Hong Kong Airlines

Qantas expands Asian strategy with Jetstar Hong Kong venture with China Eastern

Qantas has announced a bold initiative to set up a new low-cost carrier joint venture in Hong Kong with its long-time Chinese partner, China Eastern Airlines. Jetstar Hong Kong will operate short-haul routes within Asia – including to mainland China, Japan, South Korea and Southeast Asia – from 2013 with an initial fleet of three A320s, growing to 18 A320s by 2015.

It is a key stepping-stone for the Qantas Group as it grows its Jetstar brand across the region. Jetstar currently has entities in Singapore with Jetstar Asia/Valuair and in Vietnam with Jetstar Pacific. Jetstar Hong Kong will be the group's fourth Asian affiliate as Jetstar Japan, a new joint venture with Japan Airlines that was announced last year, will be launching services in Jul-2012.

The Jetstar group will bring considerable low-cost experience to the new venture, which will become the first short-haul low fares airline to be based in Hong Kong. The LCC model is, however, a new concept for China Eastern, which is following the pattern of several of its full service counterparts in Asia in working with an experienced partner in the establishment of a LCC offshoot.

Hong Kong Airlines swaps Qantas for Virgin Atlantic as Australian partner

Hong Kong Airlines in Jan-2012 signed a deal with Qantas allowing Hong Kong Airlines to sell its new all-premium A330 Hong Kong-London flights to Australia with Qantas covering the Hong Kong-Australia sector. Hong Kong Airlines is pitching its all-premium service, which offers business class and premium economy seats, as offering a high quality product at a lower fare level. Not too long after the Hong Kong Airlines-Qantas deal was completed more senior managers at the Australian carrier became fully aware of the contract and realised giving traffic to a competitor was not in its best interest.

Hong Kong Airlines has now done a deal with Virgin Atlantic, which operates between Hong Kong and Sydney. Australia-London tickets offer Hong Kong Airlines segments in either premium economy or business between Hong Kong and London with a Virgin Atlantic economy sector between Hong Kong and Sydney. While the Qantas deal included business class, Virgin Atlantic is not offering its business class or premium economy product, and Virgin Atlantic's flights are only available from Sydney whereas the Qantas agreement also brought Brisbane, Melbourne and Perth destinations online.

Hong Kong Express to re-brand as LCC and switch B737s for A320s as Cathay stands clear of LCCs

Hong Kong is set to receive its first ever short-haul LCC in a move that will see the market further press Cathay Pacific to justify not having a LCC subsidiary. Hong Kong Airlines president Yang Jianhong stated Hong Kong Express Airways will be transformed into an (unnamed) LCC in Jul-2012 or Aug-2012, operating under its new low-cost model to cities in mainland China, South Korea, Japan and Southeast Asia. It will use the traffic rights of Hong Kong Express to Shanghai, Beijing, Singapore, Seoul, Kuala Lumpur, Osaka and Taipei, according to reports in the South China Morning Post.  

Mr Yang stated the new carrier will appoint a CEO with European LCC sector experience and will acquire 15 A320s over the next three to four years. Its current fleet of five B737-800s will be transferred to Hong Kong Airlines in 2012. The new LCC will pose a new challenge on lucrative routes from Hong Kong to Beijing, Shanghai and Taipei and opens the door for a pan-Asian carrier like AirAsia or Jetstar to become involved.

Qantas' Hong Kong capacity increase underscores city's importance to pan-Asian strategies

Qantas will increase capacity from Jan-2012 on its Sydney-Hong Kong service despite the route soon losing traffic as onward passengers to London are forced to transit through Singapore after the Hong Kong-London service ends in Mar-2012. The increase shows the emerging relevance Hong Kong, and its access to mainland China, has to Australia as Cathay Pacific increases competition and Hong Kong Airlines looks to enter the market. Hong Kong also has strategic relevance as a low-cost carrier hub for Jetstar or any other pan-Asian airline – if local incumbent Cathay Pacific loses its fight to keep LCCs out from its home turf.

Traffic rights limitation forces Hong Kong Airlines to delay Sydney and Melbourne services

A breakdown in negotiations between Australia and Hong Kong to increase traffic rights between the two countries will force Hong Kong Airlines to delay its planned Sydney and Melbourne services. The carrier, 45% owned by mainland China's Hainan Airlines, had planned to launch Hong Kong-Sydney services early next year and Hong Kong-Melbourne services approximately six months later.