Hong Kong Airlines
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- IATA Code
- ICAO Code
- Corporate Address
- L2 CNAC House, 12 Tung Fai Road Hong Kong International Airport
Hong Kong SAR, China
- Main hub
- Hong Kong International Airport
- Hong Kong
- Business model
- Full Service Carrier
- Association Membership
- Codeshare Partners
- China Eastern Airlines
Hong Kong Airlines is an airline based at Hong Kong International Airport and the sister carrier of all-cargo airline Hong Kong Express Airways Ltd. Establised in 2006, the airline operates services within Asia and long-haul destinations in Europe. China's Hainan Airlines is a major shareholder. Hong Kong Airlines has aggressive growth plans, with a large order book of Airbus A320 and Airbus A350 aircraft.
Location of Hong Kong Airlines main hub (Hong Kong International Airport)
395 total articles
41 total articles
Hong Kong will welcome its first home based low-cost carrier on 27-Oct-2013 when Hong Kong Express re-launches as a LCC and over the next few weeks serves eight cities in China, Japan, Malaysia, Taiwan and Thailand. The transformation of the HNA-backed carrier occurred in a speedy five months. At first blush that may seem insignificant, but Hong Kong Express had been highly integrated with sister carrier Hong Kong Airlines. Those ties were largely cut as Hong Kong Express defined its own route network and handled its own distribution, marketing and staffing while re-configuring its fleet.
The tight timeframe meant Hong Kong Express had to forgo some strategic decisions. Implementing those while pursuing growth will now largely comprise the carrier's plans for the rest of 2013 and much of 2014. The carrier plans to introduce a new booking platform to provide a more robust offering from connections to ancillary revenue options.
Hong Kong Express will undergo a re-branding exercise, likely re-naming itself "HK Express". Much more prominent in the public domain, Hong Kong Express plans to more than double its destinations by northern summer 2014. More Chinese cities will be brought online as the carrier has the scale to absorb operational factors in China that are not conducive to efficiency.
The low-cost carrier focus in Hong Kong is firmly on Jetstar Hong Kong's effort to secure a licence, but much more quietly Hong Kong Express is preparing to re-launch as a LCC on 27-Oct-2013. Hong Kong Express will become Hong Kong's first LCC, and nearly two years after Hong Kong Express first mooted adopting the LCC model.
Its initial network will comprise mainland Chinese as well as Northeast and Southeast Asian destinations, a medley of new cities, previously served ones and actively served ones. Competition will range from light to heavy as it faces formidable full-service and low-cost carriers. Hong Kong Express plans to fly 1.5 million passengers in its first year and have a fleet of 30 A320s by 2018.
Hong Kong Express is clearly not an AirAsia or Jetstar. Its ancillary offering is light and other structural differences, like IT, will make it less robust. This is partially to be expected as it does not have an experienced LCC group to piggyback on, but its launch has hints of being under-whelming compared to what Peach or Scoot achieved.
The competitive outlook is not encouraging when a flag carrier feels the need to seek government protection, as Cathay Pacific has done in protesting Jetstar Hong Kong's application to operate scheduled services. The Hong Kong flag carrier manages to argue that despite the additional business and visitors Jetstar Hong Kong would bring, the proposed LCC ultimately "would undermine the Hong Kong economy". And allowing its entry would be to waste Hong Kong's "hard-negotiated sovereign air traffic rights", argues Cathay.
Hong Kong must find a solution that complements its business-friendly environment yet also does not put Cathay at peril or open the door for other carriers to establish a Hong Kong base with ease. Yet a final decision on Jetstar Hong Kong extends beyond the territory's borders and the local laws that have been called into question. There is the matter of Chinese politics as Cathay uses Air China, while Qantas and Jetstar use China Eastern, to gain influence in mainland China that would trickle down into Hong Kong. And Qantas' approval for Jetstar Hong Kong comes as Cathay has unsuccessfully sought greater access on routes to Australia, under a bilateral still driven by reciprocity. In the end it is possible neither Qantas nor Cathay will receive exactly what they want, an outcome of what will be one of the most complex aeropolitical rulings this decade.
It is better late than never for Hong Kong to use its proximity and scale with mainland China to cater to the booming China-Maldives market. Chinese nationals are the single largest inbound group to the Maldives, with 230,000 visitors in 2012 – more than double the next largest market, Germany, with 98,000 visitors in 2012. A few weeks after Hong Kong Airlines resumed service to Male, the main gateway of the Maldives, Cathay Pacific on 22-Jul-2013 opened reservations for four weekly flights from 27-Oct-2013. Reflecting inertia at the legacy carrier, Cathay spent over a year deliberating on whether to serve the Maldives, while Singapore Airlines and scheduled/charter carrier MEGA Maldives effectively cleaned up the market.
Cathay's services will bring stiff competition to SIA. Cathay and its Dragonair subsidiary have a far deeper China network than SIA and its SilkAir subsidiary, and connecting through Hong Kong is shorter than via Singapore. But SIA has a strong frequency advantage – double daily – and uses regional aircraft light on premium seats whereas Cathay will use a long-haul aircraft heavy on premium seats.
Although there is considerable wealth in the outbound Chinese leisure market, it is still price sensitive and primarily package-driven. Existing operators Hong Kong Airlines and MEGA Maldives should consider gaining scale to reduce unit costs.
Hong Kong Airlines is the latest carrier in Asia to embrace a dual-brand strategy of complementing the full-service airline with an LCC subsidiary. HK Airlines will transform sister carrier Hong Kong Express, currently almost identical to HK Airlines, into an LCC launching services in the northern winter 2013/2014 schedule – around Oct-2013, giving Hong Kong its first low-cost carrier. HK Express plans to grow to 30 all-economy A320s by 2018, which should make it larger than planned LCC Jetstar Hong Kong.
Partially owned by China's HNA Group, HK Express plans to be a hybrid LCC, offering connections within its operation and that of HK Airlines and other HNA Group carriers, plus perhaps even other airlines. A premium offering may be added in a latter stage of growth. While HK Express may be able to transform into an LCC, its success will depend on the freedom HK Airlines offers it.
The success of the overall dual-brand strategy will depend on HK Airlines effectively marketing itself as a premium full-service airline, which it has yet to achieve. With HK Express taking the lion's share of the short-haul market, HK Airlines will resume its planned long-haul aspirations. There is a path for this strategy to pan out, but it will likely take time with many revisions.
Jetstar Hong Kong’s decision to introduce a third investor – and its first based in Hong Kong – should be seen in the context of changing attitudes in Hong Kong. While the territory wants to be pro-competitive, it is mindful of its experience with Hong Kong Airlines.
Of greater interest to the Hong Kong regulators than share ownership of a prospective airline is where control rests. Hong Kong wants to ensure any future airline has unimpeded growth and maximises potential, for itself and Hong Kong. For example, Hong Kong Airlines is owned by mainland China’s HNA Group and largely run by HNA executives on secondment. The busy and expansive nature of HNA has, on this thesis, meant that Hong Kong Airlines has missed out on orderly growth.
The introduction of casino mogul Stanley Ho’s Shun Tak Holdings to Jetstar Hong Kong with a 33.3% stake gives Jetstar Hong Kong local ownership, which is not required presently but may be so, directly or indirectly, in the future.
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