AirAsia to use Bangalore as its India hub?

by Devesh Agarwal

AirAsia is close to signing an agreement to use Bangalore as its hub for India operations, Bhaskar Bodapati, Senior Director of the Bengaluru Airport International Limited (BIAL) revealed in Saturday's Deccan Herald.

This will be a coup for the company, especially after the loss of the financially defunct Kingfisher Airlines.

Historically, Bangalore has been ignored by India's domestic airlines for their international operations, who chose to go to Chennai, thus leaving the field wide open for foreign carriers like Emirates, Lufthansa, Singapore Airlines, and Air France from the HAL airport days, and DragonAir, Qatar Airways, Etihad and others since 2008 when the new international airport opened.

Air India operates just one flight to Dubai, via Goa, and SpiceJet has just commenced a flight to Bangkok from the city. Jet Airways briefly operated a flight to Brussels which is its scissor hub for flights on to the east coast of north America, but it was shut within months.

Both BIAL and AirAsia have not commented on this story.

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China Eastern increases Kunming - Kolkata and Kunming - Dhaka

by Vinay Bhaskara

Chinese full service carrier China Eastern Airlines is increasing its service to the Indian subcontinent from its Southwestern Chinese hub of Kunming. From 27th October 2013, its offering on each of Kunming - Kolkata and Kunming - Dhaka will increase from daily to 10x weekly, using Boeing 737-700 aircraft configured in a 134 seat, two class configuration (8J / 126Y). Flight schedules for the new and existing flights to Dhaka are as follow:

Flight Number	Route	Depart	Arrive	Frequency
MU 2589	KMG-DAC	0810	0820	246
MU 2035	KMG-DAC	1255	1310	Daily
MU 2590	DAC-KMG	0910	1320	246
MU 2036	DAC-KMG	1410	1815	Daily
MU 2599	KMG-CCU	1425	1420	246
MU 555	KMG-CCU	2355	2345	Daily
MU 556	CCU-KMG	0030	0510	246
MU 2600	CCU-KMG	1510	1935	Daily

Kunming is China Eastern's third largest hub after Hongqiao and Pudong, Shanghai's two airports, with more than 180 daily departures. China Eastern will be able to offer passengers from Kolkata and Dhaka onwards connections to 67 domestic destinations within China, as well as to 16 international destinations around Asia (though these connections require a transit visa). It serves as China Eastern's primary gateway to the Indian subcontinent, with  services to Colombo, Dhaka, Kathmandu, Kolkata, and Male. The airline also serves Delhi from its largest hub at Shanghai.

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Analysis: Emirates to launch Kabul continues trend of contrarian A340-500 utilization

by Vinay Bhaskara

MEB3 carrier Emirates is launching daily nonstop services to Kabul, its first Afghan destination, from 4th December, 2013. The route will be served using 258 seat Airbus A340-500 aircraft in a 3-class configuration (12F / 42J / 204Y).

Flight Schedules for the new route are as follows:

Route	Depart	Arrive	Duration	Aircraft
Dubai - Kabul	0955	1315	2:50	345
Kabul - Dubai	1530	1800	3:00	345

The route is especially interesting because it is part of a pattern of Emirates' curious utilization of its nine frame Airbus A340-500 fleet. At 1686 kilometers, Dubai - Kabul is an extremely short flight for the A340-500, which is one of the longest range aircraft in the world, with a design range of greater than 17,000 kilometers for the high gross weight (HGW) version operated by Emirates. In fact, the world's longest flight, Singapore-Newark on the A340-500, at 15,345 kilometers. Even when Emirates first bought A340-500s (10 to be exact), it used the type on the longest routes in its network, like Dubai - New York JFK (11,022 kilometers) or Dubai - Sydney (12,039 kilometers). But over time, the A340's role in Emirates' network has shifted. The table and map below show the markets where Emirates operate the A340-500 in September 2013, as well as the market distance in kilometers.

*Note: Al Manama is Bahrain and Mahe is the Seychelles

Market	Distance (km)
Dubai - Amman	2024
Dubai - Bahrain	488
Dubai - Beirut	2143
Dubai - Cape Town	7620
Dubai - Doha	383
Dubai - Entebbe	3723
Dubai - Hyderabad	2548
Dubai - Kabul	1686
Dubai - Kuwait	530
Dubai - Lyon	3548
Dubai - Nairobi	875
Dubai - Riyadh	3311
Dubai - Seychelles	4452
Dubai - Tunis	4452
Dubai - Venice	4435
Dubai - Vienna	4226

Courtesy www.gcmap.com

As the table and map show, Emirates is using the A340-500 on routes that are a lot different than its original design mission. The only route that could even remotely be considered long haul is to Cape Town, and even that is more of a mid-haul route than anything. The majority of the routes are in Europe and the Middle East and can even be operated by narrowbody aircraft.

The A340-500 has fallen out of favor with airlines around the world because it burns lots of fuel on ultra long haul routes relative to its direct competition; the Boeing 777-200LR, of which Emirates operates 10. It is clear that Emirates needs the extra widebody lift, which is why the A340-500s are still in the fleet. It's also possible that the short routes are where the A340-500 loses the least money for Emirates, as the fuel costs are proportionately lower.

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Analysis: Jet Airways to add second daily flight between Mumbai and Singapore

by Vinay Bhaskara

Image Credit: Devesh Agarwal

India's largest full service carrier, Jet Airways, is adding a second daily flight between its largest hub at Mumbai, and Singapore. The second daily flight, effective 1st November 2013, will be served using 154 seat Boeing 737-800 aircraft in a 2-class configuration (16 J / 138 Y).

The proposed new flights, 9W 10/9 will be scheduled very tightly with the existing daily flights on-board the Airbus A330-200; 9W 12/11. Jet Airways Flight 12 currently departs Mumbai at 23:30, arriving at Singapore at 07:25 the next day. The return, Jet Airways Flight 11 departs Singapore at 19:05 after nearly 12 hours on the ground, returning to Mumbai at 22:00. The outbound, Jet Airways Flight 10, will be offset as a morning departure, leaving Mumbai at 09:50 and arriving to Singapore at 18:00. However, the return Jet Airways Flight 9 is currently scheduled to depart Singapore at 20:05 (just one hour after the existing flight), and return to Mumbai at 23:01.

These flight timings make little sense squished so close together on the return to Mumbai. While it is a good idea for Jet Airways to grow its international operations to Asia given the better performance of its international division as a whole. However, placing the return flight so closely with the existing flight is a missed opportunity for Jet. Especially with an integrated terminal coming to Mumbai by the end of 2014, Jet should be looking to maximize connectivity out of Mumbai, especially on international to domestic and vice-versa. A better schedule for the flight would have been a morning departure from Singapore at around 5:50 am, which would have arrived back at Mumbai at 8:50 am, in time for connections with morning departures to dozens of domestic destinations, while still leaving enough time for a turnaround to depart at 9:50 am. Jet already offers double daily flights to Singapore from Chennai and Delhi, and the second dailies to both of those destinations use a similar schedule to the one we propose here.

However, the addition of a second daily Mumbai-Singapore is a good move for Jet, and it points to future international growth opportunities for Jet. Even as the westbound international operations will largely be culled in favor of routing passengers through Abu Dhabi via the Jetihad partnership, there remain opportunities for Jet to grow its eastbound international operations. Air travel demand between India and East/Southeast Asia is growing rapidly, and Jet could offer more flights to the region moving forward, especially with the purchase of 50 737 MAX aircraft offering increased range on tap. 

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Report: Jet Airways scissors hub moving to Amsterdam

Earlier this week in a press conference at Amsterdam’s Schiphol Airport, Etihad CEO broke the news that Indian full service carrier Jet Airways will be transferring its European scissors hub from Brussels to Amsterdam. Thanks to the recently created Jetihad partnership (Etihad owns 24% of Jet Airways), Etihad exerts significant control over Jet’s international strategy.

Jet Airways currently operates daily flights from Mumbai and Delhi to Brussels, which then continue onwards to Newark and Toronto. Etihad recently signed a cooperation agreement with KLM that covers several destinations under a joint venture agreement. While Etihad (and by extension Jetihad) have no plans to join SkyTeam, they are apparently interested in working more closely with Air France-KLM and Delta. Etihad already places its code on 12 KLM destinations out of Amsterdam and on 15th May launched daily services between Abu Dhabi and Amsterdam using Airbus A330-200 equipment.

No timeline has been set for the transfer and it remains to be seen whether the shift of Jet’s North American services to Amsterdam is an intermediate step, or the final plan for these flights. Most industry observers had predicted that Jet Airways’ long haul fleet would be re-deployed for use on westbound international services through Abu Dhabi; indeed part of the value proposition for the Jetihad deal was the ability to utilize Jet Airways’ wide-body fleet to augment Etihad’s hub in Abu Dhabi via a scissors hub.

Still, Amsterdam makes sense as an intermediate transfer point. Mumbai does have more O&D demand to Brussels, but KLM’s Amsterdam hub is much stronger than the comparable operation for Brussels Airlines in Brussels. So Jet Airways will get some additional feed in Amsterdam. And if they were to launch a joint venture for US-Europe-India with Air France-KLM and Delta, it could be potentially lucrative.

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Opinion: Jetihad deal means India's international market belongs to the MEB3

by Vinay Bhaskara 

When Abu Dhabi based Etihad Airlines announced in late April that it had acquired a 24% stake in Mumbai

Will the MEB3 hold sway?

based full service carrier Jet Airways for $379 million, it marked a paradigm shift in the state of the Indian air travel market. The newly formed “Jetihad” partnership would hold a nearly 18% share of international passenger traffic to and from India, versus 13% for Emirates, and 12% for Air India based on statistics from 2011-2012. However, the recently re-written India-UAE bilateral more than trebles the weekly seating rights to Abu Dhabi, which means that Jetihad will likely hold close to 20% of India’s international passenger traffic by 2017.

When combined with Etihad’s gulf rivals Emirates and Qatar Airways (the so-called Middle Eastern Big 3 carriers), Middle Eastern airlines are will effectively control 40% of India’s international passenger flows, and closer to 70% of westbound international traffic.

In practical terms, this is a net positive for Indian air travelers. Middle Eastern carriers are able to offer lower fares than Western and Indian airlines, thanks to favorable labor conditions and the economies of scale offered by their massive super-hubs (larger operations have lower cost per enplanement because fixed costs like terminal rent and ground services are spread over more flights and passengers). The MEB3 carriers offer the most competitively priced westbound international tickets in the Indian market, and the expanded access thanks to the Jetihad deal will only increase the supply of such tickets.

However when one considers the strategic implications for India’s airline industry, the deal has a profound impact. Jet Airways was India’s premier full service carrier due to the demise of Kingfisher and the poor international reputation of Air India. And India’s government has at least verbally expressed its desire for India to develop both a world-class full service airline and a world class hub airport in Delhi, Mumbai, or one of the other metros.

And in pursuit of that goal, India’s dreams have suffered a major setback.  By default, Jet Airways was the one Indian airline that, had it pursued a sensible strategy and taken full advantage of the upcoming integrated terminal at its largest hub in Mumbai, could have conceivably fulfilled such aspirations (unless Air India is privatized – which the present government is unwilling to do). But with the Jetihad deal; Jet Airways’ position in the global airline market has shifted.

One need only consider the shift in strategy by Etihad’s previous equity investments to predict Jet Airways’ international network moving forwards. AirBerlin once had a worldwide long haul network with several destinations in Asia, Africa, and the Middle East. Following Etihad’s investment however, they cancelled the majority of their eastbound long haul destinations (which can be served via connections through Abu Dhabi). A few core routes (Tel Aviv, Phuket, et. al, are still served on airberlin’s mainline platform, but the long haul network has shifted to focus on services to the America and Abu Dhabi. For Jet Airways, thus the path forward is clear. As far as standalone westbound long haul destinations are concerned, only London has enough demand to survive as a nonstop destination. A core network to the Gulf will likely stay in place because of the short distances, but services to the Americas and to the rest of Europe are likely to flow over Abu Dhabi. Meanwhile, expect expansion of services to Asia and other international markets which cannot be easily served on Etihad code shares.

What this means for the strategic vision of an Indian hub is that Jet Airways’ operation in Mumbai will never turn into a massive connecting powerhouse in the vein of Singapore for Singapore Airlines or Frankfurt for Lufthansa. India will not, in the near future, have its own version of Thai Airways International, or even Vietnam Airlines for that matter. Westbound international travel will flow in volume over Dubai, Abu Dhabi, and Doha with business traffic also being captured by the various alliances as well. Absent a significant change in Air India’s status, India’s international air travel market is now firmly in the hands of the MEB3.

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Jet Airways international fleet and network operations analysis

by Vinay Bhaskara

A recent report from Flightglobal quoted Boeing Asia head Dinesh Keskar as saying that India’s largest full service carrier, Jet Airways, could potentially convert existing order into the larger Boeing 787-9 variant. Jet Airways currently has 10 Boeing 787-8s on order for delivery from 2014 onwards, but Mr. Keskar said, “"If they do that [convert orders to the 787-9], there will be a delay. The -9s, however, have better economics for them, so now they are looking at their portfolio."

Interestingly, the move would parallel Jet Airways’ recent fleet planning decision to shift away from the smaller A330-200 to its larger cousin the A330-300. Part of the impetus behind the decision was certainly the competition from Jet’s largest Gulf and Asian rivals. Most of these carriers operate not only the A330-300, but also the Boeing 777-300ER, both of which blow the A330-200 out of the water in terms of unit costs on regional routes. Especially as Jet consolidates around the core long haul routes in New York, Toronto, and London, all of which face severe competition from a myriad of airlines around the world. In response to this heightened state of competition, Jet made the correct choice in opting for a larger variant.

The same principle applies to the 787-8 versus the 787-9. While the smaller 787-8 (seating around 220 passengers) was the first 787 variant to come out, most industry analysts (including Bangalore Aviation) feel that the 787-9 will have much better operating economics, as the airframe is actually more optimized for aerodynamic driven fuel efficiency and has lower seat-kilometer costs thanks to its larger seating capacity. Furthermore, Boeing’s current projections for the ranges of the two aircraft show the 787-9 to have a range of 8,000 – 8,500 nautical miles (9,210 – 9,780 miles), which would allow Jet to operate most, if not all, US-India route pairs nonstop, including routes as long as Mumbai and Bangalore to the US west coast. Bangalore-San Francisco nonstop would be a gold mine to whichever carrier launched it first, and given that Air India only has 787-8s and that United will only receive 14 787-9s (many of which will likely be used to retire aging Boeing 777-200 non-ERs), Jet could conceivably be the first airline to launch onto this important route.

* The range figures for the 787-9 are quoted from sources within the industry

Currently, as per the Jet Airways fleet matrix, beyond the 787s, Jet has 3 A330-300s on order (the A330-300s start service on 23rd December) with 1 already having joined the fleet, 10 operational A330-200s with 5 outstanding orders, and 5 operational Boeing 777-300ERs with 5 aircrafts leased out to Thai Airways International. With the understanding that any *new* (beyond the initial 10) 787 orders would not be delivered till around 2018 at the earliest, the following is my suggestion for Jet Airways’ widebody fleet plan moving forward.

Immediately switch the 787-8 order to 787-9s and trade delivery slots with other airlines wherever possible to ensure delivery of these aircraft between 2015 and 2018. Order 15 further 787-8s for delivery 2018 onwards as well as 15 more 787-9s for delivery in the same timeframe. Of the current A330-200 orders, convert all 5 to A330-300s and cancel one order to create a fleet of 8 A330-300s, with the last 6 being the recently upgraded A330-300 with higher gross weight and range. Keep the current 5 777-300ERs as is, and reconfigure the 5 777-300ERs currently at Thai Airways into a 2-class configuration when they are returned (aim for 349 seats in a 2 class configuration – similar to Air Canada).

*These plans imply that Jet Airways will use Mumbai as an international connecting hub moving forward, made possible in part by the new integrated terminal.

Following this shift, the A330-200 would be used on European flights (excluding Heathrow) from Mumbai (Brussels-Chicago, as well as Paris, Frankfurt, and Munich – the latter two assume Jet’s entry into Star Alliance), Delhi (Brussels – Toronto), Bangalore, and Chennai (both to Munich), as well as on Delhi-Hong Kong-Manila, Mumbai – Seoul, and potentially Bangalore-Narita. Longer term, the 787-8s would replace the A330-200s one to one, converting the Delhi-Toronto and Mumbai-Chicago legs to nonstop flights.

The A330-300s would be used primarily on regional and VFR heavy routes. Mumbai-Brussels-Newark would continue in the very near term. Additionally, Mumbai/Delhi – Beijing, Mumbai – Tokyo-Narita, Mumbai – Jakarta, and Mumbai -Shanghai could be launched with the A330-300s, as well as Mumbai-Nairobi, Mumbai-Cairo, and both Mumbai-Dubai flights. Longer term, 787-9s would be used to replace the A330-300s on a one-to-one basis after all of the 777-300ERs have been replaced.

The 5 777-300ERs currently in the fleet would be deployed onto the two daily flights between Mumbai and London-Heathrow, as well as the daily Delhi - London-Heathrow. Mumbai – Hong Kong would remain as an 777-300ER service, with potential extension to Taipei since the aircraft is required to spend almost 8 hours in Hong Kong anyway for commercially viable timings. And Mumbai-Singapore could be converted to 777-300ER for the night flight, leaving one aircraft for spare.

The remaining 5 777-300ERs would be reconfigured into 349 seat configuration without first class, thus allowing the aircraft to fly India-US nonstop. Two aircraft would be deployed onto the Mumbai-Newark sector nonstop (in partnership with United through a potential JV after joining Star Alliance), while two more aircraft would ply Mumbai – Boston nonstop 3 weekly, and Mumbai- New York JFK 4 times per week. The final aircraft would be used to run thrice weekly flights Mumbai-Sydney-Auckland.

All of these 777-300ERs would be replaced with the first batch of 787-9s. The first 5 aircraft would be configured in 3 class configuration as a subfleet, while the remaining 20 787-9s would be configured in 2 class configuration for 1 to 1 replacements and growth.

All of this would leave Jet Airways with a standardized widebody fleet of 40 Boeing 787s, 28 for replacement, and 12 for growth. The standardized fleet would help save money on maintenance and training (the so-called “commonality” effect) and if necessary, Jet could even order the larger 787-10 to replace some A330-300s and 777-300ERs if demand conditions warrant such an action.

All of the above is an idealized scenario based on several assumptions, but it represents the kind of strategic thinking one should expect from Jet. However, it is also possible that Jet Airways simply wants to delay the acquisition of aircraft due to a funds constraint, in which case the delayed timeline of the 787-9 would offer Jet more time.  

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Analysis: SpiceJet plots international expansion and should create an international hub in Delhi

When Gurugaon -based low-cost carrier (LCC) SpiceJet announced its latest round of international expansion, it continued the recent shift in strategy by India’s second largest LCC. Amongst the new routes announced or filed for (according to a report from the Mint, India’s local Wall Street Journal affiliate) were Madurai-Colombo, Delhi-Dhaka-Rangoon/Yangon, Delhi-Riyadh, Delhi-Guangzhou, and Trivandrum-Male. Of these, Madurai-Colombo has already been announced with SpiceJet’s Q400 turboprop with service commencing September 20th. The schedule for Madurai-Colombo services is as follows: 

SG3314 IXM-CMB 1230-1345 DH8 Daily
SG3316 CMB-IXM 1435-1520 DH8 Daily

The service is the first ever international service for Madurai, a town with population of about 1.5 million people in Southern Tamil Nadu whose airport served 511,000 passengers in fiscal year 2011-2012 and recently built a new terminal in 2010. The primary ties between Madurai and Colombo are ethnic ones (given the large Tamilian population in Sri Lanka), though there are strong business links as well, and as Madurai’s first international service, demand should be strong. SpiceJet is currently the largest operator at Madurai Airport with service to 6 Indian destinations and Colombo.

The flight timings seem a bit long given that the distance between Colombo-Madurai is only 350 kilometers, which requires only 35-45 minutes for the Q400 to traverse and that neither Colombo nor Madurai is so congested as to require a long time for takeoff and landing or taxiing at the airport.

Choosing to add new Q400 routes internationally is a smart move for SpiceJet. There are several SAARC routes, especially from the South to Sri Lanka and from the North to Bangladesh, Nepal, or even Pakistan that could one day be served by SpiceJet. Especially if SpiceJet focused these services on Tier 2 and 3 cities, it would likely generate strong demand by not forcing customers in these cities to waste time connecting at a Metro airport.

SpiceJet is also considering Trivandrum-Male service with the Q400, a move that fits with our suggested strategy. The route would be supported in part by the burgeoning medical tourism links between Trivandrum and the Maldives. However, making this route work may be tough, given that local carrier Maldivian serves the route with 37 and 50 seat Bombardier Dash 8 Q200/300 turboprops while Air India operates the route with its A320 family aircraft.

As for the other international routes, these will all be performed with SpiceJet’s fleet of Boeing 737 jets. Service to Dhaka has not yet been approved by India’s Ministry of Civil Aviation, nor has the extension to Yangon. Yangon currently sees Air India service only to Kolkata and Gaya (a Buddhist centre akin to Tirupathi for Hindus), thus SpiceJet would be the first airline to offer direct Delhi-Yangon service for a market that is set to boom assuming that the hard-line Myanmar government continues its recently enacted policy of social and economic reforms.

Meanwhile, Delhi-Riyadh is a huge ethnic market with more than enough room for SpiceJet to enter the market after full service carrier Kingfisher Airlines withdrew such service. But it is the Delhi-Guangzhou service which is the best move. No Indian airline serves Guangzhou today, China’s 3rd most important city and its manufacturing capital (the Guangdong province, which Guangzhou is part of, had a GDP in 2011 of close to US $900 billion, which is 20% of that of the entire Indian nation, despite having just 7% of the population). Most Indian small and medium businesses source their goods from the Guangzhou area, and SpiceJet should see excellent demand on the route. SpiceJet should also consider starting Chennai-Guanzhou, given that Chennai is India’s largest manufacturing hub and has strong business ties to Guangdong province.

Bangalore Aviation feels that it was smart for SpiceJet to continue to expand its growing international presence (currently they serve Dubai, Kathmandu, and Colombo). Even though domestic pricing pressures have temporarily receded, the presence of several new entrants domestically means that capacity discipline may yet again go out the window. Meanwhile, the collapse of Kingfisher means that international fares have shot upwards, leaving room for SpiceJet to come into the market and undercut the existing players with its lower costs. In particular, SpiceJet should continue to expand with new routings (like to Guangzhou and Yangon) that lack service from an Indian carrier. IndiGo has mostly chosen to service the existing major cities in the Gulf and Southeast Asia, and with lower costs than SpiceJet, it would do the latter well to avoid too much head to head competition.

Meanwhile, SpiceJet appears to have built up a strong portfolio of international destinations from its largest hub in Delhi, with services now to Dhaka, Colombo, Dubai, Riyadh, Kabul, Kathmandu, Yangon, and Guangzhou. As SpiceJet simultaneously expands its domestic presence in Delhi, we feel that the airline can succeed where Air India failed and build up a true regional hub at either Terminal 3 or Terminal 1D in Delhi. While it will take a lot of coordination with India’s Ministry of Civil Aviation to facilitate placement of FIS into Terminal 1, and especially to maximise international to international connections, this move would be strong for SpiceJet. Using its existing fleet of 737s, SpiceJet could continue to expand its services to the SAARC region, but also to Southeast Asia, the Gulf, and Western China. Bangalore Aviation also suggests that SpiceJet invest in a fleet of around 10 Boeing 737-700 aircraft. These have longer range than SpiceJet’s existing 737-800s and would allow the airline to open services from Delhi to every major city in East Asia excluding Tokyo and Osaka (even Jakarta is within the range of the 737-700), as well as to all of Central Asia, Russia, most of Eastern Europe (including Warsaw, Kiev, and similar), and most of Northeast Africa. Truly leveraging Delhi’s location, SpiceJet could make a visionary move and become the dominant player in Delhi and beyond.

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Jet Airways should strengthen its Brussels hub, not shift to Munich

Editor's note: This is Part 1 in a series of analyses answering the question: “What should Jet Airways do with its international operations?” Parts 2 and 3 will cover the idea of a Mumbai hub and the fate of Jet’s 777-300ER fleet.

Photo courtesy Jet Airways

Late last week, a report emerged from the Economic Times of India that India's largest private airline, Jet Airways, was considering a shift of its scissors-hub operation for flights to North America from Brussels to Munich. While questions have arisen about the factuality of the report, the combination of such rumours and the fact that Jet Airways recently applied for 35 weekly frequencies between India and Germany lends credence to the idea that Jet might actually consider such a move.

While Munich would appear to have a larger origin and destination (OD) market with North America and India, Brussels has the edge to North America. Munich, lying close to the automotive heartland of Germany, and virtually all German automotive majors having a presence in India, has the traffic to and from India, it is also a full-fledged hub for Star Alliance member and global behemoth Lufthansa, who operates more than 250 flights per day in Munich. Supposedly, the shift in scissors operation would be in conjunction with Jet Airways' entry into the Star Alliance global partnership of airlines.

However, it is doubtful that Jet Airways will be allowed entry into Star Alliance unimpeded. In August 2011, Air India’s long touted entrance into Star Alliance was delayed indefinitely, due to a variety of operational, financial, and service issues. However, reports that have emerged since that time give indication that one of the sticking points on Air India’s entry was that the Star Alliance insisted on the condition that Jet Airways be allowed to join the alliance simultaneously (listen to podcast here). Whether or not these reports are true, India’s government has taken a provocative stance, and is unlikely to allow the induction of Jet Airways without significant concessions from the alliance.

Regardless, there is a scenario under which a scissors hub in Munich just might be viable. The most important step for Jet Airways would be to secure antitrust immunity (ATI) and/or a joint venture with Lufthansa. This would allow the two airlines to coordinate on schedules, pricing, and service, as well as (most importantly) sharing costs and profits. Once this profit sharing plan is in place, it incentivises Lufthansa to slot Jet Airways’ flights into its current hub.

With that in mind, the potential exists for Jet Airways to integrate its scissors hub operations into the current Lufthansa hub structure at Munich. The current departure timings to North America from Munich are as follows (including Lufthansa’s partner airlines):

Newark: 0920 (United), Charlotte: 1125 (Lufthansa), Washington DC Dulles: 1140 (United), New York JFK: 1145 (Lufthansa), Toronto: 1150 (Air Canada), Philadelphia: 1215 (US Air), Chicago: 1235 (United), Newark: 1530 (Lufthansa), Chicago: 1535 (Lufthansa), Montreal: 1540 (Lufthansa), Los Angeles: 1545 (Lufthansa), Boston: 1555 (Lufthansa), Washington DC Dulles: 1555 (Lufthansa), San Francisco: 1605 (Lufthansa)

Current India operations are timed to arrive in the morning (from Mumbai) and around noon (from Delhi)

Currently, Jet Airways operates three sectors in each direction of Brussels; three to and from India - Mumbai, Delhi and Chennai and three to and from North America - Newark, New York JFK, and Toronto.

Under this hypothetical scenario, there is one potential path for Jet to follow. Their long haul flights should be integrated into Lufthansa’s afternoon departure bank and timed between 3:45 and 4:15 pm. Under this scenario, there would be overlap between Jet’s EWR service and Lufthansa’s, so the carrier would instead pair Mumbai service with Miami on a daily A330-200 service Mumbai-Munich-Miami. The Mumbai-Miami leg has more than 40,000 OD passengers per annum, the Munich-Miami leg has close to 50,000 OD passengers per annum, and the Mumbai-Munich leg has around 25,000 OD passengers per annum, for a sum OD of close to 115,000 passengers per annum. A daily A330-200 represents roughly 160,000 seats per annum, so when combined with new connections enabled by Lufthansa’s hub, the flight could be adequately filled.

Delhi-New York JFK and Chennai-Toronto services could be continued by simply substituting a Munich stop for the Brussels one once again retaining the usage of an A330-200. Finally, a Bangalore-Munich-Houston routing with A330-200 could be used to connect two Star Alliance hubs and feed Bangalore into the scissors hub. This routing would be more heavily dependent on connecting traffic from Lufthansa, and on connections with Latin America in Houston. All of these flights would be timed to arrive between 12 and 1 (with late morning departures from the Indian airports allowing for connections from other Indian cities).

Return flights for the 8 segments would work similarly, with early afternoon departures from the US (2pm~4 pm). Return flights would arrive in Europe in the early morning (6am~7 am), as do most trans-Atlantic flights, and then a departure bank back to India would leave around 9am~10 am.

This series of flights would maximise loads and utilisation of Jet’s flights thanks to the improved connections, especially on the long haul connections to the US which will improve the overall flight potential.

However, despite this potential viability, we feel instead that Jet Airways should maintain its scissors hub operation in Brussels, for a couple of important reasons.

The first is that OD between India and Brussels is more plentiful than to Munich, (roughly 140,000 annual passengers versus around 85,000 annual passengers) though Munich traffic is higher yielding. But even more importantly, OD traffic between Brussels and the US is more plentiful than from Munich (700,000 annual OD versus 600,000 – both estimated figures), and higher yielding. High-yield OD is critical to the profitability of long haul flights.

Secondly, Jet Airways has already built up significant loyalty in the Brussels-North America market, which is equally critical for the viability of these flights. Moving to Munich will mean that they would have to once again start from scratch in building customer loyalty, which is likely to be retained by Lufthansa anyway.

If Jet Airways can get a joint venture with Lufthansa in spite of the Air India-Star Alliance fiasco, then they can just as easily get a JV with Brussels based Brussels Airlines (with whom they already have a code-share agreement), who did not have as direct of a role in Air India’s deferral as Lufthansa, who sponsored the Indian national carrier’s entry into the alliance.

Once this JV is in hand, Jet Airways could proceed as follows. Brussels Airlines is already starting a daily Brussels-New York JFK flight to connect into their own African network, so with a JV, Jet could drop the Brussels-JFK segment of their flight from Delhi, and instead replace it with Chicago O’Hare (while Brussels-New York is a larger market, it also has much more competition). This route would continue to be served with an Airbus A330-200, while Mumbai-Brussels-Newark and Chennai-Brussels-Toronto will continue with their current equipment. Additionally, Bangalore-Brussels-San Francisco would be added daily using A330-200s.

While Bangalore-Brussels OD demand is very small, at just over 7,000 passengers per annum, there is a huge and well documented high-yielding OD demand between Bangalore and San Francisco (73,000 passengers per year) thanks to IT industry links, while Brussels-San Francisco is also a large market (57,000 passengers per year). This cumulative passenger base of 130,000 passengers should be more than enough (along with connections from both Jet Airways and Brussels Airlines short haul networks) to fill daily A330-200 flights on the 258 seat variant, or even 777-300ER of current configuration (it would provide for optimal utilisation of the 777-300ER fleet as one of few routes with huge high yielding OD traffic base).

Longer term, a second daily flight Mumbai-Brussels-Miami (50,000 passengers per annum Mumbai-Miami – 53,000 passengers per annum Brussels Miami) with low density A330-200, as well as a four times per week flight Delhi-Brussels-Vancouver (120,000 passengers per annum Delhi-Vancouver, 15-40 thousand passengers annually between Brussels and Western Canada) using a high density A330-300 (more on this in another part). Finally, a three times per week Chennai-Brussels-Los Angeles could be run with the same high density A330-300 to tap into the large OD market Chennai-Los Angeles (more than 15,000 passengers per annum) as well as Brussels-Los Angeles (69,000 OD passengers per year).

The aforementioned changes will allow Jet Airways to continue to grow critical mass at Brussels, and win an ever increasing share

So to summarise, here is our proposed structure of Jet Airways’ scissors hub in Brussels.

Near-term (within 1 year of writing):

Delhi-Brussels-Chicago O’hare: daily: A332
Mumbai-Brussels-Newark: daily: B77W
Chennai-Brussels-Toronto: daily: A332
Bangalore-Brussels-San Francisco: daily: A332 or B77W

Long-term (within 3-5 years of writing)

Delhi-Brussels-Vancouver: 4/week: A332
Chennai-Brussels-Los Angeles: 3/week: A332
Mumbai-Brussels-Miami: daily: A332

Map generated courtesy GCMap

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Critical analysis of Delta Air Lines hub in New York La Guardia

Late last week, Atlanta based Delta Air Lines announced a large expansion of its focus operation in New York's La Guardia, adding more than 100 additional daily flights to 29 new destinations. The expansion was made possible by the final approval of the carrier's slot swap deal with US Airways that saw Delta trade landing slots at Washington's Reagan National Airport with US Airways in return for landing slots in La Guardia.

In its PR materials, Delta has consistently touted the advantages of its new "hub" in La Guardia, which is a critical cog in its plan to "Win New York" from competitors American, United, and JetBlue. Given the natural excitement surrounding this deal, we thought we'd take a look at Delta's new operation and judge whether it can truly be considered a hub.

Before we start, we'd like to clarify a few things. Firstly, the idea of a dual hub for Delta split between JFK and La Guardia in New York is compelling, but at the moment more of a pipe dream than anything. It takes more than 40 minutes under perfect traffic conditions to get from La Guardia to JFK door to door, and that timing excludes security checks and baggage claim then re-check amongst others, and as such is simply not feasible.

That being said, the following analysis looks at the Delta hub on July 17th, 2012. At this point, the La Guardia operation will be in full swing, with the first batch of slots having been transferred on March 25, 2012, and the second; July 11, 2012.

Categorizing the new flights

*Data on new flights courtesy of Airline Route

Before we swing into our analysis of the new hub, we thought it'd be helpful to characterize the various new flights into several key groups.

New flights in major business markets

• New York La Guardia – Dallas/Ft. Worth 6 Daily Embraer E170
• New York La Guardia – Miami 4 Daily MD88
• New York La Guardia – Charlotte 5 Daily (4 Daily CRJ700 + 1 Daily CRJ900)
• New York La Guardia – Cleveland 5 Daily ERJ145
• New York La Guardia – Denver 2 Daily Boeing 737-800
• New York La Guardia – Houston 4 Daily (3 Daily E175 + 1 Daily E170)
• New York La Guardia – Milwaukee 3 Daily (1 Daily E170 + 2 Daily CRJ900)
• New York La Guardia – Ottawa 3 Daily ERJ145
• New York La Guardia – Philadelphia 4 Daily ERJ145
• New York La Guardia – Pittsburgh 7 Daily (1 Daily E175 + 3 Daily CRJ700 + 2 Daily CRJ900)
• New York La Guardia – Washington Dulles 4 Daily ERJ145
• New York La Guardia – Montreal 5 Daily ERJ145

These flights are usually present in both major hubs and large O&D (origin and destination operations); while the flights obviously have large amounts of high-yield O&D travelers, they also are used to feed flights to smaller destinations and vice versa.

Frequency increases in current Delta markets

• New York La Guardia – Ft. Myers Increases from 2 to 3 Daily
• New York La Guardia – Indianapolis Increases from 4 to 5 Daily
• New York La Guardia – Jacksonville FL Increases from 2 to 3 Daily
• New York La Guardia – Kansas City Increases from 3 to 4 Daily
• New York La Guardia – Nashville Increases from 2 to 3 Daily
• New York La Guardia – Minneapolis 1 Daily MD88
• New York La Guardia – Raleigh Increases from 6 to 7 Daily
• New York La Guardia – St. Louis Increases from 3 to 4 Daily

This batch of additional flights are once again increases used mostly for business travel, but adding frequency can enhance hub operations as well.

Frquency increases in current Delta feed markets

• New York La Guardia – Bangor Increases from 2 to 3 Daily
• New York La Guardia – Columbia SC Increases from 1 to 2 Daily
• New York La Guardia – Portland ME Increases from 2 to 3 Daily

These selected small markets either have significant untapped demand for high-yield O&D to NYC, or untapped demand to other destinations in connecting markets.

New flights to feed markets

• New York La Guardia – Albany NY 1 Daily ERJ145
• New York La Guardia – Buffalo 6 Daily CRJ900
• New York La Guardia – Burlington VT 3 Daily (2 Daily CRJ700 + 1 Daily ERJ145)
• New York La Guardia – Dayton 2 Daily ERJ145
• New York La Guardia – Greensboro 3 Daily ERJ145
• New York La Guardia – Louisville 2 Daily ERJ145
• New York La Guardia – Manchester NH 2 Daily ERJ145
• New York La Guardia – Nassau 1 Daily MD88
• New York La Guardia – Norfolk 4 Daily ERJ145
• New York La Guardia – Richmond VA 5 Daily (4 Daily ERJ145 + 1 Daily CRJ200)
• New York La Guardia – Rochester NY 4 Daily CRJ700
• New York La Guardia – Syracuse 5 Daily (4 Daily ERJ145 + 1 Daily CRJ700)
• New York La Guardia – Charlottesville 1 Daily ERJ145
• New York La Guardia – Halifax 2 Daily ERJ145
• New York La Guardia – Myrtle Beach 1 Daily CRJ700
• New York La Guardia – Roanoke 1 Daily ERJ145
• New York La Guardia – Wilmington 2 Daily ERJ145

These destinations are once again large O&D sources that provide a large amount of feed for a hub (note the multiple daily frequencies in many markets).

To facilitate this unprecedented expansion, "Delta will invest $100 million to create an expanded main terminal at LaGuardia in Terminals C and D, where it will operate a total of 26 gates. A 600-foot connector bridge will be built to conveniently link the two terminals. Delta also will convert the existing US Airways lounge in Terminal C to a Delta Sky Club, while continuing to operate its current Sky Club in Terminal D."

The following video has a few renderings of the new terminal at La Guardia along with some key facts about Delta's NYC operations.



Analysis of Delta's operation

With all of that in mind, let's actually take a look at Delta's operations in La Guardia on the 17th of July, 2012.

Key Characteristics

Category	Figure
Daily Departures	263
Outbound Seats	23,753
Inbound Seats	21,337
Total Available Seats	45,090
Destinations Served	59
Premium Seats	4,566
Percentage of Seats Premium	10.1%
Percentage of Flights Operated by Mainline Aircraft	28.9%

As the chart shows, Delta will have a large operation in La Guardia; albeit one that falls short of the typical critical mass for a hub in the United States of around 300 daily departures. Still, the available seat capacity on an annualized basis is more than 16.4 million; at an airport that handles about 28 million passengers per year. In terms of destinations served, 59 may not seem like a large number until you consider the fact that flights at La Guardia are limited to those within 1,500 miles (excluding Denver). The following map should give a good illustration of this, with current La Guardia destinations marked within the perimeter (denoted by a red line). Traveling left to right, the destinations marked outside of the perimeter are Regina, Canada, Denver, Austin, Cancun, and San Juan.


An interesting figure is the percentage of available seats that are premium, 10.1%. Given New York's position as the economic powerhouse of the United States, and the flight caps at La Guardia, one would expect this figure to be larger. 10.1% is actually less than our calculated figures for other Delta hubs like Atlanta, Detroit, and Minneapolis.

Also notable is the split between flights operated by mainline aircraft, and those operated by regional partners under capacity purchase agreements (CPAs). 28.9% is on the low side for a typical hub operation, although the following table, which details the number of daily Delta flights at La Guardia by aircraft, should clarify their rationale.

Aircraft	# of Daily Departures
Embraer ERJ 145	63
Bombardier CRJ-700	38
Embraer E175	36
Embraer E170	31
McDonnell Douglas MD-88	25
Airbus A319	24
Boeing 757-200	16
Airbus A320	15
Bombardier CRJ-900	15
Boeing 737-800	7
Bombardier CRJ-100/200	4

As the table indicates, a large chunk of these flights are on 70-90 seat regional jets such as the Bombardier CRJ 700/900 and Embraer E170/175. These aircraft are configured in two classes of service, and allow carriers to offer a first class cabin while maintaining frequencies. Thus, Delta might have substituted 70-90 regional jets in place of more expensive mainline aircraft in order to maintain frequencies, which are critical to generating high fares domestically, in large business markets.

Over the past few years, the operating economics of regional jets have been questioned by industry analysts. With many La Guardia flights being operated on inefficient 50 seat jets, it will be interesting to see how the operation performs economically.

Meanwhile, the following tables illustrate the largest destinations from La Guardia by frequency, daily seat capacity, and percentage of seats that are premium respectively.

Rank	Destination	Daily Frequencies
1	Atlanta	16
2	Boston	15
3	Washington-Reagan	14
4	Chicago O'hare	13
5	Detroit	9
6	Minneapolis St. Paul	8
T7	Raleigh-Durham	7
T7	Pittsburgh	7
T8	Buffalo	6
T8	Dallas-Fort Worth	6
T8	Indianapolis	6
T8	Orlando	6

Rank	Destination	Daily Seats
1	Atlanta	2745
2	Boston	1890
3	Detroit	1294
4	Minneapolis St. Paul	1172
5	Washington-Reagan	1064
6	Chicago O'hare	988
7	Orlando	876
8	Fort Lauderdale	710
9	Palm Beach	592
10	Miami	568

Rank	Destination	% of Premium Seats
T1	Washington-Reagan	15.8%
T1	Chicago O'hare	15.8%
T1	Buffalo	15.8%
4	Pittsburgh	14.9%
5	Nashville	14.4%
6	Houston-Bush	14.1%
T7	St. Louis	13.8%
T7	Portland (ME)	13.8%
T7	Rochester	13.8%
T7	Savannah	13.8%
T7	Madison	13.8%
T7	Myrtle Beach	13.8%

The tables covering flight frequency and capacity are both actually quite typical of hub operations; with frequencies being highest in large business markets, and capacity being highest in large business markets, and important Delta operations (hubs and large destinations). However, the breakdown of premium seats is actually more indicative of an O&D focused operation. In typical hubs, the largest premium operations are to large business markets which see high volumes of connecting premium passengers. In La Guardia, Delta has instead chosen to weight its premium capacity towards smaller markets where they have a monopoly or face limited competition; so as to maximize revenues on an individual flight basis, as opposed to the network revenue maximization strategy employed at most other hubs.

Conclusion- The overall operation

The basic idea of a hub is to connect people from points A to B while funneling them through a common point C. Thus most hub operations employ banks of flights, in which a group of inbound flights arrives, and then a group of outbound flights departs within an hour; thus maximizing the connection potential of the hub. Large airline hubs will have several of these banks daily, but at La Guardia, the slot controls have somewhat restricted Delta's ability to engage in this strategy. They have been instead forced to operate a rolling hub (which we first introduced in our analysis of SpiceJet's Q400 operation), and an imperfect one at that. The following chart maps Delta's flight frequencies by the hour of day.



In an ideal rolling hub, the "peaks" and "valleys" of this frequency graph would be opposite of each other. Departures would be maximized when arrivals were minimized and vice versa. However, as this graph shows, Delta has only been able to partially achieve this vision under the slot constraints. Meanwhile, on the capacity side, the operation is actually much flatter; so the true connecting volume might actually be less than one would predict. As expected, the outbound capacity peaks in the morning (with business travelers heading out to get at least a half day's worth of work done that night), and inbound capacity at night (when aircraft will be parked overnight to once again fly the business travelers out the next morning).



Ultimately, the Delta operation in New York La Guardia will be very powerful, but not truly a hub. The destination portfolio for Delta from the airport is sound, but the actual operations do not fluctuate enough (capacity-wise) to truly drive connecting volume.

Do not let our pessimistic view of the idea of a Delta hub La Guardia extend to our opinion of the operation itself. Simply put, Delta's expansion at La Guardia gives them a large operation at New York's preferred airport for business travel; an operation that should be profitable for years to come.

Maps generated by the Great Circle Mapper - copyright © Karl L. Swartz.

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