Hong Kong Airlines IPO Part 1: reportedly profitable but with improvements needed

Hong Kong Airlines, the third largest airline in its namesake hub, has filed an application to be listed on the Hong Kong stock exchange. Its application discloses many figures for the first time in the airline's history, but is not yet a formal prospectus. The application shows Hong Kong Airlines has been profitable, but with significant contributions from sub-leasing of aircraft.

The first part of this report benchmarks Hong Kong Airlines' yield, cost, labour productivity and aircraft utilisation against Cathay Pacific and Dragonair, its most significant competitors. Cathay has a yield premium over Hong Kong Airlines, while cost figures are impacted by very different average sector lengths.

Hong Kong Airlines does appear to benefit from being a younger airline in having lower labour costs, but will need to gain more cost efficiencies and yield growth. Its strategy will be examined in part two of this report.