Jet Airways Severs Ties With 4 Star Alliance Airlines While Delta Plays American for the Greater Fool

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.

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.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Olivia Munn is hot. What is your take on the failure of Republicans to hold their promise to kill off old and sick Americans. I was looming forward to am American master race.

  2. AA is the one with the least desirable setup to move pax from US to India.

    UA leverages their own nonstops from EWR, AI nonstops from JFK EWR ORD SFO and soon LAX (not codeshared but still dangling FF carrot), AC nonstops from YYZ and YVR (not too sure whether those have a code-share or not), a FRA JV scissor hub, and AI interlines from DEL and BOM to carry pax to a myriad of smaller Indian destinations. There are also certain itinerary options that can go via NRT, ICN, and even SIN.

    DL has finally found its footing with the AMS scissor hub and lots of onward 9W feed once you arrive the anchor airports of BOM and DEL. Not too sure how well the US-ICN-India connections are timed to leverage their new Pacific JV.

    AA’s solution is asking for a bus transfer at LHR plus flying with QR, UL, and occasionally JAL.

  3. It seems DUI Parker picked up the old habit again…much to the opposition from major investors like iahphx

  4. I am Not a Delta Fanboy and fail to See the Invincibility of the Atlanta Airline. if You like Delta Fine….. Fly Them…..I Don’t and rarely ever consider Them. the Delta LoveAffair is fn ridiculous!

  5. @credit

    Looks like we’ll have to go back to that brilliant healthcare legislation know as Obamacare . Be careful what you wish for.

  6. The reasoning here is suspect.

    First of all, there is no evidence for your overriding assumption/premise that AA follows Delta’s lead on everything. AA may have other reasons for appearing to do the same thing. Different causes may have the same effect.

    How is it that you know more about where AA’s passengers need to go and how they get there than AA? Obviously you don’t because no where do you mention Cathay to India from the West Coast. (I guess the people who would know don’t comment here.)

    On that note, how is it that you know more about the financial hit that AA is going to take for this decision than they do? You don’t. More speculation on your part.

    As to the rest, it’s vulgar deconstruction to show how everyone’s hands are dirty when it comes to receiving government assistance. It glosses over the reality that despite everyone’s original sin there has to be something like a level playing field if some of these companies can continue to stay in business without government intervention.

  7. It’s no surprise that Delta played stupid Parker for a fool.
    BTW, Oscar is a moron too, in the same league as Parker.

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