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Oil Prices and problems
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Message of speedbird9468 - Sent 28 Apr 23:45 |
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It has all come to our attention recently that some US carriers are to merge due to increasing costs. The question on our tongues is this going to be a way for the future for many cheap carriers such as FR and EZY. But on the other hand we see Asian carriers buying new aircraft such as the A380 etc etc. Now, is this because they have such a large amount of money or is it that they are able to get fuel at a lower price than the US/EU carriers. Or are there route networks so full. Also How long can they justify using widebodies on short domestic sectors. It obviously makes profits. But how full are the these domestic short hops in 747's and 777's A330's etc etc. While I agree it maybe cheaper to operate lets say 2 flights a day. But Surely those 2 flights a day could be operated by smallaer craft such as he 737 or A320 series aircraft.
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Message of FLX - Sent 28 Apr 13:25 |
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speedbird9468:
1st of all, a bit of clarification. ALL airlines, Asian or non-Asian, bought 388s primarily for Long-Range services(over 8hrs). Take a look of the related press-releases of any 388 customer so far. They all intend to deploy 388 on Intercontinental routes which is what it's primarily designed for. Obviously, rather than letting an expensive giant jet sits on the tarmac for say, 7-8hrs per day between departures in a routine daily schedule flying between homebase and its Intercontinental destination, airlines will try to max its utilization by using it for some shorter hops. That's why in addition to LHR and SYD, SQ will also fly their 388s to HKG and NRT soon. Nearly all Asian airlines hv been doing similar thing with their 744s, 747s and other long-range widebodies for decades. This is why designing an airliner(to do a perfect job) is so diff fm operating an airliner(to do all jobs).
Now re your questions about Asian airlines and their widebody fleets:
1. <...is this because they have such a large amount of money or is it that they are able to get fuel at a lower price than the US/EU carriers?>
Quick answer is a bit of both. Some like SQ, EK, NH, CX, do hv large amount of $. Others like MH, GA, CZ get some form of subsidized fuel fm the gov'ts. But I think the most important reason is that many of them are still indirectly controlled by their gov'ts. Take the 388 as an example, all 9 of its Asian customers, except KE and King Fisher, are at least majority owned by gov't controlled holding companies or SOEs(State Owned Enterprises). These 7 airlines are effectively instruments of long-term national aviation policies and of course, also the indirect financial beneficiaries of being linked to the gov't(In our life time, we often hear airlines bankurpcy but rarely hear gov't bankurpcy, right?). This is a huge contrast with their purely commercial counterparts in most western countries where shorter-term financial mkt performance(e.g. Stock prices+dividends) is paramount to survival. As for KE+King Fisher, their total order is only 13 units(Tiny when compared with huge customers like EK and SQ) and both hv cozy relationships with their countries' gov't and big local banks.
2. <...Or are there route networks so full. Also How long can they justify using widebodies on short domestic sectors...>
Quick answer is they've the EOS(Economies of Scale...the bigger U produce+sell, the less it'll costs U per unit if all are SOLD). Around Asia, U really can sell that many seats. Avg load factors on most routes are amazing by western stds. Fly 1 flight between any major cities in Asia anytime of the yr(Practically no low season) and U'll understand why. What's more, on many trunk routes between major Asian cities such as SIN-BKK, HKG-TPE, ICN-NRT, PEK-SZX, HND-CTS, we're not talking about 2-3 flights a day on widebodies for each city pair. We're talking about 10-15 flights a day on widebodies per city-pair(A few even per airlines)+some narrowbodies to supplement. I just flew NGO->HKG today(Off-peak season) on a CX A333(BTW, this is the SMALLEST jet on CX fleet with 300+ seats). The flight was at least 75-80% load factor and CX is the only airline flying this route direct, 2-3 times daily! Tokyo-HKG(4-5hrs) is another route I often fly and @ peak, there're at least 15 daily direct flights - all on widebodies and frequently with 400+ seats 744s or 773s. Just imagine how many 737NGs /320s U'll need to replace those 15 widebodies on just 1 city-pair.......don't forget Tokyo NRT operates less than 17hrs a day due to night curfew.
But still, why are there more flying in Asia than U.S./Europe? Most of Asia are booming economically but avg income of many Asians are still significantly lower than in U.S.+Europe, right? Well, to understand it, U hv to get outside the mindset of a typical U.S. or EU airline executive:
A) A city in U.S./EU classified as <small> typically has 0.1-0.2mil population. A city in Asia known as <small> typically has 1-2mil population. Hong Kong, a tiny city, has twice the national population of New Zealand. The whole of Australia has less population than Peking and Shanghai combined and China has at least a dozen cities half the population of Beijing.
B) Service transport is very fast & well-developed within EU. U can take a train to get to London fm Brussels in a few hrs. To get fm Singapore to Mumbai or Tokyo to Shanghai, flying is the only realistic way to go. It's simply impossible to travel overland between some Asian cities due to political(e.g. N.Korea, Myanmar, Tibet) or geography(e.g. Ocean) reasons. Even within China, the fastest train takes over a day to get fm Beijing to Hong Kong while flying takes only 3hrs.
So, Asian airlines will continue to fly widebodies on short-range(1.5-4hrs) routes for many many yrs to come. Just think short-range flying in Asia is just like in EU or U.S....only 5-10 times more pax per trip.
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Message of speedbird9468 - Sent 28 Apr 18:22 |
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Very interesting FLX, thanks. Another of the top of the head question is, Why don't western Governments have such an influence with troubled carriers? My answer would be that there are so many and the Asian Govts help only there national flag carrier. So would the Flag carrier/s of a western counry benefit from this relief to help them out. I also thought about the idea of 1 airline representing the whole of the EU and the USA covering all existing routes an more. I mean that for the EU and the US to have a representative within the industry
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Message of flylinefrontier - Sent 28 Apr 20:41 |
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Oils/Gas prices increases, affects lots of low cost airline such as Oasis Hong Kong Airline, ATA, Aloha Airline, MAXjet Airways and also Frontier Airline, who have been reported running almost no money ...
Champion Airline also will be planning to stop operating
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Message of FLX - Sent 29 Apr 6:08 |
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speedbird9468:
The U.S. started large-scale airline deregulation+liberalization over 20yrs ago. EU hv the same not long after the birth of the union. These moves support their aviation policy where the focus is on increasing mkt competition and therefore, maximizing consumer choices - all consistent with their gov't's overall public policies(More mkt forces driven, less gov't interventions, etc.) popular in most western democracies. The basic premise is that @ any particular point in time, the mkt decides how many airlines and which airlines(Or what biz models) to thrive or to die, not the gov't. Gov't won't stop any airlines fm entering the mkt(e.g. No airfare+route authority control that were popular to gov'ts before deregulation) and it also won't stop them fm exiting the mkt(e.g. No help to troubled airlines that were popular to gov'ts before deregulation). As a result of this kind of policy, we saw a whole bunch of new airlines entering the mkt when the mkt was good(e.g. Hi-growth) and a whole bunch of airlines exiting the mkt when the mkt was bad(e.g. Hi-cost such as jet fuel). Frankly, I don't see the current wave of bankurpcy+industry consolidation any diff than the last 6-8 cycles occured since airline deregulation in the U.S. Some Europeans may be less used to this than Americans due to later adoption of airline deregulation policy in EU. However, the concept of <national flag carrier> is fast-fading in EU though(e.g. Is AF-KLM a French or Dutch carrier? Or should it simply be known as an EU carrier?).
In Asia, most of what I hv described above(Mostly deregulation) hv only started to emerge in the last few yrs. Unlike the U.S. or EU, there is no such thing as a <common mkt> in Asia. Where any EU airline(FR is a perfect example) can fly between any EU nations, flying between Asian countries hv been heavily regulated and restricted by bi-lateral agreements for many yrs just like in Europe 20yrs ago. Some Asian aviation policies are starting to move toward the same direction as EU+U.S. especially within their domestic mkts.
...1 airline representing the whole of the EU.. : AF-KLM, FR, etc. are effectively doing that already. This is the new breed of EU airlines covering the whole EU.
...1 airline representing the whole of EU and the USA.. : The JV between AF-KLM, NW and DL for the transatlantic mkt will effectively be the 1st move in that direction which already received antitrust immunity. Read flightglobal.com for more details.
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Message of speedbird9468 - Sent 29 Apr 12:13 |
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I see your point. another thought that came to mind being that KLM is a subsidiary of AF or/and Dl and NW being jv. Are KLM and AF Jv's to or are they regarded as subsidiaries.
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