CEO Richard Anderson confident that the long term strategy used from the Amsterdam model can be replicated well enough
Delta Airlines, Inc. (DAL) CEO, Richard Anderson, envisioned creating an additional international hub in China (more precisely Shanghai) last week, as part of strengthening its relationship with China Eastern Airlines Corp.
Mr. Anderson pointed out that he attaches great importance to this route, as he wants to replicate the model to that in Amsterdam, a destination where the airline uses it as a hub to perform its operations in European or some parts of the MENA region.
Delta will initiate that process by launching flights from Los Angeles to Shanghai, which will be an addition to the flights from Seattle and Detroit to the largest city in China. Once it commences the service, Delta Airlines will co-locate with China Eastern Airlines inside the Shanghai airport.
The question is: will it work in China too? In the Pacific international airline market, Delta trails behind United, since the latter has a head start in the Chinese market by offering direct flights to secondary cities. So this strategy can be seen as a catch-up attempt by the airline, which is currently embroiled in a collision course with Gulf carriers, who are apparently being financed through subsidies. The Gulf carriers continuously and vehemently deny this claim. They seem to be responding by turning up the heat on Delta with more flights to important routes in US and specially, China.
There is no denying that there is a good deal of logic from Mr. Anderson in pushing for the idea of setting a feeder hub in Shanghai to feed the traffic into the US market. It is not without flaws though. Shanghai is ranked as the 29th busiest airport in the world, compared to Schiphol being the 5th. This means that despite millions of passengers processed from the airport, Shanghai does not receive a lot of traffic, even though a number of airlines operate there, but the China Eastern Airlines lags with other regional carriers behind in the number of destinations served. Secondly, there is little chance that the government will give the go ahead to fly between two cities in China.
The verdict: It is not a bad idea, given that the Chinese market is still huge, despite the slowdown in its economy. Delta should look into the idea of feeding their growth from China to Brazil via the US, since there is a lot of strong traffic out there now and especially as Delta has a stake at Gol, a local Brazilian airlines, providing wide range of choices for Chinese consumers to fly to various Brazilian cities.
Mr. Anderson pointed out that he attaches great importance to this route, as he wants to replicate the model to that in Amsterdam, a destination where the airline uses it as a hub to perform its operations in European or some parts of the MENA region.
Delta will initiate that process by launching flights from Los Angeles to Shanghai, which will be an addition to the flights from Seattle and Detroit to the largest city in China. Once it commences the service, Delta Airlines will co-locate with China Eastern Airlines inside the Shanghai airport.
The question is: will it work in China too? In the Pacific international airline market, Delta trails behind United, since the latter has a head start in the Chinese market by offering direct flights to secondary cities. So this strategy can be seen as a catch-up attempt by the airline, which is currently embroiled in a collision course with Gulf carriers, who are apparently being financed through subsidies. The Gulf carriers continuously and vehemently deny this claim. They seem to be responding by turning up the heat on Delta with more flights to important routes in US and specially, China.
There is no denying that there is a good deal of logic from Mr. Anderson in pushing for the idea of setting a feeder hub in Shanghai to feed the traffic into the US market. It is not without flaws though. Shanghai is ranked as the 29th busiest airport in the world, compared to Schiphol being the 5th. This means that despite millions of passengers processed from the airport, Shanghai does not receive a lot of traffic, even though a number of airlines operate there, but the China Eastern Airlines lags with other regional carriers behind in the number of destinations served. Secondly, there is little chance that the government will give the go ahead to fly between two cities in China.
The verdict: It is not a bad idea, given that the Chinese market is still huge, despite the slowdown in its economy. Delta should look into the idea of feeding their growth from China to Brazil via the US, since there is a lot of strong traffic out there now and especially as Delta has a stake at Gol, a local Brazilian airlines, providing wide range of choices for Chinese consumers to fly to various Brazilian cities.
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