United Airlines to exit Hangzhou, a secondary China city from 14Oct 2017

Hangzhou Cityscape
Travel News 07 Aug 2017

After blaming softer demand in China and Hong Kong for its worse than expected trans-Pacific performance in 2Q2017, United Airlines is returning to Plan A as it ends service to secondary Chinese city Hangzhou from 14-Oct-2017. United launched three times weekly San Francisco-Hangzhou 787 flights in Jul-2016 when it was unable to secure slots for a second daily San Francisco-Shanghai Pudong service. Hangzhou is part of Shanghai's catchment area, 45 minutes distant by high speed train, and has large digital companies based there, so Hangzhou seemed a worthy alternative to being blocked in Shanghai.

Yet after launching Hangzhou, United received slots and launched its second daily San Francisco-Shanghai service in Oct-2016. Hangzhou under-performed and incurred load factors below United's average and lower than typical performance for secondary city long-haul routes. United's Shanghai performance has weakened from apparent over-capacity. Ending Hangzhou should alleviate the over-capacity situation. China's secondary long-haul routes attract attention and despite United's Hangzhou exit following BA's Chengdu withdrawal, market fundamentals remain unchanged. What varies is opportunities in primary cities and what different management makes of the secondary city opportunity.

Original resource from CAPA.