My Account Menu

CAPA Login


Register to trial CAPA Membership!

San Francisco Airport: Keeping a close eye on United Airlines

28-Aug-2009

WEEKLY REFLECTIONS WITH RON KUHLMANN & THE CENTRE. Recently CAPA published (10 August) an overview of diminishing international service at Los Angeles International Airport (LAX). Spurred on by the attention given to our larger neighbor to the south, this week we compare San Francisco International Airport (SFO) to LAX. As in most cases, the figures tell a story and mirror broader economic trends that have been afoot.

Much like cutting a slice of tundra to see climate trends, by looking at the most recent 10-year period, we can see the effects of 9/11 and SARS, the current economic mess and a general directional drift towards Asia. This Asian focus is perhaps not surprising given geography and current economic trends, but San Francisco has traditionally had a strong European heritage.

The decade covered includes a great many figures and, consequently, the charts are big. Chart 1, taken from data collected by SFO, tracks the international service history as recorded each June month for the past ten years.

Numbers reflect reality

The total passenger line aptly reflects economic trends that were observed. In 2000 airlines were riding high but the economic weakness evident even before 9/11 is already visible in figures for June 2001. There followed a two-year downward spiral through 2002/2003 with recovery and steady growth building until 2009.  The impact of the current global slowdown shows a passenger decline of 8%. While this pales in comparison to the roughly 19% drop between 2002 and 2003, few expect the kind of rebound that occurred in 2004 to be repeated in 2010.

SFO: A decade of international service statistics

June

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

International Flight Ops

4074

4080

3590

3240

3584

3942

3978

4488

4502

4264

 - by US airlines

1534

1528

1380

1320

1432

1700

1556

1836

1752

1774

 - by Foreign Flag

2540

2552

2210

1920

2152

2242

2422

2652

2750

2490

Total Passengers

775,975

736,947

666,601

543,192

689,734

742,211

780,850

804,426

825,919

760,102

 - Europe

245,573

238,782

192,620

191,615

202,479

213,355

205,824

211,176

223,103

214,194

 - Far East

329,893

323,129

321,544

209,467

337,759

355,505

357,522

372,150

380,601

329,893

 - Australia/Oceania

14,406

14,012

15,948

14,644

16,658

24,751

41,205

43,659

39,213

39,280

 - Mexico/Caribbean/Central  America

70,321

62,281

45,296

41,166

44,051

56,021

65,729

64,065

67,235

66,122

 - Canada

115,782

98,743

91,193

86,300

88,787

92,579

110,570

113,376

115,767

110,613

A massive impact if United withdraws

San Francisco is well known as a United hub and is the carrier’s major focus point for Asian service; with its offer from SFO far exceeding the UA capacity available from LAX. It is, with its domestic connections, a massively important customer for SFO.

Nonetheless, US airlines operate only about one third of the frequencies from SFO to foreign destinations. Chart 2 shows the foreign flag share of operations over the period in question. While the percentage has declined very marginally from its 2001 high of 63%, the majority of flights continue to be provided by foreign airlines. If United were to further weaken, there could be some interesting ramifications, as already-strong foreign flags jockey for a more prominent role.

Unlike LAX, with international service provided by Delta and American as well, United’s longhaul competition at SFO from other US carriers is currently limited to a single DL/NW service to Tokyo so there is no heir-apparent in the case of additional United decline. It will be interesting to see if the new Continental/United ties will see CO increase its role at SFO.

In any case, the winter months will see the foreign flag proportion increased as United has announced discontinuation of its second daily services to London, Frankfurt and Tokyo for at least the winter timetable period, reducing UA’s overall international departures by 21 each week.

Percentage of total annual international services operated by foreign flag carriers at SFO

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

62

63

62

59

60

57

61

59

61

58

The shifting international priorities

In Chart 3 we look at the distribution of traffic across markets as displayed by the percentage of travelers attributable to various sectors. Asia now claims the largest share of travelers but Europe has had a large share as well. Some of Europe's decline has come as a result of the loss of some European service juxtaposed against a rather constant supply of seats to Asia. As we will see in the last chart, in 2000 United operated a daily 777 to Paris and Swissair had a daily MD-11 to Zurich. The Europeans may bulk up again as economic conditions improve. Swiss International, Swissair’s successor, had planned to resume A343 flights in 2009 but has now postponed the service.

Volumes to the other three geographic regions have been far more consistent. While the addition of both Qantas and Air New Zealand to the SFO market doubled the sub-region’s share, it is still rather small. Noteworthy, however, by looking at Chart 1, is the fact that this market is the only one to show an increase June over June – OK, only 67 passengers but still…

Star Alliance & SkyTeam dominate Europe

Star alliance has the bulk of the European connectivity, with London, Frankfurt and Munich all being alliance on-line transfer points. Together they have a combined total of six widebodies for the summer, scheduled throughout the day. Skyteam has two, one each to Amsterdam and Paris and oneworld is limited to online connections at Heathrow with no AA codeshare on the current BA services. Just how an approval of AA/BA/IB antitrust immunity might affect the market is yet to be seen – even assuming it is granted.

Star carriers also predominate to Asia with United, Singapore, Asiana, ANA and Air New Zealand providing connections to multiple Asian destinations at a variety of gateways. Cathay, JAL and Qantas provide better representation for oneworld than is evident to Europe while Skyteam’s Korean and Delta/Northwest trail in the tally and have far fewer options, especially to points in South Asia and Oceana.

Percentage of total international SFO traffic by region: 2001 to 2009

 

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Europe

32

32

29

35

29

35

29

29

26

27

Far East

43

44

48

39

48

39

49

48

46

46

Australia/Oceania

2

2

2

3

2

3

2

3

5

5

Mexico/Caribbean/Central America

9

8

7

8

6

8

6

8

8

8

Canada

15

13

14

16

13

16

13

12

14

14

Given the large Latin American population resident in Northern California, it is interesting that the passenger levels registered in 2000 to Mexico and Central America have yet to be repeated. One possible factor is that both Oakland and San Jose host Mexico flights, so the traffic may have grown but more diffusely across the area’s airports.

A ten year update: better Canada connections; Asia gauge downsizes

Finally, Chart 4 displays the actual services operated for the two summer timetables, 10 years apart, and again they reflect changes in the broader marketplace. For instance, especially to Canada there are a great many services operated with RJs. Calgary’s weekly service went from 14 737s to 42 RJ flights. Places like Edmonton and Victoria that required connections to reach in 2000 now have nonstop RJ operations.

In line with the global move to fewer 4-engine aircraft, we see lots of 2000’s B747s and A340s replaced with B777s, and for DL/NW to Tokyo, an A330-200.

Though a smaller metro population, Tokyo is served by the same number of flights as LAX. The offer between SFO and Hong Kong is larger than that from LAX, and with more incumbent carriers. LAX lost its Dublin link via Aer Lingus, while SFO has retained 4 weekly flights.

As is the case in virtually every US city, the European service is dominated by seats to London – both because of the strong O & D traffic as well as the vast number of connections that have traditionally been available. However, with Heathrow at or beyond capacity, other European hubs may see the benefit of Heathrow’s congestion.

If headed to Asia, Tokyo dominates but is also a congested hub (at least until next year). However, SFO travelers headed beyond Tokyo have frequent connections over both Hong Kong and Incheon; airports with capacity and broad connecting networks.

Even more so than LAX, SFO has scant direct access to South America. While LAN provides broader LAX service via Lima, no such direct intercontinental service is available at SFO. Nor has it been since the brief and ill-fated Varig foray many years ago. Whether or not the new South American players, TAM and LAN will move into the SFO market is yet to be seen.

SFO Nonstop International Service

 

Summer 2009

Summer 2000

City

Airline

Aircraft

Flts/wk

Airline

Aircraft

Flts/wk

Amsterdam

KL

747

7

KL

747

7

Auckland

NZ

772

5

     

Beijing

UA

777

7

UA

747

7

 

CA

74E

7

CA

747

5

Calgary

UA

CRJ

28

UA

737

14

 

AC

190

14

     

Cancun

UA

757

1

     

Dubai

EK

77L

7

     

Dublin

EI

330

4

     

Edmonton

UA

CRJ

7

     

Frankfurt

UA

777

7

UA

777

7

 

UA

747

7

LH

747

7

 

LH

747

7

     

Guadalajara

MX

319

7

MX

757

5

       

MX

320

10

Hong Kong

SQ

773

7

SQ

747

7

 

CX

747

14

CX

343

7

 

UA

747

7

UA

747

7

Leon

MX

319

2

     

London

UA

777

14

UA

777

7

       

UA

747

7

 

BA

747

14

BA

747

14

 

VS

747

7

VS

747

7

Los Cabos

UA

320

7

AS

737

7

 

AS

737

7

     

Manila

PR

747

7

PR

747

7

 

PR

343

1

     

Mazatlan

     

AS

M80

1

Mexico City

UA

319

7

AM

737

7

 

MX

320

7

UA

320

7

       

MX

320

7

Montreal

AC

319

7

AC

319

7

Morelia

     

MX

320

11

Munich

LH

346

7

LH

747

7

Osaka

UA

777

7

UA

747

7

Paris

AF

747

7

AF

747

7

       

UA

777

7

P. Vallarta

UA

320

7

AS

M80

7

 

AS

739

7

     
 

MX

320

5

     

Salvador

TA

320

7

TA

320

7

Seoul

OZ

777

4

OZ

747

4

 

UA

777

7

UA

747

7

 

KE

777

5

KE

777

5

 

SQ

777

7

SQ

343

7

Shanghai

UA

747

7

UA

747

5

       

CA

747

2

Sydney

UA

747

7

UA

747

7

 

QF

747

5

     

Taipei

BR

777

9

BR

747

10

 

BR

747

3

CI

747

7

 

CI

747

7

UA

747

7

Tokyo

UA

747

7

UA

747

7

 

UA

777

7

UA

777

7

 

NH

777

7

NH

747

5

 

JL

773

7

JL

747

8

 

NW

332

7

NW

747

7

Toronto

AC

320

28

AC

320

28

 

UA

320

7

UA

320

7

Vancouver

UA

319

21

UA

727

7

 

AC

190

28

UA

757

7

       

AS

737

21

       

AC

737

14

       

CP

737

7

Victoria

UA

CRJ

14

     

Zurich

     

SR

M11

7

Outlook SFO: On United we stand

United's international presence at SFO is very significant for the airport.

San Francisco Airport international capacity share by carrier (%)

And, as much of the international traffic is connecting through the airport, the domestic flow-on, in terms of passenger throughput and domestic flights is also relatively heavily weighted towards international passengers.

San Francisco Airport domestic capacity share by carrier (%)

So, the loss of even some of United's international traffic both creates some problems and some opportunities (for others) internationally and beyond the gateway.

The ongoing weakness of United provides interesting fodder for speculation should the carrier again enter bankruptcy. But the global traveling public repeatedly ranks San Francisco and its environs as one of the world’s most sought-after destinations, so SFO will likely continue to grow.

Nonetheless, there will be a number of airlines - in the US and outside - who must have SFO plugged into their "potential" network plans, all the while watching United's fortunes very closely. LAX too will have more than a passing interest.


Want more analysis like this? CAPA Membership gives you access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find out more and take a free trial.