Delta plans Pacific network restructuring in 2014

Washington DC
Source:
This story is sourced from Pro
See more Pro news »

Delta Air Lines plans to restructure its Pacific network as it expands its international operations at Seattle Tacoma International airport in 2014.

The restructuring includes diversifying its Asia network with less of a concentration in Japan, and additional nonstop service between the USA and both China and South Korea, executives said during an earnings call today.

Much of that additional flying will be from Seattle where growth is providing Atlanta-based Delta with “additional frequencies and opportunities in China”, they say.

About 50% of the SkyTeam Alliance carrier’s Pacific capacity touches Japan where it has a hub at Tokyo Narita International airport. Narita was the carrier’s highest yielding hub during the third quarter despite the continued weakness of the Japanese yen, says president Ed Bastian during the call.

Executives say that they intend to reduce inter-port flying – routes from Tokyo on to other cities in Asia – while expanding nonstops into the region from Seattle over time.

Delta flies to Bangkok, Beijing, Hong Kong, Manila, Shanghai, Singapore and Taipei from Tokyo Narita, according to Innovata FlightMaps Analytics.

It added new nonstops from Seattle to Shanghai Pudong and Tokyo Haneda earlier this year and plans to launch flights to Hong Kong and Seoul Incheon in June 2014.

“We expect the Pacific restructuring will improve our Pacific performance next year,” says Bastian.

The carrier saw passenger revenue for its Pacific operations fall 5% to $1.04 billion compared to a year earlier. Unit revenue was down 4.2% and capacity fell 0.8%.

Bastian says that the continued weak Japanese yen and lower demand negatively impacted the region’s revenues by $80 million.

An immunised joint venture with an Asian carrier may be in Delta’s cards for the future.

“In a decade, it would be nice to replicate the joint venture structures we have in Europe and move them to China,” says Richard Anderson, chairman and chief executive of Delta. He says that this is needed in order to “sustain the free cash flows and growth of the enterprise over the long term”.

China Eastern Airlines and China Southern Airlines are both partners of Delta and fellow members of the SkyTeam alliance. Anderson says that the carrier transfers about 20 to 40 passengers per day to the carriers over Beijing and Shanghai.

Regarding a potential joint venture with SkyTeam partner Korean Air, Bastian says that he cannot predict where such a project will go.