Tuesday, May 8, 2018

American cuts Chicago-Beijing as Sino-US market crowds

American Airlines has decided to cut Chicago O’Hare-Beijing service from Oct. 22 because of overcapacity in the Sino-US market–which used to be one of the most lucrative markets worldwide.

“The current fare environment severely limits our ability to successfully compete between Chicago and Beijing,” American Airlines VP network and schedule planning Vasu Raja said May 2.

Dallas/Ft. Worth-based American launched the nonstop route in May 2010, and competes with China’s Hainan Airlines and Chicago-based United Airlines; each carrier operates a daily flight on the route.

According to the US Department of Transportation, the Beijing-Chicago O’Hare route saw the biggest decline—16.4%—in passenger boarding for the first ten months of 2017 among all Sino—US routes. Passenger load factors have averaged 80.9% in the same timeframe.

Beijing-Chicago service is typical of the general Sino-US market, which is facing headwinds now that additional carriers have flooded the market to meet the robust growth of Chinese citizens’ outbound travel and the US government’s loosening of visa restrictions in recent years. The challenge is especially notable with the growing trend, since 2014, of more medium-sized Chinese carriers rushing to increase direct flights to the US starting from Chinese secondary cities and using new-generation wide-bodies like the Airbus A350 and Boeing 787.

Hainan Airlines has opened routes between Chengdu-New York, Chongqing-New York, Changsha-Los Angeles; Xiamen Airlines has launched Fuzhou-New York, Xiamen-Los Angeles; and Sichuan Airlines has opened Jinan-Los Angeles. Industry analysts have suggested the new routes mainly rely on local governments’ subsidies as these Chinese carriers are more interested in growing their market shares rather than earning profits.

As the biggest US operator on Sino-US routes, United has said that it will not add more capacity in the short term. Last year, United suspended two services: San Francisco-Hangzhou and San Francisco-Xi’an.

Air China, meanwhile, reported a 5% drop in passenger revenue on its North American routes in 2017.

Despite this, some Chinese carriers and US carriers are still planning to launch more routes.

According to the Civil Aviation Administration of China (CAAC), Hainan Airlines’ subsidiary Tianjin Airlines is scheduled to open new routes between Xi’an-Los Angeles and Zhengzhou-Los Angeles with 3X-weekly flights by the end of 2018. Sichuan Airlines also plans to launch Chengdu-Los Angeles service with 3X-weekly flights and Chengdu-Chicago service with 2X- weekly flights.

Atlanta-based Delta Air Lines also plans to increase Sino-US capacity by 23% with the opening of a Shanghai-Atlanta route in July using an Airbus A350-900.

American says it does not rule out the possibility of resuming Chicago-Beijing service with the scheduled 2019 opening of Beijing’s new airport.

“We remain committed to China and anticipate that moving to the new Beijing airport in the future will improve the viability of the route through the additional connectivity in conjunction with our codeshare relationship with China Southern in the long run," Raja said.

The new Beijing airport is projected to handle 45 million passengers in 2020, 72 million in 2025, and 100 million in the longer term.

(Katie Cantle - ATWOnline News)

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