Update one: US airline international traffic pressure. The facts: The combined share of bookings of flights between the United States and the Indian subcontinent for United, American, Delta and their joint venture partners has fallen to 34% in 2014 from 39% in 2008. During that same period Qatar Airways, Etihad Airways and Emirates have increased their market share from 12% in 2008 to 40% in 2014. US Airlines and their JV partners serving South East Asia have seen market share fall from 43% to 36%, while the Middle East majors have seen market share in Southeast Asia increase from 1% to 13% during the same period.
This information is contained within the latest Delta/A4A lobbying paper to Capitol Hill. South East Asia traffic to the USA is a hot area of competition at this time with many airlines from South East Asia ramping up their USA coverage and this, not the Middle East majors, is the biggest factor when considering competition for the US majors in connecting those regions. The US East Coast connections to Europe and Africa are another matter entirely and the Middle East majors are having very high levels of initial success here. Delta want to see the US Open Skies agreement repealed or at least given an overview to potential amendment on the basis that US airlines are competing with state-backed airlines. Unfortunately for Delta it is likely that Capitol Hill will fall back on its remit to create as many options for passengers as possible to keep prices in check, if however by some chance Capitol Hill decides that there is far more to this and something needs to be done then this could become the big story of 2015.
But look at Milan – a major battle ground. Emirates uses Milan as a stopover point for its flights between Dubai and the USA. Emirates market share is now 19% and Etihad is now in the frame to compete with Alitalia too. But even so US airlines and their JV partners used to have an unhealthy 85% of this market under wraps, which has fallen to 78% since Emirates went on the attack. So the question from Delta is this: Are the Middle East majors able to drop their prices simply because they receive state aid and does this breach US agreements on Open Skies? Delta thinks it is onto something – We shall see.
Update two: Last week we mentioned Harbin and Guangzhou with a stable population pyramid is actually seeing an increase in working population over the course of the next 40-50 years. Now although the Chinese overall pyramid shows a falling away of the working and overall population (due mainly to population control) the influx of 18-25 year olds to both Harbin and Guangzhou have created pyramids that do indeed create zones where the pyramid differs greatly from overall Chinese stats. Given the sheer size of these cities – Harbin has 9.5m and Guangzhou 8.5m (just within the city limits alone) – we can and should focus on airlines servicing connections between these cities that are both the size of London and are yet 3.461 thousand kilometres apart (that is just shy of the 3.5 thousand kilometres of London to New York). This puts the very popular route between the cities in more or less the same league as London to New York in terms of population if not wealth and connections.
Now at the moment many see Harbin/Guangzhou as being firmly within A321Neo/737-9 territory and those aircraft will become real winner for the Chinese domestic and International market but, as mentioned, it also opens up possibilities for far larger aircraft to ply the route given that passenger demand at this time seems to be insatiable. China does indeed need many more far larger aircraft on many routes in the here and now and this should present possibilities for lessors to begin briefing their Chinese clients and prospective clients in a far more dynamic manner in asking them to consider larger aircraft options which would create huge savings and cut the current significant levels of spill which Airline Economics has been tracking. So this is a matter well worth taking note of and the message is don’t look at the Chinese population pyramids any more, look to the regional province and most importantly the city ones for your data/forecasts.