United Airlines MD Japan and Asia Pacific sales Matt Miller, speaking at the CAPA Australia Pacific Aviation Summit, stated (08-Aug-2013) “the expansion for us in the future, and I think for the Chinese carriers, will be the secondary cities” in the China-US market.
United Airlines: Secondary Chinese cities present expansion opportunities
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For the large three global US network airlines – American, Delta and United – the final quarter of 2016 offers some hope of negative unit revenue trends starting to stabilise, a welcome sign after two years of declines. But those positive developments are occurring against a backdrop of rising fuel costs and overall cost creep for those airlines, as labour expenses rise in the face of new collective bargaining agreements they have achieved.
Although each airline has offered a nuanced interpretation of domestic trends, the general consensus is that dynamics began to improve in Aug-2016 as close-in yields started to strengthen. After enduring tough conditions in Latin America driven by Brazil’s recession, American and Delta posted positive passenger unit revenues (PRASM) in their Latin entities in 3Q2016, and expect further improvement. Higher industry capacity is creating challenges for those airlines in the Atlantic and Pacific, but generally it seems that the path of unit revenue declines in those regions should moderate progressively.
Delta is aiming to post positive PRASM early in 2017, and American believes it can reach a positive result in total unit revenues in 1H2017. For now United is not offering a specific time period for a reversal of negative PRASM, but feels confident it is heading in the right direction, given the changing dynamics in certain areas of its network.
China Southern to add 20 787-9s in first phase of refleeting as it prepares long-term hub strategy
To Shenzhen, or not to Shenzhen? That is a question facing China Southern Airlines as it prepares its long term hub strategy: whether the Guangzhou-based airline should continue growing in the nearby city of Shenzhen, or should concentrate its southern hub exclusively in Guangzhou.
In the upcoming peak season Guangzhou will account for 85% of China Southern's long haul departures. That includes, for the first time, 20 intercontinental Guangzhou departures in a single day. Shenzhen is part of China Southern's catchment area, but Shenzhen Airlines and its majority owner Air China plan to expand in Shenzhen, and competition continues in nearby Hong Kong.
As China Southern weighs its Shenzhen presence, and awaits regulatory clarity on where it can grow at the new Beijing Daxing airport from 2019, the airline intends to take 20 787-9s in the compact period of 2018-2020. China Southern operates 10 -8s, while its sister company Xiamen Airlines is due to receive its first -9 in Dec-2016. China Southern's 787-9 order puts long haul aircraft back on order at Asia's largest airline. A later aircraft order will provide China Southern with post-2020 growth capacity.