Date: 21 Feb 97 01:10:39 From: Chuanga@cris.com (H Andrew Chuang) Organization: Concentric Internet Services References: 1 2 3 4 5 6 7
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In article <airliners.1997.465@ohare.Chicago.COM> Karl Swartz (kls@ohare.Chicago.COM) wrote: > > > Given the dramatic shift in the trans-Atlantic market from large > planes flying between major hubs to smaller planes linking far more > city pairs, overflying the hubs, this shouldn't be too surprising. > With more liberal aviation agreements in the Asia/Pacific countries > and planes with sufficient range, the same thing is inevitable in the > Pacific. Some market fragmentation will occur in the trans-Pacific market with the availability of the proposed ultra-long-range planes like the B777-200X and the A340-500X. However, I just don't think you will see the same magnitude of transformation to take place in the Asia/Pacific market as it did in the trans-Atlantic market. > > The answer to congestion at airports like Narita is not bigger planes > to shove more people through there, it's overflying Narita wherever > possible. United's ORD-HKG non-stop service is just a hint of what > the future will bring just as soon as politics and longer range planes > like the 777-200X allow it. > One thing peculiar of the Asia/Pacific market is the Japanese carriers have significantly higher operating costs than most other East Asian carriers. Furthermore, Japan is unlikely to open up its market to the extent that the US will like any time soon. Thus, yields on routes to/through Japan will remain high. OTOH, to other parts of Asia, US carriers don't have that overwhelming cost advantage. That's why US carriers are not very interested in non-stop services to places other than Japan. Hong Kong is the lone exception with sizable non-stop services by US carriers: UA has 3 daily non-stop (plus 3 weekly seasonal service from ORD), NW also has 3 or 4 weekly services from SEA to HKG. Seoul is second with 4 weekly NW non-stop service, and one daily non-stop flight each by UA and DL. (One may think 18 weekly flights are not insignificant, but if you compare with what Korean Air and Asiana have, the US carriers are dwarfed by the Korean competitors.) UA also has one daily non-stop service to Taipei, and NW has 3 weekly services from Detroit to Beijing. If the two biggest players are unwilling to change its operation pattern (NW in particular), what other smaller carriers do will not impact the market too much. Case and point: non-stop services between the US and Korea as well as Taiwan have been significantly increased with new carriers like Korea's Asiana, Taiwan's EVA Air and fifth-freedom operators like Singapore, Thai International, and Malaysia. OTOH, US carriers have noticeably reduced their presence in these two markets. Therefore, I believe as long as yields on Japanese routes remain high and yields on non-Japanese routes remain low, planes like the 777-200X and A340-500X will not have a significant impact on Trans-Pacific market. UA, and NW will remain serving the rest of Asia with the lucrative Japan-Asian traffic rights. Even for Asian airlines like Singapore, they may introduce SIN-LAX non-stop services with planes like the 777-200X, but do you really think SQ will give up its profitable US services via Hong Kong, Taipei, Tokyo, Seoul, Amsterdam, and Frankfurt? With less than 300,000 people traveling between Singapore and the US annually, why do you think UA, SQ, and NW can viably offer nearly eight daily B747 flights between the two countries? (There are also quite a few airlines carrying six-freedom traffic between Singapore and the US.) In contrast, almost all Western European airlines have higher operating costs than US carriers. Hence, it made sense economically for some (big) US carriers to pioneer non-stop services between secondary trans-Atlantic cities pairs. Another thing that has not been discussed here is intra-Asian traffic. Unlike in Europe, surface transportation in East Asia is either poorly developed or limited due to geographical barriers. Also, Asian population centers tend to be more populated than European and American cities. Example of poor surface transportation: One can take an over-night train to travel from Amsterdam to Zurich, but it will take at least two days to travel from Hong Kong to Beijing by train. Example of travel between heavily populated cities: Even in Japan, where there are bullet trains, the B747 is still heavily used between Osaka and Tokyo. Examples of geograpical barriers: To travel from Hong Kong to Tokyo, or Taipei to Hong Kong, or Tokyo to Singapore, air travel is pratically the only sensible means of transportation. With four times the population of the US, if people in China or India are half as affluent as people in the US, the demand for air travel will be immense. It will probably takes a long time for India to reach that goal. However, I think China may reach that milestone in probably ten to fifteen years. With more than half of the B747-400, B777 and nearly half of the A330/340 being sold to Asian airlines, I believe many of these Asian airlines will need some "superjumbos". Whether there will be enough demand for Airbus or Boeing to have a profitable program, I don't know. Nevertheless, I do see a need for the plane.