KA to launch DVO (Davao, the Philippines) & KNO (Medan, Indonesia)
May 4, 2018, 5:56 am
#31
Join Date: Aug 2016
Location: Toulouse
Programs: TK*G
Posts: 283
Fair point. I am just afraid that at some point where competitors continue to add flights and have much better schedule and lower fares than CX/KA, more destinations will end up like BKI.
Not all destinations are like Maldives where CX can beat its lower fare competitor, in this case HX, easily. Just some extra information, HX cancelled all flights to MLE in April and May because she claimed that the travel alerts caused a significant drop in group passenger travel. If I remember correctly, the previous news uploaded on HX website, which has gone right now, stated that the cancellations in April had affected eighty something passengers. That is pathetic considering it should be a 3 weekly A330 service.
Not all destinations are like Maldives where CX can beat its lower fare competitor, in this case HX, easily. Just some extra information, HX cancelled all flights to MLE in April and May because she claimed that the travel alerts caused a significant drop in group passenger travel. If I remember correctly, the previous news uploaded on HX website, which has gone right now, stated that the cancellations in April had affected eighty something passengers. That is pathetic considering it should be a 3 weekly A330 service.
That is not just what CX is facing but also other major airlines in the world. BA has less frequency than U2/FR for a handful of leisure destinations too. You are right to be afraid, but that's a global trend happening and I guess there's not much you can do to stop this from happening. Yet, I would say CX still have a large market share on business routes.
For MLE, I remember the press says there were 80 something passengers affected. I believe the number only applies to people who book via travel agencies or through HX. I have heard op-up stories on this route and the loading is not bad actually - haven't said that I guess most passengers are group travels from China. Hence, the cancellation is caused by the drop in group tours and hence they aren't counted in the 80 something number.
May 4, 2018, 7:28 am
#32
Join Date: Aug 2011
Posts: 1,421
Fair point. I am just afraid that at some point where competitors continue to add flights and have much better schedule and lower fares than CX/KA, more destinations will end up like BKI.
Not all destinations are like Maldives where CX can beat its lower fare competitor, in this case HX, easily. Just some extra information, HX cancelled all flights to MLE in April and May because she claimed that the travel alerts caused a significant drop in group passenger travel. If I remember correctly, the previous news uploaded on HX website, which has gone right now, stated that the cancellations in April had affected eighty something passengers. That is pathetic considering it should be a 3 weekly A330 service.
Not all destinations are like Maldives where CX can beat its lower fare competitor, in this case HX, easily. Just some extra information, HX cancelled all flights to MLE in April and May because she claimed that the travel alerts caused a significant drop in group passenger travel. If I remember correctly, the previous news uploaded on HX website, which has gone right now, stated that the cancellations in April had affected eighty something passengers. That is pathetic considering it should be a 3 weekly A330 service.
They are replacing 23 A320's WITH 32 a321's
that should change things drastically as will 3-4-3 on the now 17 777-300 regionals
May 4, 2018, 10:04 am
#33
Join Date: Apr 2011
Location: LEJ
Programs: BA GGL IHG PlatAMB HH Dia
Posts: 343
Beside the fresh fruits the Ministry of Foreign Affair in Germany wrote since months travel alerts for the southern Philippines incl Davao coz of kidnapping and IS terror.
May 5, 2018, 10:14 am
#34
Join Date: May 2015
Location: EGLL, OMDB, VTBS, VHHH
Posts: 18
A couple of interesting armchair CEOs here so let me add some points for the sake of discussion.
When discussing route strategies, I believe airlines also evaluate 2 oft-overlooked factors: (I) labour cost and (II) capital cost.
Say, you have Stockholm (ARN) vs. Medan (KNO). To keep a barebone 3x/week frequency to ARN, you would need a new A359. For a 3x/week to KNO, you'd just need an A320 running an extra rotation.
For ARN, you need 12 FAs + 4 pilots for 280 pax (1 crew per 17.5 pax). For KNO you need 5 FAs + 2 pilots for 158 pax (i.e. 1 crew per 22.5 pax). Not to mention, it's easier to hire/train an A320 pilot than an A359.
For the A359s, you would likely need them anew. It's like paying a new mortgage for a flashy apartment. For an A320, the average age in KA approximates 13 years. That means they're most likely at the end of the repayment cycle. Not to mention, your opportunity cost of flying a prime overnight flight to ARN costs more than just adding a midnight rotation to KNO.
On the other hand, you have the usual competition on long haul connecting flights. For my colleagues, they'd rather fly HKG-DXB-Boglona (which is a daily service) rather than connecting on the 5x/week HKG-FCO flight. The longer the flight is, the more likely a traveller is willing to consider a connection. Believe it or not - for business travellers - connecting via SVO/IST everyday beats having to spend an extra day to wait for a nonstop flight home. In this regard, HKG-KNO would have less competition than HKG-ARN.
Finally, there's a somewhat controversial consideration. It's "cheaper" to serve a Southeast Asian passenger than a Swede. A Filippino/Indonesian is likely to expect less as they know less about air travel / already get too used to LCCs. They are also less likely to blog about the tiniest service pitfall and cause a PR disaster. For the Swedish market, you'd probably need to set up a new distribution network for the country, hire local BD managers, and splurge on media briefings. For DVO/KNO, all you need is to assign someone from the MNL/CGK office to brief the travel agents in DVO/KNO. Your staffing and supporting infrastructures are there (incl. airport check-in signage!) Mind you those admin costs add up.
So yes, there may be more revenue potential from Stockholm. But overall it's cheaper to give Medan a try with an old A320 doing an overnight run. Did I mention the KNO flight may get landing fee rebates from HKIA, and it saves some parking fees as well?
When discussing route strategies, I believe airlines also evaluate 2 oft-overlooked factors: (I) labour cost and (II) capital cost.
Say, you have Stockholm (ARN) vs. Medan (KNO). To keep a barebone 3x/week frequency to ARN, you would need a new A359. For a 3x/week to KNO, you'd just need an A320 running an extra rotation.
For ARN, you need 12 FAs + 4 pilots for 280 pax (1 crew per 17.5 pax). For KNO you need 5 FAs + 2 pilots for 158 pax (i.e. 1 crew per 22.5 pax). Not to mention, it's easier to hire/train an A320 pilot than an A359.
For the A359s, you would likely need them anew. It's like paying a new mortgage for a flashy apartment. For an A320, the average age in KA approximates 13 years. That means they're most likely at the end of the repayment cycle. Not to mention, your opportunity cost of flying a prime overnight flight to ARN costs more than just adding a midnight rotation to KNO.
On the other hand, you have the usual competition on long haul connecting flights. For my colleagues, they'd rather fly HKG-DXB-Boglona (which is a daily service) rather than connecting on the 5x/week HKG-FCO flight. The longer the flight is, the more likely a traveller is willing to consider a connection. Believe it or not - for business travellers - connecting via SVO/IST everyday beats having to spend an extra day to wait for a nonstop flight home. In this regard, HKG-KNO would have less competition than HKG-ARN.
Finally, there's a somewhat controversial consideration. It's "cheaper" to serve a Southeast Asian passenger than a Swede. A Filippino/Indonesian is likely to expect less as they know less about air travel / already get too used to LCCs. They are also less likely to blog about the tiniest service pitfall and cause a PR disaster. For the Swedish market, you'd probably need to set up a new distribution network for the country, hire local BD managers, and splurge on media briefings. For DVO/KNO, all you need is to assign someone from the MNL/CGK office to brief the travel agents in DVO/KNO. Your staffing and supporting infrastructures are there (incl. airport check-in signage!) Mind you those admin costs add up.
So yes, there may be more revenue potential from Stockholm. But overall it's cheaper to give Medan a try with an old A320 doing an overnight run. Did I mention the KNO flight may get landing fee rebates from HKIA, and it saves some parking fees as well?
May 5, 2018, 10:47 am
#35
Join Date: Aug 2011
Posts: 1,421
yes yes, just arm chair CEO's
LH group is not really flying from Munich and Vienna to HKG
TK is not really flying twice daily to HKG
SAS is not really flying to HKG either
HKG is connected directly to 180 cities and CX just flies to half that
I suppose those other 80 destinations are all on paper , all "arm chair routes"
the fact is CX route planning over the last 10 years has been pathetic ( Tianjin has less traffic to HKG than Medan?!!)
CX has 5 spare 777w that is is retiring ahead of time so new aircraft is not an issue when it comes to a 10 year plan ( CX fleet count has barely moved since 2012)
The fact is CX is not as attractive as you have to fly other airlines who can make routes viable that CX cannot
also FCO schedule on CX website is daily 77W....
LH group is not really flying from Munich and Vienna to HKG
TK is not really flying twice daily to HKG
SAS is not really flying to HKG either
HKG is connected directly to 180 cities and CX just flies to half that
I suppose those other 80 destinations are all on paper , all "arm chair routes"
the fact is CX route planning over the last 10 years has been pathetic ( Tianjin has less traffic to HKG than Medan?!!)
CX has 5 spare 777w that is is retiring ahead of time so new aircraft is not an issue when it comes to a 10 year plan ( CX fleet count has barely moved since 2012)
The fact is CX is not as attractive as you have to fly other airlines who can make routes viable that CX cannot
also FCO schedule on CX website is daily 77W....
Last edited by Kachjc; May 5, 2018 at 10:52 am
May 5, 2018, 4:35 pm
#36
Join Date: Jun 2005
Location: HKG
Posts: 1,502
Fair point. I am just afraid that at some point where competitors continue to add flights and have much better schedule and lower fares than CX/KA, more destinations will end up like BKI.
Not all destinations are like Maldives where CX can beat its lower fare competitor, in this case HX, easily. Just some extra information, HX cancelled all flights to MLE in April and May because she claimed that the travel alerts caused a significant drop in group passenger travel. If I remember correctly, the previous news uploaded on HX website, which has gone right now, stated that the cancellations in April had affected eighty something passengers. That is pathetic considering it should be a 3 weekly A330 service.
Not all destinations are like Maldives where CX can beat its lower fare competitor, in this case HX, easily. Just some extra information, HX cancelled all flights to MLE in April and May because she claimed that the travel alerts caused a significant drop in group passenger travel. If I remember correctly, the previous news uploaded on HX website, which has gone right now, stated that the cancellations in April had affected eighty something passengers. That is pathetic considering it should be a 3 weekly A330 service.
I also think CX needs a chunk of leisure destinations, those don't rely on filling the front of the cabin to make money. Business travelers need a vacation every now and then, too, and need a way to redeem their miles flying full-fare or J/F on their business trips with CX.
May 5, 2018, 8:35 pm
#37
Join Date: Aug 2016
Location: Toulouse
Programs: TK*G
Posts: 283
This is why I don't think HX is really a competitor for CX. On this route in particular, HX relies on its group bookings, perhaps from its HNA parent. They might be priced competitively against CX but would CX's core passenger group migrate over for price? If price is really at stake, they would have flown AK already, and were never within CX's market radar in the first place.
I also think CX needs a chunk of leisure destinations, those don't rely on filling the front of the cabin to make money. Business travelers need a vacation every now and then, too, and need a way to redeem their miles flying full-fare or J/F on their business trips with CX.
I also think CX needs a chunk of leisure destinations, those don't rely on filling the front of the cabin to make money. Business travelers need a vacation every now and then, too, and need a way to redeem their miles flying full-fare or J/F on their business trips with CX.
CX has a high operating cost (at least definitely higher than HX), and that explains why sometimes they can't really sell tickets as cheap as HX for those leisure destinations where price is much more sensitive.