Wednesday, 19 January 2022

The Amazing Race 33, Episode 3

St. Gallen (Switzerland) - Schwägalp (Switzerland) - Säntis (Switzerland) - Urnäsch (Switzerland)- Altstätten (Switzerland)

[Cast of The Amazing Race 33 boarding specially-repainted chartered Boeing 757 for flight from Los Angeles (LAX) via Halifax (YHZ) to Zurich (ZRH).]

[Newly-repainted Northern Pacific Airways Boeing 757 being refurbished at San Bernardino airport (SBD).]

One of the most obvious changes when filming of The Amazing Race 33 resumed after a 19-month COVID-19 interruption is that the cast (and the portion of the TV production crew travelling with them) were transported back to Europe to resume the race on a Boeing 757 chartered (and repainted) just for the reality-TV show, rather than on scheduled airline flights.

The day before viewers of The Amazing Race got their first look at the show’s Boeing 757 (tail number G-POWH) in its new paint job, another newly-repainted Boeing 757 was rolled out for reporters (I was invited, but couldn’t make it to San Bernardino) by Northern Pacific Airways, a nascent Anchorage-based airline that has bought six mothballed off-lease 757s formerly operated by American Airlines and plans to acquire more as the sole type of plane in its initial fleet.

What is “Northern Pacific Airways”, or what will it be? Why would a new intercontinental airline base itself in Anchorage, of all places, or base its business plan on a discontinued model of narrow-bodied plane? Why would “The Amazing Race” choose to charter a plane of that same type? And what, if anything, does this have to do with the changes in travel and the travel industry wrought by the COVID-19 pandemic?

As I noted last year in my coverage of the previous season of The Amazing Race, “Airlines have… parked many planes or cancelled leases,” and lower purchase or leasing costs for idle planes and empty hotels and airports have created opportunities for new pandemic and post-pandemic airline and lodging business plans.

I don’t know whether Northern Pacific Airways will be able to make money during the ongoing COVID-19 pandemic. But if intercontinental travel recovers significantly within the next couple of years, it’s the most promising post-pandemic airline start-up I’ve heard about yet. The Boeing 757 and its sibling the Boeing 767 are the best aircraft it could choose for its planned routes, taking into consideration their functional features and their current low (second-hand) cost of acquisition and operation.

The business plan for Northern Pacific Airways starts with its base of operations: Anchorage, Alaska (ANC).

If you think that Anchorage is an out-of-way location for an aviation hub, look at a globe and think again. Anchorage is ideally located on great-circle routes between Pacific Rim Asia and North America. It’s basically the only place you can stop for fuel midway without having to increase the length of your flight path and thus your fuel costs.

Most newer wide-bodied jets can cross the Pacific with a full load of passengers without needing to refuel. But cargo can profitably be packed much more densely than passengers. And even urgent air cargo is rarely so time-critical that an hour’s refueling stop is a problem. As a result, Anchorage is the world’s fourth-busiest air cargo airport, behind Memphis (FedEx hub), Hong Kong, and Shanghai’s Pudong Airport and ahead of Lousiville (UPS hub) and Dubai.

If you ever buy something online and have it mailed or shipped directly from Asia, look at the package tracking and see where it clears U.S. customs. There’s a good chance that will be Anchorage. Anchorage Airport is a port of entry for air freight from Asia to America, a transshipment hub, a refueling station, and an aircraft maintenance and aircrew base. For example, with the phasing out of Boeing 747 passenger service by more and more airlines and the conversion of more and more passenger 747s to all-cargo configurations, Anchorage now sees more daily 747 landings and takeoffs than any other airport in the USA, and perhaps the world.

International passenger flights at Anchorage Airport have waned, however, even as air cargo volume and the number of international airlines with cargo-only flights has waxed. That has left the state of Alaska, which owns and operates the airport, desperate to find a tenant for the vacant North (international) Terminal.

I was in the North Terminal at ANC in 1992 while the elegant Aeroflot Ilyushin-62s I flew from San Francisco to Khabarovsk and back from Moscow to San Francisco (some of the the last scheduled narrow-bodied trans-Pacific passenger flights to and from the USA) were being refueled. But Aeroflot service to, from, and via Anchorage was suspended after 9/11 and has yet to resume. Many European airlines used to fly to and from the Far East via Anchorage, but discontinued their Anchorage stops in favor of more direct nonstop routes once post-Soviet Russia liberalized its rules for overflights. The famous Korean Air flight KAL 007 — shot down while overflying the USSR before the rules changed — was a JFK-ANC-SEL flight, but has been replaced by a nonstop New York-Seoul flight. Other airlines have also phased out refueling stops in Anchorage on passenger flights as they have replaced 747s with smaller but more fuel-efficient and longer-range planes.

The North Terminal at ANC, last renovated in 1993, has been a white elephant for the state of Alaska for years. I assume that Northern Pacific Airways has been offered extraordinarily favorable terms for renovation and use of the North Terminal, especially in light of the hope that some Northern Pacific transit passengers might stop over in Anchorage and spend more money in the state for tours of Alaska.

For what it’s worth, the closest counterpart to Anchorage with respect to flights across the North Atlantic is Gander, Newfoundland (YQX), even though “The Amazing Race” chose for some reason to refuel in Halifax, Nova Scotia (YHZ) instead. Although it’s not quite as close as is Anchorage to a “half-way” location, Gander was a standard technical stop for major transatlantic airlines until Aeroflot, its last major user, replaced the IL-62 and IL-86 (a medium-range widebody designed for USSR trunk routes like Moscow-Tashkent) aircraft with the IL-96 long-range widebody on its routes to the Americas in the early 1990s. That allowed Aeroflot to fly nonstop between Moscow and New York, and eliminate refueling stops in Shannon and Gander. But the distance across the Atlantic is much less than that across the Pacific, and today far fewer trans-Atlantic than trans-Pacific flights, even fully-loaded cargo flights, need to refuel.

Gander remains in use, and important (as became apparent on 9/11) as an emergency diversion airport, but most often is used only by smaller private planes. It’s interesting to imagine what a Canadian trans-Atlantic airline could do with a hub at the largely unused passenger terminal at Gander (and another fleet of second-hand 757s). But that’s another story for another hypothetical entrepreneur.

Next let’s talk about the choice of planes. Suppose you’re a reality-TV producer trying to ferry a few dozen cast and crew members around the world, or an airline entrepreneur who’s snagged a sweetheart deal on some distressed passenger terminal real estate at ANC. Why would you choose second-hand Boeing 757s over any other new or used planes on the market for “The Amazing Race” or Northern Pacific Airways?

The Boeing 757 is a very distinctive plane, and most of its distinctions are positive. Until the recent (and behind delivery schedule) introduction of the Airbus 321LR and the (substantially less comfortable, in my experience) Boeing 737 Max, either of which are several times more expensive, the 757 was the longest-range narrow-bodied (single aisle) passenger jetliner ever produced. Looked at from the opposite end of the air fleet spectrum, it’s the smallest-capacity and least expensive airliner currently available with its range.

Either way you get there, this leads to the conclusion that a medium or long-haul airline can make money by targeting a smaller segment of passengers or city-pair market more easily with one or more bargain-basement (but still high-performing) second-hand 757s than with planes of any other model. A 757 doesn’t have the range to fly across the Pacific without refueling, but a 757 have long been the plane of choice on trans-Atlantic routes between secondary airports. The last time I was on a trans-oceanic narrow-body was on a Delta 757 from Paris to Boston.

The basic design of the 757 and 767 (more about the 767 in a minute) is almost 20 years more modern than that of the 737, but the 757 is no longer in production and is available on the secondary market for a fraction of the price of newly-produced, older-designed 737s. The 757 and 767 are still in use in sufficient numbers, especially as passenger-to-freighter conversions, that qualified pilots, maintenance technicians, and spare parts are readily available — especially at a major long-haul cargo hub like Anchorage.

The argument has been made that Boeing should have updated the 757 and 767 with newer, more fuel-efficient engines rather than discontinuing them. Patrick Smith of “Ask The Pilot” has an obvious bias as a longtime 757/767 pilot. But he also has a basis of expertise for his opinion, and I think he’s right. On the basis of passenger comfort, all else including the price of a coach/economy class seat being equal, I’ll choose a 767 over any other type of plane for any flight of more than a couple of hours, and a 757 over any other “mainline” narrow-bodied jetliner.

A used 757 in good condition, configured for airline use (they are also available in private-jet or cargo configurations) might cost US$5-10 million, compared to a list price of more than US$100 million and a long backlog for delivery of a new A321LR or B737 Max. No savvy airline pays list price to Boeing or Airbus, but the price difference is still huge. The COVID-19 pandemic prompted airlines including American Airlines — the previous operator of the 757s acquired by Northern Pacific — to sell off their 757s or return them to leasing companies sooner and more suddenly than they had planned, creating a glut of distressed airline-configured 757 inventory.

This makes the 757 the ideal choice — as long as the routes are within its range — for an airline start-up that wants to test out a new market on the cheap. It will cost a bit more in fuel per available seat-mile (and, unfortunately, have a somewhat larger carbon footprint) to operate a 757 fleet than a fleet of new planes. But it could take years to burn enough additional kerosene to offset the higher purchase price of more efficient planes. And by that time, if your concept proves a success, you may have (or be able to borrow) enough money to finance the purchase of more efficient (and perhaps larger) planes.

The model for Northern Pacific Airways, both with respect to its fleet and its planned route map, is Icelandair. As I discussed when the cast of The Amazing Race 30 started their trip around the world on Icelandair, Icelandair built its business on its ability to use smaller, shorter-range planes to connect passengers across the Atlantic via Reykjavik. Icelandair is beginning to take delivery of new B737 Max planes, but its fleet still consists primarily of 757s and some 767s.

Using a great circle mid-point hub reinforces the benefits of using smaller-capacity narrow-body planes to serve smaller origin-destination markets. With one wave of flights to and from points west, connecting to another wave to and from points east, an airline can serve dozens of city pairs without having to operate separate direct flights between each of them. Of course these will all be connections with one change of planes. But if there isn’t enough traffic between a secondary pair of cities or airports to reliably fill a nonstop flight, one-stop connections through a well-located hub may be the most direct flights available, even if price is no object.

Many tourists stop over in Iceland (and spend money in Iceland on tourist services) if they are passing through, even if they might not have taken a separate trip just to Iceland. In the same way, tourists passing through Anchorage on Northern Pacific might welcome a chance to see a little of Alaska on a stopover without having to pay for a separate ticket to get there.

The trilingual (English, Japanese, and Korean) Web site for Northern Pacific Airways makes its initial target market clear: travel in both directions between the USA, Japan, and Korea.

Even from Tokyo, there are direct flights to only a few U.S gateway airports. And there are even fewer flights between the USA and anywhere else in Japan. From Osaka to Orlando, Fukuoka to Phoenix, or San Francisco to Sapporo, connections through Anchorage on Northern Pacific could be faster than any current flights.

Is there any traffic between airports such as these? Actually, yes, and perhaps more than you might think. More people travel from Japan to the USA, mainly as tourists, than travel from the USA to Japan. And Japanese tourists want to go to Disney World and the Grand Canyon. With no direct flights between anywhere in Japan and anywhere in Florida, better air connections between Orlando and Japan are a high priority for central Florida business and tourism boosters.

Fukuoka (FUK) and Sapporo (CTS) are the main regional air gateways to southern and northern Japan respectively, and the busiest airports in Japan after those in Tokyo and Osaka. Before the pandemic, there were nonstop wide-body flights on Japanese airlines and Hawaiian Airlines between Honolulu and both Fukuoka and Sapporo. But there are no direct flights between either Fukuoka or Sapporo and anywhere on the U.S. mainland. I entered at Fukuoka Airport on my first visit to Japan. It’s a pleasant, low-key back door to Japan that avoids the mega-city intensity of Tokyo. For tourists from the USA, Sapporo is the gateway to outdoor nature and adventure tourism on under-visited Hokkaido. Connections through Tokyo to and from other parts of Japan often involve an inconvenient and expensive train trip or transfer between airports. Northern Pacific is much more likely to have a competitive edge on flights in and out of these “secondary” airports in Japan than competing with larger airlines with sunk-cost wide-body fleets and established operations in Tokyo.

Airfares from Japan to the USA are typically higher than fares from the USA to Japan, so it makes sense for Northern Pacific to prioritize Japan-originating over U.S.-originating traffic in its choices of airports to serve. Both South Korea and Japan are in the U.S. Visa Waiver Program, and tourism to the USA surged after South Korea was admitted to the VWP in 2008. 757s have the range to reach as far from Anchorage as Beijing and Shanghai, but U.S. and Chinese requirements for tourist visas for each other’s citizens make it harder to promote tourism in either direction. Perhaps more importantly, flying to China would put Northern Pacific in direct and likely losing competition with Chinese airlines with lower labor costs and deep pockets for the newest planes.

To reach Hong Kong or more distant points nonstop from Anchorage, Northern Pacific Airways would need a plane with longer range than a 757. The obvious choice, if the first phase of operations goes well enough for the airline to consider expansion, would be the Boeing 767. A 767 could reach as far from Anchorage as Singapore or Mumbai — essentially anywhere in East, Southeast, South, or Central Asia, nonstop.

The 767 was designed at the same time as the 757, with many systems and controls in common. All versions of the 767 have the same type rating as the 757, meaning that the same pilots can, and routinely do, fly either type interchangeably once they’ve received some classroom training in the differences.

While the 757 is the largest and longest-range narrow-bodied jetliner of its era, the 767 is the smallest wide-body, with a very attractive seven-across (2-3-2) seating configuration in coach that makes it easy for all passengers to get up and move around. The 767 was, and remains, popular as a cargo plane. Some were sold as freighters, while many more have been converted for cargo use after service with passenger airlines. 767s are currently used by major air freight companies including FedEx, UPS, DHL, and Amazon.

767s would be the obvious choice of aircraft if Northern Pacific Airways wants to reach places further into Asia. Few are on the market, however. The only one being openly offered for sale right now seems to be this one configured as a flying mansion being sold off (in favor of a larger and newer Boeing 787) by the Russian billionaire Roman Abramovich. But more 767s are expected to become available a few years from now, just about when Northern Pacific might — if all goes well for its 757 service — be ready to extend its route map.

The largest current operators of 767s are Delta Air Lines and United Airlines, both of which plan to phase them out within the next few years as they take delivery of newer, more fuel-efficient planes. The expectation has been that most of these Delta and United 767s would be converted to all-cargo configurations. But given the cost of passenger to freighter conversion, an airline such as Northern Pacific that wants 767s for passenger service may be willing to pay more for used 767s already configured for passenger service than an air cargo company would pay for them as freighter conversion feedstock.

Everything about Northern Pacific Airways makes sense, except the pandemic. The pandemic is part (although only part) of why planes, terminal space, gates, and landing slots are available at prices a start-up airline can afford. But the pandemic is not over, and may never be. Investors in Northern Pacific are gambling that travel A.C. (“After Coronavirus) will return to what it was like B.C. (“Before Coronavirus”), rather than establishing a “new normal” in which travel is different in ways we may not yet be able to predict. Northern Pacific has already committed money to buy and begin repainting and refurbishing the interiors of its planes, and hopes to start flights by the end of this year. I wouldn’t be surprised to see that schedule slip. It remains to be seen whether intercontinental travel on the routes it is targeting will recover quickly enough for it to become profitable before it burns through its start-up funding, but I hope it does.

Link | Posted by Edward on Wednesday, 19 January 2022, 23:59 (11:59 PM)

Informative article with deep knowledge.
Thank you

Posted by: jessica f., 7 April 2022, 23:42 (11:42 PM)

"New international airline plans $6 million upgrade at Anchorage airport" (by Alex DeMarban, Anchorage Daily News, 3 May 2022):

Posted by: Edward Hasbrouck, 10 May 2022, 15:45 ( 3:45 PM)

The plans for Northern Pacific Airways have reportedly been complicated by the closure of Russian airspace to US-flagged aircraft because of the Russian invasion of Ukraine. With emergency diversion airports in Russian unavailable, Northern Pacific will need "ETOPS" (extended-range) certification to operate 757s or other twin-engined planes on its planned routes:

Posted by: Edward Hasbrouck, 20 May 2022, 09:45 ( 9:45 AM)
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