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.
American's order for 460 aircraft, with 465 options, will obviously spur the opening of new international routes, as will the merger. "In the American standalone plan, we were planning to add service to Asia," Casey added. "The merger with US Airways will provide additional opportunities to make that (expansion) successful, because it will give us a greater share of the customers in the U.S. market." Unfortunately, adding airplanes and passengers does not address what may be American's biggest problem in Beijing and Shanghai: a lack of slots, or assigned takeoff and landing times, at the congested airports. But given high demand for air service in China, more slots will likely become available over time because the Chinese government controls most of the air space. Historically, around the world, airlines that need slots find a way to acquire slots. The lack of Chinese partners is another impediment in serving secondary Chinese cities. Of the big three Chinese carriers, China Eastern and China Southern are both in the Skyteam Alliance while Air China is in Star. But Michael Thomas, American's managing director for network development, said "in China, as in a lot of developing countries, traffic initially is very concentrated in just a few markets, in this case Beijing and Shanghai. You're beginning to get some foreign carrier entry into secondary China markets, but it's very limited. The traffic for those secondary cities from the U.S. is relatively small." Moreover, in Beijing, American has a code-share agreement with Hainan, the fourth largest Chinese carrier, which operates a small Beijing hub. As for the U.S. West Coast,, a map published recently in the Dallas Morning News shows that that American's network suffers from a large gap north of Los Angeles and west of Chicago. Los Angeles "is too far south to be a good connecting gateway between North Asia and most of the U.S.," said aviation consultant Sandy Rederer. "United's Asia network is bolstered by its long-term development of San Francisco as the premier US-Pacific connecting gateway (while) Delta has developed Seattle into a strong gateway, supported by its marketing affiliation with Alaska ( ALK), and Air Canada uses Vancouver, but doesn't draw all that much Asia traffic to and from the U.S."
Casey noted that Alaska code shares with American in Seattle, just as it does with Delta, and American partner Hainan flies between Beijing and Seattle. It is clear that prevailing wisdom within the airline industry is that American is severely disadvantaged in Asia. Responding to the perception last week at the JP Morgan investor conference, US Airways CEO Doug Parker acknowledged that Delta and United have more routes to Asia, but referred to the benefits from the merger and the strong partnerships. "The real issue is to make sure you can get customers to where they want to go," Parker said. "Oneworld has that." Experts say partnerships with JAL and Cathay Pacific are fine, but go only so far. "American has a decent set of partners," said Imperial Capital analyst Bob McAdoo. "But they only have partners to a handful of cities in China." Air China, for instance, serves 96 cities in mainland China, while JAL serves 10 and Cathay Pacific serves 20. "I'm not sure it's critical," McAdoo added. "It would be nice to say that you go all over the world. But maybe you just don't." Henry Harteveldt, travel industry analyst for Hudson Crossing in San Francisco, said the two partnerships mean that "American at least has acceptable stop-gap measures in place." Longer term, Harteveldt foresees "lobbying various governments, particularly China, for expanded route rights, although this won't be easy, and results won't occur quickly." Another distant possibility could involve a merger or partnership with Hawaiian ( HA). "The only airline with Asia presence that might be an option for a merger is Hawaiian, which flies from Hawaii to several points in Asia and the South Pacific," Harteveldt said. Rederer, meanwhile, said American might consider buying Alaska, although "it would be a high-cost and high-risk strategy because Delta would also bid."
Consultant Bob Mann said the best option could be to lure either China Eastern or China Southern from Skyteam. Hainan is fine, Mann said, but the big three "are so big that you would have to do a lot of work over a long time to manufacture a reasonable competitor." "Alliances are like Friday night dates," Mann said. "Things change all the time." Follow @tedreednc -- Written by Ted Reed in Charlotte, N.C. >To contact the writer of this article, click here: Ted Reed