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
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85 Comments On "American Had 840,000 Reasons To Launch New Service From Dallas To Tel Aviv"
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They are attracting the bible belt Christian tourism…
That’s definitely the hope. The subsidy will help mitigate the risk.
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.
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.
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.
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.
Dan.
Can you please explain how much 840k is for a route in comparison to the costs and expenses
That’s proprietary information, but $840K will certainly help mitigate the risk on a route launch like this.
That’s proprietary information for AA, not for you. The question was to you, not to AA… 😉
3 flights/wk * 52 wks = 156 -> $840,000/156 = $5,384/flight
3 Roundtrips a week. So it’s half that per flight– $2692.
I believe the Philadelphia route was nixed due to Americans relationship with ELAL? Why wouldn’t AA choose Chicago instead of Dallas…
El Al already announced Chicago-Tel Aviv nonstop service starting in March.
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
They decided that IAD made more sense. They need to see if that’s sustainable before adding more routes to TLV.
Cute you think that money was taken into account
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.
Wow, 560 per flight.. never knew that! That’s crazy
No chance, unfortunately.
840K is approximately the cost to operate one flight.
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.
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.
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.
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
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.
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.
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.
“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.
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)
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.
Flew from BOS-TLV and the flight was mostly filled with Christian tour groups from the south who got routed on a layover in BOS (they were all wearing a group T-shirt). Very few Jews on the plane.
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
What makes you think the US numbers are similar?
Vast majority of Jews in the world either live in the US or Israel.
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?
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.
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.
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.
@shaul
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
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.
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)
Incorrect,
LY will probably offer connections via AA and B6
4. a typical myopic American answer.
Israeli Tourism cares about not just the volume of people coming but how much they’ll be spending per day. Tourists who spend more $ per head are disproportionately valuable because they bring in cash while putting a smaller drain on resources. The people coming from Dallas are likely to be spending more per head than those from Poland or Bangkok, and to be spending $ rather than yen which is probably preferable as well.
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.
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.
$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.
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…..
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.
Why do you keep on repeating yourself?
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.
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.
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.
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.
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
AA has been shrinking their JFK hub. There is also still established competition in NYC and no subsidy.
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.
We have no idea why the Israeli government would want to finance a route over another. If you just start thinking about “religious Jews” as the prime passengers on a specific route you are entirely incorrect, they could make up a large portion of passengers but not the entire flight.
If you think of the direct flights to/from SF, you realize a large serviced demographic are technology companies that do business with Israel in one way or another (remote offices, subsidiaries, acquisitions and so on).
I know for a fact that AA and the Israeli government have more data on possible passengers for this flight route than we do. I would guess that they are primarily targeting stop over flights from various locations in the middle of america, as stated earlier probably parts of the bible belt and “religious Jews” looking for a good deal, we all know people are willing to make a ridiculous stopover for a good price. There is also a growing startup scene in Austin (which is already very big) that they may want to tap into.
Who said anything about religious Jews??
Israel will subsidize any new route.
Was addressing earlier comments, where people seemed to imply that the majority of passengers were religious Jews.
Do you believe they would just throw money to any flight route?
Believe?
It’s a fact. Any new route gets a subsidy.
what happened to the issue of American not flying to isreal because they were scared of their planes being impounded because of the old TWA debt?
Ruled not to be AA’s liability.
When did this ruling take place?
Dan, do you expect award travel availability??
Back in 2015 I got business saver award space from PHL-TLV for the whole family.
But times are different now. If there is good saver award space on the route it likely won’t bode well for the long term viability of the route.
was that just availability on the phl route or was it easier overall to get business saver seats even from ny and if it was why is that is it
1) a higher demand for business saver seats now or
2) less seats being released
USAirways is not the predecessor of American. USAirways merged with American in 2013, after American filed for bankruptcy in 2011. American stakeholders then owned 72% of the company; USAirways shareholders owned 28%.
How is it not one of the current American’s predecessor airlines?
It’s more accurate to say that American is a predecessor of US Airways, which rescued it from bankruptcy and acquired everything including the name. Predecessor means “a thing that has been followed or replaced by another.” Do you consider Jews a predecessor to Christians?
Absurd logic. Feel free to argue with Wikipedia:
https://en.wikipedia.org/wiki/History_of_American_Airlines#Predecessors
Did you just edit that yourself? Or did you have a friend do it? Difficult to argue with anonymous self-appointed editors.
According to a December 27, 2018 article in Haaretz, “the airlines are required to use the money for marketing in their home countries travel to Israel.”
“Since the program began the biggest recipients have been LOT Polish Airlines, which has received 2.05 million euros for seven new weekly flights. The low-cost carrier Ryanair has 2.3 million for eight weekly flights from Poland. Wizzair is the biggest recipient of them all with 3.3 million for 12 flight’s weekly. Air India is expected to get 750,000 for its new New Delhi-Tel Aviv route.”
One of the best quotes is from a hotel executive in Eilat.
“If the Greeks, the Jordanians, the Egyptian and even the Spanish Canary islands do it, we also need to play the game,” said Shabtai Shay, the director of the Eilat Hotels Association.
“You can’t keep saying to the airlines, ‘Well, Jesus was born here and the sun shines all year’ to get them to open new routes to Israel. You have to offer them a financial incentive,” Shay said.
Actually, I think this route may be very successful
Firstly it caters to a whole new area in the USA and there are many evangelicals that support Israel that will use this flight to visit and support their causes in Israel.
More missionaries watch out!
Interesting, AA is being subsided.
Maybe the big 3 shall complain and request a meeting with Trump.
Maryland subsidized BA’s daily LHR BWI flight to the tune of $5.6M per year. The last funding round covered 2017 & 2018, I assume that 2019 is funded as well. For BWI it is a source of kovod to have that prestigious (?) flight.
Us spotters appreciate the 787-9’s appearance that replaced the 767…
Crazy that BWI keeps paying that.
PIT just paid BA $1.5MM/year for 2 years to fly nonstop to LHR.
https://www.bizjournals.com/baltimore/news/2016/01/26/british-airways-could-get-nearly-6m-per-year-to.html
That’s more than the rat eradication program!
Friendly message in advance to all our new friends from Israel (and the US) who will be enjoying this new flight to Dallas – please stay for Shabbos! Shaare Tefila (google us) can arrange meals in our member’s homes if you give us a little advance notice. Also, if Gd forbid any travelers get stranded in Dallas on the way home, we’ll be happy to do whatever we can to get you kosher food or Shabbos hospitality – there are a number of restaurants and caterers in town…
I think there is another piece of the puzzle here. Lots of technology companies in Dallas and Austin. Never underestimate what you don’t see. Did the technology sector in Israel ask for this flight, did AA’s corporate sales team hear from their clients that this will increase Dell and others spending. That’s money spent at the front of the plane.
Not sure about Dallas, but ive met many oil-related flyers on planes to Israel, assuming they come from Houston etc
I believe the Israeli Tourism Ministry has some data, and they see that they can still grow the Tourism industry from Christians in the Southwest/Midwest.
Adding a flight which will make it more convenient for Jews, will not really bring more travelers to Israel, as Jews will anyway go there, it will only make it more convenient for the traveler, however the Tourism Ministry is not here for that reason, they are here to bring new tourists.
However, giving an easier option for regular Americans to spend their vacation time in Israel vs any other city in Eastern Europe, can bring new visitors to Israel.
I believe that’s the reason they gave a larger subsidy here than usual.
That is probably also the answer why they are subsidizing more North American cities, as Israel is very easy for Americans, all the signs are in English, most Israelis can communicate in English. It will be much harder to get that amount of tourists from Japan or Korea or any place in Asia, and to some extent even Eastern Europeans.