Airlines still not ready to invest in direct Asia Pacific flight from Philadelphia

PHL's proximity to airports with such flights, and uncertainty over need, keep those flights from being offered. ( ALEJANDRO A. ALVAREZ / STAFF PHOTOGRAPHER )

Philadelphia has long wanted a direct flight to the Asia Pacific region. A survey of business travelers here in 2012 found the top desired international business destinations were Tokyo, Shanghai, Beijing and Mumbai, India.

Philadelphia already has a lot of international service to Europe, Mexico, the Caribbean, and the Middle East. But attracting a nonstop flight to China, Japan, Hong Kong, or Korea has proven difficult.

"We are the largest metropolitan area in the United States without direct nonstop service tothe Asia Pacific," Philadelphia International Airport CEO Mark Gale saidin a recent interview.

But it's not for lack of trying. "I talk to carriersabout this almost on a weekly basis," Gale said.

Still, Philadelphia's proximity to New York and Washington, as well as the presence of a dominant hub carrier, and uncertainty whether there would be enough daily top-paying corporate travelers are key reasons the local airport has struggled to get off the ground with a direct flight to Asia.

American Airlines, Philadelphia's hub carrier with more than 450 daily flights after merging with US Airways, is serious about expanding service to Asia. The world's largest airline has dedicated some of its newest airplanes to flying there - from Dallas-Fort Worth, Chicago, and Los Angeles. But not Philadelphia.

"For the foreseeable future, our Asia growth is going to be focused on growing out our Los Angeles gateway," American president Scott Kirby said last month on a quarterly earnings conference call.

Philadelphia may one day get an Asia flight, but not anytime soon. "We will continue to look at it over time," CEO Doug Parker said. "We're not saying that it won't make sense at some point in time."

A big hurdle to Philadelphia getting a nonstop flight to Asia is its location - sandwiched between Newark, N.J., and New York John F. KennedyInternational airports, which have lots of direct Asia flights - and to the south, Washington Dulles airport, which has Asia service.

"I've had many discussions, particularly with foreign flag carriers that look at Philadelphia and say, 'How easy is it for folks to get to New York?' " Gale said. "In many cases, they already have a flight, and there's fear if they add a flight in Philadelphia it will cannibalize one of their other routes."

Besides proximity to three airports with direct Asia flights, Philadelphia is a hub for American, which controls 76 percent of the market and could threaten a rival airline's ability to make an Asian flight from here viable. Companies often have corporate travel accounts with a hub carrier, and corporate sales are the bread and butter for airlines.

"If an airline were to come into Philadelphia and not be aligned with American, either through a code share or a revenue share, they need to make sure they are going to get enough passengers on those aircraft to make a profit," Gale said.

"It's a lot easier to fill that aircraft, if you are a foreign flag carrier, and you have a business relationship with the hub carrier," Gale said. "I think, ultimately, Philadelphia will gain an Asia Pacific flight, if not by American Airlines directly, then by a foreign carrier that potentially has an arrangement with American."

By contrast, Boston, which does not have a hub airline, has flights to Asia operated by several foreign airlines. Boston tried for years to get the service. The city's location 220 miles from New York was an added advantage.

To attract any new air service to Asia, Philadelphia airport officials must make the case that the planes would be filled regularly with full-paying business travelers, as well as budget-conscious leisure travelers.

From Philadelphia, a flight to Beijing, Shanghai or Seoul would take 14 hours and require two aircraft, one on either end, plus a third plane if parts or maintenance were required. The latest-generation airplanes capable of such a long-haul route cost $250 million to $300 million.

That's a hefty investment that an airline must recover from passenger and cargo revenue.

"You've got to make certain the economics are right, not that they won't be at some point," one American executive said, speaking on the condition of anonymity because he did not want to speak for management. "Philadelphia's prospects for international service to Asia got much better post-merger" with the combination of American and US Airways.

American has orders for 42 Boeing 787 Dreamliner aircraft and 22 Airbus A350s through 2019. The long-range aircraft are smaller - with fewer seats - and are cheaper to operate because they burn 20 percent less fuel than older Boeing 767 and 777s.

Now, American funnels East Coast passengers to Asia through Dallas, Chicago or Los Angeles. Should there be a flight to the Far East from Philadelphia, it would head north over the North Pole. The "catchment"area for the majority of passengers would be the East Coast.

"Half the U.S. population lives on the East Coast," saidSeth Kaplan, managing partner of Airline Weekly, an industry publication. "The benefit of Philadelphia vis-a-vis New York or Washington is that it's a rather robust hub for American with a lot of feeder flights that they don't have at JFK."

For example, an Asia flight from here might start in Miami or Charlotte, which are both American hubs. The Philadelphia flight would likely depart midday, after morning connecting traffic had arrived, bringing potential travelers to go onward to Asia.

About 70 percent of American's international passengers in Philadelphia connect from elsewhere, and 30 percent are local. On some flights to Europe and the Middle East, as few as 10 percent of passengers originated in Philadelphia, American said.

Philadelphia's "Holy Grail" is lower operating costs than Newark, Dulles, and JFK airports. "Keeping those costs down potentially opens up new markets out of Philadelphia," said a former US Airways official, who requested anonymity because he no longer works for the company.

Gale and his airport staff, in talking to airlines about flying to Asia, provide regional data and statistics from the Chamber of Commerce, Select Greater Philadelphia, Visit Philly, and the Philadelphia Convention & Visitors Bureau.

When Qatar Airways began flying from Philadelphia to Doha, the Qatari capital, in April 2014, the deal was sealed with the merger of US Airways and American, Gale recalled. American is a member of the Oneworld global airline alliance, and so is Qatar.

As alliance members, American and Qatar share passengers and revenue on legs of a journey. Qatar may bring travelers from Pakistan or Tanzania, who then board American flights to go to Detroit or Pittsburgh.

Kaplan said the lowest-risk "starter Asian market" for Philadelphia might be Tokyo. "It's a high-volume route, a well-developed market with hubs on both endsin Philadelphia and Tokyo for American and Japan Airlines. You can sell the connections on either end."

American and Japan Airlines have a joint business venture on trans-Pacific routes, which is a "closer relationship than an alliance," Kaplan said. American also has joint ventures with British Airways, Iberia, and Finnair to Europe.

"China and India are moving up constantly in Philadelphia, even without direct nonstop flights," said Jack Ferguson, CEO of the Philadelphia Convention & Visitors Bureau.

Middle-class consumers in those countries are traveling more, and their visas now are valid for 10 years. "When you have a 10-year visa, it opens up travel to more U.S. cities," Ferguson said.

China had the second-largest number of international visitors and overnight hotel stays in Philadelphia in 2014, according to the Commerce Department's Office of Travel and Tourism. India was fifth and Japan was in the top 10. The greatest number of foreign visitors - 87,000 - was from the United Kingdom.

Last year, Philadelphia saw a 52 percent increase in visitors from China, to 61,000. The 21,000 travelers from Japan was a 40 percent increase from 2013.

"Asians are definitely traveling and they are figuring out ways to get here," Ferguson said. "Any time we can create an opportunity where they can get here easier than they do today, we win."


lloyd@phillynews.com

215-854-2831@LoydLinda

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