Delta to add Seattle-Osaka, Drops SEA-HKG
May 24, 2019, 4:39 pm
#391
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May 24, 2019, 5:11 pm
#392
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Flying on KE is like flying in a sauna. They really don't run the AC - at all - and have temperature set unbearably hot. Even in shorts and with the thinnest possible clothing, expect o be drenched in sweat and sticking to the seat for the whole duration of the flight. To add insult to injury, the water that KE gives is in half-filled super tiny cups, so drink a lot before a KE flight, as you likely will get seriously dehydrated due to the uncomfortable cabin and lacking drink service. BYOW (bring your own water bottle - preferably a large one).
May 24, 2019, 6:10 pm
#393
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+1000
Flying on KE is like flying in a sauna. They really don't run the AC - at all - and have temperature set unbearably hot. Even in shorts and with the thinnest possible clothing, expect o be drenched in sweat and sticking to the seat for the whole duration of the flight. To add insult to injury, the water that KE gives is in half-filled super tiny cups, so drink a lot before a KE flight, as you likely will get seriously dehydrated due to the uncomfortable cabin and lacking drink service. BYOW (bring your own water bottle - preferably a large one).
Flying on KE is like flying in a sauna. They really don't run the AC - at all - and have temperature set unbearably hot. Even in shorts and with the thinnest possible clothing, expect o be drenched in sweat and sticking to the seat for the whole duration of the flight. To add insult to injury, the water that KE gives is in half-filled super tiny cups, so drink a lot before a KE flight, as you likely will get seriously dehydrated due to the uncomfortable cabin and lacking drink service. BYOW (bring your own water bottle - preferably a large one).
May 24, 2019, 9:43 pm
#394
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Connections may be irrelevant.
May 24, 2019, 10:08 pm
#395
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It certainly seems like that wasn’t the case for Delta in Hong Kong, so AA and CX must be benefiting from additional traffic obtained by having a hub at both sides of their routes.
May 25, 2019, 5:20 am
#396
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DL has options. CX doesn’t.
May 25, 2019, 5:05 pm
#397
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HKG is not a UA hub. Even with CX's competition, UA is sill standing strong (maybe even better than CX) for its HKG routes.
It is simple - HKG is generally a profitable route, unless the airline has stupidly planned another end of the destinations. With the failure of DTW/MSP, DL has clearly failed to learn the lesson and moved the route to SEA. I am sure that if DL starts LAX/JFK-HKG , DL can turn this route profitable within weeks, maybe even days.
May 25, 2019, 5:58 pm
#398
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How about UA?
HKG is not a UA hub. Even with CX's competition, UA is sill standing strong (maybe even better than CX) for its HKG routes.
It is simple - HKG is generally a profitable route, unless the airline has stupidly planned another end of the destinations. With the failure of DTW/MSP, DL has clearly failed to learn the lesson and moved the route to SEA. I am sure that if DL starts LAX/JFK-HKG , DL can turn this route profitable within weeks, maybe even days.
HKG is not a UA hub. Even with CX's competition, UA is sill standing strong (maybe even better than CX) for its HKG routes.
It is simple - HKG is generally a profitable route, unless the airline has stupidly planned another end of the destinations. With the failure of DTW/MSP, DL has clearly failed to learn the lesson and moved the route to SEA. I am sure that if DL starts LAX/JFK-HKG , DL can turn this route profitable within weeks, maybe even days.
There was not enough of that corporate, higher fare-class, business in SEA to get it to break even despite decent load factors.
YVR also steals some TPAC business away from SEA. More flights and better airport experience (for now). Canadians don't really cross the border to fly TPAC from SEA.
Hopefully it will be back once DL sorts out the 767 refurbishments and 339/359 delivery schedules. Or if SEA-KIX under-performs. Putting a 339/359 on that route would make the hard product very competitive, and that is a good way to start. Don't think the 359 has the range for JFK-HKG and the fact that DL has committed the 77L to JFK-BOM means it will be less likely we see JFK-HKG.
May 25, 2019, 6:39 pm
#399
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It is simple - HKG is generally a profitable route, unless the airline has stupidly planned another end of the destinations. With the failure of DTW/MSP, DL has clearly failed to learn the lesson and moved the route to SEA. I am sure that if DL starts LAX/JFK-HKG , DL can turn this route profitable within weeks, maybe even days.
It is simple - HKG is generally a profitable route, unless the airline has stupidly planned another end of the destinations. With the failure of DTW/MSP, DL has clearly failed to learn the lesson and moved the route to SEA. I am sure that if DL starts LAX/JFK-HKG , DL can turn this route profitable within weeks, maybe even days.
May 25, 2019, 8:14 pm
#400
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Also daily reminder that DL is the currently the most profitable US airline (and I believe airline in the world).
You may not like the decisions they make or they may not line up with your desired travel plans but questioning DL's route decisions seems stupid at the moment -- the business team at DL should have enough credibility that if they don't think a route can work with their current business model, it's probably the right call.
They seem to have done a pretty good job at optimizing the many largely fixed facts they have to deal with (hub locations, fleet decisions, etc) -- good businesses don't just operate loss-making enterprises if the loss isn't offset by gains elsewhere
You may not like the decisions they make or they may not line up with your desired travel plans but questioning DL's route decisions seems stupid at the moment -- the business team at DL should have enough credibility that if they don't think a route can work with their current business model, it's probably the right call.
They seem to have done a pretty good job at optimizing the many largely fixed facts they have to deal with (hub locations, fleet decisions, etc) -- good businesses don't just operate loss-making enterprises if the loss isn't offset by gains elsewhere
May 25, 2019, 9:07 pm
#401
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It probably won't be profitable that quickly. UA has had a multi-decade head start in those markets and has corporate contracts sewn up for LAX-HKG and EWR-HKG O/D travel. Pretty intense fare competition on LAX-HKG, but not unlike the same competition that DL gladly accepts on LAX-SYD. The difference is that DL has a partner at SYD and not HKG.
There was not enough of that corporate, higher fare-class, business in SEA to get it to break even despite decent load factors.
YVR also steals some TPAC business away from SEA. More flights and better airport experience (for now). Canadians don't really cross the border to fly TPAC from SEA.
Hopefully it will be back once DL sorts out the 767 refurbishments and 339/359 delivery schedules. Or if SEA-KIX under-performs. Putting a 339/359 on that route would make the hard product very competitive, and that is a good way to start. Don't think the 359 has the range for JFK-HKG and the fact that DL has committed the 77L to JFK-BOM means it will be less likely we see JFK-HKG.
There was not enough of that corporate, higher fare-class, business in SEA to get it to break even despite decent load factors.
YVR also steals some TPAC business away from SEA. More flights and better airport experience (for now). Canadians don't really cross the border to fly TPAC from SEA.
Hopefully it will be back once DL sorts out the 767 refurbishments and 339/359 delivery schedules. Or if SEA-KIX under-performs. Putting a 339/359 on that route would make the hard product very competitive, and that is a good way to start. Don't think the 359 has the range for JFK-HKG and the fact that DL has committed the 77L to JFK-BOM means it will be less likely we see JFK-HKG.
May 26, 2019, 6:16 am
#402
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How about UA?
HKG is not a UA hub. Even with CX's competition, UA is sill standing strong (maybe even better than CX) for its HKG routes.
It is simple - HKG is generally a profitable route, unless the airline has stupidly planned another end of the destinations. With the failure of DTW/MSP, DL has clearly failed to learn the lesson and moved the route to SEA. I am sure that if DL starts LAX/JFK-HKG , DL can turn this route profitable within weeks, maybe even days.
HKG is not a UA hub. Even with CX's competition, UA is sill standing strong (maybe even better than CX) for its HKG routes.
It is simple - HKG is generally a profitable route, unless the airline has stupidly planned another end of the destinations. With the failure of DTW/MSP, DL has clearly failed to learn the lesson and moved the route to SEA. I am sure that if DL starts LAX/JFK-HKG , DL can turn this route profitable within weeks, maybe even days.
In the notes section of their Q4 2018 Financial Report (bolding is mine, for emphasis):
Impairment of assets:
Routes: The company conducted its annual impairment review of intangible assets in the fourth quarter of 2018, which consisted of a comparison of the book value of specific assets to the fair value of those assets calculated using the discounted cash flow method. Due to increased costs without sufficient corresponding increases in revenue in the Hong Kong market, the company determined that the value of its Hong Kong routes had been impaired. Accordingly, in the fourth quarter of 2018, the company recorded a special non-cash impairment charge of $206 million ($160 million net of taxes) associated with its Hong Kong routes. The collateral pledged under the company's term loan, including the Hong Kong routes, continues to be sufficient to satisfy the loan covenants.
The yields in many of the US-HKG markets are in the toilet. For example, for travel tomorrow, with practically no advance purchase, UA is charging $427 one-way in Coach for the nonstop SFO-HKG flight.
May 26, 2019, 9:47 am
#403
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FYI - HKG is not the goldmine you think it is, even for UA. For Q4 2018, UA took a special non-cash impairment charge of $206m ($160m net of taxes) on the value of its HKG routes: https://www.prnewswire.com/news-rele...300778886.html
In the notes section of their Q4 2018 Financial Report (bolding is mine, for emphasis):
Impairment of assets:
Routes: The company conducted its annual impairment review of intangible assets in the fourth quarter of 2018, which consisted of a comparison of the book value of specific assets to the fair value of those assets calculated using the discounted cash flow method. Due to increased costs without sufficient corresponding increases in revenue in the Hong Kong market, the company determined that the value of its Hong Kong routes had been impaired. Accordingly, in the fourth quarter of 2018, the company recorded a special non-cash impairment charge of $206 million ($160 million net of taxes) associated with its Hong Kong routes. The collateral pledged under the company's term loan, including the Hong Kong routes, continues to be sufficient to satisfy the loan covenants.
The yields in many of the US-HKG markets are in the toilet. For example, for travel tomorrow, with practically no advance purchase, UA is charging $427 one-way in Coach for the nonstop SFO-HKG flight.
In the notes section of their Q4 2018 Financial Report (bolding is mine, for emphasis):
Impairment of assets:
Routes: The company conducted its annual impairment review of intangible assets in the fourth quarter of 2018, which consisted of a comparison of the book value of specific assets to the fair value of those assets calculated using the discounted cash flow method. Due to increased costs without sufficient corresponding increases in revenue in the Hong Kong market, the company determined that the value of its Hong Kong routes had been impaired. Accordingly, in the fourth quarter of 2018, the company recorded a special non-cash impairment charge of $206 million ($160 million net of taxes) associated with its Hong Kong routes. The collateral pledged under the company's term loan, including the Hong Kong routes, continues to be sufficient to satisfy the loan covenants.
The yields in many of the US-HKG markets are in the toilet. For example, for travel tomorrow, with practically no advance purchase, UA is charging $427 one-way in Coach for the nonstop SFO-HKG flight.
I think DL is simply making financially prudent business decisions here.
Last edited by ab2013; May 26, 2019 at 9:58 am
May 26, 2019, 11:25 am
#404
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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 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).
May 26, 2019, 12:21 pm
#405
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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 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).
https://ir.delta.com/news/news-detai...t/default.aspx
Labor cost was about 27% of total operating expenses for DL in the most recent quarter ending in April of this year.
https://www.cathaypacific.com/conten..._annual_en.pdf
Slide 26 seems to show labor cost at 18% for CX in FY18
It does seem to me that labor cost does put DL at a significant disadvantage here, at least in relative terms. I know, this might not show the exact picture of what's going on financially ... but if someone else wants to dig deeper, they're free to knock themselves out.
Last edited by ab2013; May 26, 2019 at 12:27 pm