17-Sep-2014 8:50 PM

787 and A350 airline operators will open up new Europe-US routes - despite some inertial resistance

Analysis

The development of the new generation wide body aircraft such as Boeing's 787 and Airbus' A350 may soon lead to direct services from European hubs to a growing number of secondary cities in North America. The EU-US Open Skies agreement opened up the market to a large degree, but hub economics mean that most EU airlines still focus their large wide body operations on the major gateways. In practical terms, once they land at the main US hubs, access to airports beyond remains restricted.

It may be some time before European airlines can operate from and to secondary cities at both ends of the route, but operators of these more fuel efficient and smaller wide bodies can offer direct flights from their hubs in Europe to US cities that were once only 'beyonds'.

Criteria for choosing US cities are likely to include population, importance as a tourist destination, airport size and the presence of network carriers to add feed (possibly in preference to LCCs). New cities such as San Antonio, Nashville, Memphis, New Orleans and even Honolulu may be under consideration in the coming years.

Summary

The development of new generation wide body aircraft may lead to direct services from European hubs to secondary cities in North America.
European airlines are currently focused on major gateways due to hub economics, but smaller wide body aircraft can offer direct flights to secondary cities.
Criteria for choosing US cities for direct flights include population, tourist importance, airport size, and presence of network carriers.
There are currently direct services from Europe to 44 airports in the US and Canada, most of them large airports.
Smaller airports with direct European connections include Whitehorse, Orlando, Quebec City, and Portland.
Several large US cities and major tourist destinations have no direct European services, but may be attractive to European airlines in the future.

There are direct services from Europe to 44 airports in US and Canada, most of them quite large

According to data from OAG, there are 44 airports in the USA and Canada with direct flights to/from Europe. All but four of these feature among the 100 largest airports by total seats in the two countries. The top 100, ranked by total scheduled seats for the week of 15-Sep-2014, starts with Atlanta Hartsfield (more than two million weekly seats) and ends with Myrtle Beach International Airport (46,00 seats, source: OAG).

Located on the Atlantic coast of South Carolina, Myrtle Beach's only international connection is to Toronto. While small, its location in a popular tourist area marks it as a potential recipient of European services, although its relative proximity to Charlotte Douglas Airport (around 150 miles) may mean that it remains a low priority for European airlines.

Four smaller airports with direct European connections: Whitehorse, Orlando, Quebec City and Portland

Way outside the top 100 airports in USA and Canada, and the smallest with direct European flights, is Erik Nielsen Whitehorse International Airport, in Canada's Yukon Territory. It is connected directly to Frankfurt by Condor with a once weekly Boeing 757 service. It is the smallest airport in the USA or Canada with a non-stop flight to Europe (ranked by total scheduled seats), with little more than one fifth of the seat capacity of Myrtle Beach.

Also outside the top 100, but with just over twice the total capacity of Whitehorse, is Orlando Sanford. The Florida city's second airport has a direct flight to Reykjavik operated by Icelandair with a three times weekly 757 service and to Amsterdam by ArkeFly. The TUI-owned airline's twice weekly 767 service from the Dutch capital stops at Sanford en route to Miami.

The third airport outside the top 100 with a direct transatlantic flight is Quebec, almost twice the size of Orlando Sanford by total seat capacity in the week of 15-Sep-2014 (source: OAG). AirTransat operates a three times weekly A310 service from Paris CDG.

The largest of the small transatlantic airports is Portland International, which is only a little smaller than Myrtle Beach in total seats and ranked at 103 by total seats among all airports in the US and Canada. Delta operates a double daily A330-300 service to Amsterdam from Portland, which is in the US west coast state of Oregon.

Whitehorse, Orlando, Quebec and Portland demonstrate that an airport does not need to be particularly large to have direct flights from Europe, although they can also be viewed as the exception that proves the rule that larger airports are more likely to have such connections.

Top 20 US cities for foreign visitors 2013

Rank	City	Direct Europe flights
1	New York	JFK, Newark
2	Las Vegas	Las Vegas
3	Orlando	Orlando, Sanford
4	Los Angeles	Los Angeles
5	Miami	Miami
6	San Francisco	San Francisco
7	Honolulu	None
8	San Diego	San Diego
9	Chicago	O'Hare
10	Washington	Dulles
11	Boston	Boston
12	Fort Lauderdale	Fort Lauderdale
13	Seattle	Seattle
14	Newark	Newark, JFK
15	Anaheim	Los Angeles
16	Lake Buena Vista	Orlando, Sanford
17	Houston	George Bush Intercontinental
18	New Orleans	None
19	San Antonio	None
20	Hollywood	Los Angeles

This table does suggest considerable upsides for some cities and their airports; for example, New York JFK, the #1 in the table, has over 300,000 weekly seats to Europe, according to OAG. This contrasts strongly with Las Vegas, which at present has only 16,000. As smaller gauge aircraft enter the market, this would imply considerably increased attraction for direct international air service to Las Vegas. Although its ranking clearly does not rely wholly on European visitors (as it is e.g. much closer to Asia), a reasonablly large proportion could be expected to originate across the Atlantic.

San Antonio: the largest US city with no direct European flights, but Texas has connections at other airports

San Antonio in Texas is the largest US city by population not to have direct European services from its airport, which is San Antonio International. San Antonio was ranked at 18 in the most popular US cities for international visitors in 2013, according to hotels.com (one of only three top 20 US tourist destinations with no direct flights from Europe).

San Antonio is also an important airport, ranked number 14 on the list of US/Canadian airports with no transatlantic flights (ranked by total seats). It is 95% domestic (by scheduled seats in the week of 15-Sep-2014, source: OAG) and its only international destinations are in Mexico. The leading airline is Southwest, with 42% of seats, but the airport is also served by all the network majors. As the fourth largest city in the US, San Antonio would seem to be a prime candidate for direct flights from European airlines.

Texas already has a significant number of direct European connections at Houston's George Bush Intercontinental Airport (British Airways and United/London, KLM and United/Amsterdam, Lufthansa and United/Frankfurt, Air France/Paris, Turkish Airlines/Istanbul, United/Munich, Singapore Airlines/Moscow and SAS/Stavanger) and Dallas/Fort Worth (British Airways and American/London, Lufthansa and American/Frankfurt, American/Paris, KLM/Amsterdam and American/Madrid).

Another Texan airport, Houston's William P Hobby Airport, is the sixth largest North American airport not to have direct flights to Europe, but more than 90% of its seat capacity is operated by Southwest, which plans to launch near international flights in 2015.

For San Antonio, the strong connections at Houston and Dallas/Fort Worth help explain why it has so far been overlooked by the Europeans, although neither Houston nor Dallas/Fort Worth is very close to San Antonio (at around 200 miles or more). By contrast British Airways serves the smaller Texas city of Austin, the Texan capital, which is only 70 miles from San Antonio, with a double daily 787-8 service from London Heathrow. Southwest is also the leading airline at Austin's Bergstrom airport.

American/US Airways are number two at San Antonio, with 17% of seats, suggesting that oneworld partner British Airways could have some interest in the destination in the future. Star's United (15% of seats) and SkyTeam's Delta (14%) are close behind, raising the possibility that Lufthansa and Air France-KLM may also take a look at San Antonio.

US cities ranked by population 2013

Rank	City	2013 estimate	Direct Europe flights
1	New York	8,405,837	Yes
2	Los Angeles	3,884,307	Yes
3	Chicago	2,718,782	Yes
4	Houston	2,195,914	Yes
5	Philadelphia	1,553,165	Yes
6	Phoenix	1,513,367	Yes
7	San Antonio	1,409,019	No
8	San Diego	1,355,896	Yes
9	Dallas	1,257,676	Yes
10	San Jose	998,537	No
11	Austin	885,400	Yes
12	Indianapolis	843,393	No
13	Jacksonville	842,583	No
14	San Francisco	837,442	Yes
15	Columbus	822,553	No
16	Charlotte	792,862	Yes
17	Fort Worth	792,727	Yes
18	Detroit	688,701	Yes
19	El Paso	674,433	No
20	Memphis	653,450	No
21	Seattle	652,405	Yes
22	Denver	649,495	Yes
23	Washington	646,449	Yes
24	Boston	645,966	Yes
25	Nashville	634,464	No

San Jose: no direct European flights, but the Bay Area is well served at other airports

California's San Jose is the tenth largest city in the USA and the second largest not to have direct European services. Its airport, where Southwest is again the leading airline, with 53% of seats, is dominated by domestic routes (97% of seats).

Nearby San Francisco and Oakland airports offer a number of direct European connections and this helps to explain why there are none at San Jose. Nevertheless, the size of the wider Bay Area and San Jose's proximity to Silicon Valley could support direct transatlantic flights at some stage.

Indianapolis: appeal to European airlines may be more limited

Indianapolis, ranked at 12 by population in the US, its third largest city with no transatlantic service. The airport is the largest in the state of Indiana and 99% of its seat capacity is domestic. The largest carrier is Delta, with 28% of seats, almost matched by the sum of US Airways and American, followed by Southwest on 19% and United on 16%.

Indianapolis might have some appeal to European airlines, given the size of the city and the presence of network airlines, although its relative proximity to Chicago O'Hare (less than 180 miles) and low profile as a tourist destination mean that it is unlikely to be a priority. Delta operates to Paris from Cincinnati, less than 100 miles from Indianapolis, and this may reduce the latter's appeal to Air France.

Other large US cities with no European service

Other US cities in the top 25 by population that have no direct service from Europe include Jacksonville (Florida), Columbus (Ohio), El Paso (Texas), Memphis (Tennessee) and Nashville (Tennesse). New Orleans does not rank in the top 50 by population, but is a top 20 US destination for international tourists and has no direct transatlantic flights.

Taking these in turn, Jacksonville is not a major tourist destination, although it is the 13th ranked city in the US by population. It is only some 140 miles from Orlando, which is well connected by European airlines to Europe (Aer Lingus/Dublin, Lufthansa/Frankfurt, Thomas Cook and Virgin Atlantic/Glasgow, British Airways and Virgin/London Gatwick, Thomas Cook and Virgin Atlantic/Manchester and Norwegian/Oslo).

Columbus is the number 15 US city by population, although its airport is only at number 52 by seats in the week of 15-Sep-2014. Virtually an entirely domestic airport, Southwest and the combined American/US Air both have 31% of seats. Transatlantic flights can be found at Detroit, Chicago and Washington Dulles, although the closest of these, Detroit, is 160 miles away.

Detroit is served by Air France from Paris and Lufthansa from Frankfurt, while Delta flies to London, Amsterdam and Rome. Chicago O'Hare and Washington Dulles, both within 300 miles of Columbus, offer direct flights to 20 and 16 European airports respectively.

El Paso's airport is quite small (ranked 67 in the US) and its schedule is 100% domestic. Its leading airline is Southwest (55% of seats) and it seems unlikely to feature as a non-stop destination for European airlines any time soon.

Memphis, Nashville and New Orleans: greater appeal

Memphis and Nashville are important tourist destinations, both having connections with the music entertainment industry, in addition to being large cities (ranked at 20 and 25 in the US by population). Nashville International Airport is the seventh largest airport in the US and Canada not to have direct flights to Europe.

Nashville's schedule is dominated by domestic flights (99% of seats) and its leading airline is Southwest, which has 56% of seats (week of 15-Sep-2014, source: OAG). Oneworld members American/US Air have 20%, while Delta has 15% of seats, and the airport offers significant connections across the US. The size of the city and the importance of its airport could make Nashville one of the more attractive prospects for direct flights from Europe, particularly oneworld's British Airways.

Memphis is a larger city than Nashville, but its airport ranks as only the 29th largest among those in the US and Canada with no European services (ranked by seats). Nevertheless, it is bigger than many airports that do offer such flights and is the world's largest cargo airport. Its passenger schedule is 100% domestic and SkyTeam's Delta is its leading passenger airline, with 45% of seats, followed by US Air/American with 17%. Delta cut trans-Atlantic flights from Memphis to Amsterdam in 2013; but the airport could still be a good candidate for service from a European airline.

New Orleans is the number 51 US city by population, but its airport is the tenth largest in the US and Canada not to have European services. It is also an important tourist destination, with musical and cultural attractions. Its passenger schedule is almost 100% domestic, with Toronto its only international destination.

Southwest is the leading airline at New Orleans, with a seat share of 41%, but legacy network carriers also have an important presence. US Air/American and Delta both have a 19% share and United has 15%. New Orleans is an important destination in its own right and also has connections to 38 other US cities. New Orleans would also seem to have some appeal to European airlines for direct services.

LaGuardia, Reagan, Midway: largest airports with no Europe connections

Having reviewed the largest US cities by population that have no flights to Europe, it is also useful to check the list of the largest North American airports. There are 59 airports among the top 100 in USA and Canada with no direct European flights, according to OAG data. The top ten among these are shown in the table below and we have already considered Houston Hobby, Nashville, San Jose and New Orleans.

The three largest of these - New York LaGuardia, Washington Ronald Reagan and Chicago Midway - all serve large cities that have other international airports with a significant number of direct transatlantic services.

Top 10 airports in US/Canada with no direct flights to Europe, ranked by total seats*

Rank	Airport	Total Seats*
1	New York LaGuardia Airport	709,207
2	Washington Ronald Reagan National Airport	538,247
3	Chicago Midway International Airport	531,352
4	Honolulu International Airport	436,779
5	St Louis Lambert International Airport	318,816
6	William P. Hobby Airport	302,610
7	Nashville International Airport	274,830
8	Kansas City International Airport	253,666
9	Mineta San José International Airport	241,191
10	New Orleans Louis Armstrong International Airport	224,666

LaGuardia's only international routes are to/from Canada and its prime focus has always been domestic US routes. Washington Reagan also has a domestic focus, with only a handful of non-US destinations, in Canada, the Bahamas and Puerto Rico.

Chicago Midway, dominated by LCC Southwest Airlines, is also very domestically focused, with 98% of seats within the US and a small number of international destinations in Mexico, Canada, Dominican Republic and Jamaica.

None of these three seem likely candidates for new direct transatlantic services, given that their size is built on a domestic focus and that there are important nearby airports already serving Europe. Both Washington National and New York LaGuardia are slot controlled, which somewhat precludes European airlines from gaining access to those airports. Washington National also has a rule that prohibits certain aircraft from taking off or landing from the airport between 10pm and 7am due to higher noise levels.

Honolulu: the largest US tourist destination with no direct Europe flights

The fourth largest US/Canada airport with no direct European service is Honolulu in the Pacific island state of Hawaii. It is also the only top ten US tourist destination (as identified by hotels.com) with no European flights. Primarily a leisure destination, it is one of the top tourist destinations in the US, but its lack of direct European flights probably reflects the niche-like nature of demand and Honolulu's distance from Europe.

Demand is unlikely to fill the larger long range wide bodies of the current generation, but direct services from Europe to Honolulu could be feasible with new generation aircraft types such as the Boeing 787-8 and the Airbus A350-800, although yield in this tourism market will always be a challenge.

St Louis or Kansas City?

Next on the list is St Louis, ranked at 58 in the US by population. Its airport is the biggest in the state of Missouri and also serves the surrounding metropolitan area (which includes part of south-eastern Illinois. The airport's biggest airline is LCC Southwest and the area does not rank highly for European tourism. On the other hand, the nearest transatlantic airport is Chicago O'Hare, some 250 miles away.

Kansas City is the final airport among the top ten not to have a direct flight to/from Europe. Again, Southwest is the leading airline, but all the major network carriers area also present. Kansas City is number 37 in the US by population and less than 240 miles from St Louis. There could be a case for choosing one or other of St Louis or Kansas City for direct flights from Europe.

New worlds are opening up.....but some minds remain tightly closed

Several large US cities and major tourist destinations have no direct European services. This report aims to provide some thoughts as to which of these may potentially be attractive to European airlines and the kind of criteria they may use in assessing these markets.

It is striking how many of these cities have Southwest Airlines as the number one airline at their local airport and European airlines may initially prefer to select airports where they have alliance partners who can provide additional feed. Southwest is a decidedly domestic-facing airline, with a quirky history of IT connectivity and pilot concerns about international codeshares. This does suggest that Southwest is ignoring significant and valuable international partnership opportunities in areas where other LCCs have seen great potential.

Meanwhile, there are already a number of US airports where Southwest is the leading airline and European airlines successfully operate direct flights, such as Las Vegas and Baltimore/Washington.

In many cases, the unserved routes may be viable without feed from a formalised partnership. At Oakland, where Southwest has 73% of seats, Norwegian Air Shuttle has only this year opened direct 787 services from Oslo and Stockholm (the only European services to the airport), raising obvious potential partnership possibilities. There has however been no apparent discussion at management level between Norwegian and Southwest to explore the obvious mutual opportunities that arise.

Indeed, the not always forward looking Southwest Airlines Pilots' Association (SWAPA) in Sep-2014 was staunch in its opposition to Norwegian even operating: "The denial of a temporary operating authorization is applauded by the pilots of Southwest Airlines," said SWAPA Governmental Affairs Chairman Captain Paul Jackson. "We agree with (DoT) Secretary Foxx's assertion that the application of Norwegian Air International is not in the public interest."

With a whole new world of long-haul low cost airline operations gradually opening up in Asia and Europe, aided by new aircraft types and by independent, new age airlines, the US international market is ripe for new possibilities. Not so new are some of the residual attitudes.

What is clear, with the 787 already in service and the likely entry into service of the A350 in the next few months, the old hub economics are changing. Seat cost savings claimed by the manufacturers to be of the order of 15% to 20% mean that thinner routes bypassing the main gateways can be commercially viable, particularly if the destination airports can also offer competitive fees.

New worlds may soon open up to Europe's musicians, Elvis fans and surfers. And the waves of change will eventually carry them through.