LIFE AFTER SQ006 - Orient Aviation

s p e c i a l r e p o r tBy Jonathan SharpChinese carrier Hainan Airlines, whichboasts U.S. financier George Soros asa key shareholder, has approachedHelicopters Hong Kong Ltd (HeliHongKong)about possible joint ventures including thesetting up of a Hong Kong-based regionaloperator. This is according to Andrew Tse,chief executive of HeliHongKong, a sistercompany of Macau-based East Asia AirlinesLtd, which operates helicopters plyingbetween Macau and Hong Kong.Tse sees an opportunity for a regionalairline providing feeder services to the HongKong hub from under-served points in southChina and several southeast Asian centres.“Hainan Airlines has been quite aggressivein the regional airline business. They have afleet of Fairchild Dornier 328JETs and theywere wondering whether it would be possibleto operate in and out of Hong Kong usingthese Dornier jets,” Tse told Orient Aviation.Tse said that instead of applying to HongKong aviation authorities for an air operator’scertificate (AOC) he commissioned a studyfrom Trinity Aviation Ltd to see if the ideacould fly.Trinity concluded the current service to 22cities in south and central China from HongKong was inadequate with the aircraft onthe routes being too large and the frequenciestoo few.“Many of these cities are being servedonly by an airline from China, therebyallowing the opportunity for a Hong Kongairline to operate the route,” the study said.“This study shows such an airline wouldbe commercially viable within a system witha breakeven load factor for the operation ofaround 50%.” It added outbound traffic fromChina was increasing at a high rate and wasexpected to grow. There will therefore be acontinual need for services to points in Chinaaway from the main hubs.Under such conditions it would be reasonableto expect the regulatory authoritiesin both Hong Kong and China to approvesuch an operation as envisaged in the study.It highlighted the case of Shantou, in southChina, which was served by one airline (ChinaSouthern Airlines) although annual trafficwas over 100,000 seats sold. Tse said he sawHong Kong International Airport as the majorairport for southern China in future. “Unlikeplaces in North America or in Europe, there isno feeder service in Hong Kong so I believethere is a need for such a service.” Tse said Trinityhad not studied feeder service opportunitiesoutside China. “Obviously I believe thereHainan seeksHong Kong venturewith 328JETChief executive of Helicopters Hong Kong,Andrew Tse: looking for a positive air rightsresponse from Hong Kong authoritiesis a market in the Southeast Asian area. So weare still doing some studies now.”As possibilities, he cited smaller citiesin Malaysia and points in Vietnam andCambodia. Tse said he had sent a copy of hisproposals to the Hong Kong civil aviationauthorities.“What is important is not the hardwareof setting up an airline, it’s not the capital orthe expertise. What is important is whetherthis airline can secure scheduled rights fromthe Hong Kong authorities.”He said he was waiting for a meeting withthe Hong Kong authorities to clarify whethera regional airline could obtain the necessaryrights. At present just six AOCs have beenissued in Hong Kong.“If the answer is positive then the nextstep is whether we should go ahead and raisemoney to form a new airline. If the answer isno, then forget it. It’s as simple as that,” saidTse. He acknowledged frankly that he sawno great financial rewards in such a regionalairline. “Setting up a regional airline operatingout of Hong Kong is very, very costly.”He said the “big boys” such as HongKong-based carriers Dragonair and CathayPacific Airways were not considering a smallairline using 50-seaters because of the capitalcost and the small investment return.“It’s not a pot of gold. But personally I dosee an opportunity for this kind of regionalairline linking south China and SoutheastAsia to Hong Kong as a hub, as some sortof a feeder airline to the big boys. I do seea need as far as the consumer is concerned.Now whether there is a business case, I don’tknow.”Tse said he had not received any furtherfeedback from Hainan Airlines, which he saidmight have approached Hong Kong authoritiesindependently about obtaining rights tofly to the territory.China’s Hainan Airlines may enter into a ground breaking deal with Hong Kong operator42 | Orient Aviation | March 01