Hong Kong Express

Hong Kong's low-cost airline presence could triple to 15% of seats in 2015

Hong Kong is no Singapore for low-cost carriers – in early 2013 LCCs account for 5% of all seats at Hong Kong, compared with 27% of seats in Singapore. But Hong Kong is on the verge of a possible rapid structural change that could see LCCs account for approximately 15% of seats in Hong Kong in 2015.

The spike in LCC presence is predicated on a number of factors, including the successful launch of Jetstar Hong Kong, the continued expansion of mainland China’s Spring Airlines and the mooted re-launch of Hong Kong Express into an LCC. The fast ascent of LCCs will level off around the middle or latter part of the decade when almost all slots at Hong Kong airport will likely become utilised, leading to the possibility of a period of almost no growth until the completion of a much-needed third runway, which will not open until around the turn of the decade. Singapore in contrast has enjoyed many years of rampant LCC growth.

As the Hong Kong slot shortage comes closer into view, airlines are participating in an effective slot grab, growing routes or maintaining unprofitable capacity in order to secure slots and hope the services will later be sustainable.

Spring Airlines in major move adds flights from Hong Kong to Chongqing, Hangzhou, Nanjing and Xiamen

At CAPA's World Aviation Summit in Hong Kong on 28 & 29 Nov-2012, Spring Airlines announced a significant expansion of its services between Hong Kong and mainland China, a high-demand market that has only recently seen competition. Spring's addition of services from Hong Kong to Chongqing, Hangzhou, Nanjing and Xiamen supplement its three daily flights between Hong Kong and its base at Shanghai.

The once-stagnant market is seeing rapid change and competition with fledging carrier Hong Kong Airlines, invigorated mainland carriers, a tie-up between Hong Kong Airlines and China Eastern as well as the forthcoming entry of planned LCC Jetstar Hong Kong.

Spring commenced services in 2005 as a LCC but is moving away from a strict interpretation of the model at it seeks higher yields, hybridising as other former LCCs have done. Its advantage and platform for growth is efficiency, which is generally lacking in China's state-owned airlines.

Cathay Pacific must seize the moment and launch a low-cost carrier

If Cathay Pacific is to participate effectively in the tremendous regional growth this decade has on offer, then it is surely time to launch its own low-cost carrier subsidiary. To delay further merely compounds the risk of being left out of one of the biggest ever growth markets. The competitive landscape will see homegrown LCCs Jetstar Hong Kong and Hong Kong Express, as well as unannounced carriers, either private or affiliates of existing carriers, assuming strong positions. Added threats come from the invasion by carriers from Southeast Asia – and increasingly North Asia – that will encircle fortress Hong Kong.

While Asia is still a developing market, the largest growth will come from a handful of carriers positioning themselves now. Cathay is well positioned to stake its claim in one of the region’s most blessed hubs: a large financially-oriented catchment area with geography permitting narrowbody flights to much of Asia. Cathay has the experience and clout to capture this low-cost travel growth while it is there for the taking. Better move quickly than eventually be obliged to launch a LCC under duress.

Hong Kong Express to re-brand as LCC and switch B737s for A320s as Cathay stands clear of LCCs

Hong Kong is set to receive its first ever short-haul LCC in a move that will see the market further press Cathay Pacific to justify not having a LCC subsidiary. Hong Kong Airlines president Yang Jianhong stated Hong Kong Express Airways will be transformed into an (unnamed) LCC in Jul-2012 or Aug-2012, operating under its new low-cost model to cities in mainland China, South Korea, Japan and Southeast Asia. It will use the traffic rights of Hong Kong Express to Shanghai, Beijing, Singapore, Seoul, Kuala Lumpur, Osaka and Taipei, according to reports in the South China Morning Post.  

Mr Yang stated the new carrier will appoint a CEO with European LCC sector experience and will acquire 15 A320s over the next three to four years. Its current fleet of five B737-800s will be transferred to Hong Kong Airlines in 2012. The new LCC will pose a new challenge on lucrative routes from Hong Kong to Beijing, Shanghai and Taipei and opens the door for a pan-Asian carrier like AirAsia or Jetstar to become involved.

Hong Kong Airlines plans A330 all-premium product for Hong Kong-London route

Hong Kong Airlines is preparing to enter the highly competitive but typically lucrative Hong Kong-London market next year with a unique all-premium service. London will be one of at least three new long-haul destinations for Hong Kong Airlines in 2012, along with Paris and Sydney, as the fast-growing carrier continues to rapidly expand its A330 fleet.