Korean Air

Hawaiian continues to embrace challenges in reaping rewards from its network diversification

Hawaiian Airlines is still awaiting the rewards of network diversification it undertook a few years ago with the launch of several new Asian routes along with flights to Auckland and Brisbane. The effort was designed to offset Hawaiian’s dependence on service to the US mainland, which has become increasingly competitive during the last few years.

The rapid-fire route introductions have been plagued by currency weakness in Japan, retaliatory competitive capacity additions and Hawaiian’s spooling up in understanding the distinctive nuances of each market. At the same time overcapacity in its North American markets – which still comprise the majority of its revenues – continues to pressure Hawaiian’s performance.

As those challenges continue to cast a spectre on Hawaiian’s performance, the carrier has reversed its fortunes within its inter-island network, which weakened during 2012 when Hawaiian made a push from Maui and overestimated the capacity it needed to build a hub in Kahului.

The A380 becomes mainstream, with 103 now in service: which airlines, destinations, stage lengths?

There are 103 A380s in service as of early May-2013. Emirates has 33 and Singapore Airlines has 19, so when assessing network scheduling, these two and their hubs predominate: of the 1,048 weekly A380 flights, 402 are from Emirates alone. Dubai and Singapore airport see the most A380 flights.

But there are some less predictable statistics. The airport to see the most A380 operators is Hong Kong followed by Paris and Los Angeles. The largest A380 destination that is not (yet) an A380-hub is London Heathrow. The UK and USA are the most common A380 destinations after Australia, Singapore and the UAE. Asia, not the Middle East, sees the most A380 flights; South America sees none. Guangzhou-Shanghai Pudong is the shortest A380 route at 1,202km while Los Angeles-Melbourne is the longest at 12,751km. Qantas and Lufthansa have the highest average sector length while Thai Airways is placing the most number of cycles – about two – on its aircraft per day. Qantas and Air France are placing the least (just over one).

South Korea-Japan airline market sees structural change from LCCs, political tension & weakening yen

The once tidy and highly profitable Japan-Korean market is undergoing fundamental change – accompanied by double-digit yield declines.

It is difficult to identify precisely which ingredients are provoking the greatest change in the South Korea-Japan airline market. First, in mid/late 2012 the market was transformed as new airlines entered and others added capacity; these were mainly LCCs with unprecedented low fares. Then late 2012 saw Japanese outbound tourist numbers fall sharply due to political tensions between South Korea and Japan over largely uninhabited but disputed islands.

In 2013 the Japanese outbound market remains soft as the yen weakens. While the international political situation will eventually cool down, the Korean response has been to target individual tourists rather than tour groups, a change that was long overdue in any event.

But the difference now is that those individuals have LCCs to provide for their needs. These carriers are here to stay, and they will grow – for the usual reasons, but also due to the weakening yen. While the economic and political factors favour the Korean side, it is the Japanese side that has a larger share of the market.

Harbin Airport seeks a hub role for Russia and Siberia, but home airlines are less interested

Siberia-China seat capacity grew 202% between 2003 and 2012 and China's northern City of Harbin is now jockeying to become a network hub for Siberia. The airport accounts for 15% of Siberia-China capacity, far less than the largest Chinese airport, Beijing, 1000km to its southeast. Harbin offers geographical advantages to Siberian cities in the far east while Beijing can serve those with some circuitry as well as western Siberian cities. Urumqi in China's far west could also be a hub for Siberia, supporting China Southern's development of Urumqi as a West Asia/CIS hub. 

The motivation is simple. Siberia's 40 million population has proven an increasingly important trade relationship for China – so much so that in the economic turmoil of 2009, Siberia was the only part of Russia to maintain a positive investment trend. China is tapping Siberia for resources ranging from wood to oil and, increasingly, hydroelectricity from Siberia's numerous rivers. Russia's largest private energy company forecasts Siberia's GDP could triple in 15 years.

South Korea's Asiana targets growth in 2013 within Asia, in advance of big long-haul growth in 2014

One of the highest growth rates in North Asia in 2013 will be from South Korea's Asiana, which is projecting a 9% increase in RPKs. This compares to 4% RPK growth at Korean Air and modest growth from All Nippon Airways and Japan Airlines. Many Chinese carriers will have similar or higher growth, but notably Air China will be lower as it runs out of slots.

The focus in 2013 for Asiana, globally the 54th largest airline based on capacity and sixth largest for intra-Asia international capacity, is regional flights, increasing capacity to cities including Chongqing and Yangon and launching new services to Denpasar and Jakarta. This traffic will help feed its long-haul network, due to commence notable expansion beginning in 2014 as A380s replace 777-200ERs, facilitating their re-deployment to new routes.

Modest achiever Korean Air to increase North American strength, tap new markets & look for partners

South Korea's largest carrier, Korean Air, is modest – too modest. It punches above its weight and is a formidable carrier being the largest Asian airline in North America. Asian carriers are increasingly favouring North America: in the short term its economy is doing better than Europe's and in the long term competition will be lighter owing to fewer carriers.

Geography is on its side given Korea's relative proximity to North America. Korea is not as close as Japan is, but Japanese carriers face a higher cost base, nearly twice that of Asiana and Korean.

Korea is also an efficient springboard from China, where Korean Air is the largest foreign carrier after Dragonair and rival Asiana, allowing it to tap sixth freedom markets as Chinese carriers sluggishly respond to that huge potential. Korean Air is increasing North American capacity, including with A380s, but also looking to new markets around Asia.