Hong Kong

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.

Cathay explains why it will not follow other Asian carriers in launching an LCC subsidiary or brand

Cathay Pacific Airways remains unconvinced there is value in establishing low-cost carrier subsidiaries or brands even as most of its peers start to follow pioneer Qantas in launching LCCs.

Singapore Airlines’ decision to expand into the long-haul budget sector with Scoot has other full-service carriers throughout Asia and beyond wondering if they should follow the emerging long-haul LCC trend. But while Cathay CEO John Slosar calls Scoot “a very interesting development” he believes SIA may find that it has its hands full as it already owns regional carrier SilkAir and has just increased its stake in short-haul LCC Tiger Airways. “To have that many [brands] will be an issue,” Mr Slosar predicts.

Global freight outlook: declines punctuated by Cathay Pacific's volume falling below 2009 levels

The outlook for freight volume – and implications for passenger traffic – continues to worsen as Cathay Pacific, the world’s largest international freight operator, reported its Sep-2011 freight volume declined 10.1% year-on-year, even dipping below 2009 levels for the first time. Cathay worriedly foreshadowed continued weakness in the sector for the remainder of the year and into 2012 – a sentiment echoed by leading cargo carriers China Airlines, EVA, FedEx, Korean Air and Lufthansa, as this global freight outlook surveys. So far DHL is alone in being a major freight carrier not to forecast any downturn.

Based on traffic trends in recent months, and comments from the world's largest freight operators and global airline and airport associations, it appears there is a growing likelihood of a protracted period of slow or negative year-on-year freight growth in the months ahead, even with the approach to the peak pre-Christmas season.

Freight volumes decline dramatically to/from Hong Kong reflecting global freight trends

Cathay Pacific, Hong Kong International Airport, Asia Airfreight Terminal (AAT) and Hong Kong Air Cargo Terminals Limited’s (HACTL) respective Aug-2011 traffic results revealed two distinctive trends: Passenger traffic to/from Hong Kong remained strong over the summer peak while the weakness in the freight market continued in the month.

The situation in Hong Kong is playing out elsewhere. According to IATA said recently that global freight markets are expected to remain weak throughout the remainder of the year, although a pick-up is likely in the lead up to the Christmas period.