BA looks at the JV purely from an international network perspective, while American has to look at it from a 65% US network/33% global network perspective," meaning it wants some priority for the domestic component. But Mann said "BA expects American to adapt to all-things BA."
Regulators approved a trans-Atlantic joint venture, with immunity against anti-trust prosecution, for
in 1997. Air France and Delta signed their joint venture in 2007. Eventually KLM and Air France merged, and Delta and Northwest merged. And last year, Alitalia joined the Delta alliance.
Today, according to Delta, the joint venture represents 26% of the airline industry's trans-Atlantic capacity and generates about $10 billion in annual revenues. With anti-trust immunity, the partners are free to jointly discussing pricing and scheduling.
In 1996, regulators approved a trans-Atlantic joint venture for
; in 2009 the agreement was expanded to include
and other new partners.
American first sought a trans-Atlantic joint venture with British Airways in 1996, apparently under the impression that it was entitled to the same treatment as its competitors. It was not until February 2010 that
This can only be viewed as a case of regulatory ineptitude, harshly penalizing one of three global competitors in the global aviation business. Could it have been that European regulators did not want to help a British carrier? Or was it simply that they wanted more access for their carriers at London's Heathrow Airport, despite the argument that Lufthansa was every bit as dominant at Frankfurt International as British Airways was at Heathrow.
After the approval came, American president Tom Horton said repeatedly that the trans-Atlantic partnership, combined with network changes and approval of trans-Pacific anti-trust immunity, would be worth about $500 million in new net income to American by 2012.
Perhaps the schedule is off, but clearly implementation delays are not unique to American.
--Written by Ted Reed in Charlotte, N.C.
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