Chicago mayor slams Ivanka Trump for ‘misleading’ tweets about the city’s recent gun violence
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American Had 840,000 Reasons To Launch New Service From Dallas To Tel Aviv
American Had 840,000 Reasons To Launch New Service From Dallas To Tel Aviv By 80 Never Miss Another Deal – Follow DansDeals on Facebook
American Airlines announced last week that they would resume flying to Israel with the launch of 3 weekly flights between Dallas and Tel Aviv starting next September.
I noted then that Dallas was an interesting choice as it has by far the smallest Jewish population of any other North American metro area that has year-round nonstop Tel Aviv service.
Now we know more about why Dallas won out over other options. YNet reports (in Hebrew) that Israel’s tourism ministry will award American 750,000 Euros, or about $840,000, for operating the route for at least 1 year.
Israel has been known to subsidize new routes and 750,000 Euros is the largest subsidy offered. El Al recently received 250,000 Euros for launching Las Vegas-Tel Aviv service, though that only operates once per week.
American’s hubs in Chicago, JFK, Los Angeles, and Miami already have or will have existing service and would not qualify for a subsidy. American’s USAirways predecessor flew from July 2009 to January 2016 from Philadelphia to Tel Aviv, before ending the route right after the airlines merged.
USAirways’ then president Scott Kirby, who moved to American before jumping ship to United, called the Philadelphia to Tel Aviv route among the most lucrative in their system. However American said the route was not profitable and didn’t have any forecast of profitability when they shut it down. I’d assume that Israel is not in the business of subsidizing previously failed routes, so that likely nixed the chance of a Philadelphia to Tel Aviv route revival.
That left AA hubs in Charlotte, Dallas, and Phoenix as the remaining options for Tel Aviv service if American wanted a route subsidy. American’s international flights from Dallas are also more profitable then the rest of their system, so Dallas was the obvious choice.
With a small plane to fill like the 787-9, just 3 weekly flights, and the $840K subsidy, American has very low risk with this new route.
So now we know that Dallas to Tel Aviv should stick around for at least a year. I’d guess by then American will know if they want to move it to a daily flight, as United did soon after launching 3 weekly flights from San Francisco to Tel Aviv. Alternatively they may keep it at that frequency, cancel the route, or move Tel Aviv service to another hub, such as JFK, Los Angeles, Miami, or Philadelphia.
Do you think the Dallas-Tel Aviv route will last after the 1 year subsidy is paid?
HT: Rabbi Moshe Rabin Get more details on credit card offers and compare to other cards: Leave a Reply 80 Comments On “American Had 840,000 Reasons To Launch New Service From Dallas To Tel Aviv” All opinions expressed below are user generated and the opinions aren’t provided, reviewed or endorsed by any advertiser or DansDeals. Notify of new replies to this comment Notify of new replies to this comment Sort by: newest | oldest
They are attracting the bible belt Christian tourism… Reply August 12, 2019 9:59 am Dan
That’s definitely the hope. The subsidy will help mitigate the risk. Reply August 12, 2019 10:04 am Nun
Not sure why you think it’s limited to the bible belt. If you want to fly from the west to anywhere on AA, it’s often through DFW if LAX doesn’t work. Reply August 12, 2019 10:11 am Dan
West coasters have better options from LAX (El Al) and SFO (El Al and United). There’s also the LAS weekly flight on El Al.
But yes, if you specifically want AA, then this flight can draw from the entire country. Reply August 12, 2019 10:13 am John
Denver, Phoenix, and San Diego have a decent Jewish population size. I could see people in those cities opting to transit through DFW. I would opt for SAN-DFW-TLV over SAN-LAX-TLV or deal with driving up to LAX in traffic if the price was right. Reply August 12, 2019 3:05 pm Dan
Denver is a massive United hub and frequent flyers/business travelers there are likely to stick with United. Same goes for Houston.
But yes, there are certainly some cities, like Phoenix, that this flight will draw from.
Will it be enough to make the route viable long-term? We shall see. Reply August 12, 2019 3:09 pm David
Dan. Can you please explain how much 840k is for a route in comparison to the costs and expenses Reply August 12, 2019 10:02 am Dan
That’s proprietary information, but $840K will certainly help mitigate the risk on a route launch like this. Reply August 12, 2019 10:04 am Jacob
That’s proprietary information for AA, not for you. The question was to you, not to AA… 😉 Reply August 12, 2019 10:48 am david
3 flights/wk * 52 wks = 156 -> $840,000/156 = $5,384/flight Reply August 12, 2019 11:00 am S Simon Jacob
I believe the Philadelphia route was nixed due to Americans relationship with ELAL? Why wouldn’t AA choose Chicago instead of Dallas… Reply August 12, 2019 10:03 am Dan
El Al already announced Chicago-Tel Aviv nonstop service starting in March. Reply August 12, 2019 10:05 am Dave
But when will United finally step in Very unexplainable why they didn’t start this route yet If they are smart they should definitely announced / fly it before elal does Reply August 12, 2019 12:35 pm Dan
They decided that IAD made more sense. They need to see if that’s sustainable before adding more routes to TLV. Reply August 12, 2019 1:14 pm Lol
Cute you think that money was taken into account Reply August 12, 2019 10:03 am Dan
The average AA flight has a profit margin of about $560.
This is a subsidy of thousands of dollars per flight.
Cute that you think cash going directly to a flight’s profit margin makes no difference to the viability of a new route. Reply August 12, 2019 11:10 am Chaim August 12, 2019 10:05 am reb yid
840K is approximately the cost to operate one flight. Reply August 12, 2019 10:05 am Dan
The profit or loss on any given flight is always small. They aren’t planning on operating the route with empty planes, they will get filled one way or another. Whether they can be filled profitably is an open question that AA will know after the route launches.
American is committing to 156 RT flights over the course of a year. The subsidy will help to ensure they don’t lose their pants and will help build a data set to see if it’s worth continuing the flight after a year. Reply August 12, 2019 10:07 am yankel
840 seems minuscule the cost to operate a flight or two is prob that amount how many seats is the dreamliner they will fly? figure average r/t is somewhere around $1000. i doubt the subsidy is anything more than a marketing gimmick or a gateway to something bigger if they decide to fly it more often unless they see a big demand for premium which would make it profitable also, not only religious jews travel to israel. there are hundreds of flights from around the world that go to israel regularly. a large constituency of religious people might help but likely is the driving force for a route. Reply August 12, 2019 10:52 am Dan
Commenters here need to go to business school it seems.
The cost of a flight is a meaningless number as there are passengers that will be paying to pay to fly on it. It’s not flying empty.
The difference is for the margin and flights always have slim margins that make or break the flight profitability.
The average AA flight has a profit margin of about $560.
This subsidy will offer thousands of dollars of profit per flight that goes right to the bottom line. Reply August 12, 2019 10:54 am yankel
but if the flights are losing money, then the subsidy would offset that indirectly to maintain the average. its def true that the subsidy offsets the bottom line number but at the end of the day, and after one year, if a particular flight is losing significant sums, they arent keeping it around. plus i dont think the 840 subsidy is even a dent to the numbers. you said so yourself Reply August 12, 2019 12:43 pm Dan
The $840K means that AA can launch the route without worrying about it being a major loser.
After a year they will evaluate if it’s worth keeping.
$840K on one route can certainly mean a difference between profit and loss. Reply August 12, 2019 1:13 pm mick
The comment that Dallas “has by far the smallest Jewish population…” is a myopic view of tourism travel to Israel.
I don’t have facts to back this up, but based on my observation of non-El Al flights between USA and Israel, Christians far outnumber Jewish passengers on these flights, even from NY/NJ. Flights between Texas and Israel should be packed with Christian tourists. Smart move for AA to be first to enter this market.
[How many kosher travelers were on the 787 that landed in CLE a couple weeks ago? Only a small fraction of the plane’s passengers.]
I doubt $840K would influence AA. The company had $44 BILLION in revenue in 2018. Reply August 12, 2019 10:19 am Dan
Not sure what flights you have been on, but all of my flights to Israel have been mostly Jewish.
There were 50 kosher keeping passengers on the CLE diversion, but most Jews don’t keep kosher. Only 10% of US Jews are Orthodox.
Revenue is the wrong number to look at. The correct number is profit, and those margins on any given route are slim. Reply August 12, 2019 10:36 am mick
“most Jews don’t keep kosher”
True- and most Jews don’t travel to Israel and aren’t interested in travel to Israel outside of a free Birthright trip.
Many more Christians are interested in visiting and supporting Israel. Nonstop flights from Dallas open up a huge market. Reply August 12, 2019 10:53 am R
Your implication is that most Jews who don’t keep kosher don’t go to visit Israel. That is wrong. You have lots of Jews who travel to Israel regularly and don’t keep kosher. Particularly many Israelis who travel multiple times a year and don’t keep kosher (or keep kosher style) Reply August 12, 2019 11:48 am Moses
Dan, don’t take one flight as statistics, with all due respect to our frum brethren , christian groups are the majority of the tourist groups that visit Israel all thru the year. They are the bread and butter of Israeli hotels, while amcha yisroel mainly visits during the chagim and the summer. Reply August 12, 2019 8:41 pm David
In 2018 twice as many Christians visited Israel than Jews (“Jews made up 27.5% of the tourists, but twice as many Christians visited – a staggering 54.9%“ Inbound Tourism Survey, reported by Jpost). The numbers are worldwide but the stats are probably similar in the US market too Reply August 12, 2019 11:13 am Dan
What makes you think the US numbers are similar?
Vast majority of Jews in the world either live in the US or Israel. Reply August 12, 2019 11:14 am rob
This “new route” subsidy is so illogical and arbitrary
There is no difference (from Israel’s perspective) for an AA DFW-TLV route and ORD-TLV route. Both would primarily do the exact same thing – give passengers a 1 stop option to get to TLV on AA. Neither route would (primarily) focus on O&D, and to the extent that there would be O&D, Chicago’s would be greater even with El Al competition.
Yet Israel will pay AA money to fly from Dallas, but not from Chicago.
You’re basically discouraging airlines to fly out of major connection hubs which already “have” O&D service, but subsidizing routes that would be much less lucrative for Israeli tourism.
The Israeli tourism ministry will give money to LOT to start flying from a tertiary Polish city, but if ANA or JL wanted to start flights out of NRT, or UA wanted to start flights out of ORD….. no money for you. Even though it would provide orders of magnitude more tourism to Israel from places well beyond Tokyo and Chicago.
How does that make any sense at all? Reply August 12, 2019 10:23 am Dan
It doesn’t make sense, but that’s the nature of an arbitrary subsidy. It creates flights that otherwise wouldn’t exist, even if they really shouldn’t exist. Reply August 12, 2019 10:43 am Shaul Yaakov Morrison
I wouldn’t call the subsidy arbitrary. It’s for any new route. Israel figures that these routes will stick around and will increase tourist revenue over the long run. I’m sure there are people who wouldn’t have gone to Israel before without a non stop flight. Reply August 12, 2019 10:53 am Dan
It arbitrarily picks winners and losers. AA may have opted for ORD-TLV, but a subsidy can move the needle to DFW.
We’ll see what happens in a couple years I suppose. Reply August 12, 2019 10:57 am rob
Let me present you 4 routes. Please rank them in terms of what would provide the most benefit to Israeli tourism. Then let me know which of these routes Israel will subsidize with the objective of increasing tourism:
1) ANA out of NRT 2) Thai out of BKK 3) UA out of ORD 4) LOT out of some city in Poland that none of us ever heard of Reply August 12, 2019 11:14 am Shaul
The airline running the route isn’t making money if nobody flies it. It pushes the margin by a couple thousand per flight, so there already needs to be logic for the flight.
In this case, having 2 flights per day from ORD or a 7th flight from NYC doesn’t necessarily increase tourists to Israel. It’s just people picking 1 airline over another. A flight from Dallas, however, makes Israel a more attractive destination for a new market. Reply August 12, 2019 12:15 pm rob
You don’t get it.
UA flying from ORD isn’t just “people picking 1 airline over another”
LY offers zero connections from ORD.
UA offers connections from ORD to 150 other cities.
That is why a “2nd daily flight” increases tourism. Becuase that 2nd daily flight is also an option for millions of people who don’t originate in ORD.
(plus the economics that @Dan already explained elsewhere in this comments section which I won’t rehash) Reply August 12, 2019 12:42 pm Moses
4. a typical myopic American answer. Reply August 12, 2019 8:43 pm rob
It’s not even about whether it “should” or “shouldn’t” exist – it’s about how there’s little correlation between toursim subsidies, and what provides the most benefit to Israeli tourism.
In this isolated case, they happened to get it “right” (I’m going on the assumption that subsidies are right in some cases, which is an entirely separate debate), it was for all the wrong reasons.
This route is valuable to Israeli tourism not because now people in Dallas and Israel can fly between those cities directly.
It’s valuable to Israeli tourism because the largest airline in the world started flying out of one of the largest connecting hubs in the world.
If the goal is to increase tourism, that’s what the subsidies should be focused on – getting large airlines to fly out of large connecting hubs irrespective of whether LY or someone else already flies from there. Get UA to fly from ORD or IAH. Get ANA/JL to fly from Tokyo. Get SQ to fly from SIN, get DL to fly from ATL etc. Reply August 12, 2019 10:59 am Agoldsc1
In the big scheme of things, I can’t imagine that $840,000 matters much when talking about a year-long commitment to a distant international destination, taking into consideration the cost of fuel, staffing and overhead in TLV, tying up a new plane, take-off and landing costs, etc…, I don’t think that $840,000 even makes a dent. I don’t know numbers, but I imagine that just one month of substandard performance is sufficient to eat up the subsidy. Reply August 12, 2019 10:27 am Dan
$840K makes a massive dent. These flights are successful or fail on the margins. This will allow AA to assess the route without having a major risk. Reply August 12, 2019 10:45 am Learner burner 613
Sorry but 840k over a year is nowhere close to mitigating a loss on this route, no matter how you slice it. It’s chump change. Watch some wendover videos and you’ll see what the costs are….. Reply August 12, 2019 10:34 am Dan
AA flies 2.5 million flights per year. AA made $1.4 billion in profit last year. That’s an average of just $560 profit per flight!
The margins on flying are very slim. Getting a subsidy of thousands of dollars per flight can make all of the difference between a money making route and a money losing route.
The mistake you’re making is thinking this is supposed to cover the entire cost of the flight. It’s not.
Obviously AA isn’t flying flights only for a subsidy. But a subsidy can absolutely mitigate the risk of an unprofitable flight. Reply August 12, 2019 10:39 am Alex
Why do you keep on repeating yourself? Reply August 12, 2019 12:50 pm Eric from Dallas
Because people aren’t listening. It’s the profit, not the revenue. Having said that, I would think that the profit picture is quite different for international flights vs. domestic coast-to-coast vs. domestic small city to small city (the latter is a big chunk of those 2.5 million flights) – but all those details are proprietary, so all we could do is speculate, which is not very helpful. Reply August 12, 2019 7:32 pm E
I’m not looking to get political (and certainly don’t want to offend Jews who may not be as affiliated) but the Jewish population of a given city is kind of a stretch and doesn’t tell the full story. Many Jews consider themselves Jewish by name only, are practically fully assimilated and/or intermarried, and don’t consider themselves Jewish outside of a jar of gefile fish. Sadly, a handful of progressive Jews don’t ever want to go to Israel and a select portion believe it is an oppressive state (picked up from their universities). So, I don’t feel like it’s smart business strategy to choose a city solely based on it’s Jewish population. San Francisco has hundreds of thousands of Jews (hardly anything certified kosher there), but the roue is successful largely because of technological business, not to go to spend Succos by the Kotel. Reply August 12, 2019 10:37 am Dan
Why do you think that only religious Jews visit Israel? Patently untrue.
Yes, SFO is a winner due to tech, but the massive Jewish population certainly helps. Reply August 12, 2019 10:51 am E
I believe many affiliations of Jews visit Israel. I’m thinking of the segment of unaffiliated and far-removed Jews who don’t know what Rosh Hashana or Yom Kippur are, or didn’t know Shabbos is on Saturdays. Reply August 12, 2019 11:09 am Moshe
Wouldn’t the safest choice be JFK? There are indeed many existing JFK-TLV flights but the those flights seem to me to fill up much more than the average international flight meaning there should still be plenty room for AA to come in as they already have a massive hub in terminal 8 Reply August 12, 2019 10:47 am Dan
AA has been shrinking their JFK hub. There is also still established competition in NYC and no subsidy. Reply August 12, 2019 10:50 am Slambowowskistienfeldbergermanhouse
Airlines know who their audience is. They know from passport information, and various state databases. They also know for instance how many east coast to TLV direct passengers originated from tx middle america etc. That is the only way they would take this gamble. The $840k can only mitigate $840k and that seems like a drop in the bucket for a year long contract. I think that’s what’s up. Reply August 12, 2019 10:53 am David
So they can just cancel in a year, open a new route from Charlotte, cancel a year later and open a new route from Phoenix. Three years of subsidies. American would be churning routes like we do credit cards Reply August 12, 2019 10:54 am Dan