ANALYSIS: Delta builds-out Asia gateway in Seattle

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Delta Air Lines is slowly reshaping its Asian network around its new gateway in Seattle, with planned new flights to Hong Kong and Seoul.

The new routes will join the SkyTeam alliance carrier's existing flights to Beijing, Shanghai Pudong and both Tokyo Haneda and Narita when service begins on 16 June 2014 and 2 June 2014, respectively. Existing service between Seattle and Osaka Kansai will end on 3 November.

"By offering new service from Seattle to Seoul and Hong Kong, Delta will now offer customers service to the top five destinations in Asia," said Mike Medeiros, vice-president of Seattle at Delta, in a statement. "Our expanding Seattle network, combined with investments in our aircraft, the airport and the community shows our commitment to become Seattle's premier international carrier."

The new routes fill out the Atlanta-based airline's Asia route network from Seattle, connecting the city to its SkyTeam alliance partner Korean Air's hub at Seoul Incheon and offering its only nonstop to Hong Kong from the USA. Currently, it only serves Hong Kong via Tokyo.

They also set Delta up to be a more formidable competitor to United Airlines - the largest US carrier to Asia - by matching the Chicago-based airlines' network into Asia from the USA without a stop at Narita almost city-for-city with Osaka as the exception.

"Seattle has decent O&D [origin and destination] traffic demand, and Seattle as a gateway to all of the United States and to all of Canada is reasonably efficient," says Shakeel Adam, managing partner of aviation consultancy Aviado Partners.

He explains that connecting at Seattle offers passengers shorter travel times to much of the USA compared to transiting through San Francisco - United's primary gateway to Asia - or Los Angeles - a large Oneworld alliance and American Airlines hub.

Delta made the same argument to the US Department of Transportation (DOT) when it lobbied the agency to allow it to shift the gateway for one its Tokyo Haneda route authorities to Seattle from Detroit earlier this year.

The carrier offers connections to its seven hubs - Atlanta, Cincinnati, Detroit, Los Angeles, Minneapolis-St. Paul, New York and Salt Lake City - as well as to Las Vegas via Seattle. It also codeshares with Alaska at the airport, placing its code on 56 of the Seattle-based carrier's routes from the city.

Connectivity in Seattle and O&D demand are important especially for Hong Kong. Delta has no SkyTeam partner on the Asia end of the route, needing to rely on either US connectivity or local demand to support the flight.

The airline has had a tough time in Hong Kong before. It launched flights between the city and its Detroit hub in June 2010 but dropped the route in August 2012 citing low demand.

"To be competitive there, you need to be between markets where you can be different," says Adam on Hong Kong, adding that local Cathay Pacific Airways dominates routes to the USA.

No carriers fly between Hong Kong and Seattle, Innovata schedules show.

Seoul benefits from Korean Air on the Asia end. Delta's new Seattle flight will connect into the Korean carrier's network to China and to the rest of Asia via the airport.

However, Korean Air recently dropped its code from flights on nearly 100 Delta routes and Delta its code from flights on four Korean Air routes - including Seattle-Seoul Incheon. The US carrier will also drop elite frequent flier credit accrual on Korean Air flights for its frequent fliers on 1 September. These moves suggest that all may not be rosy between the SkyTeam partners.

Delta says that there is no change in its relationship with Korean Air.

Korean Air could not be reached for comment.

The new Seattle routes are in line with Delta's plans to grow in Asia outside Japan. Ed Bastian, president of the airline, said in July that while it planned to "rationalise" capacity to Japan into 2014 following a $60 million negative impact to profit from a weakening yen during the second quarter. He added that growing into the rest of Asia was an "opportunity" for the carrier.

Delta could use the new nonstops to axe some of its flights from Narita into Asia, including Tokyo-Hong Kong and Tokyo-Seoul, which would help it meet the goals outlined by Bastian.

The airline cut Pacific capacity by 2.6% in the second quarter compared to a year earlier. It anticipates international capacity to increase by 1% to 3% during the third quarter.