ANALYSIS: China takes the lead in Asian hub development

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The large passenger airport hubs in the Asia-Pacific have been experiencing higher-than-average growth rates, especially since 2000. New hubs have been developed, especially in China, changing traffic flow patterns and reflecting economic growth in the region, writes Adam Zhong, a Hong Kong-based aviation analyst at Ascend.

Korean Air (KE), Japan Airlines (JL), Cathay Pacific (CX) and Singapore Airlines (SQ) have been seen in the past as the key hub carriers in terms of providing connections within the Asia-Pacific region and beyond. Their bases, at Incheon Airport (ICN), Tokyo Narita Airport (NRT), Hong Kong Airport (HKG) and Singapore Changi Airport (SIN) respectively have benefited significantly from the growth of the home carriers. This works both ways, however, as Tokyo Narita has been affected by the problems of Japan Airlines as well as weak economic growth in Japan.

The increase in traffic through open-skies liberalisation and fast-growing market demand has led to greater competition from new airlines and airport hubs.

Air China (CA) began developing hub operations at Beijing Capital International Airport (PEK) in 2002 and has achieved great success in the last 10 years. Following its example, China Southern Airlines (CZ) and China Eastern Airlines (MU) announced hub development plans at Guangzhou Baiyun International Airport (CAN) in 2004 and Shanghai Pudong International Airport (PVG) in 2007.

At least eight full-service carriers in the region have announced hub strategies to link their main operating bases to international markets.

The top three airline/airport combinations in China are now seen as the biggest hubs in the Asia-Pacific in terms of network scope, density and market dominance. Air China is now operating to 119 nonstop destinations from Beijing Capital International Airport, with 2,199 weekly departures, accounting for 41% of the airport's total capacity, according to OAG statistics in August 2012. China Southern and China Eastern have also achieved a wider spread of routes at Guangzhou and Shanghai than Cathay Pacific at Hong Kong or Singapore Airlines at Changi.

However, the scale of a hub's network is not the only factor that makes it successful and attractive. The efficiency of flight connections, origin and destination market presence, flexible connecting frequencies as well as pricing are all important from the passengers' perspective.

The experienced players, such as Cathay and Singapore, still have a thing or two to teach the newcomers. Connectivity analysis shows that Cathay Pacific's Hong Kong hub is still the most attractive hub in terms of the lower minimum connecting time required, comprehensive network coverage in international markets and flexible connecting frequencies for passengers. Chinese hubs have better coverage linking domestic markets, but have poorer international connections. Part of this may be influenced by visa requirements for transfer traffic.

The competition between hub airlines and airports will continue to increase, and it remains to be seen how attractive newer Chinese hubs will be in terms of pure international connections. In order to improve hub connecting services and their attractiveness to connecting passengers, the hub airport and its hub carriers will have to work closely with each other in these areas:

1. Reducing the minimum connecting time.
2. Building a flight bank structure with a good network spread and flexible flight frequencies.
3. Forming a highly-efficient communication and cooperation scheme.
4. Building a comfortable and attractive commercial and leisure transfer environment, taking into account issues such as transfer visas.

The new Chinese hubs have benefited so far from major network growth and a large domestic Chinese market. The next step for these hubs is to integrate their domestic connections with international connections as well.