Jetstar Hong Kong
Jetstar Hong Kong will service short haul routes in Asia, including Greater China, Japan, South Korea and South East Asia. It will be the first low fares airline based in Hong Kong, subject to regulatory approval.
Fleet: 3 x A320s, growing to 18 A320s by 2015.
CEO: Edward Lau
Capital: USD198 mill
The shareholding percentage in Jetstar Hong Kong will be equally held by China Eastern Airlines and Qantas Group, which will be equal partners in the Joint Venture. The maximum exposure for each partner is USD99 million over a three year period.
Location of Jetstar Hong Kong main hub (Hong Kong International Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Jetstar Hong Kong fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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Jetstar welcomes the Competition Commission of Singapore’s approval for airline coordination in Asia
21 total articles
Cathay Pacific says it is pleased with its seat discount programme “fanfares” that turned a year old in Oct-2013, having sold about 140,000 seats during that time. But this is an exceptionally small figure: it accounts for less than half a percent of Cathay’s 2012 traffic. In comparison, AirAsia sells 140,000 seats every two days.
But strategically "fanfares" is important, and not just because it enables Cathay to clear inventory likely to go unsold. Cathay sees fanfares giving it greater relevance in the budget market, now in the limelight due to Hong Kong Express and Jetstar Hong Kong.
Fanfares, with its colourful and sometimes wacky marketing, is a brand stretch for typically reserved Cathay. Despite this, Cathay wants to expand the offering, in line with its view towards LCCs that the cheapest seats are the remaining unsold ones. But load factors are already high on the flights budget-conscious passengers want, giving doubt to this strategy.
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.
Cathay Pacific has been rewarded for its move to decrease capacity for the first time since 2009 as a 4.8% cut in ASKs in 1H2013 has led its Cathay Pacific and Dragonair brands to reverse their operating loss from a year prior and collectively post a modest pre-tax profit of HKD452 million (USD58 million). This is less than half the group's 1H2013 operating profit of HKD1035 million (USD133 million), which includes the profit from third-party catering and other divisions. The group's operating margin was 2.1%, indicating a fundamental weakness remains in the business – although it is performing better than struggling Singapore Airlines.
Yet conservative Cathay is once again offering no new strategy. It is looking to stay the course of being a premium airline with few strategic partners and is banking on a rebound to the corporate and freight markets. But even once those markets rebound, Cathay does not enjoy the entitlement to the traffic it once had. Competition on price and convenience is increasing in almost every region and competitors in once inertia-filled Asia are finally waking up and becoming smarter.
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.
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