SH&E Presentation

Report
Proposed AA/US Airways
Merger
Benefits to DFW Airport, Metroplex
Consumers and the State of Texas
Prepared for:
Dallas Fort-Worth Airport
November 7, 2013
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BACKGROUND
American Airlines (AA) and US Airways (US) announced plans to
merge on February 14, 2013
 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 anticompetitive 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 Texas has since withdrawn from the action.
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1
DFW will be the largest hub, headquarters location, and a
strategic priority for the merged AA/US
Daily Departures
100-300
New York LGA
Chicago
ORD
301-500
459
> 500
Philadelphia
Washington
DCA
158
466 102
274
New York
JFK
664
166
Los
Angeles
Phoenix
DFW’s Strategic Attributes
 Large and vibrant domestic and
international market
 Key international gateway
 Strong business climate
 Lack of significant physical or
economic constraints
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Charlotte
306
Dallas/
Fort Worth
783
Miami
327
Source: OAG Schedules, March 2013
2
As the leading hub in the AA/US system, DFW’s strong
demographic profile will generate sustained growth
DFW’s Market Strengths
 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
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3
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
CY 2008
Rank Carrier
1
2
3
4
5
6
7
8
9
10
RPMs (000)
YE 2Q 2013
CY 2010
Percent
of Total U.S.
American
United
Delta
Continental
Southwest
Northwest
US Airways
JetBlue
AirTran
Alaska
131,755,106
110,061,748
105,697,395
80,494,630
73,639,647
71,645,710
60,567,144
26,090,035
18,805,184
18,715,425
16.1%
13.5%
12.9%
9.9%
9.0%
8.8%
7.4%
3.2%
2.3%
2.3%
Top 10
697,472,024
All Other
Total
Rank Carrier
Percent
of Total U.S.
Delta
American
United
Continental
Southwest
US Airways
JetBlue
Alaska
AirTran
SkyWest
168,139,115
125,484,277
102,524,350
79,734,979
78,135,571
58,972,021
28,290,201
20,353,807
19,563,752
13,260,552
20.9%
15.6%
12.8%
9.9%
9.7%
7.3%
3.5%
2.5%
2.4%
1.6%
85.4%
Top 10
694,458,625
119,024,743
14.6%
All Other
816,496,767
100.0%
Total
Before
DL/NW merger
1
2
3
4
5
6
7
8
9
10
RPMs (000)
Rank Carrier
Percent
of Total U.S.
United
Delta
American
Southwest
US Airways
JetBlue
Alaska
ExpressJet
Skywest
Hawaiian
177,751,448
170,581,043
126,847,880
103,787,172
64,538,314
34,793,789
25,453,573
16,249,751
14,700,826
13,300,054
21.4%
20.5%
15.3%
12.5%
7.8%
4.2%
3.1%
2.0%
1.8%
1.6%
86.4%
Top 10
748,003,850
90.0%
109,612,052
13.6%
All Other
82,881,835
10.0%
804,070,677
100.0%
830,885,685
100.0%
Before UA/CO merger,
Post DL/NW merger
(merged October 2008)
1
2
3
4
5
6
7
8
9
10
RPMs (000)
Total
Post UA/CO merger
(merged August 2010),
Before AA/US merger
Note: Regional carriers shown separately.
Source: DOT Form 41 Reports
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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
Change in DL/NW Daily Seat Departures at ATL
March 2008, 2010 and 2013
124K
122K
120K
118K
116K
114K
112K
110K
108K
106K
122.4
2008
2010
2013
112.5
113.1
Change in UA/CO Daily Seat Departures at IAH
March 2010, 2012 and 2013
60K
59.1
2010
59K
2012
59K
2013
58K
57.5
58K
57.0
57K
57K
56K
56K
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
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Leadership in global trade requires a competitive AA/US
and oneworld alliance at DFW
Texas Trade is Expanding Rapidly
 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
Source: U.S. Department of Commerce , U.S. Census Data 2012; Business Roundtable, David Thomas
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6
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
June 2014
Nov
2013
June 2014
Nov
2013
Nov
2013
New service
Existing service as of
Oct 2012
The merger will create additional DFW international growth opportunities to new
markets in Central and South America and Asia
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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
Weekly Departures and Seats at AA’s
DFW Regional Markets
October 2010 and 2013
Weekly
Departures
Seats
Load Factor
October 2010
October 2013
607
625
39,922
40,658
62.7%
71.6%
Change
+18
+736
+8.9 points
“Our negotiations confirm that
(American) will…maintain important
routes in Texas…”
-- Greg Abbott, Texas Attorney General
Source: OAG Schedules
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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
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The DFW market is already highly competitive – LCCs now
provide nonstop service in 17 of the top 20 DFW domestic
markets…
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Market
New York City
Chicago
Los Angeles
Denver
Atlanta
Las Vegas
San Francisco
Washington
Miami/Fort Lauderdale
Boston
Orlando
Phoenix
Seattle/Tacoma
Philadelphia
Minneapolis
Detroit
Houston
San Diego
Baltimore
Orange County
Subtotal Top 20
DFW O&D
Psgrs
DFW/DAL LCC Seat Share
Oct 2010
Oct 2013
1,328,110
1,082,010
922,160
794,500
789,920
698,270
689,860
604,400
572,550
567,670
500,610
474,150
436,110
427,220
368,310
364,780
338,350
324,930
322,770
318,300
0.0%
0.0%
0.0%
25.0%
19.5%
0.0%
0.0%
0.0%
0.0%
0.0%
5.6%
0.0%
0.0%
0.0%
6.7%
0.0%
58.9%
0.0%
0.0%
0.0%
4.1%
7.5%
17.5%
31.9%
6.6%
21.7%
14.9%
0.0%
10.6%
15.9%
14.0%
6.5%
0.0%
9.9%
16.6%
10.4%
56.0%
10.8%
17.6%
0.0%
11,924,980
10.6%
16.2%
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
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…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.
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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
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