Asia Pacific has become one of the growth engines for Delta Air Lines, which is contemplating more services to the region from its expanded base at New York’s JFK International Airport.
Delta needs to improve brand recognition in Asia and will stress its product strength, says Vinay Dube, senior vice-president for Asia Pacific.
The higher economic growth in many Asian countries compared with Europe and the United States is creating a lot of demand for travel from East to West.
“We’re looking to add more frequencies and routes to Asia Pacific. JFK International Airport will be the gateway to Asia,” said Delta CEO Richard Anderson.
Delta on May 24 opened its new Terminal 4 expansion at JFK, where Terminal 3 had served as its hub on the east coast of the United States for 45 years. The new facility will help it reach more Asia-Pacific destinations.
The Terminal 4 project represents an investment of $1.4 billion for Delta, which also has terminals in Seattle and Detroit. In the United States, the cost of building terminals is often borne by airlines either entirely or in conjunction with airport operating companies.
The complex known as Terminal 4 is in fact 12 years old and was built on the site of the old International Arrivals Building (IAB). The makeover by Delta involved a 32,000-square-metre expansion of Concourse B to bring the terminal’s total space to 187,000 sq m, one of the largest in North America.
Terminal 4 is home to numerous airlines including Delta, El Al, Emirates, Etihad, KLM, Singapore, Swiss, and Transaero, but Delta is by far its largest user, serving 11 million passengers per year. The existing Terminal 3 will be demolished and used for aircraft parking eventually
Work is already starting on phase two of the Terminal 4 redevelopment plan, which will include an additional 11 gates on Concourse B. Upon completion in mid-2015, Concourse B will house 27 Delta gates and replace the carrier’s current Terminal 2 regional jet facility.
“We’re looking to add more frequencies and routes to Asia Pacific,” says Delta CEO Richard Anderson.
Mr Anderson said the airline was looking to increase flight capacities to China and Hong Kong over the next three to five years. Non-stop flights from the US east coast to Asian destinations are also being considered.
Delta has used Japan as its hub in Asia Pacific for decades. It operates 14 daily flights from Japan to the US mainland. Most travellers from Southeast Asian countries including Thailand fly to Japan to connect to the US.
The American carrier currently flies to Beijing and Shanghai via its Asia-Pacific hub in Japan. However, on June 17 it began direct nonstop flights between Seattle and Shanghai. It also offers nonstop flights from Seattle to Beijing, Osaka, Tokyo-Narita and Tokyo-Haneda.
The fast-growing China market is one that all international airlines are now chasing. According to the UN World Tourism Organisation, international trips by Chinese travellers rose from 10 million in 2000 to 83 million last year. Their spending in international tourism markets last year was $102 billion last year, a 40% increase from $73 billion in 2011, making Chinese tourists the biggest spenders in world tourism. The country was ranked seventh in 2005.
Chinese tourists were the sixth biggest spenders in the US tourism industry last year at $9.2 billion. In 2008, China was not even in the top 10. New York City alone attracted 400,000 Chinese visitors in 2011, according to NYC & Company, the city’s official marketing, tourism and partnership organisation.
Although China, Hong Kong and Taiwan are all targets for expansion by Delta, Mr Anderson said Japan would remain its hub in Asia, despite the flat growth of in US-Japan travel.
Vinay Dube, senior vice-president for Asia Pacific, said gross domestic product growth in Asian countries was directly correlated with increasing travel demand, which has been reflected in Delta’s revenue.
“Delta’s revenue from Asia Pacific in 2009 was US$2.4 billion. The number grew to more than $4 billion in 2012, which was 67-68% growth for the past three years. The region remains the growth engine of Delta,” he said.
Delta’s passenger revenue from Asia Pacific in the first quarter of 2013 was $871 million, an increase of 3.1% from the same period last year.
Even though Delta is growing satisfactorily in Asia Pacific, the carrier’s European market is till 50% larger.
To increase revenue from Asia Pacific, Mr Dube said the carrier needed to expand capacity and increase market share. He admitted that brand recognition of Delta among Asian travellers still needed to improve.
To win travellers’ hearts, Mr Dube said Delta would use its strength in products, which it believes are on par or better than those of other carriers operating in Asia.
Mr Anderson acknowledged that one constraint on serving Asia from North America was aircraft availability, since the carrier needs to make decisions on how and where in the world to best deploy its long-haul jets.
Price competition is also a challenge for Delta, added Mr Dube, noting that Asia had many state-owned carriers that benefited from government support. Although this challenge is related to the operating cost as a whole, Delta feels confident in its competitive prices and the ability to compete with other Asian carriers.
He added that Delta remained focused on “capacity discipline”. Many American airlines during the late 1990s invested heavily in capacity expansion, and when the crisis came, many went bankrupt.
“Delta also invested a lot at that time. Now we’re more cautious. We’ve just announced the investment of $2 billion, which is half of what we spent during the late 1990s,” he said.
“The expansion of Delta in this region from now on will come from the investment in our products, new routes and the cooperation with our partners so that we can reach out more to Asian travellers and bring them to the US.”
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Writer: Nalin Viboonchart