Recorded at CAPA Global LCC Summit, 1-2 Mar 2018

HK Express Update

HK Express Commercial Director Jonathan Hutt discusses the airline’s new commercial plan, interline strategy and opportunities for growing the network. The airline is looking at serving potential secondary airports in Japan, where HK Express already has nine destinations that account for 60% of its total traffic. HK Express’ initial interline to Phuket with Hong Kong Airlines has been successful, leading the partnership to be expanded to more HK Express destinations in Southeast Asia. HK Express also has begun interlining with Delta Air Lines and will soon begin interlining with Virgin Australia. A new partnership with Dohop will facilitate more interline partnerships.


Jonathan HuttI think the new commercial plan for Hong Kong expresses really a consolidation of what we have right now. Really reexamining where we need to look at getting better synergy out of our network, finding new opportunities at slot constrained airports, but also looking to some of the core markets we have, which are underserved and finding new destinations, which are really gonna tap into the strong demand for short hold traffic from Hong Kong outbound. Also, tap into the Pearl River Delta area, which we have been doing in the past, but still allows us a huge room for scope.

On top of that, we're looking to find far more efficient ways of really delivering and connecting the product that we're doing to optimize our revenue far better in the peaks. And, also to find new strategies to deal with the seasonal low periods and find better synergy with the marketing campaigns that we're doing across the region.

I think in the past ... You know, the Hong Kong market has four carriers and at times they've really cannibalized business rather than growing the market. I think what we're seeing moving forward is that we now realize that we have to have a better idea of where our core business is, where we need to develop that, and what our market segment is.

With HKE, we are working with HKA in a very different way now. We do not have a very strong presence in the mainland China market, which Hong Kong Airlines do. And so, we are doing a lot more in terms of interline. Whereby, we can get a lot of that traffic from major cities such as Beijing or in Shanghai where we do not have access. And, using that to create interline and to destinations which appeal to them in South East Asia, for example.

So, our network is in fact changed in the way we do our slot allocation to encourage more of that interline traffic and in a very short period of time, we've seen some very concrete and promising results. We've launched with Pookode and now we have already looked at Sipon and Anh Trang and Dandenong as new destinations for interline.

I think we are pretty blessed in the market that we have. 60% of our capacity is very much in Japan and many people see that as an element of risk involved in that. However, there is so much demand from the Hong Kong market that we're looking to number one, add density on some our core roots. And, also to find new open shore itineraries by opening up secondary cities in Japan, which we feel we're getting a lot of encouragement from provincial government. And, also local airports to do so. So, that's very much part impossible.

Again, with mainland China we're looking at where we need to be. The new airport in Beijing coming up may give us an opportunity to enter one of the most important markets in mainland China.

I think originally, interline was something we weren't really focused on, but when we did actually start to really make it one of our core targets for 2017 and 2018, we saw some very, very strong revenue growth and revenue quality was much, much stronger. We have literally seen with the expansion of the interline with HKA the volume hit close to $200,000 additional revenue per month per route from that. Indeed, though it's quite small, this is happening within a very short period of time. So, we're only gonna see that sort of revenue expand rather rapidly as we roll out new interlines with Delta. Hopefully with Region Australia and a few other airlines that we're working with now.

DOHOP platform is actually encouraging to us in that it allows us to retain the conversation with the customer. A direct B2C type of connection, which is of course ideal for a low cost airline. Rather than rely on a GDS type of interline arrangement where we don't really have that. So, with this new type of DOHOP platform we're actually adding convenience to the consumer. We're also allowing greater scope ancillary sale and further more for follow up with disruption notification for passenger services for loyalty. All of this is DOHOP means that we can work not only closely with the passenger and another airline, but also with airport to have a much more holistic approach of rolling out that interline in each and every touchpoint.

I think any low cost carrier is always looking for strong partnerships. As long as everyone's on the same page in terms of direction and there's really strong network synergy, then there's scope for that. I think with You Fly, in the future, when we have much more alignment in our strategic direction and the synergy is there then there is scope for much more development. But, at each and every case, we'll have to look at ... Also, looking at partnerships beyond the You Fly alliance to make sure that we have a very strong holistic and multi-pillared approach to partnership.

I like coming to CAPA because I come to learn and I come to meet. And, I think even within the first morning of day one, I've been able to take onboard something which is very, very new and it's allowed me to question not only what I did in the past, but what I'm doing now. And, the fact that it's already encouraging that type of though process even before the end of day one means I'm gonna be taking a lot back to share with everyone when I get back to HQ.

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