Bangalore – Shanghai key unserved; RDC’s Apex shows low breakeven for IndiGo & China Eastern

Caption: RDC Aviation gives anna.aero readers a unique insight into airline route performance (fares, costs, and profit) and detailed airport charges data using data from its Apex and AirportCharges platforms.

With 39,000 passengers last year, Shanghai is a good-sized unserved market from Bangalore, or Bengaluru.

It also had a decent average fare, at $397 one-way (excluding 20%+ fuel surcharge, ancillaries, and taxes), MIDT data via OAG Traffic Analyser shows.

Bangalore – Shanghai is, understandably, a smaller market than Mumbai – Shanghai, which is also unserved. But Bangalore achieved a 26% higher average fare despite its distance being 3% shorter. 

As such, Bangalore had a 30% higher fare per kilometre than Mumbai.

Source: OAG Mapper.

IndiGo and China Eastern stand out for this route

IndiGo had 48% of Bangalore’s total non-stop seats last year, over four-times greater than number-two, AirAsia India. 

IndiGo operates 58 routes from Bangalore, including nine international.  Alongside Bangkok, Kuala Lumpur, and Singapore, it began Hong Kong daily in December 2018. (It is temporarily suspended.)

After beginning Hong Kong, in direct competition with Cathay Dragon, traffic grew by 50% YOY on the back of a 15% reduction in fare.

Currently, no aircraft in IndiGo’s fleet can operate this route without payload restrictions, but come 2024 it’ll be able to do it without any restriction with its A321 XLRs. 

China Eastern also makes sense, although current bilateral restrictions for Chinese airlines prohibit this. China Eastern: 

• Is by far the number-one operator at Shanghai Pudong, with 27% of total seats, even before its Shanghai Airlines subsidiary is included 
• Has multiple widebodies for the route, each with different configurations
• Bangalore could easily be timed to coincide for two-way connections to South Korea, Japan, and the West Coast USA and Canada
• It serves Delhi, Colombo, and Malé, Maldives, in South Asia, albeit more of a leisure focus

RDC Aviation’s Apex shows breakeven performance for both airlines

RDC Aviation’s Apex shows breakeven performance for both IndiGo and China Eastern.  This is based on using each carrier’s last reported seat load factor, a three-weekly frequency, and assumes all route operating costs, fixed/variable/indirect, as well as full airport charges without any discounts or incentives applied. The analysis excludes any contribution to the overhead costs of both airlines.

With a three-weekly, 240-seat A321LR and the carrier’s average 86% seat load factor, IndiGo would need an estimated $150.03 each way per passenger to breakeven.

Of this, $130.84 would be from airfares, i.e. 67% lower than the market’s average fare last year of $397. 

At this frequency, capacity, revenue, and seat load factor, it would need 64,397 passengers.  It would need to stimulate demand by just 65%, i.e. a stimulation factor of 1.65.

This seems reasonable given Hong Kong grew by 50%, despite Hong Kong’s traffic, pre-IndiGo, being over two times greater than Shanghai’s.

If IndiGo achieves breakeven at the level reported by Apex, it would make an annual contribution over $4m. This is the level of profitability where only variable operating costs are included.

Source: RDC Aviation.

Meanwhile, with China Eastern’s 81% average load factor and a 300-seat A330-300, a three-weekly service would require average revenue of $208.01 per passenger each way to breakeven. 

$195.22 of this would be from airfares, for instance 51% lower than the market average last year.

It would be achieved across cabins.  While IndiGo’s figure would be from economy passengers only, China Eastern could offer 38 business class seats.

At an 81% seat load factor, traffic would need to grow by a stimulation factor of 1.94.

If China Eastern achieves breakeven at the level reported by Apex, it would make an annual contribution of over $6m.

Source: RDC Aviation.

Connections to South India for IndiGo

While the above was based on local traffic only, connecting traffic could of course be important too.

IndiGo could easily connect multiple cities in South India, including Chennai, to Shanghai, together with other cities, such as Pune, which are not easily reachable over Southeast Asian hubs.  Pune had 5,000 Shanghai passengers last year.

Even Mumbai via Bangalore would have minimal circuity of 13% versus a non-stop, albeit with a lot of existing choice.

In all, around 130,000 connecting passengers could be targeted by IndiGo based on reasonable circuity and schedules.

Connections to West Coast, Japan, South Korea for China Eastern

Meanwhile, China Eastern could target passengers over its Shanghai Pudong hub to the West Coast USA and Canada together with South Korea and Japan. 

Based specifically on connecting with San Francisco, Los Angeles, and Vancouver, multiple other destinations – including Seoul Incheon and Tokyo – would also be reachable on a two-way basis.

In all, over 300,000 connecting passengers could be targeted, although it would likely attain only a relatively small share – and mainly those more price-sensitive, especially VFR.

It would not particularly appeal to higher-yielding passengers.

Tokyo was Bangalore’s largest unserved market; to be served this year

Last year, Northeast Asia had just 6% of Bangalore’s total international seats, per OAG Schedules Analyser.

Yet, over 370,000 flew between the two, mainly via Bangkok, Singapore, Hong Kong, and Kuala Lumpur in that order.  Tokyo was the largest unserved market. 

This July, Japan Airlines will begin a daily Tokyo Narita – Bangalore service using 186-seat B787-8s.  

It is designed for local traffic and, crucially, with easy two-hour connections to San Francisco, Los Angeles, Vancouver, Seattle, and San Diego.

India – China non-stop seats reached almost 1.3 million last year

India – China has never been a large market.  However, it had a good CAGR of 7.3% between 2010 and 2019, but from a low base.

Last year, almost 1.3 million non-stop seats were offered across just 10 routes involving Indian cities (Delhi, Mumbai, and Kolkata) and five Chinese (Beijing, Shanghai, Guangzhou, Kunming, and Chengdu).

Source: OAG Schedules Analyser.

RDC provides world-leading aviation data through its online apps, data services, and APIs. Its Apex platform delivers airline route performance data (fares, profit, schedules, costs, CO2), while AirportCharges has detailed tariff data for over 3,000 airports as well as global en-route navigation fees and government taxes. Over 250 companies subscribe to RDC’s services; visit their website, www.rdcaviation.com, to find more information and contact details.