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UA & DL Shrinking In US-Southeast Asia Market  
User currently offlinepeanuts From Netherlands, joined Dec 2009, 1442 posts, RR: 4
Posted (3 years 6 days 9 hours ago) and read 6671 times:

Even after their mergers with CO and NW respectively, UA's and DL's Southeast Asia capacity is way down. I'm just curious as to how yield has fared in all this.

A few interesting points from the article:

-A lack of a Category 1 Safety Rating for SkyTeam alliance partners in Vietnam and Indonesia is limiting cooperation significantly. Gaining Cat1 would seem to be a priority as it would drop the barriers for full cooperation.
-New flights to Southeast Asia currently not a high priority for UA, DL or any US carrier. (I'm assuming this to read as on "own metal")
-"While none of the capacity provided by the US carriers from Southeast Asia is non-stop, just over 10% of the seats provided by the Southeast Asian carriers to the US are on non-stop routes. As one-stops are the norm in the Southeast Asia-US market, North Asian and to a lesser extent European carriers also compete for Southeast Asia-US passengers."

UA
-Continental Micronesia appears to be the "solution" to the UA capacity/yield challenge in Southeast Asia.

DL
-Ho Chi Minh difficult to serve from NRT due to lack of pick-up rights in Japan, as opposed to other more liberal 5th freedom rights both UA and DL enjoy from Japan.

So, Southeast Asia's carriers dominate this market. Service sets most of them apart but what is the bottom line? Labor Costs? I thought crew bases in Asia (like NW used to have) would offset this for the US carriers? There must be many other cost advantages involved by the other carriers.

Also, it is probably important not to forget that the Southeast Asian carriers have "home court advantage" in a way since, and I'm wildly assuming here, the majority of passengers may be from that region and/or originating their travel in Southeast Asia... Is this true?

http://www.centreforaviation.com/ana...states-southeast-asia-market-62732

One thing I'm not clear on: If PR, like GA and VN, doesn't have a CAT1 Safety Rating, how is it that, according to this article, they serve the US?

[Edited 2011-11-18 08:59:53]


Question Conventional Wisdom. While not all commonly held beliefs are wrong…all should be questioned.
14 replies: All unread, jump to last
 
User currently offlinecommavia From United States of America, joined Apr 2005, 11819 posts, RR: 62
Reply 1, posted (3 years 6 days 8 hours ago) and read 6563 times:

I think the real challenge is generally just the incredibly long sector times - not even counting the entire routing from the U.S. hubs, but even just over Asian gateways. NRT-Southeast Asia is 6+ hours. That is a long flight to dedicate a substantial resource (widebody) to when fares are often competitive (due to plenty of connections, including over lower-yielding hubs like TPE) and local airlines have lower costs, stronger local presences, and often better service.

In United's case, I guess they determined that rather than "diluting" SIN with the larger aircraft over HKG, it was preferable to downguage that route and concentrate more of the capacity on the connections over NRT. Seems logical. SGN is a bigger cut for United as HKG was the only flight (i.e., no NRT), but there too I think the plethora of connections available from lower-cost local carriers was probably a competitive challenge.

As for Delta, they picked up the Northwest Asia network which was notorious for often capturing lower-yielding connections over NRT. Delta has done a good job of managing (reducing) capacity to boost yields, which makes sense. Intra-Asia markets over NRT that previously never saw anything but huge 747s for decades are now seeing 777s, A330s, and in some cases even 767s or 757s. Again, seems logical: reduce capacity, drive up yields, increase profit. Lather, rinse, repeat.


User currently offlineaznmadsci From United States of America, joined Dec 2007, 3699 posts, RR: 6
Reply 2, posted (3 years 6 days 8 hours ago) and read 6553 times:

Quoting peanuts (Thread starter):
If PR, like GA and VN, doesn't have a CAT1 Safety Rating, how is it that, according to this article, they serve the US?

I believe it's because PR has had their LAX and SFO flights operating before they were downgraded. GA hasn't had a flight to the US in decades while VN has never served the US market.



The journey of life is not based on the accomplishments, but the experience.
User currently offlinehippocampes From United States of America, joined May 2011, 19 posts, RR: 0
Reply 3, posted (3 years 5 days 6 hours ago) and read 5452 times:

FAA's Cat I vs II safety rating is NOT given to carriers such as PR or VN, but rather, to airports in the country. It's just the "penalty" factor is applies to the country's airlines. Sounds illogical but it has always been the case with the FAA regulations in this matter. The carriers in those country (i.e. Philippines, Vietnam) are not allowed to institute a new service nor add add frequencies. US carriers and others can if they wish. This happened to Mexico airports last year, on top of Mexicana's bankruptcy, but Mexican government worked hard to bring the standard back up quickly. It is taking some countries a very long time to fix their problem.

This, however, does not seem to be the main impediment for air service growth, since US carriers are free to add more flights. Rather it's about the economies of scale for the service's profitability.


User currently offlinegemuser From Australia, joined Nov 2003, 5760 posts, RR: 6
Reply 4, posted (3 years 5 days 1 hour ago) and read 5059 times:

Quoting hippocampes (Reply 3):
FAA's Cat I vs II safety rating is NOT given to carriers such as PR or VN, but rather, to airports in the country.

You sure about the "airport" bit? AFAIK it's actually about the country's "national airworthness authority" otherwise it does not make sense under the Convention & ICAO treaties.

Gemuser



DC23468910;B72172273373G73873H74374475275376377L77W;A319 320321332333343;BAe146;C402;DHC6;F27;L188;MD80MD85
User currently offlineManekS From Singapore, joined Oct 2008, 242 posts, RR: 0
Reply 5, posted (3 years 4 days 23 hours ago) and read 4770 times:

It's interesting that the article noted Delta did look into a nonstop U.S. - Singapore service at one point in time. But I don't blame them for not wanting to take such a big risk. I think the primary underlying 'problem' is that South East Asia and North America are too far away for non stop's to be financially sensible. Perhaps that will change once the 787's are delivered.

User currently onlineSLCUT2777 From United States of America, joined Dec 2005, 4122 posts, RR: 9
Reply 6, posted (3 years 4 days 21 hours ago) and read 4575 times:

Quoting ManekS (Reply 5):
I think the primary underlying 'problem' is that South East Asia and North America are too far away for non stop's to be financially sensible. Perhaps that will change once the 787's are delivered.

The 772LR was developed by Boeing to better deal with this issue since southeast Asia and South Africa are the most distant potential city pairs from North America as is Australia from Europe. DL did look into potential SIN-LAX/JFK routes but knew this was so heavily dominated by Singapore Airlines it reallywasn'tt worth the risk. I've often wondered however if DL had more 772LRs (they and AC are the sole North American operators of that type) if they might try something like an LAX-CGK route or at least try this from NRT with a 763 or 752.



DELTA Air Lines; The Only Way To Fly from Salt Lake City; Let the Western Heritage always be with Delta!
User currently offlinepeanuts From Netherlands, joined Dec 2009, 1442 posts, RR: 4
Reply 7, posted (3 years 4 days ago) and read 3947 times:

Quoting ManekS (Reply 5):
I think the primary underlying 'problem' is that South East Asia and North America are too far away for non stop's to be financially sensible.

But Southeast Asia's carriers do it.
So what is the main difference maker?

I think the truth has to be found somewhere here probably:

Quoting commavia (Reply 1):
stronger local presences

UA and DL will probably rely more on a possible JV/ATI in the future to develop these markets more and have the local carriers fly the routes. (once GA and VN, or their countries, receive Cat1 clearance from FAA, we may actually see something "happen", but not on UA/DL metal.)



Question Conventional Wisdom. While not all commonly held beliefs are wrong…all should be questioned.
User currently offlinepolot From United States of America, joined Jul 2011, 2312 posts, RR: 1
Reply 8, posted (3 years 4 days ago) and read 3863 times:

Quoting peanuts (Reply 7):
But Southeast Asia's carriers do it.
So what is the main difference maker?

Except most don't. TG and Malaysia only fly to LAX, having dropped everything else, and SQ operates half with a stop on the way. PAL flies to a handful of destinations, the Philippines are much closer to North America than the rest of southeast Asia, and their costs are likely much lower than any US carrier.

That is also assuming that the above carriers North American operations are profitable. I think SQ would be the only one that I would definitely say yes.


User currently offlineAkiestar From Philippines, joined May 2009, 786 posts, RR: 0
Reply 9, posted (3 years 4 days ago) and read 3803 times:

Quoting polot (Reply 8):
PAL flies to a handful of destinations, the Philippines are much closer to North America than the rest of southeast Asia, and their costs are likely much lower than any US carrier.

On top of that, PR is able to tap into a large (and fairly affluent) overseas Filipino market in the United States. That's why it's so keen, for example, on starting SAN, which could have been started had the Philippines not been downgraded to Cat II.

Then again, if I may ask: why doesn't PR just serve TIJ if the binational terminal there will be completed as early as late 2012?

[Edited 2011-11-20 17:22:18]

User currently offlinehippocampes From United States of America, joined May 2011, 19 posts, RR: 0
Reply 10, posted (3 years 3 days 22 hours ago) and read 3577 times:

Quoting gemuser (Reply 4):
You sure about the "airport" bit? AFAIK it's actually about the country's "national airworthness authority" otherwise it does not make sense under the Convention & ICAO treaties.

I checked and the correct terminology should have been the country's civil aviation authority, not airports, since in many countries they are run by separate entities, while in some countries the CAA runs the airports. Cat-2 status is not given to "carriers", because the Mexico case is a good example in that it was simultaneously given to the country's all carriers at once. Carriers complain because they can't do much about it themselves. Thank you for pointing it out, as it is certainly not right to say "airports" either. However they also inspect much beyond "airworthiness" of the country's civil aviation authority.


User currently offlineAkiestar From Philippines, joined May 2009, 786 posts, RR: 0
Reply 11, posted (3 years 3 days 20 hours ago) and read 3352 times:

Quoting polot (Reply 8):
I think SQ would be the only one that I would definitely say yes.

Not quite: PR's trans-Pacific routes are profitable and, if I remember correctly, account for 20-30% of flight-related revenues alone.


User currently offlinegemuser From Australia, joined Nov 2003, 5760 posts, RR: 6
Reply 12, posted (3 years 3 days 19 hours ago) and read 3252 times:

Quoting hippocampes (Reply 10):
However they also inspect much beyond "airworthiness" of the country's civil aviation authority.

Such as? (We may just have a terminology differance here)

Gemuser



DC23468910;B72172273373G73873H74374475275376377L77W;A319 320321332333343;BAe146;C402;DHC6;F27;L188;MD80MD85
User currently offlinenycdave From United States of America, joined Aug 2010, 547 posts, RR: 1
Reply 13, posted (3 years 3 days 17 hours ago) and read 3093 times:

Having worked for a financial firm in NYC with strong connections in Asia, but a corporate contract with a european *A carrier, I can say this: service DOES matter a lot. Except for when there was a significant price difference, almost all trips to asia were done on *A partners flying n/s to asia, like SQ. That n/s A345 from EWR was considered just about the best thing since sliced bread in my office.

User currently offlineMAS777 From United Kingdom, joined Jul 1999, 2937 posts, RR: 6
Reply 14, posted (2 years 12 months 4 days 20 hours ago) and read 2572 times:

I expect AA will begin codesharing with Malaysia Airlines from next year in line with its codesharing arrangements with Cathay which will impact on DL or UA trying to penetrate an already difficult and low-yielding region for US carriers.

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