The decline and fall of Asia's airline empires

By Bloomberg News, September 24 2017
The decline and fall of Asia's airline empires

The Venetian Republic and the British Empire built their economies on ocean trade. Dwindling naval power heralded their decline and fall.

It's a thought that should provoke a shiver of recognition in Hong Kong and Singapore, given the way their airborne fleets of Cathay Pacific and Singapore Airlines are falling victim to a new Great Power struggle.

The two carriers have long been tied up with the destinies of Asia's great trading cities. When the Boeing  747 shrank the world in the 1970s, it was Cathay and Singapore Airlines that connected the wealthy population centers of Europe, North America and Japan with Asia's emerging economies.

That helped transform their home territories from backwaters surrounded by a wilderness of poverty into global hubs of banking and commerce.

Those times are gone, and the new world order is looking markedly less friendly – both to the entrepot cities, and the airlines that link them to the world.

From pioneers to prey

Singapore Airlines and Cathay Pacific were pioneers of long-haul travel. In their heyday, both lost little sleep worrying about their rivals in China and the Persian Gulf.

Nowadays, they can't afford not to: China Southern, China Eastern, Air China Emirates and Qatar Airways all exceed them in capacity terms, and Etihad is rapidly catching up.

That's left the two cities' airlines exposed. Long-haul international aviation is a cut-throat business, and its best practitioners historically have had either state support or an easily dominated domestic market at their backs.

Cathay Pacific and Singapore Airlines have never had the latter, and it's a hotly contested debate whether they benefit from the former – especially when compared with their aggressive new state-owned competitors.

Disadvantage of geography

Crushed between the tectonic plates of the Chinese and Gulf carriers, the cities' airlines are also geographically disadvantaged.

Two-thirds of humanity lives within an eight-hour flight of Emirates' base in Dubai, making it particularly well-placed to link global travelers.

Qantas' 2012 deal with the Gulf carrier, which saw it give up connections via Singapore to serve a wider array of European destinations through the Gulf, is a warning that geography is destiny for airlines.

While the carriers try to fight a rearguard action against this – see Singapore Airliness flights to Houston via the English city of Manchester, or the nonstop polar trips to Newark it plans to restart next year – they are working from a position of weakness.

With ultra-long-haul jets such as the Boeing 787 and Airbus A350 opening up unheard-of routes such as direct Perth-London flights, and Chinese airlines hitting their stride, the old roles connecting Asia to Europe and North America are disappearing.

Where they still have an advantage – using the hub-and-spoke model to fill more seats on planes, thus improving profitability – the Gulf carriers' geographic advantage means Emirates and Qatar can do it better.

The short-term solution is likely to be local.

Local heroes?

Cathay Pacific may hand more routes to its regional affiliate Cathay Dragon, while Singapore Airlines has gone in a similar direction, doubling passenger capacity at its regional SilkAir unit in the seven years through 2016 while the measure stood still at its core long-haul business, and adding low-cost brands in the form of Tiger Airways and Scoot.

That's a high-stakes strategy, though, because regional routes are where budget carriers come into their own. Ryanair, EasyJet and Wizz Air now constitute three of Europe's top five airlines by market capitalization.

Tony Fernandes is working to repeat the trick in Cathay pacific and Singapore Airlines' backyard with AirAsia. In a race to the bottom, do the marquee airlines of Hong Kong or Singapore really want to be the winner?

Qantas - Qantas Frequent Flyer

18 Jun 2015

Total posts 57

These two cities are amazing destinations in and of themselves which could not be matched by the Gulf, so I think the appeal of a stopover in SG or HK is always going to be greater and these cities have business travellers of their own who will still fly their home carriers.

05 Oct 2017

Total posts 527

It's true that SIN and HK are great destinations in and of themselves but it's also even more significant that they are great launching pads for trips to fascinating neighboring countries like Malaysia and Indonesia, mainland China, Macau, Taiwan and Vietnam. A large number of travellers stopover in these cities with the aim of holidaying in the latter mentioned countries. Whereas in the Middle East, Dubai, Abu Dhabi and Qatar are your destinations. No one holidays in Saudi Arabia, Oman is unpopular, very few venture to Iran, while Iraq, Afghanistan, Yemen and Syria are off-limits due to war. Israel can't be reached from any middle eastern country except Jordan. So your options in the middle East are limited to staying in the country you landed in and then continuing to Europe, whereas in SIN and HK, a short bus, train or ferry ride brings you to large neighboring countries, within 2-3 hours flying time you can reach almost anywhere in East Asia (i.e. Thailand, Vietnam, Cambodia, Myanmar and Indonesia from SIN and any major east coast Chinese city, Vietnam, the Philippines, Taiwan, South Korea and southern Japan from Hong Kong).

Virgin Australia - Velocity Rewards

01 Aug 2012

Total posts 1

The answer for Asian based airlines like CX and SQ is further consolidation across the Asia Pacific region. Replicating the European model where IAG , AF/KLM and Luftansa group have consolidated airlines into one parent company is an obvious solution. Cathay should consider a merger or acquisition of Malaysian or other close partner. There are too many LCC players and legacy carriers in Asia and there must be consolidation similar to Europe and the USA in order for them to become profitable again. It's time to swallow national pride and start deeper relationships beyond a joint venture.

31 Mar 2016

Total posts 622


"Replicating the European model where IAG , AF/KLM and Luftansa group have consolidated airlines into one parent company is an obvious solution."
No, it isn't because of 1 simple reason: Diff geog political circumstances.

It's hard to miss the fact that every single airline brand later merged into/acquired by IAG, AFKLM or LH Group was based in 1 single econ+regulatory regime known as EU(Same story re U.S. airline consolidation but even more obvious than the EU). This rendered the airline domestic ownership rule, very popular among European nations in earlier era, completely irrelevant within Europe. Asia-Pcf airline industry never has such a equivalent and more significantly, individual gov't across the region has no plan to work towards such a highly integrated equivalent so domestic ownership rules will stick around to prevent any meaningful consolidation for decades to come. In fact, even liberated bilaterals/semi-open skies across nations(i.e. unrestricted access for airlines fm 2 nations to fly between those 2 nations such as what AU and China hv recently achieved) was only a relatively recent development in E.Asia-Pacific after yrs of slow progress.

1 single airline industry econ-regulatory regime for the entire E.Asia-Pacific region to open-up industry consolidation within is a very distant dream that can only be realized long AFTER the region eventually achieve full Openskies like EU/EEC did 3~4 decades ago.

HK and Singapore are both high-yield premium destinations. What both airlines need to do is focus on this. High-volume low-yield traffic should be let go of.

We're in a One-Stop-or-Point-To-Point world. The former is lower yielding and higher capacity. The latter is where the highest yields are. Cathay and SQ may have to accept that they have to downsize in terms of total capacity, but retain a high premium load (similar to British Airways ex. LHR). Cathay and SQ can still have an economy product and still have connecting traffic but they'll be taking the higher-end segment of that market (that will pay a little bit more). If they want the bargain-basement low-yield traffic they'll need to start a long-haul LCC... and SQ has, but Cathay hasn't.

31 Mar 2016

Total posts 622


"HK and Singapore are both high-yield premium destinations."
Absolutely true....and I would also add hi op cost in there somewhere as well to present a fuller picture of those 2 mkt environments.

"What both airlines need to do is focus on this..."
But they hv already been doing exactly that for @ least 3 decades.

The problem is demand fm the hi-yield longhaul mkt segment worldwide overall is growing extremely slow or no growth at all in recent yrs....partly why SQ+CX got into troubles recently - too much focus on that segment AND far more players competing more effectively against SQ+CX for the same segment.

"High-volume low-yield traffic should be let go of."
But demand fm this segment is precisely where the mkt is growing fastest in recent yrs and projected to continue in the future especially relative to the premium segment.

The problem is that premium focus of SQ+CX and the resultant products do not gel with the biz model that support growth of "high-volume low-yield traffic". Worst of all, many ex-premium focused players in the region hv already migrated to that model while SQ+CX are still pondering what to do.

"Cathay....may have to accept that they have to downsize in terms of total capacity."
Their fleet plan to convert longhaul Y on 77W fm 9abreast to 10abreast with deployment fm nex yr signaled an opposite strategy re total capacity plan.

CX has 77W x53 so we're talking about a lot of additional Y seats here fm the same fleet size.

"If they want the bargain-basement low-yield traffic they'll need to start a long-haul LCC. and SQ has"
Scoot is on-track to more than double its system capacity within 5yrs while SQ is @ best hovering around 1-2% annual capacity growth so it's pretty obvious where SQ Group has been betting for growth.

"..but Cathay hasn't."
Basically & for a long time, CX wants to fight LCCs without a LCC. A reasonable strategy due to HKG slot shortages(unlike SQ+Scoot hv access to plenty of vacant slots @ SIN) but clearly has been unsuccessful mainly due to wrong Y product(e.g. too costly per square meter of cabin floor area)...hence moving to 10abreast in Y on 77W to improve competitiveness not only against LCCs but also many FSCs which already enjoy lower per seat cost than CX.

13 Nov 2015

Total posts 49

StudiodeKadent: Good analysis. I personally would stick with a carrier such as CX even with a stop as long as the quality is retained. I like the CX crews, the service and reliability. But the odds in this age are indeed stacked against them with Beijing's hand playing a big part in this in favour of the Communist Big Three. It's a sad thing. Nothing lasts forever, nothing ever has in human terms. I wish CX well as I do SQ and even QF as they have no guarantees of holding out against the coming point-to-point revolution. The A350ULR will buy SQ some time and I think QF will have to act quickly on which aircraft they want for their point-to-point future.

24 Sep 2017

Total posts 7

Don’t buy it. Armchair analysis.

Yes CX will be threatened by Chinese carriers, because Hong Kong is now China. CX is now just a local Chinese carrier, a much better one, but a local one nonetheless.

But SQ is different. It’s its own city, perfectly situated between OZ and beyond. Even QF now prefers Singapore as a stopover point from OZ. And SQ has a massive fleet renewal program in place.

All 3 Gulf carriers are currently facing new and adverse headwinds. And they ain’t always so awesome from a passenger’s viewpoint, IMHO.


03 Sep 2017

Total posts 50

I like SG & HK for connection because of the wider infrastructure aspect of these 2 cities. Because they have great public transport servicing the airport to the city centre, I find myself planning longer hours of stopover (less than 24 hours) just to do things. Plus with the no visa required entry, it's free and easy to enter the country just for that brief stopover.

Catching up with friends over lunch/dinner, quick shopping trip or even just to have your favourite local dish is a breeze.

SQ & CX, just keep up with the good service and you'll have a lot of loyal followers.

Qantas - Qantas Frequent Flyer

21 Jan 2017

Total posts 51

Cathay will just become part of Air china

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 681

We're way past that point - Air China and Cathay already own reciprocal parts of each other .. and have done so for quite a while.

The question is : is Air China simply 'leveraging' off Cathay, in terms of learning the customer service world, does it see Cathay as a huge money-maker .. or is all this just a prelude to a full takeover by Air China? Or is Cathay simply an 'annoyance' to be tolerated for a while, in the grand, greater China plan?

Air New Zealand - Airpoints

21 Jan 2016

Total posts 196

An interesting comment. CX and SQ will need to think outside the square and look what the EY/EH and other large carriers are not providing. I think the SQ is in the better position to do so, by shifting more regional services to Silk Air based on 'seats to suit price' model and Scoot as LCC for regional and international short haul, similar to Norwegian business model.

With SQ investment in the A350 (16 delivered and 51 on order) it seems that SQ is looking at more 'point 2 point' travel, looking for new routes that nobody is currently flying to like SIN/CBR/WLG 'Capital Connection' service, which SQ is planning to upgrade aircraft type to A350 in 2018 and use the A380 for its 'spook and hub' long haul trunk services and invest into airlines like VA and long term partnerships like with NZ, to secure its in country product distribution. Looking at SQ aircraft purchases, SQ seems to going to one aircraft type route/service rationalisation, similar to what NZ has been doing.

With regards to CX, it is surround by main land China carriers, so there is not much room to do much. There has been alot of speculation for a while, that Air China might buy it and keep as a separate premium brand. It will be interesting to see what happens to CX.

03 Sep 2017

Total posts 50

While CX is still being highly regarded, and doing better in reputation wise, comparing to the other Mainland China, your'd find that whatever merging that's going to happen, they will most probably/definitely keep the usage of its good name and reputation. It's a surer way of keeping the loyal customer. Why chop off a good limb?

20 Jan 2017

Total posts 46

Give me a stopover in Singapore or Hong Kong any day of he week over a Gulf hub.

25 Feb 2013

Total posts 62

Aren't people talking about the demise of the ME3 with similar gusto? Sometimes even the same journalists!

I admit to having a soft spot for SQ, with it being my preferred long haul, but surely rumours of its death are greatly exaggerated.

Point-to-point is exciting, but I would actually prefer a few hours intermission in a transit-friendly airport like SIN than 17hrs+ on a tin can in the sky in Y (or for that matter, transiting through a non-transit-friendly airport like DXB).

21 Apr 2017

Total posts 42

Agree with StudiodeKadent and others here. Also that this and other similar recent pieces are disappointingly armchair from Bloomberg.

CX has a hugely loyal Asian customer base (myself included) who will continue to pay premium for higher standards (including safety) and convenient scheduling even if that involves the inconvenience of connecting vs point to point. I'll stretch my legs and take a shower and bowl of noodles in CX's fantastic lounges any day over 17+ hours at 41,000 feet.

11 Dec 2015

Total posts 85

"Two-thirds of humanity lives within an eight-hour flight of Emirates' base in Dubai, making it particularly well-placed to link global travelers."

I hear this quote often, however it's worth remembering that 40% of the world's population live in just three countries - China, India and Indonesia, and they'll all quite a bit less than 8 hours flight from Singapore.

I wouldn't write off SQ just yet.

"I hear this quote often, however it's worth remembering that 40% of the world's population live in just three countries - China, India and Indonesia, and they'll all quite a bit less than 8 hours flight from Singapore."

Sure, but the traffic flows disfavor Singapore. Singapore sits between Indonesia and Europe/USA, but is inconvenient for flows from China/India to Europe/USA.

Direct flights from India and China to Australia/New Zealand are all possible now. Singapore can take advantage of those flows but that's all lower-yield traffic more suited to Scoot than SQ.

03 Sep 2017

Total posts 50

Is India and China transit/stopover a better preferred choice compared to SIN and HKG?

Again I draw on the fact that it's easy to do things in a longer transit time in both these cities.

So if we are talking about European travelers coming to Australia, which would be a better preferred transit city?
In time, it's a hope by each of the cities with great airports in India and China, that they will outshine SIN and HKG. But there are so many other factors that will come into play for a city (or airport) to be truly considered a good transit point. Not only the services and facilities in the airport, but also the flagship airline of the city to be providing a good service in all aspects, ie. ground and in-flight. And not to mention the ease of going into the city CBD while in transit. Will it take long? Can we get into the city and back out to the airport without much stress? Both SIN and HKG offers that. In fact SIN has the day tour offered to transit/stopover passengers.

I think it's a long time yet, before these two cities loses it's "appeal".

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 681

Perhaps, it's time for SQ to examine the idea of a merger / takeover of MAS? In other words, re-combine to re-form MSA (as it was originally known).

Two separate and very different cultures would probably not see this as viable. However, the benefits would be growth for a reasonably successful current SQ .. and provision of stability, exceptional management, guidance and financial investment in a meandering MAS.

17 Sep 2015

Total posts 386

Like others, I vastly prefer SIN Changi as a stopover rather than any of the three major, horrid Middle Eastern airports.

The service on board Asian airlines such as SQ and a few others is superior to the ME3, so I agree: don'[t write SQ off just yet.

I won't be a passenger on the rerouted QF9 - why go for inferior QF when SQ is available?

31 Mar 2016

Total posts 622

So many supporters of SQ and CX show up here as usual.

I don't think SQ and CX will actually 'decline & fall' literally per the headline of the story. They just won't shine as bright as before(as most readers here remember fm an earlier era/good old days) mainly because they no longer can grow significantly due to their premium focus/model. In other words, both will stagnate/cruise along(e.g. by hanging onto loyal, well-heeled customers who can still afford the time to visit friends/shopping or eating during a Hong Kong or Singapore stopover on their way to elsewhere for a biz trip.....a clear minority of customers in this day & age) in the overall longhaul mkt where the fastest growth is occurring elsewhere far lower down beyond the premium segment.

SQ Group accepted this a long time ago and planned all assets for pure growth almost exclusively @ Scoot. If U look @ SQ fleet status in details, it's not hard to see almost everything on order(the so-called large fleet on order by SQ some folks commented here) is purely for fleet replacement, not net growth in seat capacity.

CX is a diff story because HKG hub capacity is physically restricted buying CX some time to defend against local competitors in the form of FSC(i.e. HKAir) AND LCC(i.e. HKXpress) but that won't last long. Folks who hv a habit/preference(for various reasons) to connect @ HKG hub for longhaul will continue to do so but new growth demand, with no loyalty+preference baggages+not used to CX fare level, will simply by-pass HKG hub and connect elsewhere. To capture some of that new growth, I foresee CX may evolve to go further down-mkt especially in Y to match op cost of competitors. Similar already happened a few yrs ago @ AC and NH for example.

None of the above themes are popular here so I expect tons of vote down.....bring them on.

03 Sep 2017

Total posts 50


Is there any airline that is really out shining all the others?
And especially in combination with its home base airport hub where it can flaunt an attractive interesting stopover/transit option.

It looks like most premium airlines are struggling to keep up to the high expectation especially with the industry so saturated. And even more so with the increasing number of LCC to compete with.
It will be interesting to see who has the staying power and ride the current turbulence air and keep flying.

The other big supporting party is of course their home base airport.
How good and efficient it is, and its location proximity to the city CBD, along with other factors play a major role, and will make the airline more attractive.

31 Mar 2016

Total posts 622


"...especially in combination with its home base airport hub where it can flaunt an attractive interesting stopover/transit option."
Also a home base hub where it can flaunt a higher cost in every aspect relevant to pax making flight connection fm higher ground handling/staffing(e.g. thx to much higher cost of living/rent around does AU$2,500 per mth for a 40square meter apartment sound to U?) charges embedded in fares right down to a more costly cafe latte /lounge entrance fee....

Believe it or not, most non-premium pax do notice those diff in costs @ the transit point of their journey when their main objective is really to fly fm A to B.

"...other big supporting party is of course their home base airport....How good and efficient it is..."
Good question to ask SIN authority....why the new T4 is not planned to hv any physical or rail shuttle link with the other terminals to enhance connectivity between LCCs particularly important for the fast growing LCC pax segment which often do self-connect? Even more striking is that no such problem @ the gigantic & state-of-the-art KUL T2 just across the border.

"its location proximity to the city CBD"
And irrelevant to most low-end pax limited by short vacation days annual entitlement or busy corp biz traveler in premium class - both types just want to get on the nex flight to get to their destination without any distraction of a fancy/fun stopover. Neither has the luxury of time to venture outside the terminal anyway...often not even beyond airside of the terminal. What they need is simply an efficient, pleasant and hopefully reasonably affordable connection experience within the terminal(s)...all requirements are already matched(or even exceeded in some cases) by many other hubs in E.Asia with more striking+impressive+spacious architectures than SIN(that 'old school' low ceiling design in T1 & T2 is such a let down for me) or HKG(Why the hell pax still need to take a bus to get to the N.Satellite gates in this day & age?).

03 Sep 2017

Total posts 50

Let's pull this discussion back inline to this article's main mentioned, where China and Persian Gulf airports/airlines are being said to be a threat to SQ and CX.

And to go with the cost aspect of it, let's get some indication of tax, fees & surcharge for some of these airports.

Here are some figures for a SYD-LHR-SYD flight with a less than 24 hours transit,

SQ $330.52

EK $345.32

CX $387.26

MH $329.32

Here are some figures for SYD-LHR-xxx-SYD (where xxx is the respective hub airport stopover) with a few days stopover, (extra airport tax +)

SQ $26.20 + $330.52 = $356.72

EK $29.10 + $345.32 = $374.42

CX $19.50 + $387.26 = $406.76

MH $23.40 + $329.32 = $352.72

China Southern $515.66

Air China $616.46

China Eastern $764.26

While it looks like the Mainland China airports do not have an extra airport tax charge when doing a longer stopover, their total tax, fees and surcharge is way higher than that of the other 4 airports, even when the extra stopover charge is included. In this aspect, it is not cheaper to transit via Mainland China airport hubs?

And if you are not leaving the airport and have to purchase food and beverage in the airport, I find that all airport prices are about the same.

As for KLIA2 which is where the LCC airlines are, you are correct that the tax, fees and surcharge are significantly lower. However if you were to fly into KLIA and transfer to an LCC at KLIA2, you will still have to pay for the same tax and fees of KLIA, and on top of that the KLIA2 airport tax.

However if you do a flight like MEL-PEK-MEL via KLIA2 with AirAsia, there are 3 airport tax components, which I couldn't get much of their detailed breakdown,

Airport tax $91.00 (this seems to be the MEL-PEK)

Airport tax $19.00 (this seems to be the PEK-KUL)

Airport tax $26.00 (This seems to be the KUL-MEL)

Non-premium pax would (and always) be choosing to pay for the price and get the service as per expectation. I have flown AirAsia many times, and when I do choose to, I do not put high expectation on them, and with that approach I always feel good and have no complaints, both ground service and in-flight.

Horses for courses.

In conclusion, basing it on these "stagnant" costs that's part of any airfare, altho HK has a high cost of living, it doesn't seem to be quite reflected in its tax, fees & surcharge.

I am certain that we all plan our travels accordingly, and depanding on its purpose (business or pleasure) and how we can fit in best to what we can afford, both with time and money. And if a transit city is attractive enough and we can afford the time, and it doesn't cost too much extra to do a stopover, then it is certainly part and parcel of consideration when booking with which airline and going via where. Let's face it, the airline will usually determines the city of stopover.

So if it's a choice between SIN and HKG, for me it'll probably be a question between spicy South East Asian culinary fare or the HK Cantonese fare (my favourite Roast Goose is everywhere in HK).

As for the matter of Changi T4 link to the main 3 terminals ... extracted from David Flynn's article in June 20, 2017

"Photos:inside Singapore Changi Airport's new T4 terminal"

However, T4 won't be connected to its siblings by the elevated Skytrain light rail system – there'll be an upscale shuttle bus instead.

An automated rail link was considered, Poh said, but ruled out due to both the distance required and the presence of "some existing infrastructure and services."

“We weighed the options between a Skytrain and shuttle bus and concluded that the shuttle bus is a much better, effective means of transport to connect Terminal 4 and other terminals.”

I am waiting to see how well the upgrading and renovation and all the works been happening to MEL airport, and it's final outcome. Hope there will be no low ceiling and remote bay disembarking where after a long flight, we have to walk down the stairs in the weather elements of the day, and cramp into a bus while inhaling all the aircraft fuel and exhaust.

Give me Changi anytime, even if it's just the old T1.

And if T1 can be moved to Tullamarine's T2, it will be a big improvement to the current state of MEL.

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