ROUTES 2010: Vancouver strives to become an international hub

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Routes host city Vancouver is already Canada's main Pacific gateway, but can it step up its share of traffic from the larger US-Asian market?

Thanks to geography, Vancouver will always be Canada's gateway to the Pacific. But its role as a hub between the USA and Asia is a more elusive goal that Vancouver International airport is still striving to earn.

Two things are likely to boost Vancouver's gateway status. The first is China, the second is better interline deals. As Canada's third largest city and the only one on the Pacific coast, Vancouver has always had a large Asian population. That population grew even more when many Hong Kong residents took out Canadian citizenship before Hong Kong's handover to China.

John Korenic, Vancouver's director of aviation marketing, says his airport is already the fourth-largest origin-and-destination point between North America and Asia, and that includes such behemoths as Los Angeles.

Late last year China granted Canada approved destination status. The advance people for Chinese tour companies and travel agencies are already visiting Vancouver as a prelude to marketing campaigns.

With Air China and China Eastern already serving Vancouver, the relative trickle of Chinese arrivals could grow into a flood, and the first Canadian city most of them will visit is Vancouver.

Vancouver's gateway status will also gain a boost as WestJet, Air Canada's local rival, finally enters the interline business. Nine Asia-Pacific carriers serve Vancouver, and those not in the Star Alliance may prefer a Canadian interline partner other than Air Canada. Gregg Saretsky, WestJet chief executive, is making this a high priority. Since ironing out wrinkles in WestJet's computer switchover, the airline has inked interline deals with Cathay Pacific and Taiwan's China Airlines, and is now talking to China Eastern. Better interlines will encourage Asian carriers to focus on Vancouver as their Canadian gateway rather than open new routes to such interior cities as Calgary and Toronto.

Vancouver's bigger challenge is not so much how to grow its share of Pacific gateway traffic, but how to exploit its location to become a bigger hub between its giant neighbour to the south and its giant neighbours in Asia. As Calin Rovinescu, Air Canada's chief executive, points out, Vancouver's big issue is not Canada-Asia. "In North America the far, far larger market is between the US and Asia, where our share is only 1%. By winning only a couple of extra percentage points of market share on these routes we could connect a million more passengers through Vancouver," he says.

His idea is not new. In the late 1990s American Airlines launched "The Vancouver Connection", feeding US passengers through Vancouver to its codeshare partner Canadian Airlines for onward flights to Asia. Bob Crandell, who was then American Airlines' president, touted this connection because it bypassed restrictions in the US-Japan bilateral, and "flying by way of Vancouver is a significantly faster route to Asia than going by way of either Los Angeles or San Francisco".

Changing Times

But times have changed. Canadian Airlines is gone. US open skies accords with Taiwan (1997), South Korea (1998) and Japan (2009) have freed more US flights to Asia, and long-range aircraft allows American to fly daily nonstops now to Tokyo Narita from Los Angeles, Chicago, and New York and double daily from Dallas-Fort Worth. In May the US DoT also awarded American a New York-Tokyo/Haneda route. American no longer needs a Vancouver hub as much. Delta and United also overfly Vancouver two dozen times a day on US flights to and from Asia.

So what can Vancouver do to be a bigger hub for US-Asian traffic? First, it has made it easy on passengers. US travellers connecting in Vancouver to overseas flights check their bags through and skip Canadian customs. They go through a Canadian immigration check set up separately for transit passengers, and do not have to clear security a second time. Returning from Asia, they clear Canadian and US immigration and US customs in the Vancouver terminal so that they re-enter the US as domestic passengers.

Second, the Canada-US Open Skies bilateral makes Vancouver connections easy. "Because of our US Open Skies agreement with Canada we can already feed our connecting American Airlines' passengers into and out of JAL's flight to Japan on a codeshare basis," says the US carrier.

As Korenic points out, the Canada-US bilateral also allows US carriers to operate fifth freedoms through Vancouver to Asia if they have permission from their Asian destination. So far, no US carriers exercise these rights.

Thirdly, because of Canada's bilaterals with Asia, flights from Vancouver offer additional access to Asian markets - notably China and Hong Kong - where capacity limits still constrict US carriers. United, for example, has 11 daily flights into Vancouver from US cities, and can transfer US passengers to Star Alliance partner Air Canada, which flies daily from Vancouver to Beijing, Shanghai/Pudong and Hong Kong. American and Delta have similar options in Vancouver with their Asian alliance partners.

For commercial reasons, no carrier will disclose how much connecting traffic it already feeds through Vancouver. But oneworld observes that Vancouver "is well served by oneworld carriers and you can assume that there are a fair number of passengers connecting there!"

Joint Venture

Vancouver's potential is important enough for American and Japan Airlines, whose routes touch in Vancouver, to look at extending their US-Japan joint venture to embrace Canada. "We are in the process," says American, "of evaluating what both we and JAL might need to do on the Canadian ATI [anti-trust immunity] front."

Vancouver's Challenge 

John Korenic, Vancouver's director of aviation marketing, faces a challenge. He knows that Vancouver could be a bigger hub for connecting US traffic through to Asia, but he has a hard time attracting it. "The US is a major potential market for us," Korenic says, but a lot of US airlines "overfly the West Coast en route to and from Asia on their own".

What can he do about it? "Mainly what we do is identify which carriers potentially would benefit" from routeing flights through Vancouver. Then he tries to point out the advantages of doing it. These include streamlined transfers for connecting passengers, a chance to combine US and Canadian traffic, and the potential this creates for routes between more secondary North American and Asian cities.

"The US now has more liberal accords in Asia than we do," Korenic laments. "Canada's only Asian open skies agreement is with Korea." In earlier times, when US-Asian bilaterals were tighter, US airlines found codesharing through Vancouver more attractive. Now, he admits, it is harder.

But Korenic is optimistic about Vancouver's prospects as longer-range jets come on line. They will be able to fly nonstop from Vancouver to South-East Asia and even India. "Delhi especially," he says "is a huge market for us."

Korenic's other challenge is secondary airports. Typical of otherlarge urban areas, low-cost carriers have found alternate ways to serve the Vancouver region. WestJet has launched flights into Abbotsford, 40 miles (65km) east of Vancouver, and into Comox, 100 miles across the sound on Vancouver Island. More recently, Alaska Airlines announced new flights to Hawaii from Bellingham, Washington, only 20 miles south of the US border. Alaska is trying to entice Vancouverites to drive down and use it.

No one knows how much traffic these rival airports divert instead of stimulate, but none of them offer international flights. Korenic also likes to point out that secondary airports elsewhere often draw passengers because they are closer to a city's centre. But Vancouver's rivals are in the outer suburbs, on an island, or even in another country. "Vancouver International", Korenic proudly declares, "is Vancouver's downtown airport."

Vancouver's biggest potential as a US-Asia hub depends who proves to be most right in the long-running debate between Airbus and Boeing over future route developments. Airbus foresees more hub-to-hub traffic; hence its high-capacity A380. Boeing argues that passengers prefer point-to-point, so it has bet instead on the hub-busting, long-range, lower-capacity 787 Dreamliner.

In three years Air Canada will start flying the first of 37 Dreamliners. This will be the big test for Vancouver. The 787's range is critical to any hub-bypass strategy between Canada and Asia as the Pacific is wider than the Atlantic. Tokyo, for example, is 1,300 miles (2,100km) further from Vancouver than London from New York.

Air Canada's Calin Rovinescu calls the 787 a "game changer" because it "will allow us to fly to secondary Asian cities that we cannot currently serve because not enough people fly there to justify larger aircraft".

In short, new longer-range, lower-capacity jets could fragment the North Pacific just as route proliferation fragmented the North Atlantic. With these new aircraft, Air Canada and Star partner United Airlines could combine a lot more Canadian and US traffic at Vancouver. Air Canada could operate sixth freedoms on its own US-Vancouver-Asia routings.

Other US carriers could codeshare from Vancouver with Asian partners, or deploy transpacific fifth freedoms from Vancouver with their own 787s. In all of these cases, loads combining Canadian and US traffic could be big enough in smaller long-range jets to support many more secondary routes. This would finally launch Vancouver as a major hub between North America and the Orient.

John Korenic, Vancouver's director of aviation marketing, faces a challenge. He knows that Vancouver could be a bigger hub for connecting US traffic through to Asia, but he has a hard time attracting it. "The US is a major potential market for us," Korenic says, but a lot of US airlines "overfly the West Coast en route to and from Asia on their own".

What can he do about it? "Mainly what we do is identify which carriers potentially would benefit" from routeing flights through Vancouver. Then he tries to point out the advantages of doing it. These include streamlined transfers for connecting passengers, a chance to combine US and Canadian traffic, and the potential this creates for routes between more secondary North American and Asian cities.

"The US now has more liberal accords in Asia than we do," Korenic laments. "Canada's only Asian open skies agreement is with Korea." In earlier times, when US-Asian bilaterals were tighter, US airlines found codesharing through Vancouver more attractive. Now, he admits, it is harder.

But Korenic is optimistic about Vancouver's prospects as longer-range jets come on line. They will be able to fly nonstop from Vancouver to South-East Asia and even India. "Delhi especially," he says "is a huge market for us."

Korenic's other challenge is secondary airports. Typical of otherlarge urban areas, low-cost carriers have found alternate ways to serve the Vancouver region. WestJet has launched flights into Abbotsford, 40 miles (65km) east of Vancouver, and into Comox, 100 miles across the sound on Vancouver Island. More recently, Alaska Airlines announced new flights to Hawaii from Bellingham, Washington, only 20 miles south of the US border. Alaska is trying to entice Vancouverites to drive down and use it.

No one knows how much traffic these rival airports divert instead of stimulate, but none of them offer international flights. Korenic also likes to point out that secondary airports elsewhere often draw passengers because they are closer to a city's centre. But Vancouver's rivals are in the outer suburbs, on an island, or even in another country. "Vancouver International", Korenic proudly declares, "is Vancouver's downtown airport."

Watch our recent interview with Air Canada chief Calin Rovinescu