Delta Air Lines sees an opening at LAX, but Los Angeles is not a market that airlines “win” so much as one they survive. The opportunity is real, and the gate constraints facing competitors may give Delta a rare window to grow.
Delta Sees A Rare Opening At LAX, But Los Angeles Has Humbled Airlines Before
Earlier this month, I wrote about Delta Air Lines’ growing ambitions at LAX, arguing that the carrier appears to see a real opening in Los Angeles but that Los Angeles has historically been a very difficult market.
American Airlines has pulled back. JetBlue is much smaller than it once hoped to be in Southern California. Southwest remains large, but it is not really competing for the same premium customer Delta wants and its strength is at airports beyond LAX (Burbank-Hollywood, Long Beach, Ontario, and Orange County). Alaska seems more focused on San Diego and the broader West Coast than trying to win LAX outright.
That leaves United as Delta’s most serious premium competitor in Los Angeles.
But United has a problem: gates.
Cranky Flier recently published a superb two-part series on the long and tortured history of airlines trying to win LAX and why this may be a good time for Delta to grow, but not necessarily “win,” Los Angeles. It is worth reading both pieces in full because they quantify exactly what I argued for in my earlier piece: LAX is a lucrative, fragmented, maddening market where airlines routinely mistake opportunity for dominance.
LAX Has Always Been Hard To Control
Los Angeles is not Atlanta, Dallas/Fort Worth, or Denver. There is no true fortress hub at LAX, and there probably never will be.
That is partly because the Los Angeles market itself is fragmented. LAX is the largest airport in the region, but Southern California traffic is spread across Burbank, Long Beach, Ontario, Orange County, and San Diego. Even within LAX, there is fierce competition from foreign carriers across the Atlantic and Pacific.
Historically, different carriers have taken turns trying to build something larger in Los Angeles.
United was long powerful at LAX, helped by its old Pacific gateway ambitions and its broad domestic presence. Delta became a much larger player after acquiring Western. American absorbed AirCal, later took over Reno Air and TWA assets, and then made a more serious run at LAX after the US Airways merger.
That American run is particularly instructive.
American had the brand, the gates, the local corporate presence, and the oneworld partners. It tried to turn LAX into a much larger international gateway, especially across the Pacific. For a while, it looked plausible.
Then the economics pushed back and it would be superficial to just blame the pandemic.
American eventually walked away from much of that international ambition. The pandemic accelerated the retreat, but the problems were already visible before then. LAX is an enormous local market, but longhaul flying from Los Angeles is brutally competitive. Foreign carriers are strong and costs are high. The glamour of Los Angeles does not make a route profitable.
That is the warning for Delta.
The opportunity is real. So are the limits.
Delta’s Advantage Is Not Just Demand, But Gates
The biggest reason Delta has a chance right now is not simply that it wants to grow, but that it has the space to do it.
Delta’s painful move from Terminals 5 and 6 to Terminals 2 and 3 now looks increasingly shrewd. At the time, it was a mess. The terminal shuffle was ugly, the construction process was long, and passengers had to endure the inconvenience for years.
But the result is a modern and connected Delta operation at LAX, with Terminals 2 and 3 tied together behind security and linked to the Tom Bradley International Terminal, where many of Delta’s partners operate. Delta also has its Delta One check-in and Delta One Lounge in Terminal 3, and the carrier is planning a second Delta One Lounge in Terminal 2.
That infrastructure will support a broader premium strategy.
Cranky notes that Delta now has 27 gates split between Terminals 2 and 3, with Bradley providing additional operational flexibility for international flying. That gives Delta space to grow within its existing footprint.
United, by contrast, is boxed in.
United is largely stuck in Terminals 7 and 8, soon to be consolidated under the Terminal 7 branding. Cranky notes that United has about 20 gates there, with only limited use of Terminal 6 for some widebody operations (a foolish move during the Smisek regime when United was in cost-cutting mode). United’s Star Alliance partners are largely in Bradley, physically separated from United’s own operation.
There was once a plan for Terminal 9, which could have given United and its partners a much better long-term platform at LAX. But that project has been shelved indefinitely. Without new gates, United can talk about being number one in Los Angeles, but there is only so much it can do.
American is also constrained, though in a different way.
Its Terminal 4 and 5 construction project should ultimately produce a better and more consolidated operation. LAX says Terminal 5 will become a 15-gate terminal, with completion anticipated in 2028. But for now, American is dealing with a scattered and disruptive construction environment. That is not the ideal moment to mount an aggressive competitive response…it’s such a pain to arrive at LAX on AA right now and walk what seems like miles to baggage claim.
Timing benefits Delta here. It has a functioning terminal complex, a growing premium product, and competitors whose physical limitations are not easily solved.
What Delta Should Actually Build At LAX
As I said before, Delta should be careful not to confuse growth with conquest.
No one is going to “own” Los Angeles. LAX is too competitive, too expensive, and too fragmented. But Delta does not need to own LAX to become the most powerful player there.
The better long-term vision is a premium-focused Los Angeles operation built around local relevance.
That means more domestic business markets where Delta can win corporate traffic. Chicago O’Hare, which just launched, is a good example. It also means selective transcontinental and premium leisure flying where Delta can support Delta One branding and feed its lounges.
Internationally, Delta should be more cautious.
Los Angeles to Asia makes strategic sense on paper, and Delta’s new service Hong Kong and planned service to Manila reflects a desire to rebuild relevance across the Pacific. I understand why Delta wants to try. LAX is a huge Asia gateway, and Seattle has become more complicated with Alaska and oneworld looming in the background.
But LAX has a long history of punishing ambitious longhaul plans. American learned that lesson. United has generally chosen to make San Francisco its dominant West Coast international gateway instead. Delta should not assume that a strong LAX terminal and premium lounge network will overcome the underlying economics of every route it wants to fly. Put frankly, I don’t think the new HKG service is going to work, but I hope Delta proves me wrong.
Europe is a similar story.
Delta can lean heavily on Virgin Atlantic, Air France, KLM, and other partners for much of the transatlantic network. That does not mean Delta metal has no role at LAX, but the smarter play may be selective Delta service combined with strong joint venture connectivity rather than trying to make LAX into another JFK.
The domestic side is where Delta may have the clearest upside. If it can become more useful to high-value Los Angeles travelers, the rest of the strategy becomes more credible.
A customer who flies Delta from LAX to New York, Boston, Chicago, Atlanta, and Washington is more likely to consider Delta for London, Seoul, Sydney, or Hong Kong, whether on Delta metal or a joint venture parnter. That is how utility builds loyalty.
CONCLUSION
Delta sees an opening at LAX, and I believe it is a real one. American is distracted and diminished in Los Angeles. United remains strong but physically constrained. Southwest is not the premium competitor Delta is targeting, and JetBlue is far smaller than it once hoped to be.
But LAX has humbled airlines before.
The history of Los Angeles is not one of clean victories. It is a market where airlines grow, overreach, retreat, and try again. Delta may be better positioned than it has been in years, especially with its Terminals 2 and 3 complex, its Delta One ground experience, and its partner access through Bradley.
The smartest version of Delta’s LAX strategy is not to “win” Los Angeles. It is to become more relevant to premium local travelers while its competitors are constrained.
Alot of words, nothing new
Thanks, Mr. Mayor.
“Open wide and say, Delta” … Tim, don’t get any ideas…
A good perspective. Delta senior management would agree to most of your premises. But the past is the past, and the industry is now much more consolidated. CPE at LAX is going to approach $60 very soon. Low-fare carriers are not going to grow at LAX; in fact, they will likely shrink. Expansion opportunities will be mostly limited to network and international carriers. Delta has learned many lessons in NYC, BOS, and SEA over the past 15 or so years, and it is building LAX in that context. The loyalty piece of the equation here is important. Delta has taken a lot of corporate share away from AA in recent years, thanks to its own investment and AA’s mistakes. United’s dual-gateway approach will face not only infrastructure limits but also profitability challenges. The way I think about it is this: LAX-HKG will probably be tough for a while, but Delta’s entire network and loyalty base will be directed to that one flight. Meanwhile. United, which had a U.S. carrier monopoly to HKG, has four flights (SFO and LAX each have 2). If LAX-HKG P&Ls are really bad, United will be the first to blink, and it will be at LAX. Delta knows what it is getting into and is prepared for the long haul. I think, in general, that is what you will see. Delta is increasingly focusing on the LAX point-of-sale, while continuing to route its entire portfolio of premium customers through LAX. Neither UA nor AA is going anywhere, and no carrier will ever reach 40% pax share at LAX, but I think Delta will maintain and grow its lead, which will eventually support a more successful international gateway than U.S. carriers have established in the past.
20 Gates for UA will be plenty. DL can do what they want with 7 or 8 extra gates, UA treats LAX the way AA has failed to maintain JFK. Be competitive, but you don’t need to do everything since SFO can handle connecting asia and europe travel, and AA should have kept JFK competitive while leveraging PHL for connecting flows.
AA also has PHX nearby, which they seem to forget about quite a bit since they seem to care more about duking it out in Chicago and ATX than they do in more important areas.
Interesting and informative article. Thanks Matt!
For LAX-HKG United needs tags to Vietnam and Bangkok just to make their two daily flights work. I wonder how this will all work out for Delta. That will be a long flight with such incredible competition set in place already. United is constrained by gates but 20 gates is still not too shabby. I suppose each airline has to have some token flights to competitor hubs. AA does LAX to IAH. DL serves ORD, DFW, and IAH. Obviously Delta is a market leader at LAX, but as the article says there is no way that DL is going to muscle out the others without a real fight.
Now with that said, the band is tuning up for the subsequent back and forth. Ready, Set…
For LAX-HKG United needs tags to Vietnam and Bangkok just to make their two daily flights work. I wonder how this will all work out for Delta. That will be a long flight with such incredible competition set in place already. United is constrained by gates but 20 gates is still not too shabby. I suppose each airline has to have some token flights to competitor hubs. AA does LAX to IAH. DL serves ORD, DFW, and IAH. But UA left LAX-DFW. Obviously Delta is a market leader at LAX, but as the article says there is no way that DL is going to muscle out the others without a real fight. I would not be so sure that UA will blink first on LAX-HKG.
Now with that said, the band is tuning up for the subsequent back and forth. Ready, Set…
to add onto jetlanta’s good post, DL has always done a very measured amount of “growth” flying that takes time and money to support; every airline does it.
DL built BOS over the past 3 years and its growth is being slowed there because of gates which will partly be alleviated when the A-B connector is finished. Before BOS, DL grew SEA and before that it was NYC.
LAX is DL’s latest growth focus.
Problem for AA in LAX was that it hasn’t had as much profit to support growth; they have to rely on what works and that is their most profitable fortress hubs and not compete in heavily competitive coastal markets.
and AA’s LAX growth failed because it was heavily skewed to China- LAX-PVG, PEK and HKG. The mainland Chinese carriers dumped capacity at a mighty rate and made AA’s LAX-China flights unworkable while CX has no incentive as a non-JV partner with AA to give AA a decent place in the market; AA doesn’t even serve HKG from DFW any more while DL and UA both serve HKG.
UA cannibalizes SFO with every LAX flight but UA also does a lot more strategic/developmental flying which explains why they get much less profit per ASM than DL over the Pacific.
It is domestic gates that will make the difference in allowing DL to fly to other airline hub markets; there is a fairly long list of hub markets from LAX that have very little if any competition – unlike other major markets.
LAX will support any international growth. DL has the benefit of being next to TBIT and having a facility that is connected to that facility to overflow international operations there.
3 years could be all that is necessary to grow large enough at LAX in new domestic markets and also with more international markets to really begin to move the S curve.
It will be interesting to watch and Amex is clearly wanting to see DL succeed. They benefit in NYC and BOS because of DL and are happy to do all they can to help DL in S. California.