American Airlines Chairman and CEO Doug Parker needs to get the memo that Delta is not his friend and that American’s interests aren’t the same as Delta’s.
You’d think he would have realized that when as Chairman of the airline lobbying group Airlines For America Delta pulled its membership.
In going along with Delta’s interests, copying Delta’s strategies, Parker is being played for the Greater Fool. But not the good kind Olivia Munn talks about.
Delta and Alaska Airlines parted ways. Now American and Alaska are mostly parting ways. When you ask American’s top executive what airline they admire most they answer: Delta.
Delta has a clear strategy though and American doesn’t. You don’t hear much about ‘Going for Great’ at American anymore other than in the airline’s safety video. Delta doesn’t see much growth in the U.S. market but it’s taking cash and investing in foreign airlines like Virgin Atlantic, Gol, Aeromeico, and China Eastern (incidentally the most government-subsidized Chinese airline).
Delta rails against subsidies but only minds them when they aren’t the beneficiary. And they rail against Gulf carriers only when they aren’t the beneficiaries of Gulf carriers’ money. They’ve had no problem sharing transatlantic revenue with Alitalia while Alitalia was losing money and propped up by Etihad’s subsidies.
Jet Airways has been largely controlled by minority shareholder Etihad for some time. Jet Airways JetPrivilege was even spun off as a separate business entity so that Etihad could exercise more control over the combined entity without running afoul of foreign ownership rules. But Jet has been increasingly independent of Etihad over the last year.
- They hired a Delta Senior Vice President as their new CEO.
- Then they announced a severing of ties with American.
- And there are rumors that Delta is negotiating a 24% stake in the carrier.
Now Jet Airways is cutting ties with Star Alliance airlines Turkish, Austrian, Lufthansa and Swiss. They’re remaining partners with Delta and and Delta’s joint venture partners Air France KLM. They’re remaining partners with SkyTeam members Korean, Garuda, and Vietnam Airlines. They’re remaining partners with Virgin Atlantic which is 49% owned by Delta. (They also retain a handful of other Star and oneworld partners.)
According to Delta it’s critical that everyone play by the rules. The rule of course is that Delta rules.
Etihad’s 6 daily flights to the U.S. are an existential threat to Delta — unless, of course, Delta gets its piece. That’s the classic definition of racketeering, traditionally organized crime syndicates offer to solve a problem they’ve created for a business themselves. Pay protection money, the protectors don’t break your windows or your bones.
As long as international airlines pay tribute to Delta — as Korean is now doing via joint venture — Bugsy won’t discourage frequent flyers from booking with no elite qualifying miles, or show up with the U.S. federal government at his side to block routes or fix prices.
One special irony is how American is getting played in all of this. They’re ending codesharing arrangements with Etihad and Qatar so as not to appear hypocritical seeking government protection from foreign competitors. American has no comparable partners flying West towards Europe and the U.S. with reach into small markets in India, Pakistan and the surrounding region and also several destinations in Northern Africa.
American says the losses it suffers from this decision won’t be ‘material’ which I’ve seen many writers pick up suggesting the reduction in revenue won’t be significant but that’s wrong. ‘Material’ is a specific accounting term measuring the magnitude of the transaction relative to the size of the overall enterprise. It’s still a hit in the millions and likely tens of millions of dollars.
Meanwhile Delta is picking up traffic from India via Jet Airways — and denying it to American — and didn’t profit from relationships with Emirates, Qatar, or Etihad in the first place — they have Saudia.
Delta has no problem profiting from hypocrisy. In fact, it’s become their competitive advantage.
They’re playing American here for the greater fool. American has only ever had one flight to India, Chicago – Delhi, which they ended before the buildup of U.S. service by Emirates, Qatar, and Etihad. They considered flying to Abu Dhabi, a flight that would only have made sense with their close Etihad relationship. Their revenue sharing joint venture with British Airways might suffer some marginal losses on low revenue India traffic, but British Airways’ parent IAG is 20% owned by Qatar and objects to the fight with the Gulf airlines.
American is taking it on the chin with partnerships in service of Delta’s fight.
Meanwhile not only was American’s first major aircraft order financed by the US federal government, Doug Parker personally went to DC to lobby for subsidies to bail out America West. America West took over US Airways out of its second bankrutpcy, having run through the State of Alabama’s money and offloaded pensions on the federal government. And Parker himself succeeded in taking over American while still in bankruptcy aided by the federal government’s lobbying of the creditors committee on his behalf.