Monday, December 8, 2008
Qatar Airways Chicago report
Two weeks ago, I had mentioned that I will be writing 3 reports during this month which included how SAA should restructure its entire fleet + why QR should launch DOH-ORD in 2009 and how to restructure Air India's North American operations.
Due to receiving numerous requests to complete the QR DOH-ORD report first ahead of the rest, I have managed to compile an interesting study which I hope you all enjoy reading.
Topic: Why Qatar Airways needs to launch Doha-Chicago in 2009?
Proposed flight timings and aircraft to operate:
QR 85 Dep DOH 0900 Arr ORD 1600
QR 86 Dep ORD 2200 Arr DOH 1930+1
Aircraft to operate should be a Boeing 777-300ER
The B 773ER offers the best operational economics than any other QR aircraft for this long haul flight. It is much better suited for this route compared to the A 346 and B 772LR which have approximately 70-80 less seats each respectively + can carry 2 tons of more cargo. There is demand on this route for QR to justify using its largest aircraft as the forecasted passenger load factor according to me year round is easily 75% with a reasonable yield + 85% cargo load factor year round.
Why have the above mentioned flight timings being chosen?
A vast majority of QR's Indian Sub-continent-Doha flights arrive into DOH between 6am-8am hence allow a convenient 1-3 hour transit at DOH airport which is sufficient. Currently, the minimum connecting time at DOH airport is 35 minutes. Even flights from SIN/KUL/CGK/DPS arrive into DOH between 6-7am in the morning hence allowing those passengers too to easily connect with the DOH-ORD flight.
With regards to flights departing DOH after 1930, all of its Indian subcontinent + Far East Asia flights connect with a 2-5 hour transit maximum where as flights bound for AUH/BAH/KWI/DXB connect within 1 hour.
Overall, by looking at the good connections available to/from Doha, QR can easily rely upon 4 different market segments to help fill up their DOH-ORD flights i.e. GCC/Indian Subcontinent/Iran/Far East Asia which should definitely help yields too.
Direct competition from the Middle East:
Currently, only Turkish Airlines (TK) and Royal Jordanian (RJ) fly nonstop from the Middle East to ORD respectively on a daily and 4 weekly basis each respectively. TK will be using the A 332 on this route from Summer 09 and RJ continues to operate an A 342 on this sector. QR's nearest competitors i.e. EK/EY//GF/KU/SV/WY do not fly to ORD but EY and EK have definite plans to launch nonstop DXB/AUH-ORD flights in 2009 or 2010 on a daily basis.
If QR want to gain a strong foothold in the ORD market, they have to launch this route before EK and EY do in order for its brand name to obtain a following and get decent yields in business and economy class. This is the most important factor for QR to seriously look at. They must have a pro-active approach when it comes to ORD rather than a re-active one similar to its IAH and Brazil flight planning which has hurt them from the on set aka the "Emirates factor"!!!
Target Markets via DOH:
ORD is home to a host of multi-cultural communities hailing from various Arab, Indo-Pak and Asian communities. There is enough VFR traffic from the greater Chicago area to fill up this flight as well as feeder traffic obtainable from other U.S. cities located within a 3 hour flying radius of ORD. Besides VFR traffic, there is a size able amount of high yielding business class, military + cargo traffic from ORD bound to DXB/KWI/DOH/BOM/DEL and SIN.
With regards to the Pakistani community residing in ORD and its surrounding sub-urban areas, the population is estimated at 100,000 where as Indians number approximately 170,000 (including international students). These two community groups will obviously form the core of QR's passenger base in the economy class cabin due to their large numbers. The majority of Pakistanis in ORD hail from KHI and LHE where as a majority of Indians in the city originate from HYD and BOM.
The state of Illinois also has 3-4 major universities that have a huge international student population consisting of Pakistani, Arab, Iranian and Indian students. This market segment flies back and forth twice a year to see their families back home so another market for QR to tap into through some aggressive advertising on the various campuses.
Apart from the Indo-Pak community, there is an adequately sized Iranian community numbering approximately 45,000 that resides in the Chicago area. This is another market segment that QR can easily grab on board its flights because not only do its DOH-IKA flights connect in both directions to the flight timings I propose but also they fly to Mashad-MHD too which is a niche market!
With regards to the GCC region of the Middle East comprising of KWI/BAH/DOH/DXB/AUH/MCT, QR should get a fair amount of student, VFR, business and U.S. military traffic as the latter has bases in KWI, BAH and DOH itself. If QR manages to get a UAL code share on the DOH-ORD-DOH route which should not be a problem, this will be to their advantage as U.S. military and diplomatic personnel have to try and use flights with designated U.S. flight numbers as much as possible for their international journeys. DOH now hosts the largest American military base in the Middle East, KWI is the gateway into Iraq for the Americans and in BAH, the U.S. Navy's 5th fleet numbering approximately 6000 officers is based there.
There is a huge American military base in ORF (Norfolk, Virginia) and a whole load of U.S. military traffic originates from that airport which I have myself seen when I flew QR from IAD to DOH in late October! This market segment should be the primary focus QR's business class traveller base as well as full Y class paying passenger thus high yield for the airline. Apart from this, there should be decent amount of businessmen traffic that QR can capture bound for DXB/AUH/BOM/DEL/KHI which are major financial centres in the region.
With regards to the Far East markets of SIN/KUL/CGK/DPS from ORD via DOH, QR will be offering "the fastest flight" from Chicago to the above mentioned Asian markets via its DOH hub. The o/b transit time in DOH would be approximately 5 hours and inbound it is 3 hours. There is no other airline that can match this and for the time conscious business class passenger in particular bound to SIN/KUL, QR might just end up being the airline of choice.
FYI, QR would also become the fastest airline to fly from ORD to KWI/DXB/AUH/BAH/LHE/BOM/DEL via DOH as the transit time in DOH would be 1 hour and inbound 2 hours. This would be a key selling point in attracting Arab, Indian and American businessmen heading to these cities to/from Chicago.
For QR to target the Asian businessman as well as holiday/group traffic originating from ORD and its surrounding areas, it must also highlight the fact that by flying them, points can accumulated on either United's Mileage Plus program or Lufthansa's Miles and More frequent flier programs both of which have very powerful customer bases in that region of USA. This is a huge marketing edge that QR has over EY in particular and one that must be capitalized on to the fullest.
Why ORD should be flown to before LAX/SFO?
Very simple; due to lack of direct competition that exists on the GCC-ORD-PAK/IND route. By May 2009, Emirates will have established themselves with daily flights into LAX and SFO thus once again QR will be playing "catch up" to them.
At ORD, there is no EK/EY/KU/GF plus the main advantage that ORD offers for QR is the onward feeder/code share arrangement with UAL that is critical to the route's success.
It is cheaper from an operational stand point for QR to fly DOH-ORD with a 2 class B 773ER rather than use a smaller B 772LR for a longer DOH-LAX/SFO flight.
Basically, it all boils down to competition which ORD lacks by having no EK/EY/9W/PIA operated flights, a situation which QR needs to take advantage of PRONTO!
Can the B 773ER fly nonstop DOH-ORD for QR?
Currently, QR's USA network consists of daily nonstop flights each to New York (JFK) and Washington DC (IAD) which are flown using a Boeing 777-300ER. These aircraft seat 335 passengers in a comfortable two class configuration for QR and can also carry approximately 14 tones of cargo. The range of the B 773ER allows it to easily fly long haul nonstop routes as far as DOH-ORD/MIA/YYZ with a full payload and DOH-IAH/DFW with a reduced payload. However, with airlines now keenly looking at their operational costs these days due to the economic crisis and fragile oil prices that has engulfed the world's economy, they would'nt like to especially fly a long haul route using an aircraft that would suffer a payload penalty.
From DOH, it would take QR only 1 hour and 15 minutes extra to fly to ORD than their current DOH-JFK/IAD flights so for their B 773ERs that is not a problem at all.
Benefits of feeder traffic from Chicago (ORD) from UA for QR?
In the airline alliance world, QR is a virtual member of Star Alliance by virtue of its close code share relationship with Lufthansa and United Airlines for European, trans-atlantic and domestic USA flights. UAL also codeshares on QR's IAD-DOH nonstop daily flight. The reasons why QR will get a lot of feeder traffic from Canada and other U.S. cities from ORD are as follows:
a) ORD is UAL's largest hub airport in USA hence a whole load of flight options are available for QR's passengers to continue on their journey with.
b) UAL and QR are close partners and have an extensive code sharing agreement on many domestic U.S. routes and that will be further enhanced by QR's code being put on selected flights flown by UAL from ORD to major American cities such as LAX/SFO/SEA/ORF/DFW/MSP/SAN/PDX/LAS/MKE/IND/DTW/MIA/MCO/BOS/PHLMSY/KCK/SAT.
c) QR will also get a SPA for ORD-Canada-ORD flights flown by UA in the same manner it has currently with UA's IAD-Canada-IAD operated flights. FYI, UA flies nonstop from ORD to YYZ/YEG/YVR/YUL/YYC multiple times daily.
d) EK nor EY have as close relationship with any American carrier as QR has with UA. This business relationship has mutual benefits for each other and its opportunities need to be further explored.
e) If UA decides to code share on QR's DOH-ORD flight, it will be a huge financial plus point for QR as that would mean virtual free marketing of its flights due to UA code share which can allow it to get increased sales from popular travel websites such as Orbitz and Expedia.
Will obtaining arrival slots between 1600-1700 be a problem at ORD?
No it wont as ORD has had a policy of always accomodating new international flights especially if it sees a huge financial value added for the airport and the area's economy as a whole.
What the airport's slot coordination committee usually does is that they ask domestic airlines to change their arrival/departure timings of certain domestic flights to accomodate new international one; so on the whole new problem for QR here.
If there is a problem with securing B 773ERs in 09, what is the back up plan?
This is an interesting question because of the Boeing strikes this year which has pushed back deliveries of all B 777s to all airlines worldwide including QR. This is the main reason why its DOH-IAH flights are being launched on March 30th 09 rather than November 2008.
If I was in charge of QR's aircraft rotation, I would implement the following changes:
a) Remove A 346s from HKG and replace it with a 3 class A 332 or A 333 as the route is in any case a huge loss maker for the airline.
b) Put the A 346 used for HKG on to nonstop flights to IAD for a year until more B 77Ws get delivered. The main reason for me opting for this is because IAD's economy class loads year round are below 65% hence there is no need for the B 77W to fly this route. For DOH-IAD, the ideal aircraft for QR to operate is the 259 seater 2 class configured B 772LR!
c) The 2 B 77Ws taken out from DOH-IAD should be used for DOH-ORD nonstop flights.
When should flights be launched?
Ideally, they should be launched from June 2nd 2009 so that QR can straight away go into the peak season with high yielding J and Y class fares. But if thats a problem then latest should be October 26th 2009 i.e. the on set of the IATA Winter 09-10 timetable.
Either way, the GDS must have these flights loaded into them 3-4 months prior to the first flight in order to get good advance bookings.
As one can make out from the information mentioned above, there is tremendous potential for Qatar Airways to exploit out of the ORD market by launching new daily nonstop flights from its DOH hub next year especially with a code share partnership with United Airlines. The O&D + 6th freedom transit + high yielding business class and cargo belly forms of traffic all exist for the airline to strike gold.
All that is needed for the airline's management to do is to think "pro actively" and launch the route in 2009 before Emirates and Etihad Airways establish themselves at ORD.
I hope that everyone enjoyed reading this report of mine. Please feel free to pass on this email to people in QR DOH head office who will like reading it as well as your other airline friends. Lastly, if you have some feedback on this, please email me back :)