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Airline mergers- is there place for foreign planes in US?

Palmetto, Florida
posts: 2,634
reviews: 10
Airline mergers- is there place for foreign planes in US?

Just catching comments about 80%+ air seats controlled by 4 companies in the domestic US. Prices will go up people predict. Anyone knows if it's possible /viable for foreign airlines to enter our domestic market? Just wondering.

Nowy Sacz, Poland
Destination Expert
for Poland
posts: 4,023
reviews: 42
1. Re: Airline mergers- is there place for foreign planes in US?

I'm guessing it's protected - only US airlines can carry between US airports. Overseas carriers can fly in and out, but not from US start to US destination ... same applies for passenger ships, hence NCL's Hawaii efforts a few years ago

Trondheim, Norway
Destination Expert
for Trondheim
posts: 2,937
reviews: 20
2. Re: Airline mergers- is there place for foreign planes in US?

Unless the US rules have change the last couple of years foreign airlines are prohibited from flying US domestic flights. Any airline operating domestic flights in the US must be controlled by a US citizen or entity (company).

Back when Virgin America was being set up it was barred from flying because Richard Branson, who is not a US citizen, owned the controlling stock in the airline.

Chicago
posts: 4,599
reviews: 1
3. Re: Airline mergers- is there place for foreign planes in US?

Isn't that true all over? US airlines don't fly between European or Asian cities.

Shoalhaven...
posts: 1,639
reviews: 151
4. Re: Airline mergers- is there place for foreign planes in US?

no that is not true all over. I can fly United/Delta from Bangkok-Tokyo, Singapore-Tokyo, Singapore -Seoul etc. However, within the same country is predominantly a different story, though many examples do exist.

I think it is a better and more controlled system domestically to ensure the lower cost pressures of some nations do not force our own workforces out of the market

Leeds, United...
Destination Expert
for Leeds, Bradford
posts: 9,487
reviews: 131
5. Re: Airline mergers- is there place for foreign planes in US?

As Douglass has said it isn't a hard and fast rule. Countries can agree to allow foreign airlines the rights to fly between two cities within their country. The general rule is often referred to as fifth (or sixth if the flight then goes onto another country) freedom rights.

Bangkok
Destination Expert
for Bangkok, Air Travel, Thailand
posts: 14,201
reviews: 73
6. Re: Airline mergers- is there place for foreign planes in US?

Hi,

Within the US, current federal law restricts the carriage of passengers or cargo between two US points be done so on a US flagged carrier..

This is a fairly common restriction in many parts of the world -- that being so-called domestic traffic is restricted to domestic carriers.

The common exception is for "thru" traffic .. Like if an Asian carrier operates a JFK-ANC-TPE service..

They can pick up passengers in JFK even though the next stop is ANC- a US point- but -- they can't discharge anyone or anything in ANC.. That would be a violation of US law..

They can only pick up more origin passengers (or cargo) in ANC before going on to TPE

The only way to make this kind of a routing possible is to stop at a foreign port/point between JFK and ANC hut before going to TPE,... This making the JFK-XXX and the following xXX-ANC both international sections.

But this will drive up the costs as all inbound international flights to the US have the required Customs & Immigration taxes and fees applied to it.. A wholly domestic sector would not.

(This does assume there also is in place the necessary "freedom" frights between these countries to carry such traffic)

It closely mirrors the ocean transport oriented Jones Act.

Travel Safe,

Dubai, United Arab...
posts: 3,485
reviews: 14
7. Re: Airline mergers- is there place for foreign planes in US?

Besides the legal question there is the commercial question. Given the high level of competition and low fares, would it be desirable from an economic point for a foreign airline to start domestic flights in the USA?

What foreign airline need is feeder traffic. And this traffic can be obtained at a lower cost than considering starting domestic services.

It is dangerous to generalise, but I would assume that today there will be few to none foreign airlines considering starting 'true' domestic services in the USA.

The mergers in the USA are not coming from nothing. The issue here is a lack of profitability.

Portland, Oregon
Destination Expert
for Air Travel
posts: 19,006
reviews: 5
8. Re: Airline mergers- is there place for foreign planes in US?

There's still the opportunity for domestic carriers to grow and compete. Either regional carriers (JetBlue, Alaska, Virgin America**) or LCCs (Frontier, Spirit, Allegiant).

There's been airline consolidation in Europe too you know (BA/IB, AF/KL, LH/LX/SN/OS). Yet the biggest European airline by total passengers flown is RyanAir, and easyJet is the largest UK airline, not BA. Both those carriers grew by competing on fares. You can question RyanAir's service (like Spirit) but you can't deny they've been phenomenally successful in the European "domestic" market.

(VX has been bleeding $$ but did eventually turn in a quarterly profit; the jury's still out IMO)

Edited: 2:26 am, November 19, 2013
Dubai, United Arab...
posts: 3,485
reviews: 14
9. Re: Airline mergers- is there place for foreign planes in US?

Agree about profitability of Ryan Air and Easy Jet.

Also agree with the possibility for growth of US domestic carriers. Personally I just have a different opinion on foreign carriers entering the US domestic business.

In my perception - competition in the USA is tougher than in Europe. In Europe fifth and higher freedoms still can be an issue (sometimes even fourth). Further in Europe travelers are expecting still a (slightly) higher service level than in the USA and are (in general) less price driven and rate status higher than in the USA.

Interestingly, Ryan Air starts to focus more on business travelers. Could well be that the borders between full service and budget / low cost carriers are blurring further in Europe.

I would expect the challenge going forward will rather be in low cost long haul carriers (offering nice profits) and increased salary pressure to drive efficiency to meet challenges from Middle East and Asian carriers.

Bangkok
Destination Expert
for Bangkok, Air Travel, Thailand
posts: 14,201
reviews: 73
10. Re: Airline mergers- is there place for foreign planes in US?

Hi,

I agree more with Dubai_Phil than I do USBT.

This isn't to say there is no room for competition or even profits on the US domestic side -- there is ..... However as I see it, it's just given the capital required to run a true, scale hub oriented domestic network, the ROE on the domestic side (as opposed to international) just doesn't favor carriers expending their limited capital into what really becomes a low(er) margin side of the business..

But... There are some markets that are quite lucrative -- JFK to SFO/LAX and to a degree the metro DC market too (IAD, DCA, BWI) ... But for each one of these high(er) margin markets there far more less lucrative markets ...

This is why I suspect you'll see the majors continue their push to "express" out there sectors to their partner carriers who usually operate at lower CASM levels than a major carrier can..

So... I don't think the domestic US market is dead ... Far from it.. But I think the picture is mixed... Some markets are very well suited to mainline flying --- others i think are not..

As to feeder traffic .. Absolutely ...

If US majors could -- they'd largely stop all domestic flying -- aside from a few mealy markets -- and deploy themselves nearly all internationally...

But that's just not reality .. And for some carriers, they've got CBA terms that further limit their ability to "shift" mainline to partner express flying..

That's why SQ has a great setup ... Largely for then, there is no domestic flying.. It's pretty much all higher margin international.. But they too have adapted to the reality that some markets either just can't support mainline or one of their lower cost units (Silk or Scoot) would give a better cost/revenue fit.

So... When it's all said and done.. I do think there's still growth in the US domestic side... But I'm not sure it's enough and/or consistent enough to provide for the ROE levels that a major carrier needs relative to what the RASM and CASM figures compare when you look at international..

Travel Safe,

Edited: 4:58 am, November 19, 2013