Thank China for the Massive Opportunity US Carriers See in Asia

Asia is booming! Asia is booming!

We’ve hear the refrain for a brief while now, and yes, Asia is indeed booming. Travel was shut down for so long during the pandemic that this summer is when people are finally feeling capable of getting back out there. And those within Asia have been stuck at home for so long that they are just aching to hit the road. That’s the case everywhere except for one place, China. And China is exactly why Asia is booming for everyone.

Before the pandemic, flights to China were responsible for almost 30 percent of the seats going between the mainland US and East/Southeast Asia. The numbers were even more staggering than that. There were nine airlines flying 46 routes from 14 US gateways to 16 Chinese gateways.

LAX alone had flights to 14 destinations on all nine airlines. Just look at this:

Then the pandemic hit, and well, it just disappeared.

Mainland US – East/Southeast Asia Seats By Country

Of course, every country saw traffic disappear, but they’ve all started returning in big numbers… except for one.

Mainland US – East/Southeast Asia Seat Change Since 2019 By Country

This isn’t about demand. This is about politics. Even as Hong Kong starts to wake up, mainland China remains under a draconian restriction on flights to the US. It’s entirely political, with much of the disagreement over Chinese airlines being allowed to use Russian airspace. It’s complicated, and it’s not the point of the post. Just know that because of absolutely nothing related to demand, flights are heavily restricted.

Here is what’s schedules for this month:

Air China – Los Angeles to Shenzhen (1x weekly) and Beijing (1x weekly) along with New York/JFK – Beijing (1x weekly)
American – Dallas/Fort Worth to Shanghai/Pudong (4x weekly)
China Eastern – Los Angeles to Shanghai/Pudong (1x weekly) and New York/JFK to Shanghai/Pudong (2x weekly)
China Southern – Los Angeles to Guangzhou (2x weekly) and New York/JFK – Guangzhou (1x weekly)
Delta – Detroit to Shanghai/Pudong (2x weekly) and Seattle to Shanghai/Pudong (2x weekly)
Xiamen Airlines – Los Angeles to Xiamen (3x weekly)
United – San Francisco to Shanghai/Pudong (4x weekly)

That’s it. Combining all airlines, there is the equivalent of three daily flights between China and the US. That is pure madness.

What this means, however, is that capacity to Asia is down… way down. Maybe demand is low to China, but all of those Chinese airlines were providing very low fare capacity for travelers going beyond China to Southeast Asia during the pandemic. Here are just some examples from Cirium ARC/BSP data comparing the largest market average fares for Q1 2023 vs Q1 2019 from the Continental US to:

Manila +24 percent
Bali +23 percent
Jakarta +21 percent
Da Nang +20 percent
Ho Chi Minh City +20 percent
Singapore +20 percent
Hanoi +17 percent
Bangkok +13 percent

You get the idea. Fares have soared on the dearth of capacity, and that means that every airline still in the market is making bank.

China and the US just last week increased the limit up to 24x weekly per country starting at the end of Oct, so a thawing continues but at a glacial pace. This is still far below what airlines would actually operate in an unrestricted world. That being said, it remains to be seen how much of that random Chinese airline service will return. It’s a different world now, and some of the airlines that were relying on big local subsidies to launch flights may not find the same, welcoming environment any longer.

That means in the long run, the outlook may still be rosy. But in the short run? Oh it’s a great time to be an airline flying to Asia.

Brett

35 responses to “Thank China for the Massive Opportunity US Carriers See in Asia”

Angetenar

Aug 14, 2023

How much have average fares to Tokyo and Seoul increased?

Reply
1. .
  
  Aug 14, 2023
  
  By a lot, especially DL-KE JV routes at least for Seoul.
  
  Reply
2. CF
  
  Aug 14, 2023
  
  Angetenar – For Q1 2023 vs Q1 2019, Continental US to Narita and Haneda combined saw fares drop 2%. Seould, however, was up 31%.
  
  Reply
Hammer

Aug 14, 2023

What about China Eastern? Don’t they have some scheduled PVG-JFK flying this month?

Reply
1. CF
  
  Aug 14, 2023
  
  Hammer – Oh whoops, yes 3x weekly there. Sorry about that. I’ve updated the post.
  
  Reply
  1. CF
    
    Aug 14, 2023
    
    And to be clear, that’s 2x weekly to JFK and 1x to LAX
    
    Reply
Nick Bax

Aug 14, 2023

Not exactly the point of this post, but how does it work operationally when an airline flies two times a week? Does that just mean really long layovers for the crew?

Reply
1. Kilroy
  
  Aug 14, 2023
  
  I’m curious about this as well, now that you mention it.
  
  Alternatively, do airlines sometimes book their crews on another airline’s flight to improve crew utilization? For example, if a US airline crew worked a flight into Ho Chi Minh City and that airline’s next flight out of Ho Chi Minh City were not for 4 or 5 days, might the US airline fly its crew (on another airline) to a different city it also serves (say, Bangkok or Hanoi), and (a few days later) have the crew work a flight out of that city back to the US?
  
  Or would/does the crew always get an extended multi-day layover in situations like that?
  
  Reply
2. CF
  
  Aug 14, 2023
  
  Nick – It does make for a very long layover. They need a longer layover anyway and do what they can to minimize, but it’s just not great once you’re doing long-haul at less than 3-4x weekly.
  
  Reply
SEAN

Aug 14, 2023

If you want to see what’s really going on in China right now, check out either business basics or China insights on YouTube. The latter channel had a video debut on Sunday the 13th where the entire city center of Shanghai was more or less closed including their primary railway station. This is do to capital flight out of the country as business leaders are moving operations to other countries & leaving China in the dust.

Reply
Ian L

Aug 14, 2023

Reading between the lines here, there’s little enough capacity between the US and China that connecting traffic onward from China is unlikely, as you might as well just fill seats with China-bound passengers, as there are more of them than there are seats flying.

You’d also expect each airline to fly their largest planes into China right now, due to the flight cap. But e.g. Delta SEA-PVG isn’t quite doing that, with the 330-900neo rather than the 350. But maybe the erratic flight schedules themselves are depressing demand?

Reply
Eric

Aug 14, 2023

China will never return to the way it was pre-pandemic. There are a combination of factors that are creating enormous headwinds for the Chinese economy some of which are impossible to overcome, even if there was a leadership change at the top.

That said, I wouldn’t expect many of those secondary and tertiary routes to China to return.

Reply
1. SEAN
  
  Aug 14, 2023
  
  That’s it. Don’t know how many of the readers know, but Beijing had serious rains recently that caused flooding in such places as the forbidden city. That supposedly hasn’t happened in over six centuries. So as a result dams were opened releasing a torrent of water. Now smaller cities down stream from the capitol & the countryside are now completely underwater. Now there are massive protests against the CCP over this action.
  
  Reply
2. Chris
  
  Aug 14, 2023
  
  When you have 65MM (!!!) empty homes in ghost cities waiting to be sold, your economy’s going to feel it.
  
  Reply
Tim Dunn

Aug 14, 2023

Yet another great CF article that highlights enormous issues touching global aviation.

First, the issue driving the Chinese government’s unilateral reduction in capacity to/from the US is about more than just politics. Unlike many countries, China cut airline capacity to many countries during the pandemic rather than grant slot/frequency exemptions. The WSJ has several articles highlighting that the Chinese economy is not coming back as expected which, if it continues, will lead to reduced demand. Add in that the Chinese government subsidized its airlines’ international operations pre-covid – something they do not want to repeat now – and they have every reason to carefully control the amount of capacity to/from China.

The graphs highlight the shifting economic trends in Asia. Singapore is a big winner and its development its aided by the A350 and B787’s longer range, allowing more nonstops. Taiwan is benefitting as some countries support Taiwan and its open markets. With abundant capacity, Chinese airlines pre-covid competed for connecting passengers throughout Asia but the limited number of flights has boosted Japan, the best geographically situated country for transpacific connections, and S. Korea. Tokyo’s dual airport rules and HND slots limit growth while helping NRT even as Korean and partner DL holds off on adding capacity until the KE-OZ merger is approved. Capacity is tight in all of the logical transpacific connecting markets.

And then when looking at the impacts to specific carriers, United was the largest transpacific carrier overall pre-covid and gained a big chunk of its advantage because of its oversized presence in China and HKG, the former of which was protected by frequency allocations. They are not happy that the DOT is equally allocating the limited covid frequencies on an equal basis to AA, DL and UA. AA and DL can clearly make money just like UA and want their part of these latest frequencies. AA obviously is limited to DFW, its only current gateway while DL has the advantage of serving the only US carrier gateway in the Eastern US; UA tipped its hat in doubling down on SFO as CF discussed recently although they will not get 10 of the 12 new flights which is what they need to start daily service to each of PVG and PEK. Without JVs with their US partners, the Chinese carriers will go for the biggest US cities; the only real surprise will be if AA and DL grow PVG further or add PEK and if DL adds LAX-PVG.

As for aircraft, UA’s 77W is the largest aircraft and has great cargo capacity while the DL 339 and AA 772/789 are about the same size. DL’s 359s can easily do DTW-PVG and carry lots of cargo back.

Flight tracking data shows that DL is leaving its aircraft at PVG for 26ish hours and the crew is flying the same aircraft back that they brought in. I’m sure every carrier will get better utilization w/the increased frequencies.

Reply
1. MaxPower
  
  Aug 14, 2023
  
  “ while DL has the advantage of serving the only US carrier gateway in the Eastern US”
  
  Not sure how 2x frequency per week to Detroit is an advantage. If anything, it shows how weak Delta’s main pacific gateway, SEA, is that it can’t support 4x weekly service like Sfo and dfw. The obvious move here would be to consolidate frequencies in one hub but delta doesn’t seem to think Seattle can sustain that with its flow.
  
  Reply
  1. Tim Dunn
    
    Aug 14, 2023
    
    The whole reason US carriers have multiple hubs to most regions of the world is because there are connecting markets which are best served via one or more hubs – which is unlike many global carriers in other countries – on top of multiple strong local markets.
    DL had up to 4 gateways to China and was operating 3 of them pre-covid. DTW was the largest US carrier gateway to East Asia in the eastern US when the 744s were still in operation but that torch was passed to UA at EWR. Now that UA presumably cannot operate EWR to China and HKG because of Russia airspace restrictions, DL’s routes from DTW to ICN and PVG provide a unique market position to the Eastern US.
    If DL wins JFK-HND and starts JFK-ICN and/or JFK-HKG (which was flown by CX w/ Russia airspace restrictions), UA’s position from the NE to Asia could be significantly challenged.
    It is likely that the A350 can do what the B787 cannot and that will likely become more apparent in the next two years as Delta takes delivery of more than a dozen new A350s.
    Since DL operated both DTW and SEA to PEK and PVG plus LAX-PVG pre-covid, DL’s two northern tier transpac hubs work well together while LAX is a large local market. San Francisco has significant structural issues which are depressing business far worse than any other city or metro area including from LA. AA only has DFW to China left.
    UA is focusing on SFO alone to Asia to the exclusion of its other pre-covid gateways to China which probably says more about UA’s fleet and network strategies rather than what any other airline has to do with less than 20% of the available flights than they operated pre-covid.
    
    Reply
    1. MaxPower
      
      Aug 15, 2023
      
      I’m aware of where DL flew to China from pre-covid and where UA/AA flew from… Going back to Detroit’s pre-covid & pre-747 position in a specific geographic region is pretty meaningless. Frankly, if you add in United’s partners at ORD, United was easily larger than DTW at ORD anyway in your unusually specific timeframe and geography… but you’d need to include Asia (HKG) in your calculation which, as usual, you find an unusual way to make Delta look the biggest in Asia or somewhere else which they aren’t.
      
      Obfuscating the topic with your normal random asides about A350s and Haneda slots doesn’t change the fact that Delta’s Pacific gateway can’t handle 4 flights/week to Shanghai profitably and Delta is forced to provide inferior frequency and rely on DTW flow traffic. United had far more US hub-based gateways to China than Delta or AA but still are able to focus on one hub as a means of providing valued frequency at their pacific gateway, SFO.
      
      You don’t always have to find some weirdly obscure way to make Delta look good, Tim. They do well on their own two feet without meaningless and overly specific criteria.
      
      But I’ll give you this… Even today, Delta at DTW is, by far, the largest carrier to Asia within an hour’s drive of the Big House. ;)
      
      Reply
      1. Tim Dunn
        
        Aug 15, 2023
        
        The only obfuscation comes from anyone that thinks that denigrating one airline’s strategies somehow make it more likely that someone else will get more than their equal share of these new frequencies which is what the DOT is likely to do based on DOT precedent since the time when the Chinese capacity restrictions were implemented.
        
        And, if you want to include partners, DL was the #2 carrier across the Pacific pre-covid while KE was #3. When the dust is settled and DL builds out ICN and adds routes outside of ICN, DL/KE could well become as large as UA /NH. As we have repeatedly seen, DL plays the long game.
        
        It sure appears right now that DL’s ATL and DTW hubs now each offer more seats from the eastern US to East Asia than any other US airline because of the Russian airspace restrictions which along w/ the Chinese capacity caps might be the reasons why UA has not restarted EWR or IAD to China or HKG. DL operated double daily flights from SEA and DTW to China which is no more or less than UA operated from any of its hubs except for SFO and also comparable to what AA operated from DFW. The 744s did help make DTW the largest US carrier gateway to Asia from the eastern US.
        
        Obviously every one of the big 3 would operate more than the 4 flights/week to China if they could and will have to decide how to allocate their 4 additional flights/week between their pre-covid routes since the DOT does not appear to be allowing any carrier to add or move China routes. AA and UA both appear to be committed to a single gateway to China while DL is so far going for two gateways and might add a third w/ the latest round of frequency additions.
        
        And as DL makes its decision on PDX-HND and w/ a route case likely to follow w/ my bets on DL pushing for and likely being favored to add JFK-HND over other route proposals, we could see a strengthening of DL’s Asia-Pacific network from the eastern US while UA’s decision to build up SFO might lead to its route system becoming more western US-centric, esp. if China frequencies remain far below pre-covid levels. DL’s SEA and LAX hubs do provide access to strong local markets and provide good connectivity to their system just as UA’s SFO hub does.
        
        Of course, UA could do a head fake and try to build out another hub to China or not pursue PEK service if they only get 4 new flights/week but the outcome is likely that AA, DL and UA will be the same size to China for years to come which, when combined w/ Russia airspace restrictions and the A350’s greater range, could significantly change the balance of power from the US to East Asia.
        
        Hopefully, CF will track and write on all of these developments.
        
        Reply
      2. Bravenav
        
        Aug 16, 2023
        
        MaxPower, I’m not sure why you’re so down on DTW as a connecting hub. It is a much better connecting hub to Asia for the Eastern half of the US than anything on the West Coast. Routing Eastern US traffic over SEA is circuitous, adding about 500 miles or roughly an hour of flight time. Delta has traditionally been stronger in the East, UA in the West, and AA somewhere in between, so why not put your flights where your strengths are?
        
        Reply
        
        Bravenav
        
        Aug 16, 2023
        
        One addendum to my reply–Delta’s DTW hub to Asia has traditionally relied on Russia overflight, which they don’t have right now, so the advantages over SEA are somewhat muted at the moment. But Delta’s DTW hub is still better structured to carry their Eastern US to Asia traffic than is SEA.
2. Mike Power
  
  Aug 20, 2023
  
  I’m not sure I can fully grasp DL’s situation in the Pacific. At this point they are down to just 3 destinations in Asia. I get that they might want/need to lay low on ICN expansion until KE/OZ are fully combined–plus its printing money, so they should stay close. But if the market is truly growing you’d expect they would want to use this as an opportunity to re-establish their (ok, Northwest Orient’s) once strong Asian franchise. Yet, no return to TPE, KIX, or MNL never mind SIN. Rather, it goes the other way, NGO being closed. Similarly they appear to be struggling on Tokyo, a market where DL inherited a hub and brand strength that apparently has dithered away.
  
  Back to the point of Brett’s article, if there really is pent up capacity into China (which I agree there is), you would expect DL to restart their HKG authorities from SEA (understanding that DTW is impacted by Russian airspace limitation and I have no idea if they still hold an LAX authority). China Eastern (MU) still has a significant number of interior cities connected to HKG and given that they’ve had a hard time establishing a franchise in Hong Kong, this would seem to be the right time time use the vacuum.
  
  So that leads me to assume a few things on Delta’s position:
  
  1. they aren’t interested in building their own franchise into Asia but rather would prefer to feed KE
  2. The decision to cut the 777s and buy out pilots in the fall of 2020 has left them unable to capitalize on the opportunities right now
  3. UA’s leadership position (a legacy of UA’s strength in CA + the Pan Am larger route network vs. NW’s Japan focus) will become dominant for the next decade (think AA’s position in Latin America after they bought Eastern’s (or Braniff’s if we want to be really honest) Latin network and DL squandered the opportunity to take over PA’s network and UA’s too little, too late in MIA).
  
  Reply
Jon Nicholson

Aug 14, 2023

You indicate an increase to 24 weekly flights per airline in October and I think you mean 24 per country. 24 per airline would be an increase from the current 4 so a huge increase. 24 is doubling the current 12 allowed each week by all US carriers. The same type of restrictions are impacting Canada/Asia flights.

Reply
1. CF
  
  Aug 14, 2023
  
  Jon – Whoops, fixed.
  
  Reply
Mark

Aug 14, 2023

How will the extra 12 frequencies be allocated to the US3? UA announced going daily on SFO-PVG and reinstating SFO-PEK, but that would mean taking the majority of the new flights (10 of the 12 new frequencies), so I doubt any of the other parties would be onboard with that.

Reply
1. SEAN
  
  Aug 14, 2023
  
  Stick a chopstick in them, Beijing as a global connecting hub is done just like Hong Kong.
  
  Reply
Tim Dunn

Aug 16, 2023

Delta has put its hat in the ring for additional flights to bring SEA-PVG to daily, add one weekly to DTW-PVG to bring it to 3X/week and restart LAX-PVG in March at 4X/week.
Subject to government approval, like United’s proposal.

Reply
1. Mitt Nud
  
  Aug 16, 2023
  
  Brilliant news, Tim. Of the 12 additional frequencies available to US carriers, DL will take 6 and UA will take 10. This will leave AA -4 to develop its China network. There were several hints in AAs teaser that point to new flights to China.
  
  Reply
  1. Tim Dunn
    
    Aug 16, 2023
    
    Check your math. Delta’s ask is for 10 spread between fall 2023 and spring 2024
    
    Reply
    1. Mitt Nud
      
      Aug 16, 2023
      
      Sorry, Dunn Dunn. I got confused given your previous comments, so I went ahead and fixed them for you. Feel free to use at your leisure.
      
      Delta is doing nothing more than its usual attempts at world domination. AA has every reason to each seek their 1/3 of the available number of flights which is what they have now. Since DFW is their only remaining gateway to China, AA is likely to increase DFW-PVG and might also restart DFW-Beijing (they were in the process of moving to the new Beijing airport).
      
      The DOT has consistently applied the principle that all 3 US airlines can have 1/3 of the pot until their pre-covid allocations are reached.
      
      As for Delta’s delusions about taking 10 of the 12 new additional flights, their press release clearly says “Subject to government approval” which simply means they will not operate what they have scheduled and are selling.
      
      Delta has not received approval from the DOT to launch any more flights than they current operate. No airline has.
      They have consistently published schedules for more flights to/from/ China than they have been authorized and have been forced to cancel their schedules down to what they are actually authorized to fly.
      
      The DOT must approve all US carrier flights to China. They just announced that additional flights would become available recently.
      
      As is typically Delta, they think that by bullying their way to the front of the line, everyone else will just roll over for them.
      
      Reply
      1. Tim Dunn
        
        Aug 16, 2023
        
        Delta would be second at the feeding trough behind United but otherwise I agree with your points. Which is why I made them regarding United.
        Neither Delta or United will get what they want and American won’t be shut out unless they want to be.
        I just noted Delta’s request to highlight that they intend to go toe to toe with United, are going after LAX as I noted, are not interested in Beijing and are going to daily first in Seattle which clearly takes some people by surprise
        
        Reply
        
        Mike Power
        
        Aug 21, 2023
        
        Just curious: Given that DOT has been dividing the slots pretty evenly between airlines…AA will get its 3 slots for a daily Shanghai flight…UA and DL will get 4 (UA will probably use for PEK, and DL will move SEA and DTW to 4x weekly, right?)… Who gets the one slot AA won’t take?
        * UA gets to add a 5th weekly on SFO-PVG?
        * DL gets the 5th and cuts DTW to 3X weekly runs LAX 2x weekly or version of that?
dee

Aug 16, 2023

Flights from the west coast major cities to China never went away during the pandemic!! FlightAware and Flight Tracker verified that !!

Reply
Bravenav

Aug 16, 2023

I don’t think it’s quite accurate to say the current flight schedule has *nothing* to do with demand. Yes, there’s the political component, but travel demand to China is not strong. Even with the restricted schedules, the US carriers’ current flights to China are pretty open.

Reply
SEAN

Aug 18, 2023

US has a level three travel advisory to China. They recently enacted anti spying laws & require citizens to report & turn in their own friends/ family members to the government. As a result, travel to China has been discouraged. This is especially true for those who are of Chinese descent.

Reply