In 2019 Delta Air Lines won big in the Haneda slot allocations. With seven slot pairs available, it consolidated its Tokyo operations at the in-town airport, with plans to serve it from seen US gateways. Four years later, however, the carrier sees dramatically different demand patterns and is seeking permission from the US Department of Transportation to alter its gateway cities, without going through a new slot allocation proceeding.
Granting U.S.-Haneda slot holders the gateway flexibility described in this motion as part of a three-year pilot program will be pro-consumer, pro-competitive, and serve the public interest because it will enable U.S. carriers to respond more nimbly to the evolving demand environment in Asia following the COVID-19 pandemic.– Delta brief filed with the US DOT
Haneda is relatively unique in that it allows for limited operations between the US and Japan, despite the two countries’ Open Skies bilateral relationship. In allocating those route authorities, the US DOT required the airlines to specify which airports they would operate from on the US side. Similar requirements exist for routes to Cuba and China. And when airlines want to change their services, typically that triggers DOT action on whether the slots might be better suited operated by a competitor at a different hub. Given the scarcity of Haneda access Delta does not want to go through that process. But it also wants to move two of its flights to different gateways.
Enter the proposed Gateway Flexibility Pilot Program. Under Delta’s proposal, any airline serving Haneda could move two of its operations to an alternate gateway. This program would operate for three years, allowing the DOT to evaluate whether it serves the public interest and benefits consumers in the form of increased service and lower fares.
Just as air carriers need flexibility to make market-based decisions on when and where to deploy their network and operational assets for purposes of preserving their limited-entry DOT-issued international route authorities, so too do they need flexibility to determine the optimal U.S. gateways for serving Haneda – a market that remains extraordinarily depressed relative to 2019 volumes.– Delta brief filed with the US DOT
In its filing, Delta highlights the flexibility afforded airlines during the COVID-19 pandemic, as flights could be suspended without losing them for future seasons. The writing is on the wall for that policy, however. While the DOT did extend it for the current Northern Summer 2023 season, it is unlikely to renew anew. Faced with the risk of needing to fly services with low demand or losing the slots, Delta picked option three.
Delta also notes that demand to Tokyo simply has not recovered as quickly as other markets. Indeed, excluding China (which faces myriad other regulatory challenges) the US-Tokyo market is the weakest of the 20 largest international routes, with demand at 49% of 2019 levels.
Across its seven gateways Delta has not seen demand recover beyond 65% as of March 2023. Three of the markets remain below 50%. And while those numbers are expected to improve as Japan reopens, Delta is still hoping for the flexibility.
The ability for all U.S. carriers to make network changes, as they are permitted to do in all other Open Skies markets, will maximize travel options for consumers. By contrast, when airlines are not permitted to react swiftly to market changes, consumers are harmed: routes with burgeoning demand may be underserved; routes with depressed demand may be overserved; and slot-pairs forfeited for underutilization and/or returned to the Department’s pool for reallocation will cause a gap in service – depriving consumers of the benefit of a scarce asset during the pendency of a multi-month Department-administered proceeding.– Delta brief filed with the US DOT
Delta also calls attention to a 2004 shift in policy related to the Brazilian market. When it transitioned to an Open Skies relationship all prior limits on routes were lifted. There are some similarities there, particularly around the Open Skies nature of the bilateral air services agreement. But the Haneda slots were allocated under the same scheme, so it is not entirely the same.
Delta also made a similar request prior to the 2019 allocations. It notes that the prior request was for all slots and an unlimited timeframe. This proposal covers only a limited number of operations and includes a specific sunset provision. Whether that’s enough for the DOT to play along remains to be seen.
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Delta wanted all of these slots and they got them. Now they have to poop or get off the pot. Use it or lose it. I’m sure AA, UA or HA would love to have any slots reallocated that Delta cannot use. Maybe Delta just can’t handle 7 slots. Remember when they tried to keep their SEA-HND slots and flew it only once every 90 days. Well they were forced to fly it daily or lose it and they lost it. So this will be the same. Use it or give a few to AA or UA.
Seth Miller says
Delta still wants to use them, just from different US gateways than initially requested/assigned. Basically the question is whether the DOT should be mandating where airlines fly from on international routes, or if they should trust the airlines to make business decisions that benefit consumers.
Of course, many business decisions don’t necessarily benefit consumers, so there’s a reason the DOT doesn’t always trust the airlines.
Boo Hoo DL. I think those slots should go to AA and UA split up. DL has destroyed NWA Asia network and now wants pity. Sick of the US Government siding with them. They are becoming a shell of what they were 5 years ago. AA can add PHX and likely MIA, much better use of the slots and opens new routes to growing tech and business centers unlike DTW and MSP.
Seth Miller says
I know the airport authority at MIA is very, very keen to see service from Tokyo. But that seems an incredible long-shot to me. Especially while AA is still short on long-haul aircraft.
@sunviking82, true, there’s no more NW/DL Narita hub. In the “glory days”, there were onwards flights from Narita to SIN, BKK, TPE, PVG, PEK, MNL, ICN, and some various islands. My understanding is that the old CO/UA & NW/DL hub was because Tokyo was the closest Asian metropolis to the US and airplanes had shorter ranges back then.
Nowadays, airplanes can overfly NRT/HND and go right to the desired destination (except for BKK-North America, maybe more so due to economics than technically due to aircraft range; I do believe there’s a YVR-BKK AC flight though).
Seth Miller says
The Tokyo hubs were a vestige of a few things, including the aircraft range challenges. And the lack of access for US airlines to markets like China on nonstop flights.
As for BKK, that route is possible these days and has been for a while. Back in the day Thai flew to LAX on the A345. I actually got to fly it once. It is a smidgen shorter than the SIN routes. But the economics to BKK are much worse than to SIN, so it hasn’t come back. The YVR route is flying today on a 787 as a seasonal service.
Steve Nelson says
I’m hard pressed to see where DL could better utilize the slots. Yes the difference in demand between DTW/SEA/MSP is not that great, and even ATL is only at 64%. What other two gateways could possibly perform better in the DL network?
JFK? Possibly, but that was always a long route in the past and routinely had open seats. And plenty of competition.
SLC? It does little that MSP doesn’t already do for connectivity, and local demand wouldn’t make up the difference.
Bottom line to me is the US-Japan market is still in heavy recovery mode and it has little to do with the gateways and more to do with heavily depressed business and leisure travel. Leave things of a full year of open travel and then reevaluate.
Seth Miller says
I don’t have enough data to know where Delta wants to move the slots to. Maybe doubling up in some gateways is viable. And the data was from before Japan relaxed its entry rules (and another set of limits was just removed last week) so the chart certainly will shift.
And Delta wants the flexibility to keep its slots while it figures out other gateway options that might be marginally more profitable.
If you had to guess which two routes would be cut? HNL and PDX based on the graph from Delta?
Personally, I find this uncertainty extremely annoying. I live in Hawaii, and have a bunch of Delta $$ from cancelled Covid flights. It all expires at the end of this year. I’m looking to fly HNL-HND next year, but am worried they’ll cancel and re-route me through SEA or LAX. If they want to get rid of the HNL-HND, why aren’t they playing the price game like they are with PDX-HND route?
Seth Miller says
A completely reasonable concern.
One angle I’d probably argue is that you could book the flights now and if they try to play that game with the reroute a DOT complaint would likely end in your favor, particularly given the egregious nature of a reroute via the mainland. But it is still a risk.