The changing airscape: What’s killing the region’s major airline?

By Mar-Vic Cagurangan

Tamuning, Guam. Image by panoramio.com

THE daily bustle and large crowd of visitors at the A.B. Won Pat International Airport are reflective of Guam’s currently robust tourism — a volatile industry that drives the island’s economy. Monthly reports from the Guam Visitors Bureau reinforces the industry’s optimism.

According to the latest GVB report, Guam achieved its second-best fiscal year with 1.52 million people welcomed to the island shores during fiscal. It was also the fourth top September with 116,515 visitors recorded in a month. The GVB Research Department noted weather events in the Pacific region, such as Typhoon Mangkhut, also affected September arrivals in the markets of Japan, Korea, Taiwan, Philippines, and China. The Valiant Shield exercise, which brought 15,000 troops to Guam and Northern Marianas in September, helped boost military arrivals for the month.

It’s been a tumultuous year for our visitor industry but our tourism partners have pulled through to achieve the second-best fiscal year in the island’s tourism history,” Gov. Eddie Calvo said.

GVB anticipates the winter travel to Guam to see an increase in airline seats in the Japan market. Japan Airlines has extended its second daily flights between Narita and Guam through March 2019. Daily flights on Jeju Air from Osaka and Guam have been in operation since July. Additionally, United will reintroduce its Boeing 777-200 aircraft effective Oct. 28 on two of three daily flights from Tokyo. United will also be adding four more flights a week beginning Dec. 2 between Guam and Nagoya.

At the airport’s terminal, mixed in among the tourists returning home are Guam residents bound for off-island trips for various purposes, such as visiting friends and relatives, traveling for business or seeking medical treatment. Once at the mercy of United Airlines, the main carrier in the region, Guam travelers now have more options.

As the aviation industry continues to grow and evolve in Asia, some changes will affect how Guamanians make plans for their next trip off-island,” wrote Jeffrey Teruel, founder of Flights in Asia, an online industry publication dedicated to global aviation trends.

In jeopardy is the sustainability of United Airlines — formerly Continental Micronesia before the merger in December 2010 — which is facing stiff competition from Asia’s low-cost carriers.

Low cost carriers have changed the landscape of the aviation industry globally. While it continues to maintain its strong route network from Guam, some of the foreign airlines on Guam are adding new challenges to United’s presence on key markets such as the Philippines, Japan, and Korea,” Teruel said.

While low-cost carriers may not necessarily need to add more flights, Teruel said, they could offer their own brand of customer service and attractive airfares that could attract travelers from Guam to try flying with them for the next trip off-island.

Flights in Asia analyzed the economics of airfares and the travel options for Guamanians, using the combined automated and manual search method and collecting 1,045 roundtrip economy class base airfares, including the lowest and most expensive options. “This initial study is not scientific, but to provide insights using a snapshot of airfare data during a given time period and does not account for extra fees such as baggage allowance or meals on low cost carriers,” Teruel wrote.

Data collected by Flights in Asia established that as of October 2018, the current number of weekly scheduled departures out of Guam is around 207 flights operated by 11 airlines to 20 destinations in Asia, Micronesia, and Hawaii with United Airlines serving the most flights from Guam. Along with being the source of the majority of tourists coming to the island, over 73 percent of the flight departures from Guam are to cities in South Korea and Japan. South Korea has the most flights to the island, with 86 flights per week followed by Japan with 66. The large number of weekly flights to/from Japan and South Korea are followed by the Philippines (18), Hawaii (11), and Saipan (9).

Based on more than 1,000 roundtrip airfare itineraries collected, Flights in Asia found that the cheapest airfares were found on trips to Saipan where roundtrip airfares range from US$214 to US$250. The average airfare was US$469.20, which accounts for much more expensive options connecting that involve a connection in Japan that travelers will shun.

The most expensive destination is Majuro in the Marshall Islands (US$2,069.44) followed by Honolulu (US$2,069) and Palau (US$1,547.60). Most airfares for roundtrip tickets to most destinations from Guam is between US$500-US$1,000. 

For flights between Guam and South Korea, low cost carriers such as Jeju Air, T’Way and Jeju Air offer round trip airfares to Seoul or Busan for less than US$400. Most airfares from the Korean low-cost carriers can be found in the US$300s/low US$400s, with some fares to Busan going lower for around US$276. These fares can be US$200-US$400 cheaper than airfares from Korean Air with their fares to Seoul and Busan found at around US$600s.

In addition to offering low cost airfares to Korea, Jeju Air and T’Way also offer decent fares to Osaka, Japan. Both airlines offer roundtrip fares from Guam to Osaka for around the US$400s and low US$500s. For the same route, United’s fares were US$100-US$200 higher at around US$660 to US$811.

The Guam-Manila route also sees the low-cost carrier effect. Cebu Pacific, which launched the Guam service in 2016, offers the lowest roundtrip airfares at less than US$400.

United and Philippine Airlines offer fares in the low US$400s, with the additional benefits of baggage allowance and meals included. “Depending on the season and time of booking, it is possible to get airfares on the Guam-Manila route on any of the three airlines serving the route for less than US$300,” Flights in Asia said.

While low-cost carriers continue to challenge United directly on routes to key markets, Flights in Asia recommends that other Asian carriers follow the Philippine Airlines’ lead in offering competitive fares for travel to Japan, Hong Kong, and Taipei from Guam.


But budget airfares may not stay for long.
Flights in Asia predicts a potential rise in airfares to some destinations, such as the Philippines and Hong Kong, in 2019. “The Philippine Civil Aviation Board in September approved the request by local airlines to impose fuel surcharges – fees passed on the travelers to offset rising global fuel costs,” Flights in Asia said. “Hong Kong’s government has made a similar move, ending a ban on fuel surcharges in place since 2016. As part of Hong Kong’s government policy, airlines will also be able to impose additional charges provided that they are disclosed before a traveler chooses to book the trip.”

 

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