Hong Kong Airlines IPO Part 2: Main opportunities may lie in partnerships, careful strategic growth

Hong Kong Airlines in recent years has focused on rapid growth, doubling ASKs in about 2.5 years to 8.1 billion in 2013 as it established a position in the market. It is now at the stage where it needs to bed down that capacity and refine its vision, prior to growing further.

Much of Hong Kong Airlines' operation is charter-style with over 80% of passenger revenue coming from travel agencies, mostly in mainland China and a large portion from sister HNA companies. Yet Hong Kong Airlines' strategy is to move towards becoming a premium carrier, offering a renovated lounge for passengers and lie-flat business seats.

Further growth cannot be assured as the carrier's AOC is currently capped by Hong Kong regulators and its key expansion markets are either highly competitive or suffer restricted bilateral access. Hong Kong Airlines has potential synergies with HNA, as yet untapped, and meanwhile its dual-brand strategy with HK Express remains unclear. There are numerous loose ends, so the story is one of potential - but a need to adopt the right strategies to unlock it.