Delta to add Seattle-Osaka, Drops SEA-HKG
#407
Join Date: Nov 2009
Posts: 1,594
This still doesn't explain why HKG flights are so unprofitable. CX is a full service carrier and has lower labor costs than USA carriers, but it's certainly not a LCC/ULCC, not are there any doing TPSC from HKG (or nearby airports) AFAIK. Airport fees might be high for HKG but surely not very far out of line with other major airports. HKG is a business market which also has leisure travel, so I would expect at least a signficant fraction of the TPAC seats to/from HKG to sell for high fares. It's a long route, but not compared to other major airports in Asia, so while it's expensive to carry all the fuel for a nonstop, again this wouldn't be way out of line compared to other airports in Asia.
It shows a piece of the pie. The biggest reason HKG is gone is because there is a lot of crap capacity across the pacific right now. United and American are choosing to stay in HKG because they are willing to lose money, Delta's management isn't.
and if you look at the margins/profits for the three you can generally see that Delta is MUCH more conservative.
FWIW I disagree with the conservative nature because I believe HKG is a very important market. Them leaving and CX filling the void on HKG-SEA means they will either have to A) start DTW-HKG back again, a long flight with a low local market B) try to run CX out of Seattle and I'm not sure Delta is willing to lose the money to do that C) bring HKG back from JFK and/or LAX both markets that have a metric s**t ton of capacity to Hong Kong as it is.
It also doesn't seem terribly uncompetitive to offer routing to HKG through NRT (RIP), although slots at HND are constrained and valuable while I'm not sure DL would be allowed to operate intraAsia flights out of partner hub ICN (which also seems farther out of the way than a Tokyo connection).
Delta can operate 5th freedom flying from ICN* because it is an open skies market, but most places they would do so they will just let KE do the flying for them.
*not 100% on China. I would assume they can but their might be something in the US/China/HK bilateral(s) that prevent that. Note, China, including Hong Kong, is not included in DL/KE joint venture due to the US/China Bilateral.
#408
Join Date: Dec 2018
Location: PHX
Programs: Delta DM, Marriott Lifetime Titanium, HHonrs Diamond
Posts: 1,336
And considering that UA had to write down the asset value of its routes to HKG substantially, nobody is thinking that profitability on the HKG routes is getting better anytime soon.
#409
Join Date: Mar 2007
Location: TYO / WAS / NYC
Programs: American Express got a hit man lookin' for me
Posts: 4,591
There are limited fifth freedom rights under the US-HK bilateral (historically used by UA to operate HKG-SIN/SGN), but US carriers don't have fifth freedom rights from the mainland except for cargo service.
#410
A FlyerTalk Posting Legend
Join Date: Sep 2009
Location: Minneapolis: DL DM charter 2.3MM
Programs: A3*Gold, SPG Plat, HyattDiamond, MarriottPP, LHW exAccess, ICI, Raffles Amb, NW PE MM, TWA Gold MM
Posts: 100,334
I'm almost surprised that BA doesn't use HKG as a sort of Asian hub with fifth freedom rights since the Brits basically built and paid for the new HKG airport shortly before the handover. OTOH they do have CX as a oneworld partner, while there isn't a *A or SkyTeam partner with lots of service at HKG. Similarly UA could use fifth freedom rights to operate more intraAsia flights. Also, AFAIK there's no JV between CX and BA, which is a but surprising as coordination would seem to be potentially beneficial, with BA able to deliver lots of connecting passenger from Europe, just as AA could deliver them from the USA to CX.
It's disappointing that fifth freedom doesn't cover mainland China from HKG as CX tends to operate flights to mainland China using affiliate carriers rather than mainline full service CX. Even though it's a logical routing and would avoid the mess at either PVG or PEK (or CAN) one can't easily use HKG as a connection point for destinations within mainland China unless you're willing to transfer to LCCs or limited service affiliate carriers.
It's disappointing that fifth freedom doesn't cover mainland China from HKG as CX tends to operate flights to mainland China using affiliate carriers rather than mainline full service CX. Even though it's a logical routing and would avoid the mess at either PVG or PEK (or CAN) one can't easily use HKG as a connection point for destinations within mainland China unless you're willing to transfer to LCCs or limited service affiliate carriers.
#411
FlyerTalk Evangelist
Join Date: Sep 2003
Location: San Antonio
Programs: DL DM, Former AA EXP now AY Plat, AC 75K, NW Plat, Former CO Gold, Hilton Diamond, Marriott Titanium
Posts: 26,954
I'm almost surprised that BA doesn't use HKG as a sort of Asian hub with fifth freedom rights since the Brits basically built and paid for the new HKG airport shortly before the handover. OTOH they do have CX as a oneworld partner, while there isn't a *A or SkyTeam partner with lots of service at HKG. Similarly UA could use fifth freedom rights to operate more intraAsia flights. Also, AFAIK there's no JV between CX and BA, which is a but surprising as coordination would seem to be potentially beneficial, with BA able to deliver lots of connecting passenger from Europe, just as AA could deliver them from the USA to CX.
It's disappointing that fifth freedom doesn't cover mainland China from HKG as CX tends to operate flights to mainland China using affiliate carriers rather than mainline full service CX. Even though it's a logical routing and would avoid the mess at either PVG or PEK (or CAN) one can't easily use HKG as a connection point for destinations within mainland China unless you're willing to transfer to LCCs or limited service affiliate carriers.
It's disappointing that fifth freedom doesn't cover mainland China from HKG as CX tends to operate flights to mainland China using affiliate carriers rather than mainline full service CX. Even though it's a logical routing and would avoid the mess at either PVG or PEK (or CAN) one can't easily use HKG as a connection point for destinations within mainland China unless you're willing to transfer to LCCs or limited service affiliate carriers.
#412
Join Date: Mar 2007
Location: TYO / WAS / NYC
Programs: American Express got a hit man lookin' for me
Posts: 4,591
I'm almost surprised that BA doesn't use HKG as a sort of Asian hub with fifth freedom rights since the Brits basically built and paid for the new HKG airport shortly before the handover. OTOH they do have CX as a oneworld partner, while there isn't a *A or SkyTeam partner with lots of service at HKG. Similarly UA could use fifth freedom rights to operate more intraAsia flights.
Fifth freedom hubs simply don't make as much sense as they used to back in the day when Asian carriers were relatively weak and fewer nonstops were possible. Nowadays US and European carriers generally have much higher cost structures than Asian carriers and are at a marketing disadvantage for local O&D traffic. There's also significant operational hassle in running a hub operation overseas -- you need large numbers of locally-based crew and ground staff to do it. Completely unsurprising to me that UA would rather lean on its regional partner NH for all of this. Can't speak for BA though I think they were looking into similar JV arrangements with certain Asian carriers.
#413
Join Date: Mar 2014
Location: EWR
Posts: 2,109
#414
FlyerTalk Evangelist
Join Date: Sep 2003
Location: San Antonio
Programs: DL DM, Former AA EXP now AY Plat, AC 75K, NW Plat, Former CO Gold, Hilton Diamond, Marriott Titanium
Posts: 26,954
Despite being separate technically, I consider CX and KA to be one and the same. They both offer both business and F, and other thrn the seat there's really no difference. It's not like KA is a LCC or less than full service carrier.
#416
A FlyerTalk Posting Legend
Join Date: Sep 2009
Location: Minneapolis: DL DM charter 2.3MM
Programs: A3*Gold, SPG Plat, HyattDiamond, MarriottPP, LHW exAccess, ICI, Raffles Amb, NW PE MM, TWA Gold MM
Posts: 100,334
#417
#418
FlyerTalk Evangelist
Join Date: Aug 2009
Location: ZOA, SFO, HKG
Programs: UA 1K 0.9MM, Marriott Gold, HHonors Gold, Hertz PC, SBux Gold, TSA Pre✓
Posts: 13,811
CX lost money because of being a gambling addict - fuel hedging.
It is extremely difficult to know what has exactly happened for UA to have this.
But FWIW, based on this, it did not sound like UA has lost actual money on this route. Instead, UA simply wrote off some book values.
I agree. But the overcapacity are associated with CX.
For starter, when CX decides not to merge the DragonAir brand into Cathay Pacific but rename it to Cathay Dragon, it is, at least, to CX that, they are different.
But FWIW, based on this, it did not sound like UA has lost actual money on this route. Instead, UA simply wrote off some book values.
I agree. But the overcapacity are associated with CX.
For starter, when CX decides not to merge the DragonAir brand into Cathay Pacific but rename it to Cathay Dragon, it is, at least, to CX that, they are different.
#419
FlyerTalk Evangelist
Join Date: Sep 2003
Location: San Antonio
Programs: DL DM, Former AA EXP now AY Plat, AC 75K, NW Plat, Former CO Gold, Hilton Diamond, Marriott Titanium
Posts: 26,954
It likely has to do with separate operating costs. Regardless, this isn't like AF/KL where each has a distinct brand/service from each other. Both CX And Dragon air offer same service. You get same ground and in air service (other than seat type). The only difference seems to be cost/revenue with Dragon optimized for the short/med haul and CX for long to ultra-long haul.
#420
A FlyerTalk Posting Legend
Join Date: Sep 2009
Location: Minneapolis: DL DM charter 2.3MM
Programs: A3*Gold, SPG Plat, HyattDiamond, MarriottPP, LHW exAccess, ICI, Raffles Amb, NW PE MM, TWA Gold MM
Posts: 100,334
In light of the HKG airport closure due to protests (and the fact that continuing unrest could lower demand for travel to HKG), DL's decision to abandon all service to HKG if looking fortunate today.