Uriel Holdings and Reward-U/U-Fly Update

Transcript

Andrew CowenSo, Uriel was set up about 15 months ago, and it's basic ... it's the parent company of Hong Kong Express and it's basic objective is to provide an end to end travel opportunity and range of travel products. Rather than just be limited to providing flights, we are, through Uriel and its associate companies and brands, offering flights, the ability to book hotels, packages, activities through our U Explore brand and then so on.

We've got a big opportunity. We believe that the passenger who invariably is booking a flight first is then gonna be thinking about whether it's a leisure trip or a business trip, a number of other components of the travel. So, hotels, ground transport, what they do when they get to the destination.

The fact that we've got the customer making the flight booking first give us a great opportunity to try to continue to do business with them, to continue to make other components of the travel journey available to them.

Therefore, really, Uriel's all about assembling an ecosystem or community of travel brands. Not just our own, we will partner with a number of different third parties to give a really very rich and broad spectrum of choices.

Reward U, our loyalty program's a very important component of that, because we don't want to just compete on schedule availability or room availability or price or destination or location, but to also reward travelers who book with us at the various stages with Reward U points as a means of helping to keep them within our community, within our ecosystem. That briefly is what Uriel group's all about.

Reward U was set up about 18 months ago and it has grown really very, very quickly. It's already got to 1.2 million members, so that makes it one of the biggest loyalty programs in Hong Kong. It's a points based program where the amount of points you earn is linked to the amount you spend. That's a much more, in a way, reward scheme than some of these more old fashioned mileage based programs. That's gone down very, very, well with our travelers. Not only have we got a very simple scheme, but we've set up a very big network of third parties where you can earn points.

You can earn points, obviously when you travel, at the moment just on the Hong Kong express but we hope to extend it to the other U Fly carriers. But you can also earn points when you book with our partners such as Hotels.com, Bank of East Asia ... well not book with them but you're using their products ... when you book with Pagoda or rental cars, or even just shopping in a variety of shops around Hong Kong.

That's giving our customers the ability to build up their points balances very quickly. They can then redeem those points for travel on Hong Kong Express, either a full ticket so that they don't have anything to pay, or they can pay part cash, part points. That's obviously very valuable.

Our estimates are something like 20 percent of HK Express's passengers on average are paying for their trip, at least in part, using Reward U points. It's a very effective loyalty too, meaning that HK Express doesn't have to compete all the time on price.

Business has been going very well. The next step is that we would like to roll Reward U out to our Chinese partner airlines in the U Fly lines. We hope to do that. That would give much greater breadth and scaled to the program. This is quite a big step, the Chinese market is obviously very complicated and challenging. As part of that we're looking to bring in a strategic investor to help us grow and develop the program, not just in China but into a whole range of additional travel related activities, so that's one of our projects on at the moment.

U Fly lines has been running for two years, we've got five airlines in U Fly lines, which are HK Express, Leakey Air, West Air, Urumqi and Eastar Jet of South Korea.

We've made some good progress over the two years. Most of that work has been about how we can start building out the U Fly branding, just build some awareness on that. Quite a lot of work on where we can increase the inter-line opportunities between the different airlines. This has been actually a very challenging area, simply because in so many cases, the airports that mostly U Fly carriers are flying to are quite congested, so slot difficulty, slot availability and so on means that some of that schedule coordination that would facilitate inter-line has been quite challenging. But we've been chipping away at that.

We've had issues like, for example, there's a lot of natural inter line opportunity between Eastar Jet and some of the Chinese LCC's, but then of course some political problems emerged between China and Korea. In that sense progress has been a bit slower than we would have liked.We've got three more carriers signed up to joined U Fly lines. We hope to announce those quite soon.

The other area of particular focus over the past two years has been where we are able to serve common airports and to interline is to put in place contracts with key suppliers. For example, ground handling, and [cisport 00:08:00] is a great example, where we can aggregate the flights across the U Fly carriers under a volume discount contract, and therefor extract some cost synergies. There's been a lot of work on that and ground handling is probably the best example. We've done work in most of the operating cost areas and contracts that apply at each of the airports that airlines fly to.

Certainly, China is a key focus of U Fly lines. For us, this is a total no-brainer. All the international aviation commentators I think all agree that the Chinese outbound travel market is the probably most important travel theme of the next 10 or 20 years. We're very focused on, how do we build up our position in that China market. How do we expand the footprints of each of the airlines, but how do we build a very strong U Fly lines platform in China. That, we think sort of positions us very well to participate more widely in that China outbound market.

It also means that, by focusing on China, we're actually focusing and building integration with, in a sense, one country's carriers. It's a lot easier to do, if your dealing with one country, not forgetting East Star Jet, then multiple countries. There's many complexities of organizing, interlining, cost synergies and so on with multiple airlines in multiple countries. That's really why our focus is very much on building that China platform.

We think that the core of U Fly alliance will always be LCC's and independently branded LCC's and so on. The objective of U Fly lines is to increase travel opportunities, to increase the range of destinations that those airlines can make available to their customers. Realistically, that range of destination is not just gonna be about short haul. Many people will do a combination ... many travelers do a combination of short haul and long haul trips, perhaps business ... sorry, leisure and business.

Interlining with full service carriers is very natural step for us. Hong Kong Express is already interlining with Hong Kong airlines and is working on interlining with Virgin Australia. They won't be members of U Fly alliance, but they will be friends. I think by working together, it means we can sort of stay focused on our businesses, but at the same time offer a much greater choice of destinations and frequencies.

We also realize that in some cases, travelers would very happy to have the first short sector on an LCC that's maybe only gonna be a couple of hours, but they might wish to go on a full service carrier, perhaps in premium economy or something if they're going to UK, Europe, Australia or USA.

You're absolutely right that the technology side is a fundamental part of this. In fact, one of the reasons Uriel group acquired Zuji was to acquire not just an attractive online travel agent brand, but to also acquire its system. As you're aware, online travel agents, their system is already capable of combining flights and hotels and so on. We will use the Zuji system, which we're calling Utopia, to link up our travel businesses. At the more specific interline level, we're looking ... ABB have got a very attractive product, so that's very interesting and you've seen the announcement obviously of Dohop.

The technology's evolving. There's some early technology developers, we're thinking how best to work with those ... to, in a sense, really enable a very easy and seamless travel experience for somebody wanting to ... willing to make an interline booking.

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.