Airline Leader Interview HK Express CEO Jeanette Mao

Transcript

Rich Maslen:Now, to many of you, maybe HK Express may still be a brand that you're not completely aware of, but it plays an important role in aviation across Asia. Now, before we get into some details, just a bit of background on Jeanette, who has a great perspective on Asian aviation. She spent more than 2 decades with Cathay Group. Working across a remarkable broad range of business areas and has been at HK Express since 2023 and is now leading the transformation of the airline. Jeanette, so just to start with, maybe we can just give a quick guide to everybody of where HK Express is currently today and maybe how you're looking to grow over the next couple of years.

Jeanette Mao:Your return. I think it's my great pleasure to be here today for the CAPA Airline Leaders Summit. So for those who are less familiar with HK Express, we are Hong Kong-based, Asia-focused, young, and high-growing low-cost carrier. So our purpose is simple, to making the air travel more accessible and inspiring people to explore more of Asia. And over the past 3 years, we have grown and almost doubled the scale in terms of the fleet size, network reach and the passenger carried. But I think more than the scale, actually, now we are proudly the 2nd largest Hong Kong-based airline. And also, in fact, around 1 out of every 8 passengers departing from Hong Kong IA is on HK Express. And our proposition, of course, we offer affordable fare, but our proposition is beyond the price. It's built around value, around reliability, as well as customer choice and disciplined operation. You asked me about over the next 3 to 5 years. I think one thing is we are determined to be one of Asia's leading LCCs. And over the next 3 years, today we operate around 43 aircraft, 35 destinations around Asia. So over the next 3 years, scale-wise, we are moving towards the next milestone, which is 50 aircraft and 50 destinations. But beyond the scale, we are also determined to deliver sustained profitable growth. I think this is important, and also to play an active role to contribute to Hong Kong's international aviation hub status, as well as a low-cost gateway.

Rich Maslen:I think we'll move on to talking about the fleet and network in a little while, but I just I think to start with, I think a key area is obviously Hong Kong is a major market. Demand is strong and will remain strong. Obviously, there's a lot of competition, but how do you actually set yourself apart to be able to deliver that profitable growth and get the correct demand in place so you can support it in a profitable manner?

Jeanette Mao:Yeah, I think demand is probably the relatively easier part in the equation. The most challenging part is how to turn that demand into sustained returns, right? So people want to try a travel, but the, uh, a full aircraft doesn't automatically mean a profitable, um, flight. So, uh, uh, that's why, uh, I think the discipline is really about how to serve that demand with the right cost, right capacity, and the right mix of base fare and ancillary products. That's why we spend lots of time regarding network planning, fleet planning, Make sure we deploy the right capacity on the right routes with the right economics and the right cost base, and really constantly, relentlessly challenge every element of the cost. I think we are still not there yet, and there is still room to improve. And there are lots of LCC industry leaders here today, and I also want to learn from them as well. There are lots of best practice we can bring, and more importantly is how we adapt those best practice and adapt that into our context, into Hong Kong's context.

Rich Maslen:The low-cost model has been around for quite a long time in the global market and is constantly changing. Is it becoming harder now in Asia to be a true low-cost carrier, obviously with a lot of hybridisation taking place? Do you see that the opportunities are still there on the low-cost side, or do you need to adapt a little more to meet the changing demand?

Jeanette Mao:Yeah, I think the competition is definitely intense in Asia. I think nowadays customers are also more demanding in terms of choices, flexibility, and yeah, so they actually expect more, although they want to have affordable fare. And they are also more selective on what they want to pay for. So, and that makes LCC actually more relevant to my opinion, because for us, it's really, it's not about how cheap the fare is. It's really about what's the value you can deliver to a customer, right? And the value could be different for different individuals. So for HK Express, it's really make our core proposition affordable, competitive enough, and then give lots of the different products, rich choices for customers to choose from, and they can tailor and customize based on their needs. They pay only what they need, and they get what they pay for. And the last but not least is really investing in the digital capabilities, invest in the operational reliability, because these 2 things actually drive value for majority of the customers. And also these 2 things, not only for the interest of customer, but also for the interest of airline. For example, operational reliability, on-time performance, right? So every minute counts, not just the important for customer, but definitely also important for airline. We can minimize the costly delays. We can also increase the aircraft utilization. I think continually invest in the digital capability as well as the operational reliability will serve both sides.

Rich Maslen:You're very fortunate to have a base in Hong Kong, which the strong potential for inbound market in terms of travel, but also there's a growing outbound as well. But that's actually been a bit of a constraint with capacity at Hong Kong Airport for quite a time now. Obviously, the, the 3-runway system that's now in place has fundamentally changed things. You're now one of the biggest carriers at the new Terminal 2 there. So, you know, what has the opening of the 3-runway system actually delivered for you as an opportunity to fulfill your growth needs?

Jeanette Mao:Yeah, Hong Kong is known as the mature hub, and as the mature hub, capacity constraint is always the challenge, right? So with the 3rd runway system, it's basically increased the flow by 50%. And with Terminal 2, it means the passenger handling capacity increased from 70 million to 100 million and potentially to 120 million. So all this infrastructure actually provides the golden opportunity for the airlines to grow, including HK Express, and also help to strengthen Hong Kong as the aviation hub compared to other regional hubs. Thank you. hub in Asia. For us, yes, I think if it was not about— because of the third runway system and Terminal 2, we probably wouldn't have such a growth trajectory in the past 3 years. Also, it will help to continue support our continued growth, the 50 aircraft, 50 destinations that I mentioned over the next 3 years, and also even the future growth. I think, as you said, Hong Kong, again, it's 7 million population. In order to become a successful hub, it's not just only about a 7 million population. It's very important about how we unlock the potential of the nearby area, the inbound, the connecting, right? So one thing I think the unique advantage of Hong Kong and also the unique advantage of HK Express is how nearby the Greater Bay Area is. And the Greater Bay Area, 19 million population, but not only about the population. Actually, we have around 1/3 of passengers coming from Greater Bay Area. So they come into Hong Kong, fly on us, and the most appealing part of the GBA passenger is around 60% of them are between age 21 to 39. So they are relatively young demographics compared to our Hong Kong passengers, and these people are usually the group that travel more often and have strong affinity to low-cost model, and also they are digitally savvy. Sort of engaged, right? So this provides a high opportunity potential for Hong Kong, for HK Express to further grow. I think that's the unique geographical location.

Rich Maslen:So how have you adapted to meet that? Obviously, when you're establishing the brand, you're pushing out your business model quite well. It's a completely different demographic now that you're actually trying to approach in the Greater Bay Area. So how are you adapting to ensure that you also deliver for your existing customers, but also these others you're trying to attract?

Jeanette Mao:Yeah, so our GBA passengers, as I mentioned, actually used to only contribute maybe less than 1/5. Now it's 1/3. So we definitely collect lots of data about them. Who are they? Why they travel on us? What they care? What they value? I think several observations, maybe I share one example is, you know, the Chinese travelers are very digitally engaged, So we do a lot of the brand awareness, brand consideration, brand campaign through the social media, the Xiaohongshu, the TikTok, all these social media to build that awareness so that make the crowd feel that flying HK Express is value for money. It's really cool and it brings you to those cool and exciting destinations. And because they're so digitally engaged, when we design a website, You can't only benchmark those best airlines. Actually, what we benchmark is Taobao, is those retail shopping websites to make sure it's user-friendly, it's intuitive, it's easy like that, because they are just immersed by those environment. So I think that's some of the— just one example that we— how we attract those specific groups in which is different from where we have majority for the Hong Kong demographics.

Rich Maslen:Now, we're going to talk a little while in a bit about the relationship with your parent company, with Cathay, and how you fit into that. But talking about this new market potential there, is HK Express actually delivering capacity and connectivity that perhaps wouldn't have existed with Cathay alone, with its its brands? You know, are you creating a new demand, you think, with what you're trying to offer?

Jeanette Mao:Yeah, I think stimulating new demand is definitely the defining characteristics of LCC. I won't say every single passenger is new demand. Definitely we are competing with other carriers on existing, having a higher share of the pie, but at the same time, we are so proud of making that pie bigger. So among the 35 destinations of our network, actually almost one-third are the destinations that HK Express exclusively flies between Hong Kong and those destinations. We often are the pioneer for some of the new destinations. That means we really created new demand, raised awareness, and bring the customer to someplace that they probably never thought about before. So yeah, from that front, yes, I think definitely we are creating more demand, stimulating more demand, and building improved connectivity for Hong Kong International Airport. And because of that unique network and differentiated network, people, as I mentioned, from Greater Bay Area, they are willing to come into Hong Kong and fly on us.

Rich Maslen:Now, the network growth has been quite noticeable, but there's still opportunities out there. So where would you say you would be looking in the years ahead as opportunities for new markets? And perhaps markets that are particularly supportive of the low-cost model rather than a full-service model.

Jeanette Mao:Yeah, looking at today, we operate around 3 core regions: Northeast Asia, Southeast Asia, and mainland China. So in terms of a number of destinations, around half are in Northeast Asia, 1/3 in Southeast Asia, 1/6 in mainland China. So I would say I see opportunities among all the 3 regions, but adding new destination is not like adding dots on the map. It's actually to build a more balanced portfolio with differentiated customer base, with different seasonality, so you are more balanced from the customer flow and the demand and supply, right? So I think definitely we'll continue to keep our strengths in Northeast Asia, But also we see increasing opportunities in Southeast Asia and mainland China. Actually yesterday we just announced a new destination in China, in mainland China, it's Hefei in the eastern part of China. So it will be our 7th destination in mainland China, but in the future we see more coming. Yeah.

Rich Maslen:Now I think it's quite clear that secondary destinations are gonna be the key. You mentioned that there's a number of routes that you are the sole operator on. You know, what stands out as these destinations? What are the key opportunities that you see as an airline to make some of these markets work where others wouldn't?

Jeanette Mao:I think our network across both primary cities, biggest city with established demand, as well as those secondary cities that you mentioned, underserved, underconnected, but we need to stimulate demand. So we across both. And for those, I think one of the practical reason is for those big cities, slot usually is constrained, competition is very intense. But of course you have established demand. But for the new cities, underserved, underconnected, relatively they are less exposed to competition. SLO is relatively relaxed. You can get good timing as you see fit for our fleet planning. But I think the thing is we need to invest on awareness. We need to be patient about a certain period of investment. And not all the ports work out. Right. So in 2025, we launched 12 destinations. One-fourth failed, right? So, but it's fine. Some didn't work out and we just move on. We learn from it. And there's always some learning from every route that doesn't work out. So I think we learn from it, adapt from it, and continue to expand more. Yeah.

Rich Maslen:You mentioned before about the fleet. You've sort of transitioned across now Mainly to the A320neo family. You're growing your fleet, you have a number of aircraft on order still. So can you just give us an idea where you are currently fleet size and how many aircraft you're looking now to incorporate into the fleet?

Jeanette Mao:Yeah, so currently we operate with 43 aircraft. We just got delivery with A321neo with brand new seat products and a 239 configuration. So 43 as of now, we still have 3 more to be delivered by end of this year, and total we still have 20, more than 20 aircraft on order for the coming 3, 4 years. So definitely, as I mentioned, over the next 3 years we are looking for the fleet of 50, and currently all our fleet are Airbus narrowbody. I think the commonality of the Airbus narrowbody give us the simplicity. In terms of crew rostering, in terms of maintenance, operational flexibility, and the cost efficiency.

Rich Maslen:Obviously, Adrian mentioned earlier on about low-cost widebodies. Obviously, you're in a slightly different environment being part of a wider group, but is that something that you would consider as an opportunity for the future, or is the single-aisle aircraft the best option still?

Jeanette Mao:I think at this moment we still focus on the narrowbody. One sort of principle we stick to is really really remain disciplined and focused on what we are good at. I think one of the LCC DNA is really about simplicity. As I mentioned, one narrow-body Airbus single fleet gives us that simplicity. Whether we will consider wide-body or other aircraft types, I think only when the complexity is justified, economics works, and maybe the market evolves, then we will consider. Jeanette,

Rich Maslen:And obviously the narrow-body range has been extended now with, with the A321LR and XLR. You know, is that an aircraft that works for you from Hong Kong, or does it just not offer the benefits of that additional range that would work for your proposed network plans?

Jeanette Mao:So currently we focus on around the maximum up to 5 hours flight range, and we think there is still lots of spot that we haven't explored. Around 5 hours Hong Kong, I mean the circle, actually it's a huge population. I think I would say we still focus on that range and focus on how this can deliver the economics that are required.

Rich Maslen:I just want to touch on supply chain a little bit because it's been a bit of an issue to— you may have the aircraft on order, but there's been no guarantees over the last couple of years of when those aircraft will arrive. Where do you stand currently with HK Express in terms of the Airbus deliveries? Are they back on track now? How confident are you in terms of bringing the capacity on board as you require it?

Jeanette Mao:I think supply chain is probably everyone is facing. It's not just about aircraft manufacturer. It's actually across the whole supply chain, the seats, the components, the parts, the MRO suppliers, the engines. So I think, yes, over the years we see the improvement and we keep constant communication with Airbus. For example, we look at 12 months. That's a very important checkpoint for us before the delivery, because once you enter the 12 months, then you start sale, right? So you don't want to cause disruption to passengers. So usually 12 months, the checkpoint, we sort of have a visibility whether that aircraft will deliver or not. If it's slippery, and then we just need to prioritize, prioritize those strong routes and do some trade-off for relatively weak routes. That's 12 months. And of course, we can also consider extend the existing lease or even lease the capacity, additional capacity from market, but only when the economics works. But then within the 12 months, we will look at basically the aircraft delivery won't be the exact same exact date. It's only maybe around that quarter, so it, it'll be up or down by 1 to 3 months. Then, uh, we need to be agile enough to manage that up and down. And, uh, the least, uh, least preferred scenario is to really cancel the flight and cause disruption for our customers. So that's why with a wider, bigger fleet, actually we have the flexibility to manage that up and down. So for example, to stretch out the utilization for the existing fleet, reschedule some of the timing so that we are still be able to manage that delivery delay for 1 to 3 months. So that's something that we also in our control to manage.

Rich Maslen:That's something I mentioned earlier on, we bring into now. You're in a very strategic position being part of the Cathay Group as well, which must be very comforting to have the support of, of, you know, Hong Kong's biggest carrier behind you, but perhaps also brings a little bit of rivalry internally in terms of markets and where you're serving. So how does HK Express offer that low-cost operation within the Cathay Group? And when it comes to network opportunities, how do you work alongside and also compete with what is your parent company?

Jeanette Mao:Yeah, I think definitely within the CASSI Group, the CASSI Pacific, the premium full-service carrier, and we are focusing on the cost-conscious short-haul leisure traffic, the low-cost carrier. And the dual-brand model, the beauty of the dual-brand model is they complement with each other. We want to make sure it's 1 plus 1 more than 2, right? So in the network planning, we do a lot of coordination. Some markets obviously would be more fit for the full-service carrier. For example, if it's premium demand, cargo demand for the wide-body aircraft, or long-haul connectivity is critical. But some markets is more fit for LCC. If it's, you know, highly efficient short-haul proposition, as well as sometimes it's a new destination which requires stimulating demand, then LCC probably more fit. I think with the dual-brand model, the beauty is we have the flexibility between the 2 models, and we can work out which model serves the best for the best opportunity. But you asked me whether we will have some duplication. Actually, we have 14 destinations among the 35, actually we overlap with Cathay Pacific. And I think we overlap, but we don't duplicate with each other because on each single route, it's either different timing, or serve different customers, different price points, or serve different travel occasions. So for customers, that just means more choices, right? Either the timing, frequency, different price points. And also for the airlines, actually, it's 1 plus 1 more than 2. Actually, it helps us to compete with others, no matter it's full service or LCC. So I think that's how we see the beauty of the Do

Rich Maslen:you see that relationship deepening more in terms of working together, in terms of loyalty, in terms of partnership, or does that just add a bit more complexity? And while you're one group, you're 2 separate brands and things.

Jeanette Mao:Yeah, I think we only do things together when we see value. I would say putting joint procurement as one example. We only do joint procurement when we see commonality and scale that give us a better deal. For example, aircraft engines, these kind of things. But we don't joint procure everything because sometimes the solution products that LCC requires just totally different from full-service carrier. And also some of the integration we think there's value to do. For example, we have passengers that first sector is Cathay Pacific, second sector is HK Express. Yeah. We want to make sure the experience is seamless enough, transfer, transit experience, baggage handling, even disruption handling. So this integration, I think it's valuable, but we are also very conscious that the LCC DNA is simplicity, speed, and the discipline, right? We want to stay true to this DNA. So we don't integrate everything. If We don't copy everything as a full-service carrier. If we become that, we will just be a full-service in a smaller scale. Then it loses the strategic value for having HK Express within the bigger group. So I think we take a balance. We only do things together where we see value, and we say no to those things if it's just to create unjustified complexity or unnecessary layers. Then we just say no.

Rich Maslen:But obviously, as you grow, as you add more aircraft, you add more staff, you add more routes, it becomes harder to focus on keeping costs low. You know, how do you maintain that, that visibility on ensuring that the costs remain low and that you can carry on operating as profitably as you can?

Jeanette Mao:I think the cost discipline is one of the very important DNA in HK Express, regardless how big the scale is. Because success is not measured by how many passengers you carry. Success is measured by how much the sustained returns you can generate, right? So yeah, so I think the cost mindset and the cost discipline is make sure not just me, across the whole company, from the frontline to the top, we constantly and relentlessly challenge every component of the cost. We have very clear KPI, cost KPI. And we review every year whether these KPIs are meaningful, relevant, and generate value for the organization. And once the KPI is set, and it will align from the top to the junior, everyone will have clear accountability, clear ownership to drive all these KPIs. And we make sure we celebrate those who contribute to the overall cost efficiency. And they have clear ownership, And that they will be acknowledged and recognized for them to contribute to the overall cost efficiency of the company.

Rich Maslen:Now, there's a real huge competitive position between low-cost carriers across Asia. We're seeing a little consolidation with what's been happening in South Korea, some changes here in Japan as well. Do you see future opportunities? And perhaps Hong Kong is in your name, the HK is there in your name. Do you see opportunities to perhaps bring your model into other markets and operate and serve in them more positively than just feeding flights into Hong Kong?

Jeanette Mao:I think currently we remain very focused in Hong Kong because, as I said, Hong Kong is not just 7 million of population. The 90 million in the Greater Bay Area, the 9+2 cities, we still haven't unlocked the full potential, and I think this will help to this will be enough to support our future growth, at least over the next 3 to 5 years. So we remain very focused to Hong Kong, to the GBA market, and remain very focused in Asia. But you asked me whether the consolidation, I mean industry-wise, not just in the context of HK Express. I think aviation is cyclical, right? It's always after consolidation, there's new entrant, new competition. and then another round of consolidation. I think the fuel price probably is a very big element to impact that, because for the fuel price, actually, it's affecting LCC more, because usually LCC has less fuel hedging, and we have higher price elasticity that it's difficult for us to pass all the fuel costs into the consumer, which will then affect the demand. So yeah, it's difficult to predict, but it's always cyclical.

Rich Maslen:Now, obviously, you came to HK Express from roles within the Cathay Group. It's maybe a bit of a provocative question, but did you have to unlearn things that you'd learned already to incorporate them into the low-cost model and change your thought process a little?

Jeanette Mao:I think the biggest difference, It's not good or bad, it's just different model and different environment, different organization. I think one biggest difference I would say is the rhythm, is the pace, is the rhythm. In HK Express, the feedback loop is incredibly short from you making the change or making the decision till you see the outcome, either it's customer behavior change or the operational performance or the commercial performance. It's just so quick. And also, I think one thing I really appreciate is we don't need to wait for perfect information before we act on it. There is a strong test and learn culture. Yes, we make informed decisions, but, and we act on it. We measure the success and we quickly learn and adapt. If it works, we scale it. If it doesn't work, we— learn from it, we adapt, and then we move on. It's a strong test-and-learn culture, and over time, it creates the entrepreneurship mindset, right? People have a strong sense of ownership, and the teams are empowered to act on, to adapt, to learn from it. I think that's the part that I really enjoy by leading HK Express.

Rich Maslen:We have some major airline brands in Asia that it's very very difficult to compete in terms of their scale, in terms of their brand recognition. You know, what would you say is the biggest thing that people underestimate about HK Express in that competitive marketplace?

Jeanette Mao:I think probably I previously mentioned about firstly is the unique geographical location, right? Hong Kong is the most connected international aviation hub in Asia, in the world, and also the proximity to the Greater Bay Area with high potential. I think second thing is our unique network. It's still expanding and it's across primary cities, established demand as well as new demand in the secondary city. And the third thing is we really remain focused and disciplined around the LCC model. We are not trying to build something in the middle or in between. We are very clear about what we want to become. And lastly is the advantage of having the CASA Group, the whole ecosystem, right? So either it's the joint procurement, the scale benefit, or the deeper operational expertise, or even you touch on the loyalty proposition that we can benefit from. So I think these are the 4 things I see that it's the competitive advantage of HK Express and it will bring us continued growth. Thank you, Jeanette. I mean, succeed in the future.

Rich Maslen:Well, I think it's a fascinating story that's, that's adapting and happening here. And for those of you that perhaps weren't aware of HK Express, you, you certainly are now. And I think you certainly will be in 5 years' time as the airline develops and grows. Thanks for sharing your vision, Jeanette. Thank you. Can I have a round of applause for Jeanette? Thank you

Jeanette Mao:very much.

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