Auckland, New Zealand is set to become the first destination when Hong Kong-based Cathay Pacific Airways launches the long-haul operation of its Airbus A350-900 in May 2016, following the first delivery of the game-changing aircraft next February, according to people familiar with the oneworld carrier’s preliminary plan. The initial year of A350 operation at Asia’s biggest international carrier will also see the aircraft being used to right-size its European route network, launch new long-haul thin routes whilst providing incremental growth opportunities for its constrained Australian operation.


The commencement of long-haul A350 operation follows roughly 3 months of regional deployment for crew familiarisation and the build-up of engineering station support readiness that will see Manila, Taipei Taoyuan International Airport, Singapore, Osaka Kansai, Bangkok and Ho Chi Minh City in Vietnam amongst the first cities receiving the carbonfibre composite jet.


The preliminary plan, still subject to change, also calls for the “selective replacement of a few B777 routes to current European destinations”, Aspire Aviation‘s multiple sources at Cathay Pacific said. The airline launched a 4 times weekly service to Manchester on December 8th last year and is slated to begin a 4 times weekly flight to Dusseldorf, Germany on September 1st. Replacing the 3-class 340-seat and 4-class 275-seat Boeing 777-300ER on these two routes with a 280-seat 3-class A350-900, for instance, provides the airline flexibility to either boost the flight frequency that business travellers prefer and generally carries a higher yield, or return on airfares measured in revenue per revenue passenger kilometre (RPK) while keeping a lid on the overall weekly capacity; or hasten the maturation process of these new routes by temporarily slashing short-term capacity in order to improve both load factors and yield. Should the airline ultimately decide to do so on such routes, the A350 will enable it to better optimise its product offerings to match market demand.


Meanwhile, Australia is on the radar for A350-900 deployment, with “some upsizing of some A330 services to one or two Australian ports is also being considered” towards the end of 2016, the same sources say. This makes much sense as Cathay Pacific’s number of weekly frequencies to the 4 Australian “capital cities” of Sydney, Melbourne, Brisbane and Perth is currently capped at 70 under the bilateral air services agreement (ASA) between Australia and Hong Kong, with the conversion of all Cairns and Adelaide flights to non-stop earlier this year lifting the weekly total to 74, thus leaving up-gauging the only viable growth option unless the cap is abolished. The airline has already moved one of its 4 daily Hong Kong-Sydney flights, CX138/139, to a 3-class 777-300ER and will be introducing a second 777-300ER flight on CX100/101 beginning 1st October, thus bringing the total capacity increase on the route to 18% for 2015.


Furthermore, not only will the A350 provide incremental growth opportunities for the Australian operation which is celebrating the 45th anniversary of serving Perth this year after the 40th anniversary of continuous non-stop Sydney service in 2014, the 280-seat A350-900 is arguably very fitting to the price elasticity of demand of the market, whose growth in traffic is predominantly driven by back-end economy class passengers. The A350-900, configured with 38 New Business Class, 28 New Premium Economy Class and 214 New Economy Class seats, has a 12.04% bigger Economy cabin than a 251-seat A330-300 with 39 Business, 21 Premium Economy and 191 Economy seats, thus hiking the economy ratio by over 6 percentage points to 82.3% from 76.1% (“Cathay Pacific begins the next chapter of growth“, Apr 8th, 15). The 251-seat A330-300, dubbed “33K”, itself saw the removal of 7 premium economy class seats and the addition of 16 economy seats from the 247-seat A330-300 “33G” configuration.


Given the unclear potential ramifications on the bilateral air traffic rights negotiation between Australia and Hong Kong after the decision of the Air Transport Licensing Authority (ATLA) to reject Jetstar Hong Kong’s application for a local air transport licence, in which the regulator used English and US persuasive precedents and applied the “nerve centre test” in determining Jetstar Hong Kong’s “principal place of business”, growing in Australia with the A350 from late-2016 onwards appears to carry the least risk and is independent of the negotiation outcome.


“The nerve centre has to be in Hong Kong. By nerve centre, the Panel looks at where and by whom the decisions regarding the key operations of an airline are made. Decisions are not those of the day-to-day operations only but also those which are relevant and crucial to the business of the airline. Its activities must not be subject to the control of senior management, shareholders or related parties located elsewhere,” the ATLA wrote.


Intriguingly, it is likely that there will be some months before Cathay Pacific announces the next round of network expansion with the A350, as the operational lead times of 6 months of building up engineering station support capability and gaining regulatory approvals, coupled with the delivery profile of 12 A350s in 2016, plus the aforementioned 777-300ER substitution plan and a possible Australian deployment, mean the launch of “a couple of new destinations” under consideration will be more progressive. Some of the frontrunners are understood to include Seattle, USA and Barcelona, the latter of which has 43.9% of Spain’s total origin and destination (O&D) traffic from Asia/Pacific and yet is significantly underserved with 94.2% of passengers originating from region being indirect in 2014, according to the Barcelona Air Traffic Intelligence Unit. Spain is targeting 1 million Chinese tourists by 2020 with a 20-25% annual growth, with Global Blue, a global duty-free retailer, estimating that a Chinese tourist spends €2,040 on a tour package plus €167 per day on fashion items on average, doubling the average Chinese tourist spend in Germany (“The quiet rebirth of Iberia“, 12th Feb, 15).


That said, the current focus at the airline is the induction of the A350-900 into its fleet, whose first full flight simulator (FFS) has been installed at the Flight Training Centre in the last week of May and the fuselage sections of its first example, MSN029, arrived at Airbus’s final assembly line (FAL) in Toulouse on 29th May.


Cathay Pacific will receive the remaining 10 A350-900s on order in 2017, which will feature the FB2+ New Business Class seats with customisation by Germany’s Porsche Design Group, improved table and personal television positions; in-flight Wi-Fi; and a new Economy tray service, before deliveries of 26 A350-1000s begin in 2018.



Source: www.aspireaviation.com/flickr.com; 2015-06-26

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