Hong Kong Airlines, the subsidiary of mainland conglomerate HNA Group, has announced direct service to London, San Francisco and New York, creating a fresh challenge to Cathay Pacific, which in July posted a significant first half loss of HK$2.05 billion (US$262.1m), caused by competition from mainland and Middle Eastern carriers.
Earlier this year, Hong Kong Airlines launched an expansion, which started with flights to Auckland and Vancouver, while last month HNA Aviation - which includes Hong Kong Airlines - received
approval from the Australian Competition and Consumer Commission (ACCC) for a five-year alliance with Virgin Australia. Hong Kong Airlines will also launch service to Los Angeles by the end of
the year.
Currently, Cathay Pacific and its sister company Cathay Dragon are still two-thirds bigger than Hong Kong Airlines and sister airline HK Express, and fly to more than 100 destinations across the
world, compared to under 60 for the other two. However, Hong Kong Airlines' network expansion comes at a critical time for Cathay, which so far has successfully been battling competition on its
turf.
Serious threat
This time, however, industry experts believe the expansion plans of Hong Kong Airlines could prove to be a far more serious threat to the Swire subsidiaries, because of the financial backing of
the Chinese HNA Group.
The South China Morning Post (SCMP) quoted Chinese University aviation policy expert Dr Law Cheung-kwok as saying that: “The mainland aviation market and Asia region has developed rapidly in the
past five to 10 years. The overall demand and maturity means Hong Kong is in a much better position to support a second long-haul airline.”
Cathay is rolling up their sleeves
Meanwhile, Cathay Pacific is pressing ahead with its own expansion. Despite its financial woes, the airline - which has ordered 46 Airbus A350 aircraft - last week announced the launch of
non-stop flights to Dublin, Brussels and Copenhagen.
For Brussels this new service is kind of a comeback of Cathay, which served BRU with a freighter until 2012 (originally in the Air Hong Kong livery). The company has maintained a small cargo
staff at the airport. “In being on-line we hope to extend our time-sensitive market segment,” says Gerry Heiremans, Cargo Manager Belgium & Luxembourg. He estimates weekly additional belly
capacity to be something like 240 m³ or 15 to 20 tonnes per flight. “The A350 can indeed take a lot of cargo,” says Brussels Airport’s Head of Cargo Steven Polmans. “Especially for pharma a
direct flight is very interesting.”
In another move, Cathay also said it plans to increase its passenger and cargo services in India where yields are holding up better than at home.
Mark Sutch, regional general manager for South Asia, Middle East and Africa, said in an SCMP interview this week that "The Indian economy is pretty vibrant and the growth here is significantly
higher than many countries," adding that India and China were two markets where Cathay saw a big future.
More cargo capacity into/from India
Bilateral constraints currently allow Cathay to operate only 48 weekly flights to India and to boost capacity it plans to replace Airbus A330s with B777s, which from the end of October, will
operate between Mumbai and Hong Kong. According to Sutch, it will lift passenger capacity by 21% and cargo by two-thirds. He added that Cathay planned to make a similar switch to more cities
going forward.
But it is on the cargo side, which is growing annually by 5%, where Cathay is most bullish because, unlike the passenger side, there are no restrictions on the number of flights.
Cathay has 25 freighter flights a week to India, which inbound carry consumer electronics such as mobile phones and outbound garments and pharmaceuticals.
"India is a great market but it is a slightly unbalanced market in that the yields you can get on inbound cargo into India tend to be higher than outbound,” the SCMP report quoted Sutch as
saying.
Nol van Fenema / Marcel Schoeters
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