Capitalising on increases in aviation access

Transcription

1 Michael Burke Assistant Director, Commercial Connecting to Asia Forum Cairns August 2016 Capitalising on increases in aviation access An airline s perspective

2 Market Positioning

3 Brand Positioning Fresh + very Hong Kong Key target is younger demographic and more value conscious consumer; mainland strength Average fleet age is 3.5 years

4 The World s 4-Star Airlines

5 A Clear Focus on Full-Service With a strong market position in Hong Kong already in place & strong growth : Structure of Business: Sample Key Metrics (Y/Y): Fleet: Scheduled services: 70% CAGR (5yrs): c.20% ASK s: 10% 11 x A320 5 x A332F Cargo: 20% Pax: 10% RPK s: 12% 9 x A332 Charter 10% Seat Factor: 3% C/ASK: -1.4% 5 x A333 Hong Kong Airlines international seat capacity by market: Aug-2016 Source: CAPA - Centre for Aviation and OAG

6 Hong Kong Airlines development Company Profile Full-service airline firmly rooted in Hong Kong: established in 2006, with Hong Kong as its base. Its extensive destination network covers 30 major cities across the Asia-Pacific region. It is committed to providing passengers with a quality flight experience and to expanding its footprint across the globe Business Review Continued Expansion of the Route Network Route network covers Mainland China, Taiwan and other Asian markets. Destinations include 30 commercial and tourism cities, such as Beijing, Shanghai, Sanya, Bangkok, Bali, Taipei, Okinawa, Sapporo. Further optimization of the route network by expanding to new destinations, code share etc. Seven destinations added in 2015, including Miyazaki, Yancheng, Nanchang, Krabi, Kumamoto etc. Operating One of the Youngest Fleets in the World As of summer 2016, the average age of fleet stands at just around c.3.5 years Current fleet has 30 aircraft and will continue to expand Business Performance Passenger traffic increased by around 10% y-o-y to approximately 5.6 million in 2015 Average load factor increased by 3 ppt y-o-y to around 82% in 2015 Received a total of three new aircraft including one A330 and two A320, to develop seven new destinations 2016 Outlook Further Expansion in International Market To launch more routes in Asia (Japan, Korea and Southeast Asia) and vigorously develop international long-haul routes Launched a new route to Australia s Gold Coast & Cairns - services to more than 10 new destinations expected to begin this year Size of fleet will increase to 36 by late 2016 A350s will join our fleet by late 2017 to 2018, so as to support long-haul destinations Total size of our fleet is set to reach approximately 50 by late 2018

7 Network Development Strong China market presence built Developing key regional Asia markets Leveraging Hong Kong hub to develop limited longhaul service Aggressively developing partnerships to expand global reach virtually New A350 aircraft arriving in 2018

8 Balanced Network Structure HKA has a very balanced network : approx. 1/3 of pax are connecting, 1/3 are inbound & 1/3 are outbound This allows us to quickly and flexibly react to market conditions We also have a very balanced destination network : - Major markets such as : Beijing, Shanghai, Tokyo, Taipei & Bangkok - Leisure markets such as : Okinawa, Sapporo, Krabi & Denpasar - Developmental secondary markets such as: Miyazaki, Okayama, Xuzhou, Guiyang & Nanning

9 Right place, right time

10 China outbound market Chinese outbound tourism is enormous in volume and growing aggressively : it has changed, and will continue to change, the dynamics of the world we live in, and have huge impacts on the global travel and tourism industry Tourism spend is growing at an even faster rate : the Chinese middle-class is already larger than the entire population of the USA, reaching 800m by 2025 Chinese outbound tourism has de-linked from GDP growth (c.12% pa vs 6% pa), a significant development There will be an average of 25 million first-time Chinese travellers every year, or 70,000 every day, for the next 10 years

11 The Changing Traveller

12 Regional distribution China outbound tourism is best viewed as multiple markets, or even individual countries GDP per capita varies significantly across regions The vast majority of wealth and travel remains in the eastern corridor : Guangdong, Beijing & Shanghai Governments go west policy is resulting in high central/western regional growth

13 China GDP in 2020 When viewed in this context one can more readily see China should be perceived more as a bloc of wealthy nations, akin to the EU Potential for further growth is significant : only 4% of Chinese hold passports = 135m Int. trips

14 Top 10 cities by GDP 2030 With 47% of the population now living in cities, 8 Chinese cities have a population of more than 10m and 93 have more than 5m (in the US, only New York City has a population of more than 5m) By 2030 China will have 7 of the top 10 cities contributing to global GDP

15 Future Market Growth Outbound travel is forecast to increase from today s c.120m to over 220m within the next ten years

16 China inbound Australia If we combine mainland and HK travellers together, they have now surpassed NZ to become Australia s #1 inbound tourist market

17 Inbound Australia to double

18 Case Study: HKG-OOL/CNS Hong Kong Gold Coast inaugural flight on 8 Jan A333 deployed with 292 seats on each flight, a total capacity of 84,000 seats per year Three times weekly : Departure from Hong Kong HX015 21:20/08:30(+1): Every Tuesday, Friday & Saturday Departure from Australia HX016 10:30 (Gold Coast)/12:45, 13:55 (Cairns)/19:10 : Every Wednesday, Saturday & Sunday HKA heavily restricted on market access to Australia CX uses all of HKG s traffic rights to SYD, BNE, MEL & PER currently HKA has had a long-standing desire to enter the Australia market & has been in discussions with OOL airport since 2012 However, by their nature, both markets are somewhat seasonal and more niche than the major centres This meant HKA required strong support from national, state & local tourism (inc. both airports) in order to make the route viable

19 Case Study: HKG-OOL/CNS The launch of the OOL/CNS triangular route symbolizes a new stage of Hong Kong Airlines international market development Commenced as charter services for CNY demand proved very strong, services were thus retained and changed to scheduled, year round services We are considering adding frequency for NW16/7 but this requires a multi-party, coordinated approach Source: Tourism Queensland

20 Establishment of service Hong Kong Airlines received significant support from all relevant stakeholders associated with the HKG-OOL-CNS-HKG service As a first experience with long haul route development it was ideal (viz AKL) Observations & Recommendations Such welcome and diverse support required significant coordination to align timelines, individual objectives, budgets and focusses: airport; airline; tourism bodies etc. However, an airline is not best placed to either align or drive these activities, given their relative inexperience in the market and focus on establishing activities Given the absence of a central coordinating body to facilitate marketing support approvals for HKA into Australia, the necessary marketing activities were slightly delayed

21 Build & expand services Build: - Support for HKA marketing team in executing joint plan in market and sharing of expertise / local knowledge - Joint targeting of new segments, whether new customer profiles or new secondary markets (China & Japan) so HKA is not simply stealing market share from competitors it s in the airlines interest to grow the market also Expansion: - Further frequency growth (and potential de-linking of OOL & CNS) can only come continued support from all stakeholders : we need to get to a consistently break-even year-round situation as quickly as possible, with greater frequency comes greater efficiency of operation and a more attractive customer proposition

22 Why hubs service the market more effectively There are now multiple and growing numbers of Chinese services direct from secondary China cities to secondary Australia markets year round : this is not wholly positive Services tend to be unsustainable (low fuel price keeping many afloat), supported short-term by local government subsidies Many services are therefore run on a non-commercial basis, with little or no incentive for profit, group travel remains the primary source segment, this is poor quality air service for Australia, especially in markets which are already saturated in peak seasons (i.e. CNY) Hong Kong Airlines service draws passengers from multiple source markets, including Japan, SE Asia This allows HKA to be more selective and focus on highest yielding FIT customers a win/win Therefore HKA requires support to make its niche, boutique service as viable as possible via airport, TQ, TA support of its marketing efforts to drive incremental, long term traffic to Australia China-Australia routes by airport (left axis) and city pairs (right axis): Source: CAPA

23 Thank You