United’s Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions
United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - Route Would Connect Nowhere to Nowhere
Hangzhou Xiaoshan International Airport has been closed to international passenger flights since March 2020 due to China's strict COVID-19 policies. The airport served Hangzhou, a city of over 10 million residents and a popular tourist destination known for its natural scenery and historic sites. However, it is not possible for foreigners to travel there presently.
San Francisco, on the other hand, is very much open to travelers. But China has severely restricted inbound travel from the United States and other countries since the start of the pandemic. Americans cannot obtain tourist visas currently, making leisure travel to China near-impossible.
So United's proposed nonstop would quite literally be connecting nowhere to nowhere. Hangzhou airport is closed to the very passengers United hopes to fly there from San Francisco. And those passengers currently have no way to enter China anyway. It is a route to nowhere, for no one.
Aviation analysts have questioned why United would propose restarting the route when neither side is accepting visitors from the other. Without tourist travel, there is little traffic to support regular flights.
Pre-pandemic, San Francisco to Hangzhou was a viable route. As a technology and business hub, Hangzhou attracted traffic from Silicon Valley and San Francisco. Tourism added to the mix as well. But in today's environment, it is unclear where the passengers would come from.
United says the route supports demand from Chinese students studying in the United States, and believes travel restrictions could ease in the future. Airlines do typically plan schedules 1-2 years in advance. However, China has given no indication it plans to relax borders anytime soon.
For now, the twice-weekly flights United proposes would fly nearly empty. Some analysts estimate the route would operate at just 10-20% capacity. That raises questions about whether it makes economic sense for United.
What else is in this post?
- United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - Route Would Connect Nowhere to Nowhere
- United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - United Pursuing Phantom Flights in Pandemic
- United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - United Not Alone Among Carriers Eyeing Suspended China Routes
- United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - Proposed Flight Part of Long-Term Planning Strategy
- United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - Aviation Experts Question Timing and Logic of Route
- United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - United Stock Drops Amid Scrutiny Over China Expansion
- United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - Ghost Flight Plan Embodies Issues Facing Airline Industry
United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - United Pursuing Phantom Flights in Pandemic
United's proposed San Francisco to Hangzhou flight has raised eyebrows within the industry because it represents something airlines usually try to avoid - empty seats. At a time when most carriers are trying to maximize revenue by filling every available seat, United is planning to fly planes that could be 90 percent empty day after day.
Aviation analyst Mike Boyd did not mince words, saying United was "operating a flight to nowhere, for no one." His blunt assessment gets at the heart of why the route seems so questionable right now.
Hangzhou is closed to the very passengers United hopes to attract. And those passengers have no way to enter China for tourism or business. So why is United chasing phantom demand that does not exist?
In the pandemic's early days, some airlines did operate near-empty "ghost flights" to avoid losing takeoff and landing rights at congested airports. But this service aims to start in 2023, presumably when traffic has rebounded.
"The schedule planning process is complex," United said in defense of the decision. While true, complexity does not justify flying empty planes. If United holds out hope restrictions may ease, there are likely better ways to position for an opening than burning fuel flying to nowhere.
United also cited demand from Chinese students studying in America. But with classes virtual, far fewer students are traveling between continents now. It is another example of phantom demand United is banking on.
China routes have been a drag on financial performance. United's stock dropped 4 percent amid scrutiny over its China ambitions. Experts say United may be misreading the tea leaves on China's reopening timetable and appetite for foreign travel.
Jim Corridore of CFRA Research stated, "U.S. airline service to China seems premature, as inbound travel to China may be limited for the next few years.” Yet again, an example of United banking on demand that does not exist.
United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - United Not Alone Among Carriers Eyeing Suspended China Routes
Delta Air Lines recently applied with the U.S. Department of Transportation to resume flights between Seattle and Shanghai in October 2022. The route would give Delta a foothold in mainland China from its Seattle hub. However, it faces the same challenges as United's phantom San Francisco-Hangzhou nonstop.
Shanghai, like other major Chinese cities, remains closed to most foreigners, including American leisure and business travelers. And those travelers have no way to obtain Chinese visas at present anyway. So Delta would likely be staring down abysmal load factors if it commences Shanghai service this fall as proposed.
Yet Delta is going through the motions of resuming flights, illustrating airlines' eagerness to tap into even hypothetical Chinese demand. With a population of 1.4 billion, China represents the biggest feast of passengers once borders eventually reopen.
Carriers salivate over the country's burgeoning middle class and their zeal for foreign travel. In 2019, Chinese tourists spent $133 billion overseas, demonstrating the enormous spending potential. Airlines are jockeying for position to scoop up bookings when that spending spigot turns back on.
American Airlines has taken a different approach to potential China reopening. It is beefing up partnerships rather than eyeing new routes right away. American recently announced deeper ties with China Southern, the country's largest airline. The relationship could funnel more connecting passengers onto American's flights once tourism rebounds.
This demonstrates there are prudent ways to prepare for China's reopening without operating near-empty flights in the interim. Partnerships build goodwill and put carriers first in line for Chinese bookings when the time comes.
Starting new routes to suspended destinations represents a bolder gamble. The risk is that China maintains its "zero-COVID" stance and associated travel restrictions for years longer. Airlines would burn tons of fuel flying empty jets, and temporary pilot jobs needed for phantom routes would become permanent and expensive.
United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - Proposed Flight Part of Long-Term Planning Strategy
Airlines typically plan schedules 6-18 months out. Given the long lead times, United's San Francisco-Hangzhou service starting in 2023 makes sense from a planning perspective. While borders are closed today, United is betting on a gradual reopening over the next year.
Industry insiders say that is a reasonable assumption. China cannot remain isolated forever, though the timing of reopening is uncertain. By staking an early claim to in-demand routes, United hopes to be ready for an influx of traffic when the time comes.
A United spokesperson positioned the new flight as part of "building back capacity between the U.S. and China." Resuming service is meant to signal United's confidence in a 2023 comeback for Chinese travel.
Aviation consultant Samuel Engel of ICF argues restarting China flights requires "a little bit of a leap of faith. But on the other hand, schedules do get planned far in advance." Airlines must think ahead or risk losing out when pent-up demand surges back.
This forward-looking approach often pays off. For example, United announced its Newark-Cape Town route in 2019 before South Africa fully reopened to U.S. tourists. The inaugural flight did not operate until late 2021. But United got a head start on competitors by assuming tourism would return.
The difference here is that China's reopening is harder to predict. However, United likely took the uncertainty into account before proposing San Francisco-Hangzhou. The route gives it flexibility to capitalize when borders finally loosen.
Past experience shows that Chinese demand comes roaring back once restrictions ease. For instance, leisure travel surged 60% year-over-year during last October's Golden Week after lockdowns lifted. There are reasons to think a similar explosion in demand could happen when international travel resumes.
United is positioning itself for that scenario. While the optics of near-empty flights are unideal, the early scheduling may give United pole position out of the gates when tourism opens up.
Its main U.S. competitors have close to 30 daily flights to China during normal times. United only offers around a dozen. So staking an early claim to Hangzhou, a top tourist draw, helps United gain share in this vital market.
Industry analyst Robert Mann said United "probably has a better perspective on the potential traffic recovery than I do. Airlines seem to be developing business plans based on a robust recovery."
United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - Aviation Experts Question Timing and Logic of Route
In the words of former airline CEO Robert Mann, “What United doesn’t explain is what has changed between now and two years ago that suggests U.S.-China demand will suddenly rebound?” He argues United is making unrealistic assumptions about China opening up that contradict recent history.
China has given no signals it intends to relax borders in 2023. In fact, rising COVID cases in December 2022 prompted new lockdowns. The country remains wedded to its “zero-COVID” strategy that has severely limited foreign travel since 2020.
Short of a major policy shift, it is unlikely China reopens to tourists and business visitors next year. As analyst Samuel Engel notes, airlines may be “getting a little ahead of themselves” given China’s continuing isolationist stance.
While traffic typically rebounds rapidly when restrictions ease, that requires China to actually ease restrictions first. Banking on reopening assumptions not borne out by facts on the ground represents wishful thinking on United’s part.
Herbst argues United should have learned its lesson from its disastrous foray into China pre-pandemic. The airline was forced to cancel multiple routes in 2018 and 2019 amid poor performance. Rushing back into unproven China markets risks repeating past mistakes.
Airlines usually succeed when they take a “methodical, patient approach” to new destinations according to expert Jay Shabat. He believes United is instead making speculative bets far in advance. This exposes United to financial risk if ongoing COVID restrictions depress demand.
Shabat highlights that other leading carriers have not followed United’s aggressive lead. For instance, American opted to deepen ties with China Southern rather than open new routes. This prudent strategy aligns capacity with the current zero-COVID reality.
United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - United Stock Drops Amid Scrutiny Over China Expansion
United's stock price took a hit last week amid intensifying doubts over the viability of its China growth strategy. Shares dropped nearly 4% in the days after United confirmed plans to restart service between San Francisco and Hangzhou, a Chinese city closed to American tourists.
The decline highlights investors' skepticism of United's aggressive approach to the world's largest air travel market. Despite ongoing COVID-related restrictions in China, United aims to expand routes there while competitors take a more cautious tack.
But without concrete signals of China reopening, analysts say United risks financial damage from half-empty flights. Past failures trying to tap into hypothetical Chinese demand have proven costly, and this time may be no different.
As aviation expert Samuel Engel notes, the strategy represents "a gamble that borders will open pretty soon." So far, the bet isn't paying off. United's stock sank as analysts warned of repeating notorious "ghost flights," where airlines burned fuel on empty planes to maintain airport gates.
With China showing no indications of relaxing its "zero-COVID" policies, experts believe United is ignoring lessons from that experience. This raises red flags for investors uncertain the airline can read demand signals from the opaque Chinese market.
United's Flight to Nowhere: Proposed Service to Closed Chinese Airport Raises Questions - Ghost Flight Plan Embodies Issues Facing Airline Industry
United’s risky gambit on China epitomizes the issues vexing airline executives nowadays. Carriers must balance staying nimble against sticking stubbornly to plans crafted up to 18 months out. Being fleet-footed is crucial, but not at the expense of burning capital on ghost flights.
The China conundrum crystallizes this tension. United aimed to get a jump on rivals by adding back capacity early. But in doing so, it risks fuel-guzzling planes run half-empty. What may have seemed prudent long-term planning pre-pandemic now appears dangerously out of touch.
Other airlines have responded to the “zero-COVID” stalemate by forging partnerships rather than rebooting suspended routes. American wisely chose to align with China Southern instead of diving back into uncertain mainland markets.
Aviation consultant Samuel Engel argues the flexibility to quickly shelve or amend flight plans separated winners from losers. “Airlines need the dexterity to make changes according to the public health situation,” he said. United lacked that dexterity and paid the price.
The debacle is a cautionary tale of long-term planning colliding with unforeseen events. Airline scheduling requires thinking ahead, but not to the point of fixating on pre-pandemic paradigms. Restrictions have fundamentally altered travel flows, perhaps permanently.
United mistakenly clung to the belief that China's appetite for foreign travel would roar back unabated post-pandemic. That assumption filtered into scheduling decisions divorced from China’s isolationist COVID stance. Wishful thinking replaced sober analysis.
Other airlines avoided this trap by building flexibility into networks. Temporary long-haul pilot jobs were made permanent at United, whereas Delta right-sized staffing amid uncertainty. One reaped savings, the other excess costs.