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One of two administrative regions of China, Hong Kong has experienced an advancing aviation industry for a number of years. Hong Kong's only civil airport is Hong Kong International Airport (HKG), a leading passenger gateway in Asia and one of the busiest airports in the world in terms of international passengers and cargo flights. With over 85 airlines, HKG is the hub for Cathay Pacific, Dragonair, Air Hong Kong, Hong Kong Airlines and Hong Kong Express. Although Hong Kong does not have a national airline, Cathay Pacific would be the closest to such. The Civil Aviation Department is the aviation authority in Hong Kong, responsible for providing air traffic control services as well as reporting to the Government.
Airports in Hong Kong
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Clouds loom over Cross-Strait airline market as Taiwan faces political change. Hong Kong may benefit
The ruling, and pro-Beijing, KMT party is expected to lose the Jan-2016 elections in Taiwan. Under the KMT's leadership Beijing and Taipei have forged closer ties, including the launch of charter and then scheduled Cross-Strait flights between mainland China and Taiwan, which had been prohibited for decades. There has been growth, with increase in overall frequency as well as destinations available to be served in the still tightly-regulated market.
An outstanding gripe from the Taiwanese side was that, for complex reasons, their airlines were not permitted to carry transfer traffic from mainland China to Taiwan and beyond to other markets – such as Australia and North America, two popular long haul markets from mainland China and for which Taiwan is well positioned to be a hub. Earlier in 2015 when relations were warmer, Taiwanese carriers were expected to receive transfer traffic rights by the end of the year. But as the Taiwanese political situation has turned unfavourable to Beijing, an Oct-2015 meeting did not grant transfer traffic rights. The bigger risk is that cooling relations would slow Cross-Strait liberalisation – or at an extreme, recede. One outcome could be that visitor growth would instead funnel through the Hong Kong hub.
Recently, Airports Council International (ACI), the airports global trade representative, observed that, “in many instances, airlines are not paying the cost of the airport infrastructure they use.
"In fact, some airlines are now pushing for even lower airport charges, arguing that such cuts would save passengers money and thereby boost employment opportunities.
"We believe such arguments are flawed and make overly optimistic assumptions of how directly passengers would benefit from such cost reductions.”
Airports are now deriving on average 62% of revenues from passengers, through retailing and other activities, and only 38% from the airlines they serve.
Jitters in China are enough to make the world ask if there has been an earthquake. The depreciation of the yuan has a wide range of impacts, but as far as aviation is concerned, China's outbound market outlook remains bright. China's larger economic change, of which the yuan is one part, could impact business traffic to/from China. But the larger outbound leisure segment – there were 117 million Chinese tourists in 2014 – should continue its robust growth.
Against the US dollar, the yuan is about back to 2012 levels. An increase in trans-pacific capacity and looser visas restrictions will continue to drive growth. In other popular Chinese tourist destinations like Japan, Korea, Australia and Europe, the yuan is still at a two year, or longer, high. The outlook remains bright – and a great deal for China's tourists as they are better accommodated.
Cathay Pacific remains attached to its premium business model, which in 1H2015 showed some improvements from a low base while profits from subsidiaries and associates – namely an unhedged Air China – greatly helped the bottom line. "We must be doing something right," chairman John Slosar said.
But the going is getting tough. A 12% decrease in fuel net of hedging losses was largely passed on to consumers with a 9% decrease in yields, although there is some impact from foreign exchange. Premium long haul demand remains soft. Cathay's recipe for relying on efficiency improvements could be reaching a ceiling: aircraft utilisation may be tempered to address growing congestion while load factor is at 86%. A350s, and later, 777Xs bring improvements but other gains will be precious. Cathay must rely on incremental improvements to remain ahead of competitors that have better geography and bigger local markets. Restructuring of China's bloated state-owned airlines was once a fantasy but is now coming into focus, a concern for Cathay.
Jetstar Hong Kong licence application rejected: Hong Kong becomes an island of protectionism in Asia
"Never imagine yourself not to be otherwise than what it might appear to others that what you were or might have been was not otherwise than what you had been would have appeared to them to be otherwise.” (Alice in Wonderland; Lewis Carroll).
The battle of semantics over the issue of Jetstar Hong Kong's compliance with an esoteric and highly subjective definition of the words "principal place of business" appears to be over. As Hong Kong's licensing authority rejected Jetstar Hong Kong's licence application on 25-Jun-2015, Cathay Pacific had successfully defended its market dominance with arguments more befitting of a scene from Alice in Wonderland. It is a precious victory over longstanding foe Qantas, which recently attacked Hong Kong's bilateral access to the Australian market as making no "concession to the legitimate interests of Australian airlines in establishing reciprocal hub opportunities in Hong Kong."
Ironically, the principal place of business test was established to circumvent the fact that Cathay was actually a foreign owned airline operating under a local AOC; consequently it could not be accommodated under typical bilateral air services agreements which required "substantial ownership and effective control" to reside in Hong Kong. For decades, the world made a special exception for Cathay. Today, even though it is based in Hong Kong, nearly two thirds of Cathay's voting rights reside in London with the Swire Group. And 30% of the airline is owned by Air China. It is also a common assertion that Hong Kong Airlines, another opponent to Jetstar's entry, is controlled by mainland-based HNA.
But, in the arcane world of international aviation regulation, logic and good sense is frequently a scarce commodity. The result here, as Alice in Wonderland's delightfully illogical Queen of Hearts would have said, is "Off with their heads!".
Vancouver International Airport charted impressive growth in 2014, leveraging and solidifying its position as Canada’s second largest airport. Vancouver is buoyed by its leading position as the country’s gateway to Asia; but in 2015 it has also secured new service from Air France and Aeromexico.
As it celebrates solid passenger numbers, Vancouver also faces growing competitive pressure from nearby Seattle now that Delta is quickly building the airport into its main gateway to Asia. But a recent expansion of Canada’s transit without visa programme should help Vancouver face the increased competition by giving the airport the potential to eventually connect travellers from Asia to Central and South America.
Overall Vancouver seems well positioned to meet its growth targets, which include handling 25 million passengers annually by 2020, a nearly 29% jump over a record number of customers travelling through the airport in 2014.