Cathay Pacific will commence four weekly nonstop flights from its Hong Kong hub to Boston on May 1, 2015, operated on a 4-class Boeing 777-300ER. As one of the world’s most globally-renown premium network carriers, Cathay has been highly exposed to the downturn in business travel over the past few decades, along with the surge of competition from low-cost carriers in its own backyard in the Asia-Pacific basin and the Gulf Coast carriers in the Middle East.
However, Cathay is finally starting to move its chess pieces into squares where premium demand is on the rebound, indicated by the recent growth in the US – China market by major competitors, and specifically is turning its attention toward growing its presence in the North American East Coast.
Boston to become Cathay’s 6th US destination, 8th in North America
Once it comes online, Boston will become Cathay’s 6th US destination, in addition to presently served San Francisco, Los Angeles, Chicago, New York JFK and Newark airports from Hong Kong. Additionally, Cathay flies to Vancouver and Toronto from Hong Kong; however, unlike the US, where air service agreements are very liberal, Canada’s much more restrictive environment has limited Cathay carriers from receiving more traffic rights to add frequencies and/or markets from Hong Kong.
The decision to add Boston to its US portfolio is a bold move for the traditionally conservative Cathay. Although it is a founding member of the OneWorld global alliance, Cathay has maintained a distant relationship from its primary US partner, American Airlines, compared to other major OneWorld members such as IAG (the parent company of British Airways and Iberia), Japan Airlines and Qantas, who have forged deep joint venture and revenue-sharing agreements with American on transoceanic services to and from their home countries. Rather, Cathay has forged its own path of protecting its premium brand identity using carefully measured approaches to growing its long-haul network in the Americas rather than expand at a faster rate, a trait that its Japanese and Korean competitors have exuded recently.
For example, Cathay’s most recent network addition, Newark, essentially added a 5th daily frequency to an already existing market in the New York-area, thereby rendering Chicago O’Hare – which was added in 2011 – to represent its truest new destination in the Americas. To that end, Chicago, at the time, was considered innovative for Cathay as its first non-coastal US port, and the route has been highly successful. Cathay recently up-gauged its Chicago route from 7 to 10 weekly frequencies, and converted its additional 3-weekly late evening departures from O’Hare to a 4-class cabin (with the addition of First) from a 3-class cabin (with Business, Premium Economy and Economy). This is notable given that Cathay entered the Chicago market against the longstanding presence of hometown hub carrier United, which has operated a nonstop Chicago – Hong Kong flight for over 15 years, but the route has proven to be large enough for two competing airlines.
Still, Cathay was somewhat scrutinized for shying away from opening new markets in the US, particularly with regards to expanding to more inland OneWorld bastions such as Dallas/Ft. Worth. Although a Hong Kong – DFW route on Cathay had been highly rumored for years, especially with great potential to tap into DFW’s Latin American hub via partner American Airlines, ultimately, American chose to launch the route on its own metal in June 2014.
Boston continues to attract foreign carriers, especially after years of neglect from Asia
Cathay will be the third Asian carrier to launch service to Boston within the past three years, following in the footsteps of Japan Airlines and Hainan Airlines. JAL commenced daily nonstop service to Boston from its Tokyo Narita hub in April 2012, and Hainan Airlines began 4-weekly services from Boston to Beijing in June 2014. Prior to these scheduled flights, Boston had not seen nonstop connectivity to Asia since Korean Air withdrew its thrice weekly services to Boston in February 2001, which had operated in a triangular routing that went Seoul – Boston – Washington Dulles – Seoul on a 747-400.
Although Cathay is not earliest entrant to compete in the Boston to Asia nonstop corridor, it will be the first to operate a non-Dreamliner widebody aircraft to Hong Kong. Prior logic had dictated that “thinner” East Coast markets such as Boston could only viably support service to Asia on the smaller-guage, fuel-efficient 787 Dreamliner, but Cathay believes that its high-density 777-300ER is an appropriate configuration for the route. In the official press release, Cathay’s SVP for Americas Tom Owen stated that, “in addition to passenger demand, there is also an opportunity for increased freight from New England to Asia, due to the Boeing 777-300ER belly capacity, and connectivity through [Cathay’s] new Cargo Terminal in Hong Kong to Cathay’s extensive Asian freighter network,” thereby indicating that freight will play in an important role in shaping the future of the route.
Moreover, in addition to cargo capacity and larger seat density, Cathay will also have a competitive advantage in offering a First class cabin and Premium Economy product over its two Asian rivals serving Boston. Both Hainan and JAL only offer a 2-class cabins on their Boston routes, compared to Cathay’s 4.
The introduction of Cathay Pacific will also boost Boston’s foreign service carrier count to 23 airlines, many of which have come within the past 24 months. Since spring 2012, in addition to JAL and Hainan, Boston has attracted service from Copa Airlines of Panama, Turkish Airlines and Emirates.
Cathay’s Boston flight is timed to mirror schedules used at Newark
Cathay has stated that its experiment at Newark, which was launched in March 2014, has “exceeded expectations.” Conventional wisdom would argue that Cathay’s decision to go head-to-head with United on a nonstop route from Hong Kong to Newark, when it already offered 4 daily flights into nearby New York JFK airport, would be redundant, but CAPA reasoned that Cathay intentionally targeted Newark in wake of Singapore Airlines’ decision to axe its ultra-long haul nonstop flight from Changi to Newark in November 2013.
Moreover, whereas United lacks a local partner in Hong Kong, Cathay opens up a slew of 1-stop markets across the Asia-Pac region for NYC travelers. Cathay intentionally timed Newark services to depart late night from Newark and arrive into Hong Kong early in the morning two days later, facilitating an entire day’s worth of work in New York for business travelers and connections on the Hong Kong end to a range of Asian markets. On the return, Cathay’s Newark flight departs Hong Kong in the early evening hours and arrives into Newark on the same day, close to 10 PM, again permitting a reasonably full days’ worth of work for ex-Hong Kong business travelers as well as connections from other Asian markets.
Therefore, it is no surprise that Cathay chose to emulate the same schedule for Boston, again with an early evening departure and arrival from Hong Kong and into Boston on the outbound, and a late evening and early morning departure from Boston and into Hong Kong on the inbound.
CX812 HKG1800 – 2130BOS 77W x357
CX811 BOS0145 – 0535+1HKG 77W x146
Widebody aircraft deliveries continue to open more East Coast – China routes
The advent of the 777-300ER has enabled growth for more mainland Chinese carriers to operate beyond traditional North American west coast transpacific gateways and head Eastward. In June, Air China has launched a 4-weekly service fro Beijing to Washington Dulles, on a 777-300ER, and earlier in August, China Southern inaugurated a four-weekly Guangzhou – New York JFK service, also on a Boeing 777-300ER.
The third of the “big three” Chinese carriers, China Eastern, launched a thrice-weekly service from Shanghai to Toronto in June 2014, although utilizing an Airbus A340-600 aircraft. However, this is likely to be converted to a 777-300ER route as China Eastern will receive 4 of the Boeing variant later this year, and 13 more in later years. China Eastern’s Airbus A340-600 fleet is not fuel-efficient to viably serve its long-haul routes beyond a short term period, and the carrier has made a deal with Boeing to take its 5 A346s as a replacement. In addition to Toronto, China Eastern sends its Airbus A340s to Los Angeles, New York and Paris.
Taken holistically, the pattern appears that all of the “Big Three” carriers, Air China, China Southern and China Eastern, as well as Cathay Pacific, will approach their East Coast operations in a similar fashion, using high-density, yet economically efficient, widebody planes on a less-than-daily basis and watch as the markets mature over time.
In all likelihood, the first carrier to up-gauge its frequencies from less-than-daily to daily will most probably be Cathay, given that it will hold a monopoly on the Boston – Hong Kong route. China Eastern will compete with a daily service on Air Canada between Toronto and Shanghai, and Air China competes against United between Washington Dulles and Beijing. Although China Southern is the only carrier to fly between New York and Guangzhou, the Cantonese city supports less premium traffic than Hong Kong or Shanghai, and Guangzhou is viewed as a less preferable hub to support beyond connections within the Asia Pacific region. Furthermore, New York – Asia is already saturated with a wide range of US and Asian carriers offering sixth-freedom connections over 1-stop markets to Asia, whereas Boston has more room to grow.
The Boston route will certainly be a high-profile litmus test for Cathay to see if the rebound in premium traffic in North America is indeed sustainable over a long-term period and may open up an opportunity to create more routes in the US, if successful. Despite its visibility as one of the strongest network carriers with a highly-regarded product, this is a big step for Cathay, and with high-risk comes high-reward. Given the state of the airline industry, hesitation is disadvantageous.