North Asia’s largest transpacific carrier, Korean Air, has unveiled plans to launch service to its second market in Texas when it commences nonstop flights from its Seoul Incheon base to Houston Bush Intercontinental airport (IAH) on May 2.
The flight will be operated on a 4-weekly basis using a Boeing 777-200 ER with the following times:
KE029 ICN0910 – 0830IAH 772 x247
KE030 IAH1040 – 1530+1ICN 772 x247
Once Houston comes online, Korean Air will be connected to 13 North American destinations from its Seoul gateway. This number is significant relative to Korean’s other major North Asian competitors, namely Japan Airlines and All Nippon Airways, and is a testament to its resiliency in punching above its weight class across the Pacific. Furthermore, JAL and ANA have the advantage of pursuing joint venture agreements on transpacific services to the United States with their alliance partners American Airlines and United Airlines, respectively, which helps minimize risk through revenue and cost-sharing through metal neutrality. Korean, on the other hand, has a much more limited relationship with its SkyTeam partner, Delta Air Lines.
The scenario contrasts greatly with Korean’s #1 major domestic competitor, Asiana Airlines, who also functions as a major intercontinental network carrier into South Korea. Asiana only serves a total of six destinations in North America, all in the U.S., and competes head-to-head with KE on each one.
Despite earlier indications that Korean Air’s presence in North America was relatively mature and that the carrier was focusing on growth opportunities existing in other regions of the world, it clearly feels that Houston poses a less risky venture in the near-to-medium term.
Houston – Asia is an ‘underserved’ market, as discovered by Air China. KE wants in.
Korean Air will be the 3rd Asian airline to serve Houston after Singapore Airlines and Air China, and the 15th foreign flag carrier at IAH. SIA has been flying to Houston since 2008 and operates a 5-weekly service between Changi airport and IAH, but via Moscow Domodedovo airport each way, thereby operating as an eastbound operation through Europe from Houston. Air China launched nonstop service from Houston to its Beijing Capital hub in July 2013, initially on a 4-weekly basis utilizing a Boeing 777-300ER, and is slated to go daily on March 30.
Whereas both Air China and SIA launched Houston using larger-gauge Boeing 777-300ER series planes, Korean chose to stick with a smaller-seating version given that it has a larger presence in North America relative to the other two carriers and ultimately wants to start off on a more conservative approach with IAH. Korean also aided by the fact that the polar routing from Houston to Seoul follows a more southerly path than Houston to Moscow or Houston to Peking, which gives it wider flexibility in terms of aircraft range capability when facing headwinds.
For a mid-continent airport geographically located in a very Southern part of the country, Houston airport has slowly attracted the attention of a mass array of foreign carriers over the past few years. Aside from being one of the largest population centers in the U.S., Houston’s oil traffic draws a ton of foreign visitors to the city, much of it high-yielding.
However, the reality is that even with over a dozen foreign airlines at Bush, the market has been crying for more nonstop routes to Asia, an opportunity that hometown carrier United Airlines (and merger partner Continental before it) largely neglected for years. Whereas virtually all of United’s primary hubs (SFO, LAX, ORD, IAD and EWR) have been connected to mainland Chinese cities for years, Houston was never given a consideration.
Retrospectively, that decision may have proven unwise as the opportunity was ultimately scooped up by a competitor when Air China commenced service from Houston to its Beijing Captial hub last July. Supposedly, opening IAH was a “risky” venture for CA, as openly stated by the carrier, yet it was fortuitous that the route turned out to be an instant goldmine. Air China was quick to reveal publicly that its Houston – Beijing flight was profitable ‘out of the box’ after its start-up date last July.
As such, it should come as no surprise that Korean is eager to see if it can get a slice of that pie and compete for traffic. Korean also hopes to give SIA a run for its money by offering a faster-track option to reach Southeast Asia rather than double connect over Moscow and Changi. The SIA flight is popular among the large Vietnamese immigrant community residing in the Houston area, and a faster alternative with a less circuitous routing will be favorable.
United and Star Alliance partners cede opportunity to SkyTeam
Korean will be the first SkyTeam-affiliated carrier to offer long-haul, nonstop transpacific service from Houston to Asia. This will shake-up the status quo given that virtually all of Houston’s Asia-Pacific services are served on Star Alliance-based carriers.
Given that Houston is not SkyTeam hub, the route announcement should serve as a wake-up call to Star Alliance, namely United and Asiana Airlines, denoting that Houston is hot on the watch list among Asian carriers. Air China’s wild success on its Houston to Beijing flight should come as no surprise given the fact that both airports are the largest bases for two of the biggest carriers in Star Alliance, United Airlines and Air China, respectively. As a hub-to-hub route, the flight links two massive population centers with endless connection opportunities on both sides of the coin.
Sadly, neither United nor Asiana have picked up on this. Instead, United has opted to stick with the traditional methodology of routing all Houston – Asia traffic over Tokyo Narita instead. More recently, United announced it was adding a second daily flight from Houston to Tokyo, but this appears to be out-of-sync with continual de-emphasis on using its Narita hub to funnel sixth freedom traffic between the US and Asia. United has cancelled its services from Tokyo to Hong Kong and Bangkok, and down-gauged aircraft on Tokyo to Seoul. Although United will easily be able to fill a second Houston to Tokyo route, even with a reduced intra-Asia schedule out of Narita, it’s just another way to beat the same old drum when other, more lucrative opportunities may exist right underneath its nose.
It would seem that Houston presents a ripe opportunity for Star member Asiana to fill the void, but Asiana is more restricted in terms of fleet opportunities. Still, but it could have forged ahead with a Houston plan of attack in 2013. The route would have likely been a successful startup to offer an alternative connection to Narita between Houston and mainland China, Southeast Asia and beyond over Seoul. In the reverse direction, it could have also connected well with United’s vast Latin American network from Houston.
However, Asiana instead chose to upgauge frequences to Chicago O’Hare from a four-weekly service to daily, a strategy that the carrier tried once before. Asiana hoped that with an updated premium cabin featuring First Class suites on the second attempt, it would be able to boost its level of corporate contracts on the Chicago to Seoul route. Unfortunately, Asiana’s plan fell short of its goals and has since scaled Chicago back to a 5-weekly operation, and deployed its First Class suite product to New York JFK on a daily basis instead.
Korean boldly chooses to launch Houston at the expense of DFW frequencies
Korean has opted to eliminate two weekly frequencies from its Dallas/Ft. Worth station following a short-lived experiment to operate a daily service once DFW’s hometown carrier, American Airlines, launched a daily service to Incheon in spring 2013 to compete side-by-side with the incumbent Asian carrier. Korean has been serving the DFW market since 1994, primarily on a less-than-daily basis, but decided to match American’s frequency. The carrier will revert back to a 5-weekly service on March 30, but when Houston comes online in May, the carrier will still be offering 9 weekly flights to Seoul from two Texas airports as opposed to 7 on American from just one airport.
KE’s logic to open a Houston station in 2014 at the expense of DFW is an interesting move given that the SkyTeam carrier chose to pass up on a window to launch service to Continental’s largest base back when it was a member of the SkyTeam alliance during the mid-2000’s. However, that decision may have ultimately backfired given that Continental chose to switch its allegiance to Star Alliance ahead of its merger with United in 2010.
Parallel to this timeframe, Delta Air Lines had been operating a hub at DFW airport, which added feed to Korean’s nonstop service to Seoul, but Delta shut down its DFW base in early 2005 as it was unprofitable. Surprisingly, Korean has held on to its DFW service since then even without the feed from a local SkyTeam partner. The flight was capable living off of the large O&D between North Texas and South Korea, along with assistance from an interline partnership with American Airlines. DFW airport was also limited to two daily flights to Asia via American to Tokyo Narita aside from Korean’s 3-5 weekly frequencies, so KE was able to capitalize on offering an alternative option to fill connections to Asia and beyond.
However, Korean has likely discovered that this advantage is eroding now that American Airlines is setting its sights on building DFW out to be its Asian gateway. American has been flying between DFW and Seoul for over 9 months, and will be adding services to from DFW to Hong Kong and Shanghai in the upcoming months, which will hurt Korean’s share of the DFW-Asia traffic. Moreover, American is better poised to capture connecting traffic to Latin America over DFW airport, whereas Korean is far more limited with Aeromexico serving as the sole SkyTeam carrier offering connections to Latin America from DFW.
As such, Korean has likely accepted that its longer-term fate is to serve the DFW market on a less-than-daily basis capturing ethnic traffic between Texas and the APAC region. It will fill a similar role in Houston, although Dallas’ Korean population is roughly three times larger. Taking in larger Southeast Asian immigrant communities from both cities, however, the numbers start to even out.
Houston is likely a safe bet for now, but Korean’s overall network strategy is vague
For a founding carrier of a major global alliance, Korean’s network strategy appears to be a hodge-podge of ideas, without a clear victor among them. Plans to launch a continued flight from Los Angeles to Lima, Peru have been put on hold and instead KE has upped frequencies on its LA to Sao Paulo route from 3 to 5 weekly, even though American recently entered LAX-GRU with a daily 777. Korean is sending the largest Airbus A380 capacity over the Pacific to U.S. markets, including JFK, LAX and ATL, but seemingly has withdrawn 3 of its 10 weekly frequencies to Atlanta, the biggest SkyTeam hub in the Americas. It recently expanded into Africa by launching a 3-weekly service to Nairobi, the main base of SkyTeam member Kenya Airways, but allegedly the flight has struggled to meet performance targets.
Largely speaking, the biggest takeaway message is that Korean Air is trying to make a number of long-haul markets work, yet without the level of support from its alliance partners that it probably needs. While it’s impressive that the carrier can make this work in non-SkyTeam strongholds such as Dallas, Chicago and Washington, Korean should be open to opportunities that can help it sustain its desired level of traffic and yield mixes to sustain its impressive, yet meandering long-haul network focus. At least for now, Houston is a safe bet.