0 icfi.com/aviation | benefits to dfw airport, metroplex consumers and the state of texas proposed...
TRANSCRIPT
1icfi.com/aviation |
Benefits to DFW Airport, Metroplex Consumers and the State of Texas
Proposed AA/US Airways Merger
November 7, 2013
Prepared for:
Dallas Fort-Worth Airport
2icfi.com/aviation |
American Airlines (AA) and US Airways (US) announced plans to merge on February 14, 2013
BACKGROUND
The merger would create a network airline comparable in size and domestic market share to Delta and United, each of which completed mergers in the past five years
• Delta Airlines merged with Northwest in 2008
• United Airlines merged with Continental in 2010
Both of these previous mergers, and a subsequent merger between Southwest Airlines and AirTran, were cleared by the US Department of Justice (DOJ)
However, the DOJ along with the District of Columbia and seven U.S. States* filed a complaint to permanently block the AA/US merger in August 2013, citing anti-competitive concerns
The purpose of this briefing is to review the expected benefits that an AA/US merger could produce for DFW Airport, Metroplex consumers and the State of Texas
* These States are Arizona, Florida, Pennsylvania, Tennessee, Michigan, Virginia and Texas. Texas has since withdrawn from the action.
3icfi.com/aviation |
DFW will be the largest hub, headquarters location, and a strategic priority for the merged AA/US
Large and vibrant domestic and international market
Key international gateway Strong business climate Lack of significant physical or
economic constraints
783
664
466459
327
306
274
166
158
102
Dallas/Fort Worth
Charlotte
PhiladelphiaChicago
ORD
Miami
PhoenixLos
Angeles
New York LGA
New YorkJFK
Source: OAG Schedules, March 2013
WashingtonDCA
Daily Departures
100-300
301-500
> 500
DFW’s Strategic Attributes
4icfi.com/aviation |
As the leading hub in the AA/US system, DFW’s strong demographic profile will generate sustained growth
Ranks 2nd only to Atlanta among U.S. connecting hubs
Serves the 4th largest U.S. metro population at 6.7 million
• Larger than either Atlanta or Houston
• Only New York, Los Angeles, and Chicago are larger
4th fastest growing market among the 20 largest U.S. metro areas over the past decade
Ranks 6th on domestic O&D passengers; 4th on domestic O&D passenger revenues
DFW’s Market Strengths
5icfi.com/aviation |
Previously approved mergers positioned Delta and then United as the largest U.S. airline – the merged AA/US will be similarly sized
Top U.S. Carriers by RPMs
Note: Regional carriers shown separately.Source: DOT Form 41 Reports
Before DL/NW merger
Before UA/CO merger, Post DL/NW merger
(merged October 2008)
Post UA/CO merger(merged August 2010), Before AA/US merger
CY 2008 CY 2010 YE 2Q 2013
PercentRank Carrier RPMs (000) of Total U.S.
1 American 131,755,106 16.1%2 United 110,061,748 13.5%3 Delta 105,697,395 12.9%4 Continental 80,494,630 9.9%5 Southwest 73,639,647 9.0%6 Northwest 71,645,710 8.8%7 US Airways 60,567,144 7.4%8 JetBlue 26,090,035 3.2%9 AirTran 18,805,184 2.3%
10 Alaska 18,715,425 2.3%
Top 10 697,472,024 85.4%
All Other 119,024,743 14.6%
Total 816,496,767 100.0%
PercentRank Carrier RPMs (000) of Total U.S.
1 Delta 168,139,115 20.9%2 American 125,484,277 15.6%3 United 102,524,350 12.8%4 Continental 79,734,979 9.9%5 Southwest 78,135,571 9.7%6 US Airways 58,972,021 7.3%7 JetBlue 28,290,201 3.5%8 Alaska 20,353,807 2.5%9 AirTran 19,563,752 2.4%
10 SkyWest 13,260,552 1.6%
Top 10 694,458,625 86.4%
All Other 109,612,052 13.6%
Total 804,070,677 100.0%
PercentRank Carrier RPMs (000) of Total U.S.
1 United 177,751,448 21.4%2 Delta 170,581,043 20.5%3 American 126,847,880 15.3%4 Southwest 103,787,172 12.5%5 US Airways 64,538,314 7.8%6 JetBlue 34,793,789 4.2%7 Alaska 25,453,573 3.1%8 ExpressJet 16,249,751 2.0%9 Skywest 14,700,826 1.8%
10 Hawaiian 13,300,054 1.6%
Top 10 748,003,850 90.0%
All Other 82,881,835 10.0%
Total 830,885,685 100.0%
6icfi.com/aviation |
The development of ATL and IAH after previous airline mergers indicates that DFW should lead network expansion for AA/US
Post-merger, Delta increased hub capacity at ATL - its largest hub
And United grew service at IAH - its largest hub - and San Francisco (a primary international gateway) through 2012
Similar to ATL and IAH, DFW will grow as the largest hub in the combined AA/US route network
106K
108K
110K
112K
114K
116K
118K
120K
122K
124K
112.5 113.1
122.4200820102013
Change in DL/NW Daily Seat Departures at ATLMarch 2008, 2010 and 2013
Change in DL/NW Daily Seat Departures at ATLMarch 2008, 2010 and 2013
Change in UA/CO Daily Seat Departures at IAHMarch 2010, 2012 and 2013
Change in UA/CO Daily Seat Departures at IAHMarch 2010, 2012 and 2013
54K
56K
58K
60K
57.5
59.1
57.0
2010
2012
2013
Source: OAG Schedules Note: The drop in United’s Houston capacity during the past year may reflect, in part, its response to a dispute with the City of Houston over Southwest’s Airline’s successful initiative to provide future international services at Houston Hobby
7icfi.com/aviation |
Leadership in global trade requires a competitive AA/US and oneworld alliance at DFW
In 2012, worldwide Texas exports were $265 billion - up 9% vs. 2011
In 2012, Texas exports accounted for 17% of the U.S. total
International trade (exports/imports) supports 2.9 million or 1 in 5 Texas jobs
• Foreign-owned companies employ 428,000 Texas workers
• Trade related employment grew 12% vs. total Texas job growth of 6% from 2004 to 2011
Future economic growth and jobs for the DFW/Metroplex, Texas and America increasingly depend on expanding U.S. trade and investment opportunities in the global marketplace
Texas Trade is Expanding Rapidly
Source: U.S. Department of Commerce , U.S. Census Data 2012; Business Roundtable, David Thomas
8icfi.com/aviation |
New serviceExisting service as ofOct 2012
Nov 2013
June 2014
June 2014
The AA/US merger will directly help DFW achieve its full international growth potential
American’s new Shanghai, Hong Kong, Seoul, Bogota, and Lima nonstops are precursors of a logical DFW international growth strategy for a merged AA/US
The merger will create additional DFW international growth opportunities to new markets in Central and South America and Asia
Nov 2013
Nov 2013
9icfi.com/aviation |
Source: OAG Schedules
“Our negotiations confirm that (American) will…maintain important
routes in Texas…” -- Greg Abbott, Texas Attorney General
American’s commitment to DFW’s Texas regional markets is evidenced by AA’s schedule stability from 2010 to 2013
AA’s DFW Regional Markets
Departures Seats Load Factor
October 2010 607 39,922 62.7%October 2013 625 40,658 71.6%
Change +18 +736 +8.9 points
Weekly
Weekly Departures and Seats at AA’s DFW Regional Markets October 2010 and 2013
10icfi.com/aviation |
A strengthened merged airline and DFW hub will produce significant benefits for consumers and businesses in the DFW Metroplex
The merged AA/US will create and sustain leading global connectivity for the DFW/Metroplex, facilitating the movement of people and goods
Network expansion will result in a greater diversity of nonstop services, including both domestic and international routes, with more frequent and convenient schedules
A financially stable and revitalized airline will enhance job security for the 25,000 AA/US employees in Texas
DFW’s status as the merged airline’s largest hub will benefit the DFW/Metroplex in attracting new and relocating companies, with positive effects on employment and income
11icfi.com/aviation |
The DFW market is already highly competitive – LCCs now provide nonstop service in 17 of the top 20 DFW domestic markets…
DFW O&DRank Market Psgrs Oct 2010 Oct 2013
1 New York City 1,328,110 0.0% 4.1%2 Chicago 1,082,010 0.0% 7.5%3 Los Angeles 922,160 0.0% 17.5%4 Denver 794,500 25.0% 31.9%5 Atlanta 789,920 19.5% 6.6%6 Las Vegas 698,270 0.0% 21.7%7 San Francisco 689,860 0.0% 14.9%8 Washington 604,400 0.0% 0.0%9 Miami/Fort Lauderdale 572,550 0.0% 10.6%10 Boston 567,670 0.0% 15.9%11 Orlando 500,610 5.6% 14.0%12 Phoenix 474,150 0.0% 6.5%13 Seattle/Tacoma 436,110 0.0% 0.0%14 Philadelphia 427,220 0.0% 9.9%15 Minneapolis 368,310 6.7% 16.6%16 Detroit 364,780 0.0% 10.4%17 Houston 338,350 58.9% 56.0%18 San Diego 324,930 0.0% 10.8%19 Baltimore 322,770 0.0% 17.6%20 Orange County 318,300 0.0% 0.0%
Subtotal Top 20 11,924,980 10.6% 16.2%
DFW/DAL LCC Seat Share
Note: O&D to/from DFW Airport only; LCC service includes competitive DAL airport service by Southwest
Source: US DOT, O&D Database, Database Products Inc and OAG Schedules
12icfi.com/aviation |
…and LCC competition will increase significantly when the Wright Amendment expires in October 2014
Potential New Southwest Destinations After the Wright Amendment Expires
Source: “The Wright Amendment Consumer Penalty,” Cambell-Hill Aviation Group, June 2005; ICF-SH&E analysis.
13icfi.com/aviation |
Conclusion
The proposed AA/US merger will create a stronger competitor to United and Delta, and their respective global alliances
As the leading hub in the combined carrier network, DFW is positioned to grow following an AA/US merger
A strong and growing DFW hub provides critical support to the DFW Metroplex and cities across the state
The DFW market has significant LCC competition today, and this competition will increase when the Wright Amendment expires in October, 2014
The AA/US merger will benefit DFW Airport, consumers and businesses in the Metroplex region, and the State of Texas
14icfi.com/aviation |