Analyst Has High Hopes for New Delta Los Angeles-Shanghai Flight
MIAMI — Delta Air Lines today announced plans to begin daily nonstop service between Los Angeles International Airport and China’s Shanghai-Pudong Airport on July 9, 2015, pending government approval. And Mike Boyd, founder and owner of the Denver-based aviation consultancy Boyd Group International, has high hopes for the new route.
China is among the air service regions covered in Boyd’s yearly International Aviation Forecast Summit, which brings in global airline executives to discuss industry forecasts and trends to attendees. He thinks that Delta’s move on this route helps solidify it in the region. “It’s not like there’s a lack of seat between Los Angeles and Shanghai, so this keeps Delta in play in China,” he said. “We’re projecting that in five to seven years, half the lift between the U.S. and China will be on Chinese carriers.”
United is back in the market, American is there and so is China Southern, said Boyd. “As of this month, there are 769 seats each way in the LAX-PVG market, including United,” he noted. “Load factors indicate 88 percent for year-to-date data, which would mean that there are almost 500,000 passengers (counting both ways) on the nonstop route. Some of that on each carrier is connecting flow, but I would estimate it’s not more than 25 percent.”
“Using rough numbers, if Delta jumps in with a 250-seat airliner and gets an 88 percent load factor, it would have to stimulate the on-board traffic by another 160,000. That’s 32 percent stimulation, according to conventional thinking,” said Boyd. “But Delta will do gangbusters. First, at 88 percent load factor, the existing LAX–PVG service is spilling passengers to other routings. Second, the growth in the U.S.-China market will be huge over the next five years.”
Right now, there are two million leisure visitors from China coming to the U.S., and that will rise to 10 million in five years, said Boyd. “And the spend per customer will average $4000. Wouldn’t you want to be in that market?” he asked. “This route could also help Delta buttress additional service from Atlanta in the future.”
There’s already $10 billion in Chinese investments here in the U.S., said Boyd. “So Delta needs to do this because there are already a lot of carriers in China,” he said, including United on San Francisco-Chengdu and American opening Dallas/Fort Worth to Shanghai and Hong Kong. “So no matter how many seats you have today, it won’t be enough for tomorrow. We’re looking at a whole slew of markets in the future, like Chengdu.”
Traditionally, Los Angeles is not a good gateway to Asia for rest of the world, said Boyd. “A major flow is between Brazil and China, and American is using DFW to connect Latin America to China,” he said. “But Los Angeles does have strong business ties with China, so this route makes sense. SkyTeam partner Korean Air flies Los Angeles-Sao Paulo, so that would be a great partnership, but Korean and Delta seem to be at odds within the alliance.”
The Los Angeles market makes up 25 percent of all U.S.-Asia demand, and the start of Shanghai service marks Delta’s fourth daily nonstop flight to the Asia-Pacific region in addition to Tokyo-Narita, Tokyo-Haneda and Sydney. The new flight, using a Boeing 777-200LR, will connect travelers to more than 25 cities in China, while the Los Angeles-bound Shanghai flight will offer connections to 40 markets throughout the U.S., Canada and Latin America.