Aviation hubs: The Gulf between

Once the titans of transit travel, the South East Asian hubs have been hit by the rise of Middle East carriers. Alex McWhirter reports on where they go from here

History and geography haven’t been kind to South East Asia’s main hub airports – Bangkok, Kuala Lumpur and Singapore.

At the time Business Traveller was founded in the mid-seventies, these three believed they had never had it so good. Not only were they perfectly located astride the busy Kangaroo route to Australia, but they also acted as regional gateways to China, Hong Kong, Taiwan, Japan and South Korea.

What has happened since is something that, back then, nobody could have predicted – the fall of Communism, the rise of China and the emergence of Gulf aviation in the shape of Emirates, Etihad, Qatar Airways and, to a lesser extent, Oman Air and Gulf Air.

The end of the Cold War opened up new, faster air corridors between Europe and North East Asia. It meant that you could fly nonstop between the two regions in a fraction of the time it took before.

Over the years, the Gulf carriers have expanded so that they now offer a comprehensive network in most areas of the world, but especially in Europe, where they cover cities ranging from Copenhagen, Oslo and Stockholm in the north, and Warsaw, Prague and Moscow in the east, to Lisbon and Rome in the south.

The effect of this has been felt most keenly by Bangkok and Kuala Lumpur, and their national carriers, Thai Airways and Malaysia Airlines (MAS), which is being renationalised. Singapore Changi airport and its national carrier Singapore Airlines (SIA) have weathered the storm, but both would have grown far more in terms of long-haul flights had the Gulf operations not existed.

Speaking at the CAPA Summit in Sydney in August, MAS chief executive Christoph Mueller said: “MAS set up its network 15 years ago. At that time, the Gulf carriers combined handled 10 million passengers. Now it’s 100 million. The world has changed, it’s time to move on. Our network was built with Australia-Europe in mind. We recognise this and must adjust. We will cut Australian flights by 40 per cent.”

Not so long ago, travellers from Europe and all points west saw Bangkok as the gateway to the region, especially mainland South East Asia.

It was also key for Australia, as Bangkok is halfway between Oz and Europe. The airlines liked this as broken journeys meant more economical fuel consumption.

Over the years, Bangkok has lost many long-haul routes as passengers have switched to Gulf carriers. British Airways and Qantas no longer transit the Thai capital several times a day (en route to Europe and Australia).

And many European carriers axed services as Bangkok’s prestige waned – it’s now often seen as a leisure rather than a business destination.

Thai Airways, which has required financial support from the Thai government in the past, has had to slim down its long-haul network. South Africa and many European points have been dropped.

It means that most Bangkok flights are either short- to medium-haul rather than those long-haul services it would once have claimed as its right.

One piece of good news concerns London and Frankfurt. Thai Airways had downgraded to a single daily flight but says it will resume twice-daily operations from the start of the winter timetable.

Although the Thai government adopted an “open skies” policy aimed at encouraging more airlines to fly to Thailand, the agreement is expected to be scrapped, according to the Bangkok Post, officially because of “safety concerns”. Thai transport minister Prajin Juntong told the Bangkok Post: “Our sky cannot provide space for more flights. To ensure safety and prevent aircraft collisions, we must limit the use of our sky. The problem must be solved quickly.”

One wonders if the real reason is because, while the policy has boosted visitor numbers, it has driven down airline yields and, crucially, Thai aviation has lost out as travellers have chosen foreign carriers.

Thailand’s industry has also been tarnished by a number of safety allegations. Restrictions on flight operations with several regional Thai carriers are now being imposed by Singapore, Indonesia, Taiwan, South Korea, Japan and China.

More bad news concerns the US Federal Aviation Authority (FAA), which has started to investigate Thai aviation for omissions in its commercial safety standards.

Kuala Lumpur is in an even worse situation. Both the airport and MAS had ambitions that would enable them to compete with Changi and SIA.

MAS aspired to be a global operation like its Singaporean rival and from the mid-nineties onwards began flying to South Africa, Latin America and the US. But the first two were dropped in 2012, followed by the US in 2014, as the loss-making carrier was forced to make cuts.

MAS has also had to cope with the aftermath of two tragedies that dented passenger confidence and prompted the airline to discount its product.

The European network has been slimmed down to three cities – London, Amsterdam and Paris. Of these, MAS said that London will definitely remain.

A question mark hangs over the other two. Paris has been downgraded from an A380 superjumbo to an elderly B777-200, which lacks passenger appeal. Amsterdam is also served by a B777-200, but for how long?

One need only compare the number of flights that MAS operates between Europe, the Middle East and Kuala Lumpur, to those services offered by the Gulf carriers, to see where the traffic has gone.

So, like Bangkok, Kuala Lumpur’s main network is now for short- to medium-haul services. Even fewer European airlines fly there compared with Bangkok, which has overtaken Kuala Lumpur as the region’s leading low-cost airline centre.

Although BA restarted flights in May after an absence of many years, Air France will be withdrawing at the start of the winter schedule.

CHANGI’S CHALLENGE

So of these three, it is Singapore’s famous and award-winning combination of Changi and SIA that continues to prosper.

Changi had high ambitions when it opened in 1981. Built on reclaimed land, it replaced the colonial-era Paya Lebar airport, which is now used by the local air force. Changi remains an important transit point for flights in the region and is still Australasia’s leading gateway.

When it first began operating, it handled eight million passengers a year, but by last year the number had risen to 54 million.

To cope with demand, Changi will increase capacity by 16 million passengers with the new Terminal 4, due to be completed by 2017.

A huge new Terminal 5, which will be one of the largest in the world, is also opening in the middle of the next decade. It will be bigger than the current Terminals 1, 2 and 3 combined, with an initial capacity of 50 million, and the potential to handle up to 70 million.

Still, Changi’s passenger growth will come mainly from new short- to medium-haul flights, now operated by a multitude of carriers, rather than long-haul services. SIA holds its own on the Kangaroo route (many readers tell us they would rather transit at Singapore than Dubai), but has recently rejigged its Australian schedules to improve connectivity with Asia, especially China, and not just Europe.

London aside, in the case of mainland Europe and Scandinavia, passenger growth has been anaemic thanks to the Gulf airlines. In an interview with trade magazine Airline Business, SIA’s chief executive, Goh Choon Phong, cited the Gulf operators as one of the challenges his airline faced.

So unless restrictions (by Singapore and other countries) are imposed on Gulf carriers, it seems SIA will only see strong growth in markets where it does not compete with them.

THE AMERICAN WAY

One hurdle faced by Singapore is that it is not that well positioned for Europe and North America.

In the case of the former, the Gulf carriers score, but for North America, Singapore, along with Bangkok and Kuala Lumpur, is just that bit too far away for nonstop flights.

Hong Kong, however, is just about close enough for nonstop services and has therefore stolen a chunk of the other airports’ custom.

Like Thai Airways, SIA must now fly one-stop to North America after both carriers abandoned their ultra long-haul single-leg flights a few years ago. (Thai Airways is now planning to cancel its only US service next month; MAS has never operated nonstop US flights.)

The routes were run using special A340-500 aircraft, of which Thai and SIA acquired a small fleet. But at the time, the economic situation and the high cost of fuel made such flights inviable.

On journeys of this length, the aircraft were burning fuel just to carry fuel. Former Air France chief executive Pierre-Henri Gourgeon once described A340-500s as “flying fuel tankers with few people on board”.

Even though they were unbroken, the journey times were lengthy and variable depending on weather conditions and the season. For example, SIA’s New York flights were scheduled to take between 17 and 19 hours and, after departing Singapore, could either head west or east depending on the conditions.

Thai was first to accept defeat but Singapore Airlines persevered until 2013. It converted the A340-500 into an all-business class aircraft, but that didn’t succeed for long.

Now SIA’s chief executive, Goh Choon Phong, has said that he wants to restart nonstop US flights and has been in discussions with Airbus and Boeing about suitable aircraft. Singapore Airlines is conscious that by not offering a nonstop option, it has lost both kudos and relevance with its business passengers, some of whom have defected to rival airlines and hubs.

Reports say that the only aircraft Boeing could offer would be the B777-200LR but that doesn’t have the range for New York and is a generation behind the A350-900, which is Airbus’s solution.

If Airbus agrees to modify the A350-900 – like it did when creating the long-range A340-500 – the problem should be solved.

But ultimately these are twin-engined aircraft and will not offer the same flexibility as the four-engined A340-500. For now, it’s a case of wait and see.