Airlines have begun to ramp up network connectivity at any cost. After what felt like an age, the roars of the engines are finally starting to be heard more frequently.
With airlines resuming operations, jostling for prime positions in their core markets, they are signalling that they have navigated beyond the crisis.
However, a big question lingers on whether demand has genuinely recovered in the long-haul sector. Throughout the pandemic, we have been exposed to countless scenarios and forecast models - but the majority have been well off the mark.
The conservative estimate challenges airlines to optimise their networks in a far more disciplined manner, which reflects a low-demand environment. On the other hand, there are overoptimistic airlines rapidly scaling up their long-haul operations again at a time when there is low passenger confidence and on the brink of another global recession.
As airlines employ a range of strategies to rebuild their long-haul networks, we could witness the fifth/sixth freedoms’ boost in connectivity. Fifth freedom is the right for airlines to fly between two foreign countries on a flight originating or ending in one’s own country.
Sixth freedom is the right to fly from a foreign country to another while stopping in one’s own country for non-technical reasons. It would allow hub carriers to consolidate their networks since fifth freedom flights may also prove to be more dynamic.
Their launch would also lead to additional revenue opportunities during/after the pandemic, e.g. belly-hold cargo carriage.
Corridors of strength
Until 2017, United operated several fifth freedom flights from the US to cities like Hong Kong and Singapore via its Tokyo hub. However, a new generation of twin-engine, more fuel efficient aircraft - like the Boeing 787/Airbus A350 - made such intra-Asia flights obsolete.
United then began nonstop service between both cities on its 787-9 aircraft. Doing so ended its historic fifth freedom service between Hong Kong and Singapore.
By adjusting to a long and slow recovery for long-haul air travel demand, it would make sense to reintroduce routes like this, and optimise capacity. Even the thought of re-introducing routes is a more interesting prospect than prioritising non-stop flights than have become more popular over the past few years.
With demand and oil prices at rock bottom, the incentive to fly non-stop partly diminishes. Serving Singapore via Hong Kong suddenly becomes a more feasible option to sustain service between both cities, while airlines avoid unnecessarily increasing capacity through independent non-stop services to each city.
A fifth freedom champion
Carriers like Singapore Airlines could be in a position to take advantage of fifth freedom agreements and operate multi-stop flights. They would benefit from demand at its core hub to supplement weaker point-to-point load factors.
In addition to the increasing number of ultra long-haul flights, SIA is experienced in fifth freedom flights. The carrier has diverse routes that allow passengers to fly between different countries, including Singapore - Frankfurt - New York.
In January, SIA was granted permission by the Japanese authorities to operate fifth freedom flights between Tokyo and New York. Any potential route to NY could be flown by SIA in partnership with Star Alliance partner ANA. The permission could serve as a solid foundation to kick-start travel between Asia and the US in near future.
The fiffth freedom flights between Singapore and Houston via Manchester further enhances Manchester’s Transatlantic connectivity and provides SIA with services to the US that bypasses competition from busy hubs in London. This example could be followed by other airlines.
Opportunities abound
With respect to the recent normalisation of the UAE-Israel relations and UAE carriers’ increasing shift towards point-to-point traffic, Etihad and/or Emirates could restore its previously challenging Latin American network by operating fifth freedom flights via Tel Aviv in codeshare with El Al to cities like Buenos Aires, Sao Paulo, Mexico City and Panama City.
The Jewish population in LATAM stands somewhere around 400,000, with the majority living in Brazil (130,000) and Argentina (250,000). The financially weak El Al could maintain its focus on the high yield markets like the US.
Direct flights have significant benefits over connecting flights requiring a stopover midway through your journey. Recent developments have forced airlines that rely on a hub-and-spoke model to rethink their entire strategy and consider launching fifth freedom routes via another city/country in the future.
Foregoing a typical connection at a busy hub airport with the health- and safety-related benefits could be one of the safer options for. Since the ultra-long-haul sector remains niche and more expensive option, the alternative opportunities for air travel with competitive health benefits could lie in the fifth and sixth freedom sector.
- Linus Benjamin Bauer is Managing Director at Bauer Aviation Advisory.
