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AC traffic on routes to China and Hong Kong - Q2 2019 report

AC traffic on routes to China and Hong Kong - Q2 2019 report

Old Jul 30, 19, 7:17 am
  #1  
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AC traffic on routes to China and Hong Kong - Q2 2019 report

Mods - We had a thread last year that discussed the issue of China and the impact of the politics on AC's routes. IIRC, the thread was closed. Therefore, not sure where this post should be moved to.

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In today's Second Quarter 2019 Management’s Discussion and Analysis of Results of Operations and Financial Condition

page 14

"The 2.7% traffic increase which reflected traffic growth on all major Pacific services with the exception of services to China and Hong Kong. The geopolitical situation between Canada and China continued to negatively impact travel demand in the quarter, particularly business- related traffic demand between Canada-China/Hong Kong. In the second quarter of 2019, Air Canada reduced capacity to China to better align it with demand. "

and

"Cargo Revenues

Cargo revenues of $177 million in the second quarter of 2019 and $354 million in the first six months of 2019 decreased $23 million or 12.1% and $14 million or 4.1%, respectively, from the same periods in 2018. Compared to the 2018 periods, cargo traffic and yield decreased 7.0% and 5.4%, respectively, in the second quarter of 2019, and 2.3% and 1.8%, respectively, in the first six months of 2019. Demand for air cargo decreased industry-wide, particularly in the Atlantic and Pacific markets, causing reductions in volumes and putting downward pressure on yields. This industry-wide situation reflects the impact of external factors, primarily centered around on-going trade disputes. "

https://www.aircanada.com/content/da...019_MDA_q2.pdf

****

NOTE: I am looking at this as a reader. I am not in finance.

I wonder if this partly explains not just the shift in aircraft last year e.g., the B789 on YVR-HKG replacing the B777-300ER (28J HD), bur also the very reduced prices on flights to China as well as a large supply of seats on Aeroplan for routings to Asia via PEK and PVG (versus other options).

I welcome comments from others who can offer insight. Thank in advance.
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Old Jul 30, 19, 8:16 am
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There's also typically cheap competition. CA for example. A lot of spare capacity going to Asia in general I think. Look at the addition of routes from YUL as well over the last year and a half.

Someone was mentioning in another thread that NRT had almost looked like an airport in Canada last time they were there. There were AC planes waiting to go to YVR, YYC, YUL and YYZ at the same time.
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Old Jul 30, 19, 8:42 am
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Originally Posted by jcamp028 View Post
.......Someone was mentioning in another thread that NRT had almost looked like an airport in Canada last time they were there. There were AC planes waiting to go to YVR, YYC, YUL and YYZ at the same time.
YYC=YYZ as AC 9/10

I once mentioned it and posted photos of fins on one of those days where AC 3/4, 9/10/ and 5/6 were all there. I was on AC 4, pushing back at the time. It's also one reason I stay away from the very congested Satellite 4 - where AC departs NRT - until boarding. (BTW, mayhem ensues when in addition to multiple AC's, a TG 380 is boarding at the same time.)

Originally Posted by jcamp028 View Post
There's also typically cheap competition. CA for example. A lot of spare capacity going to Asia in general I think. Look at the addition of routes from YUL as well over the last year and a half.......
For sure ex-YVR because of the vast buffet choices available to China, Japan, HKG, Taipei etc. And yes, another interesting thing is if one looks at a destination in SE Asia for eg. from YYZ, in addition to AC and CA via YUL and China, Aeroplan is showing a lot of YYZ-YUL-NRT-XXX.
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Old Jul 30, 19, 9:02 am
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So With a decrease in OPM traffic to China (political situation, and superior competition), they are sustaining those flights with $300s Y fares ex-USA?
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Old Jul 30, 19, 2:16 pm
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An excellent post in large part because I was awaiting the update I don't believe we have been given an accurate indication. Here's why;

- Combining Hong Kong and mainland traffic distorts actual airport specific information. My impression is that the Hong Kong traffic remains stable. Even though there is public dissent, it hasn't had much of a negative impact on Canadian traffic The people who were flying in and out prior to the protests continue to do so, particularly the Hong Kong residents. My comment is not intended to downplay the situation, only to put it into context. People still have a positive sentiment towards Hong Kong, even if it is part of the China.

- PVG and PEK are a different story. Putting aside the summary detention concerns many people have, transiting PVG and PEK remains an unpleasant, uncomfortable time consuming process. One always needs a buffer time to connect, particularly since AC can't provide connecting BPs. The line up and agent rudeness at the Air China transfer desk is insulting.The connection flights elsewhere to Asia are a joke. I usually had to wait 4-5 hours to take a flight at to get to SIN or BKK with miserable flight times. Add to that, neither airport has a decent lounge or restaurants or a coffee shop or even bar at the connecting times and it is a depressing uncomfortable experience. In the winter, it was plain awful in the barely heated terminal. My last transfer through PVG with overnight at the travesty of an airport hotel did it for me. I avoid a China transfer now, which means avoiding AC.

-AC had high hopes of making China its cheap connection hub for Asia. Boy, did the airline miscalculate. Air China has been taking advantage of its landing/departure slots in Canada to slice and dice the Canadian market, just as many predicted.

I don't see the China- Canada situation improving anytime soon and if anything we could very well see a decrease in traffic. I hope that AC realigns its strategy and tries for routes to Vietnam and Thailand. With the sizeable Vietnamese ethnic community and its growing tourist economy, as well as the Canadian push to grow trade, it may make economic sense to replace part of the China emphasis.
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Old Jul 30, 19, 3:32 pm
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Last week I was chatting with a friend who is a former YVRAA board member and has been a Green Coat volunteer for several years since. He mentioned that YVR - China traffic is down substantially this year on all airlines serving those routes. Not sure how reliable that is, but hes well connected and it seems to follow the current political situation.
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Old Jul 30, 19, 4:11 pm
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I'll be somewhat reluctantly transiting through PVG next month. Will be interesting to see loads.
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Old Jul 31, 19, 4:14 pm
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I will bet that even after the geopolitical situation improves, AC will still not grow in this market.

The expansion out of YVR in the past few years does not reflect the actual growth in passenger demand. The supply out grew demand, so some airlines are expected to see a drop in load factor.

I also like how the report mentioned the geopolitical situation, but chose not to mention the less known issue of deflated seat and where AC stands in terms of OTP, service quality, and pricing in TPAC market.
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Old Aug 1, 19, 7:00 am
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Originally Posted by 24left View Post
I wonder if this partly explains not just the shift in aircraft last year e.g., the B789 on YVR-HKG replacing the B777-300ER (28J HD), bur also the very reduced prices on flights to China as well as a large supply of seats on Aeroplan for routings to Asia via PEK and PVG (versus other options).

I welcome comments from others who can offer insight. Thank in advance.
I agree that it party explains the B789 on AC7/8. I think they moved to daily flights throughout the year as well? Is the B789 year round now too?
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Old Aug 1, 19, 7:46 am
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Originally Posted by Diabeetus View Post
Is the B789 year round now too?
No, my Oct trip is booked on the 777-300s.
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Old Aug 1, 19, 7:50 am
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Originally Posted by Diabeetus View Post
I agree that it party explains the B789 on AC7/8. I think they moved to daily flights throughout the year as well? Is the B789 year round now too?
@Diabeetus
AC 7/8 was switched to the B789 last October and was in place until approx April 1 this year, IIRC. In the thread where it was posted/discussed, mention was made of how AC is losing money on that route, thus the B789 made more sense. It's been back to the Big Bird since April. Also, AFAIK, it's been daily for the last few years that I've been flying the route. Other here who've been flying it longer, might recall when/if it wasn't daily.
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Old Aug 1, 19, 7:59 am
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Not just the HKG route. Even YZZ to PVG has switched planes from 787-9 to 777-200LR to 777-300ER. My flight to PVG on Oct 24 is on 787-9, Nov 13 to YYZ is on 777-200LR, and Mar 13 to PVG is 777-300ER. Majority of Shanghainese passengers heading to PVG around March is attending the Canton Fair for their business/work. There's quite a lot of Shanghainese in Toronto nowadays. When summer hits it tends to slow down for AC and maybe that's why they switch to 787-9 because there's not much going on in Shanghai. I know that in November there's a big import show in Shanghai from Nov 4 to 9. My flight heading back to YYZ is about 40% booked in Buisness. All the window seat in the first section are gone except the last two.

I don't want to sound all political but the Hong Kong protest that's happening there is not good business for AC. It seems unsafe by reading and watching the news so if you have small children you would avoid heading there for vacation. I'm mean come on, if you wear white you'll be attacked by gangs who are wearing black and vice versa. Its ridiculous.
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Old Aug 1, 19, 10:27 am
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The major protests only started in June, and the violent ones appeared much later, so I doubt they had much to do with Q2 results. Perhaps more attributable to the trade war and resulting economic slowdown.

https://yp.scmp.com/article/113283/h...-mass-protests
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Last edited by tcook052; Aug 4, 19 at 7:32 pm Reason: off topic
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Old Aug 1, 19, 8:38 pm
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Air Canada has had some "cheap" J deals from PVG-YYZ trying to fill its Business Cabins. Clearly the $400 fares from the US to Asia in Y, are not sustainable.
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Old Aug 1, 19, 9:47 pm
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@24left
i hadn't realized that ac7/8 had gone back to the big bird.

I think years ago (not sure how many) in the winter it was only 5 days a week. For some reason I thought when they went to 7 days a week on the winter was when the 789 switch happened.
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