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Economist Article On Future Of Asian Flying  
User currently offlineTravelin man From United States of America, joined Mar 2000, 3556 posts, RR: 0
Posted (12 years 9 months 10 hours ago) and read 2144 times:

From the Economist (British):

Place your bets on the future of flying

Mar 28th 2002 | HONG KONG
From The Economist print edition


How will people be flying to and from Asia in future? A lot rides on the answer

THE fate of Airbus and Boeing, the world's two biggest aircraft makers, may be decided in the Asia-Pacific region. Why? Because, for Boeing to succeed, Pacific air-traffic patterns have to start following Atlantic trends. For Airbus to thrive, Asia has to stay different.

The difference between Asia and the rest of the world goes to the heart of one of the great schisms in the industry: will airlines in future bring passengers to their final destinations directly, by flying “point-to-point”, or indirectly, by flying them first to a hub and then out to the spoke airport? The outcome is crucial for both the airlines and the aircraft makers. Point-to-point flying requires long-range but relatively small planes, and Boeing is concentrating on building these. The hub model requires gigantic “super jumbos”, and Airbus is largely staking its future on these.

In the United States, thanks in large part to liberalisation, the hub model has been losing out to non-stop connections over the past two decades. In the 1980s, passengers flying from, say, Berlin to Washington, DC, had to switch planes at least once. These days they can fly direct. So whereas most flights across the Atlantic in the 1980s were in Boeing 747 jumbos, nowadays most are in smaller planes.

By contrast, air traffic to, from, and within Asia—a market that both Airbus and Boeing expect to triple within 20 years, overtaking North America as the world's largest—is still centred on hubs. Some 80% of flights from America to Asia stop in Tokyo, for instance, even though two out of three passengers on these flights are destined for other Asian cities. Flights within Asia also tend to rely on hubs, such as Hong Kong and Singapore.

There are good reasons for this, not least geography. For many years, Japan was the only part of Asia that an aircraft could reach in a non-stop flight from the American west coast. As the range of aircraft grew, it became possible to fly non-stop to places such as Seoul and Taipei. But some big airports, notably Singapore, remain out of reach. Moreover, population centres in Asia are more concentrated than those in Europe and North America.

Airbus has concluded from all this that Asia will retain the hub model, and it envisions a shortage of landing slots at big airports in the region. This is why Airbus is betting heavily on the A380 super jumbo, a 555-seat double-decker, 97 of which have already been ordered. Adam Brown, an Airbus director, thinks that eight of the top ten routes to be operated by such huge aircraft in 2019 will be in Asia, and that Asian airlines will take over 40% of the world's super jumbos.

Singapore Airlines has already ordered several A380s and will be the first to operate one, in 2006. Stuck in a city-state whose fate is tied to its hub status, the carrier is praying that non-stop flights will not lead to Singapore being passed by. Although travellers will seek greater convenience by using point-to-point services, claims Michael Tan, a director, this will not in itself threaten hub operations.

Hong Kong's incumbent carrier, Cathay Pacific, is more honest and more cautious. Says Tony Tyler, in charge of corporate development: “We both [Singapore and Cathay] have to hope that Airbus has it more right than Boeing, so that we can continue to hub traffic, and it won't all go on direct flights like Vancouver/Bangkok or San Francisco/Kuala Lumpur.” But those hopes might yet be dashed, so Cathay has delayed ordering the A380, opting instead for smaller long-range aircraft to connect to more spoke cities.

Most other Asian airlines, meanwhile, and certainly those not based in obvious hubs, are taking for granted growth in point-to-point flying. China Southern, which is about to be restructured into one of China's three dominant carriers, recently started a service from Guangzhou to Los Angeles, and is considering flights to Las Vegas as well. Last year, other airlines linked Taipei to San Jose, and Beijing to Chicago.

Two other developments are helping point-to-point. One is liberalisation. America, for instance, has in recent years signed open-skies agreements with New Zealand, Malaysia, Brunei, South Korea, Taiwan and Singapore. Several of these destinations are currently out of direct reach, but not for long, thanks to advances in aircraft technology. The greatest growth market is in non-stop flights between new city pairs in Asia and America, says Jim Eckes of Indoswiss, an aviation consultancy. If he's right, that spells trouble for super jumbos, and for Airbus.
----------------------------------------------------

So which way will Asia go?

14 replies: All unread, jump to last
 
User currently offlineRayChuang From United States of America, joined Jun 2000, 8037 posts, RR: 5
Reply 1, posted (12 years 9 months 9 hours ago) and read 2084 times:

I my opinion, airports such as NRT, ICN, PEK, PVG, TPE, HKG and SIN wiil continue to have lots of traffic due to their status as major business centers. This means we'll see lots of long-range flights from these cities, especially from NRT, HKG and SIN.

I think there were two major factors in getting SQ to buy the A380-800: the SIN-LHR-SIN route and the SIN-HKG-SFO-HKG-SIN route. Indeed, I believe that SQ's busiest and most profitable flight is the HKG-SFO-HKG section of SQ 2 and SQ 1, closely followed by SIN-LHR-SIN on SQ 318/320/322 (westbound) and SQ 317/319/321 (eastbound). This is why I expect SQ to fly the A388 on SQ 2/1 shortly after it inaugurates the plane on the SIN-LHR-SIN route.

I also think that if Airbus offers the right incentive, JL might be the next Asian airline to buy the A380-800. JL could definitely use the A388 on its routes from NRT to SFO, LAX, HNL, HKG, SIN, LHR, CDG and FRA by 2010.


User currently offlineManni From South Korea, joined Nov 2001, 4221 posts, RR: 22
Reply 2, posted (12 years 9 months 9 hours ago) and read 2059 times:

Point to point or trough hub cities, the potential of passengers in most of the Asian cities will even justify A380s flying point to point in the future. And where the A380 is to big there is the A340-500/600 for.

What other cities in South Korea did you had in mind to see trans-pacific service from, other then Seoul. Pusan? Same goes for Singapore and Hong Kong, what other city of significant importance in Thailand would you see supporting trans-pacific flights from, other then Bangkok? There might be more cities in the US that could justify service to one of these Asian cities, but that does not mean that these cities will have enough capacity to allow this. Same goes for European cities. LHR will most likely be the most frequented airport by the A380 just because it can carry a lot more passengers.



SUPPORT THE LEBANESE CIVILIANS
User currently offlineCX829 From , joined Dec 1969, posts, RR:
Reply 3, posted (12 years 9 months 9 hours ago) and read 2056 times:

The only problems I see is that:
(1) Load factors. Is it 70-80% to break even? So, for a 555-seat a/c, that's 416 pax per flt.
(2) Aircraft substitutions if A380 went tits-up. You'll need 2 big planes to do it.


User currently offlineManni From South Korea, joined Nov 2001, 4221 posts, RR: 22
Reply 4, posted (12 years 9 months 8 hours ago) and read 2033 times:

It is difficult to say what the load factor should be to break even. I remember reading somewhere that the A380 should be about 17% cheaper per passenger to operate than the 747-400 and that about 56% of its seats need to be filled to break even.


SUPPORT THE LEBANESE CIVILIANS
User currently offlineCruising From Canada, joined Jan 2001, 258 posts, RR: 0
Reply 5, posted (12 years 9 months 8 hours ago) and read 2025 times:

I need the crystal ball... Big grin

User currently offlineRogueTrader From , joined Dec 1969, posts, RR:
Reply 6, posted (12 years 9 months 8 hours ago) and read 2019 times:

Outstanding unbiased review of the situation by the Economist. All the A v. B wars that go on shouldn't spend all their time talking about the aircraft performance stuff, they should talk about the subject in this article: namely hub and spoke v. point to point.

Ask anyone on the street, if all things including price are equal:

"Do you want to fly through a hub or fly point to point"

And of course the answer will be point to point. The airlines and manufacturers who get closer to offering a perfect version of this will be more successful than Hub and Spoke diehards.

I think the history of commercial aviation shows that eventually the rest of the world will follow the US lead. I think this will happen again: point to point will increase in Asia. The question is: to what degree and does this automatically hurt the hub and spokes?

kind regards,

RogueTrader


User currently offlineTravelin man From United States of America, joined Mar 2000, 3556 posts, RR: 0
Reply 7, posted (12 years 9 months 7 hours ago) and read 2004 times:

Obviously there will be a market for superjumbos. I guess the question is, how many of the passengers currently travelling through hubs such as LHR and NRT do so because they are connecting to other cities, and how much of these passengers will be siphoned off with the introduction of more point-to-point services?

As the article notes, we've all seen aircraft sizes go down on trans-Atlantic runs (and frequencies increased). Will the same thing happen trans-Pacific? More and more airlines are introducing 777 service trans-Pacific, so initially the answer would seem to be "yes". If SIA could fly LAX-SIN non-stop with a 340-500/600 (and bypass NRT/TPE), why would they put a super-jumbo on the route? Or if BA will be able to go LHR-SYD non-stop (and bypass BKK/SIN), will traffic really justify a superjumbo?

Both Airbus and Boeing are coming out with products that may significantly reduce demand for Superjumbos -- the A340-500/600 and the Boeing 777-300ER. In my opinion this is where the bulk of the market will be.


User currently offlineSingapore_Air From United Kingdom, joined Nov 2000, 13745 posts, RR: 19
Reply 8, posted (12 years 9 months 6 hours ago) and read 1997 times:

I hope that the Boeing plan goes "tits up" (that's great isn't it! Tits up  Big thumbs up) or SIA will have a slight problem.

Travelin_man has a point (above). SIA has ordered the A345 and sources indicate that they will order the 744XQLR as well. One problem I have with that is transit traffic is what makes money. As Ray pointed out above, he thinks that HKG - LAX / SFO is the most profitable route. Would / Could SIN - SFO/LAX be as profitable? True the A388 can do such routes as SIN - LHR/HKG/NRT/SYD blah blah, but there is room for long range, as long as it is much much more economical to make up for loss of transit pax (in Singapore Airlines' case) and therefore it would have to carry less pax, increasing fares, but being slightly offest hopefully by more economical planes.



Anyone can fly, only the best Soar.
User currently offlineRayChuang From United States of America, joined Jun 2000, 8037 posts, RR: 5
Reply 9, posted (12 years 9 months 6 hours ago) and read 1993 times:

Actually, the market I primarily see for the A340-600 and the 777-300ER--especially when higher-weight versions become available that will likely extend the range of both planes to nearly 8,000 nautical miles--is a total and complete replacement for 747 Classics altogether. They'll be primarily used for point-to-point service for smaller destinations.

However, there still will be demand for the A380-800 by 2010. The reason is simple: the possibility that all the world's major airports will impose severe landing/takeoff slot restrictions as a noise-abatement measure. That at once will force airlines to use larger planes, and this means for very long international routes even the 777-200ER might be too small a plane for airports likely to impose such rules such as LHR, FRA, ZRH, NRT, SFO, LAX, JFK, IAD and MIA.

I think SQ is one of the few airlines where the purchase of the A388 makes sense; because Singapore is an extremely important financial and manufacturing center in southeast Asia, SQ is assured of a lot of both O & D and hub and spoke traffic through SIN. Like I said earlier, SQ also has a number of very lucrative (and busy) routes from SIN, primarily LHR, HKG, NRT and the US West Coast. Given the traffic loads on the SQ 002 (SIN-HKG-SFO) and SQ 001 (SFO-HKG-SIN) flights, SQ has always put their largest planes on these two flights; it is a natural that SQ will switch the SQ 002 and SQ 001 from the 747-400 to the A388 by mid to late spring of 2006, especially since by then SIN, HKG and SFO will be ready to accommodate the A388 easily.

Note that SQ will use the A340-500 on the SIN-LAX-SIN non-stop routes aimed at a very select group of flyers; that's why the A345 in SQ's pax configuration will likely have far more premium (First and Raffles Class) seating than normal, and the plane is relatively small.

The place where I don't really see the A388 being that successful is on North Atlantic routes. Due to the heavy competition over the North Atlantic and the fact there is much more desire for point-to-point service (e.g., MIA-CDG direct instead of MIA-JFK-CDG), you will see the A340's and 777's plying these routes.


User currently offlineSingapore_Air From United Kingdom, joined Nov 2000, 13745 posts, RR: 19
Reply 10, posted (12 years 9 months 5 hours ago) and read 1979 times:

Great post. Maybe the rumours of a F and J Class A345 / 744XQLR are true!


Anyone can fly, only the best Soar.
User currently offlineTrintocan From United Kingdom, joined Apr 2000, 3257 posts, RR: 4
Reply 11, posted (12 years 9 months 3 hours ago) and read 1946 times:

Interesting topic. I think though that due to the overwhelming geographical factor that the Asian market will remain hub-and-spoke, especially where flights to N. America and Europe are concerned. The distances involved greatly increase the costs of operating any craft on such routes and as such direct flights between ever-smaller points would not appear very feasible. Certainly newer planes could stretch routes to make SIN-LAX or YVR-SIN nonstop possible but the list of core destinations may not be expanded.

Certainly, too, within Asia as the economies open up and develop more there will be more city pairs linked by direct flights.

Where the newer longer-haul planes may come in could be if the demand for increased frequency of service arises. It is important to note that the high frequency of flights within and between North America and Europe developed because business pax demanded the flexibility of flying whenever they needed to. As a result more services with smaller planes became the norm - consider the fact that A300s, 767s and even 757s are often used trans-Atlantic. Even though some flights may appear empty, if the high-yield seats are full the airline makes a profit - and, of course, there is the air cargo sector which will bring in more revenue.

So where does Asia fit in? Certainly the air cargo sector is very competitive and that could justify the additional frequencies. However, again the geographical factor becomes overwhelming and unless the business demand is extremely high additional frequencies would only be marginally profitable.

Based on all of this I think that the hub and spokes arrangement of services to Asia will persist for the time being.

Trintocan.



Hop to it, fly for life!
User currently offlineSingapore_Air From United Kingdom, joined Nov 2000, 13745 posts, RR: 19
Reply 12, posted (12 years 8 months 4 weeks 1 day 21 hours ago) and read 1910 times:

IC IC. Let us continue the debate.


Anyone can fly, only the best Soar.
User currently offlineFly_airbus From Australia, joined Oct 2000, 41 posts, RR: 0
Reply 13, posted (12 years 8 months 4 weeks 1 day 18 hours ago) and read 1894 times:

Let's not forget the effects of airline alliances. When the economy is good, perhaps airlines are more willing to try new direct flights, but when times go bad you see them all pulling out. The costs of flying to a new destination then withdrawing are considerably large, so consolidating the traffic through hubs is one cost-saving method. So far we've seen both Qantas and Cathay increasingly hubbing its passengers through Heathrow for BA to fly them across Europe. Perhaps one should try to understand that you can point-to-point if there's not enough traffic and perhaps it's more cost-effective to codeshare with alliance partners via a hub. BA's pulled out of MNL and TPE and CX out of MAN, both now codesharing with each other.

User currently offlineFly_airbus From Australia, joined Oct 2000, 41 posts, RR: 0
Reply 14, posted (12 years 8 months 4 weeks 1 day 18 hours ago) and read 1896 times:

FOUND A MISTAKE.. SORRY

Let's not forget the effects of airline alliances. When the economy is good, perhaps airlines are more willing to try new direct flights, but when times go bad you see them all pulling out. The costs of flying to a new destination then withdrawing are considerably large, so consolidating the traffic through hubs is one cost-saving method. So far we've seen both Qantas and Cathay increasingly hubbing its passengers through Heathrow for BA to fly them across Europe. Perhaps one should try to understand that you CAN'T point-to-point if there's not enough traffic and perhaps it's more cost-effective to codeshare with alliance partners via a hub. BA's pulled out of MNL and TPE and CX out of MAN, both now codesharing with each other.


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