World's longest flight heralds the death of airline hubs

By Bloomberg News, September 1 2017

To see where an airline is heading, look at its order book.

The routes a carrier can fly and the markets it can serve are defined by the planes in its fleet. As a result, recent announcements from Cathay Pacific and Qantas are telling indicators of how the global aviation market is changing.

Qantas will push Airbus and Boeing to develop long-range variants of their A350 and 777X aircraft capable of flying non-stop from Sydney to London and New York by 2022.

Meanwhile, Cathay agreed to buy 32 Airbus A321neo aircraft in an order worth US$4.1 billion at list prices.

What connects a Qantas plane capable of spanning the earth to a Cathay one that can't even make it from Hong Kong to Sydney?

The answer lies in the decline of the world's global aviation hubs.

The shape of global aviation is largely driven by the capabilities of its longest-range aircraft.

Since the introduction of the 747-400 in the late 1980s, that's meant that cities such as Hong Kong, Singapore, Dubai and London have played crucial roles connecting passengers beyond the range of a single flight. At Cathay's Chek Lap Kok base, about 30 percent of people board other flights.

That created a golden age for the likes of Cathay, which was able to use its strategic position to operate as a node on a global trunk network.

For the likes of Qantas, which had to connect through other countries' hubs, life has been harder. For all that Chief Executive Officer Alan Joyce touts the benefits of the carrier's 2013 alliance with Emirates, the deal was struck from a position of weakness rather than strength.

These new planes are changing the equation.

Qantas is already taking bookings for a direct Perth-London route on Boeing's 787 that will skip over Emirates' hub in Dubai from next March. It can hardly wait to extend the concept to the larger cities on Australia's east coast.

The shift won't cause the alliance to fall apart. Passengers wanting to travel between, say, Adelaide and Barcelona will still find the easiest way is to catch a connecting flight via Dubai. Still, it will give Qantas a stronger hand than it had when rival carriers were the gatekeepers between Europe and Australia.

Where does that leave Cathay Pacific? This new era could be deeply discomfiting for Asia's pre-eminent airlines of the hub era.

Business-class travelers, who generate most of the profits, will increasingly migrate to the quickest routes between the world's financial capitals, leaving Cathay and Singapore Airlines' slick cabins in the service of low-margin economy class passengers. Cathay's current financial distress risks being a harbinger of future conditions.

One way out of this is to stop fighting the mainland Chinese and Gulf carriers on unprofitable long-haul routes and focus on regional flights instead where there's more of a captive market. That's the strategy being employed by Singapore Airlines, which has moved more capacity to its budget carrier Scoot and shorter-haul SilkAir unit.

This week's fleet announcement suggests that, despite CEO Rupert Hogg's open skepticism about setting up a discount airline, Cathay is finally giving up on the romance of long-haul travel.

In place of its current fleet of 15 A320s and eight A321s on its Dragon Air short-haul unit, the new order will give it 32 of the new variant A321s – enough to increase capacity on such routes by close to 60 percent at a stroke.

Both carriers, in their different ways, have done well out of the current era – but both need to adapt if they're to survive in the one that's dawning. That may mean flying further, or flying shorter. The middle route, though, is fast becoming a dead end.

01 Sep 2017

Total posts 4

Yet CX just announced Dublin, Brussels, and Copenhagen

31 Mar 2016

Total posts 644

@Bevski:

"Yet CX just announced Dublin, Brussels, and Copenhagen"

Which align perfectly with the recently accelerated(Mostly since Hogg start calling the shots @ CX) strategic shift away fm the traditional top intercon hubs like LHR by CX....the underlying essence of /prediction by this article.  Sure, HKG-DUB/BRU/CPH are technically not really 'flying further, or flying shorter' for a viable future @ CX as described by this article.  However in a mkt access or consumer reach sense, CX is indeed flying further with DUB /BRU /CPH launches which are along the same theme as MAN and LGW came online only a little earlier(about 1.5yrs ago).


Before this CX network shift, U bought a CX ticket and going to:

DUB region= U connect @ LHR

BRU/CPH regions= U drive/ride from AMS

MAN region= U drive/ride from LHR

LGW(i.e. S.E.England region)= U drive/ride from LHR


If there were any CX traffic growth for any of these 5mkts, CX simply added frequency @ LHR or AMS.


After this CX network shift, CX take U directly into all 5 regions and any future growth there will hv little or nothing to do with CX @ LHR /AMS.

Qantas - Qantas Frequent Flyer

21 Jan 2014

Total posts 224

SIA have done well in lifting routes with Silkair and Scoot, I would expect they will look at places like MCY, TSV and others in Aus to increase flow direct to Singapore. 

Virgin Australia - Velocity Rewards

06 Sep 2012

Total posts 213

Singapore and Hong Kong are financial hubs in their own right and will always have premium traffic. The advent of non-stop flights means it will be difficult to retain premium traffic as a stop-over hub. SQ and CX will need to think outside the box and be proactive to solidify their market share and give good reason for their flyers to stay with them (by upgrading their whole fleet with the latest products, diversifying their revenue streams, etc). SQ is already trying something out by diversifying their portfolio to suit current market needs (Scoot, Dollar, Vistara) . 

Virgin Australia - Velocity Rewards

06 Sep 2012

Total posts 213

Dollar should be Silkair 
This is exactly what I would say.

SQ and Cathay aren't going to lose their local premium traffic. Its CONNECTING premium traffic which will quickly diminish. As premium traffic gravitates to non-stop and point-to-point, Cathay will lose premium connecting traffic. But that doesn't mean its going to become nothing more than some giant LCC.

When HKG gets its third runway, we might see Cathay go for smaller jets. Not sure about longer ranges though... the only markets out of their range are South American (and perhaps a few West African), and its unlikely they'd want a specialized fleet for markets which seem to be relatively low-yield destinations. But Cathay absolutely are the home airline of the world's third biggest financial hub. They'll still have meaningful longhaul premium travel... its just that less people will use HKG as a connecting hub.

And maybe one day they will start their own LCC. Its possible but that won't be happening for a while due to HKG slot restriction.

Qantas - Qantas Frequent Flyer

28 Dec 2011

Total posts 90

How do the Chinese airline vouch for the cost of their J fares. Also would like a Chinese airline to fly to Scotland. Would make my life a lot easier.

28 Dec 2016

Total posts 69

Having to opportunity to fly in Y for 36 hours does not bring deaths to hubs. Only supersonic travel will.

21 Apr 2017

Total posts 35

I completely agree (as an FF and "business traveller" of the type I assume this article is referring to). Ultra long haul flying is currently being completely over-hyped IMO and will be attractive largely to more infrequent flyers. As any genuine FF will tell you, serious mileage at 39,000 feet takes a toll even in J and F. From a business perspective it is as much a productivity issue as a personal health one. Unless supersonic flight or other game changing technology materialises, I will not be taking my long haul business away from hubs.  

Asiana Airlines - Asiana Club

09 Feb 2017

Total posts 42

Meaning that airlines are at the mercy of the economic competitiveness of their hubs. Cities will return to having to spruik themselves as destinations in their own right.

Dubai's days are numbered ...

Qantas

19 Apr 2012

Total posts 407

Hubs like Dubai aggregate loads from large number of second and third tier cities across Asia Africa and Australia. Only a couple of these will have very long distance flights, so the hub will remain ezpecly perfectly located ones like Dubai.

Qantas - Qantas Frequent Flyer

08 Sep 2012

Total posts 244

Until there is another global recession and premium demand falls. Then they'll be flying non stop but half empty or at huge discounts. The risk mitigation of a hub won't seem so unattractive then...

Virgin Australia - Velocity Rewards

17 Mar 2016

Total posts 41

There is a cost to rushing on long haul flights to Europe or North America. I recently woke up to this fact after trying out EVA airways. I flew overnight to Taiwan, spent a whole day exploring Taipei, followed by an overnight flight to CDG, arriving at 7:30am ready for business. I felt refreshed and not out of whack with jetlag, because I had two overnight flights, it felt like a regular day on arrival in Paris (and on return). Before I would barely blink, on a quick transfer en route, to spend 2 or 3 days recovering from the jetlag. The longer overall flight time is offset, compared to arriving at a destination at an odd hour (such as mid-afternoon) limiting the work that can done and how tired you are from the flights.

Qantas - Qantas Frequent Flyer

22 Jul 2015

Total posts 223

Not sure about that. My hubs are LAX and DFW to the US or DXB and in future SIN. I enjoy the stops as it breaks up a long journey to NYC in one direction or LHR in the other.  Non stop SYD to NYC would be very hard on the body even if in J or F. LHR even worse. 
paa
paa

21 Dec 2012

Total posts 62

This article made me wish there was a voting button for articles. If there is I cant see it, but it would a big thumbs down. Don't agree at all.

12 Jan 2016

Total posts 13

Pleanty of business travel happens in Y too. Our policy at work only extends to the C-suite for J. The other few thousand of us fly Y to Europe and the US. Not confident about 22 hours in Y! If you're not feeling great or it's a rough flight, it would be absolutely brutal. 

Qantas - Qantas Frequent Flyer

06 Oct 2016

Total posts 109

Hope that is at least PE or I just wouldn't go!

12 Jan 2016

Total posts 13

PE is for special occasions! 

Qantas - Qantas Frequent Flyer

17 May 2015

Total posts 72

'World's longest flight heralds the death of airline hubs'? I'm unconvinced. Hubs aren’t just a stopover point for flights that can’t make it to their main destination because the distance is too great. Look no further than domestic travel in the USA or Brazil. Flight go through hubs (think Atlanta, LA, Dallas, Brasilia, Sao Paulo) for both logistical and economic reasons. And while New York and London are popular destinations for Australians, a significant number of passengers will be flying between cities that will never be serviced by a direct route. Hubs will still be essential for years to come.

25 Feb 2017

Total posts 26

If you study the cities on the Map, you will notice they are already Substantial Hubs for One or More Airlines . So the headline is very misleading. Ultra Long Haul Non-Stop flights do not eliminate Hubs they just make routes between Hubs now available without a refueling Stop. EG Perth to London

Virgin Australia - Velocity Rewards

10 Nov 2011

Total posts 123

There's just no way I'm flying one of these routes if I'm in economy. My back would give in. Give me a stretch and a shower in a hub like SIN any day.

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