Home' Asian Aviation : AAV April 2014 Contents 24 AsianAviation | APRIL 2014
HK Express is Asia's newest low-cost carrier
-- even though it recently celebrated its
tenth birthday. This apparent enigma is
quite simple to explain. Originally set up
by casino magnate Stanley Ho in March 2004, in
2006 it was bought by a band of investors including
China's Hainan Airlines Group (HNA Group) and
merged with Hong Kong Airlines. The idea was to
provide competition to Cathay Pacific and Dragonair.
There was a dramatic change in strategy last
year. "The airline was getting good scale and had
a bit of weight in the market. But it was competing
with Cathay Pacific and Dragonair at one end of the
spectrum and low-cost carriers at the other. That's
very difficult to do if you've got a full service, two
class offering," explains Andrew Cowen, deputy CEO
at HK Express.
Crucially, HK Express had kept its Air Operators
Certificate (AOC). Cowen came from Mango Aviation
Partners, an LCC specialist management provider, to
help set up a separate budget carrier from the full
service Hong Kong Airlines operation. "I came in at
the beginning of last year and took HK Express' AOC
out of the Hong Kong Airways Group, using it as a
nucleus for an LCC."
Cowen is no stranger to LCC start-ups -- his CV
includes VietJet Air in Vietnam, Peach Aviation in
Japan, PAL Express in the Philippines, Jazeera Airways
and Sama in the Middle East and Go in the UK.
The HK Express budget operation was set up
in June last year, seats went on sale in September
and the first flight was on 27 October. "The impetus
for much of this was Jetstar Hong Kong," Cowen
says, referring for the Jetstar affiliate, which has yet
to launch due to legal challenges over its national
status. Having an AOC in place saved about 6-9
months, Cowen estimates.
HK Express had a skeleton staff to maintain its
AOC, including an operations team, pilots and cabin
crew. "We had some route rights, but had to build
new commercial, support functions from scratch,"
Cowen says, adding that the same was true for
suppliers. "Obviously there was a transition period."
HK Express took delivery of its sixth Airbus A320
in March. Initial destinations included Taichung in
Taiwan (incidentally, the first route in its original guise
under Stanley Ho, using an Embraer 170); Chiang
Mai in northern Thailand; Kota Kinabalu in Sabah,
Malaysia; Phuket in southern Thailand; and Kunming
in Yunnan Province, China.
"We received a dowry of a reasonable set of
routes," says Cowen. Once utilization had increased,
it added three new routes -- Penang in Malaysia and
Tokyo Haneda and Osaka Kansai in Japan.
"Why Japan? That's where Hong Kong people
wanted to go," says Cowen. The airline conducted
surveys, including on Facebook, asking the Hong
Kong public where they wanted to fly. Japan came
out on top. "As things have turned out, they're our
most popular routes," notes Cowen.
The scarcity of flights to mainland China has a
simple explanation -- Hong Kong Airlines will, by-in-
large, fly those routes, bringing mainlanders into Hong
Kong. The LCC will focus on leisure destinations out
of Hong Kong, be it shopping, adventure or beach
holidays, or visiting family and friends -- there is a
large community of international domestic workers,
for instance. Another target market is small and
medium sized businesses.
There is also an opportunity for connecting traffic.
"If you live in Osaka and want to go to places like
Phuket, you have to go through somewhere like
Hong Kong," notes Cowen.
The sixth A320 delivery coincided with the launch
of services to Seoul Incheon and Fukuoka in Japan,
giving a total of ten destinations. By the end of the
year it will have 10 A320s and up to 23 destinations,
says Cowen. By the end of 2015 the fleet will be up
to 18 A320s.
This sixth aircraft was the first to have 180 seats
(the previous five had 174 seats). This was due to a
new, thinner seat, manufactured by Pinnacle.
There have been a few challenges along the way,
but one stands out from the crowd. Slots - or rather
the lack of them. "Slots is our biggest issue - one that
has come on more quickly than we first anticipated,"
As an LCC, HK Express can use price to get people
to travel outside the peak periods, either arriving or
departing in trough periods. But even that is proving
tricky at slot-constrained Hong Kong Airport, where
a third runway is still some way off, perhaps 2023 if
all goes well!
"Unfortunately slots have been disappearing much
faster than we expected," says Cowen. He adds that
the airport could squeeze some more slots out of
the system. At present, Hong Kong's two runways
handle 64 flights per hour, expected to reach 68
per hour by 2015. London Heathrow's two runways
handle 80 flights per hour. London Gatwick has
recently increased its single runway capacity from
53 movements per hour up to 55!
This is of no use to HK Express of course, and
Cowen is considering his options. "How do we
maximize the opportunities in Hong Kong and
the wider Pearl River Delta Region?" he asks,
hypothetically. The latter has a total population of
around 100 million. "Growth could be in aircraft size."
Macau Airport is another option as a spillover, once
a bridge linking the latter to Hong Kong is complete
One option that is unlikely is growth through joint
ventures. "The fact is, if you look at the published
accounts, Jetstar's overseas affiliates aren't making
any money. The same goes for AirAsia, with the
possible exception of Thai AirAsia. Tigerair Group's
last set of results were horrible."
HK Express Airways was launched last year, giving Hong Kongers their rst home-
based budget carrier. Deputy CEO Andrew Cowen has seen plenty of opportunities
and challenges since then, writes Colin Baker
"Slots is our biggest issue - one that
has come on more quickly than we
deputy CEO, HK Express
HK Express deputy CEO Andrew Cowen
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