As Delta works to dismantle its Tokyo Narita hub, could it open the door to a new Seattle – Singapore connection?

Delta Air Lines will need to decide over the next year how to serve Singapore in future. As it works to dismantle its Tokyo Narita hub thoughts on how it will continue to serve its tagged markets of Manila and Singapore will certainly see increased cooperation with Korean Air, but could also see the introduction of a new direct Seattle – Singapore service. 


Summary:

  • As Delta Air Lines plans to drop its Tokyo Narita hub by 2020, a question on how it will continue to serve the Manila and Singapore markets needs to be answered;
  • While its new JV with Korean Air could efficiently serve the Singapore-US market, Singapore competition authority approval is far from certain;
  • As an alternative, Delta could potentially launch services from Seattle to Singapore, which would enable it to compete better with likes of Singapore Airlines and United Airlines in the Singapore-US market.

A nonstop service from Seattle, which will enable Delta to better compete with new nonstop Singapore-US services from Singapore Airlines (SIA) and United Airlines, would be sensible. But pulling its own metal from Singapore and serving the Singapore-US market via Seoul using Korean Air for the Singapore-Seoul leg is the other perhaps more likely option.

Delta and predecessor Northwest Airlines have served Singapore via Tokyo Narita for decades. Northwest’s Singapore-Tokyo service actually predates the opening of Singapore’s famous Changi International Airport facility in 1981 and was initially operated from Paya Lebar Airport.

DID YOU KNOW?
Delta’s Singapore operation, originally flown from Tokyo by Northwest Airlines, actually predates the opening of Singapore’s famous Changi International Airport facility in 1981 and was initially operated from Paya Lebar Airport.

However, Delta is planning to drop its Narita hub, where it has already scaled back operations to eight daily flights to seven destinations, since initially unveiling plans in 2013 to shift its Tokyo operation to Haneda. It currently has only two flights to Haneda, from Los Angeles and Minneapolis. However, it expects to secure additional Haneda rights as the Japanese government opens up more international slots at Haneda ahead of the 2020 Tokyo Olympics.

While it is not yet clear how many additional Haneda slots will be made available for Japan-US flights (there are currently 12 daily flights from six airlines) or how the slots will be distributed (other US airlines besides Delta will bid for the slots), Delta should be able to secure enough slots to move most or all of its remaining Narita-continental US flights. Delta currently serves Narita from Atlanta, Detroit, Honolulu, Portland and Seattle.

For the intra-Asian markets its serves from Narita – Manila and Singapore – Delta has the option of bypassing Tokyo once its Narita hub is closed and serving the two markets nonstop. However, Manila likely does not have enough premium traffic to support a nonstop service. Using Korean to provide offline services to the Philippines is sensible. Korean has a large presence in the Philippines, operating three daily 777 flights to Manila and one daily 777 flight to Cebu.

Singapore has a much higher mix of premium traffic than the Philippines. Offering a nonstop option is also necessary for Delta to compete effectively against SIA and United. Both airlines launched nonstop services from Singapore to the US in 2016.

United, which previously served Singapore via Hong Kong and Tokyo Narita, currently has two daily nonstop flights to Singapore. It currently has one Los Angeles-Singapore flight and one San Francisco-Singapore flight but the Los Angeles link will be suspended in late Oct-2018 in favour of a second San Francisco frequency.

As The Blue Swan Daily has previously analysed, SIA is increasing its nonstop US operation over the next few months from seven to 20 weekly flight as seven A350-900ULRs are delivered. San Francisco is being increased from seven to 10 weekly nonstop flights while SIA is launching 10 weekly nonstop flights to Los Angeles and seven weekly nonstop flights to Newark.

Delta could respond by launching nonstop service to Seattle, which is now one of the largest unserved US markets from Singapore. A Seattle-Singapore flight, which Delta is able to launch using its new A350-900 fleet, would increase the total number of weekly Singapore-US nonstop flights to 41 – from zero at the beginning of 2016.

CHART – The expanded operations of Singapore Airlines between Singapore and the US will see weekly movements increase to over 40 return flights from Dec-2018Source: CAPA – Centre for Aviation and OAG

To regain its competitiveness in the Singapore-US market, Delta really needs to offer a nonstop flight. The suspension of several Narita routes over the past few years (such as New York, Minneapolis, Los Angeles and San Francisco) has weakened Delta’s position in the Singapore market. It is currently only offering a one-stop product to/from Singapore linked to four continental US cities.

A Seattle flight would give it a one-stop product to up to 50 US cities. While this does not quite match United’s offering via San Francisco, it is sufficient enough as all the main city pairs would be covered – alongside an exclusive nonstop option for the Singapore-Seattle market.  A link to its Seattle hub is the only practical nonstop option for Delta because San Francisco, the only other destination within range from Singapore with a standard A350-900, is now too competitive and is not a Delta hub.

The alternative for Delta is to drop Singapore entirely and rely on new JV partner Korean Air. Serving Singapore via Seoul would provide a one-stop product in nine continental US markets. However, the Seattle service would provide a one-stop product in four or five times as many markets and providing an online product is important to ensure loyal Delta customers do not switch over to competitors when flying to/from Singapore.

Delta’s new JV with Korean may also not be able to secure ATI approval from the Competition and Consumer Commission of Singapore (CCCS), which is necessary for the two airlines to jointly price Singapore-US itineraries. Singapore-Korea is a bilateral restricted market with no more available traffic rights. The CCCS should insist on Singapore-Korea open skies, which Singapore and SIA has been advocating for several years, as a condition to approving the Delta-Korean JV. However, South Korea, which has been reluctant to expand the Singapore bilateral, is unlikely to support open skies.