Low cost battlers in a high cost city

The Jetstar Hong Kong epic took a peculiar turn last week when the SAR’s director general for civil aviation Norman Lo Shung-man said congestion at Chek Lap Kok meant it would be ‘incompatible’ with the airport’s development.

Really? Let’s consider the implications of the report, which at face value means other larger carriers lead by Cathay Pacific are also going to be in serious trouble meeting demand at Hong Kong.

It’s like being back in the early 90s, when the painfully obvious but sort of fun congestion at the old airport at Kai Tak threatened to end life as Hong Kong then knew it, and there was a huge public argument over the costs and location of a replacement airport at the current site, which opened for business in 1998 in a disastrous state of unpreparedness.

Consider this report in The Standard:

Jetstar rejects claim airport unable to cope

Imogene Wong

Friday, December 27, 2013

Jetstar Hong Kong yesterday insisted that it could operate flexibly, using slot resources at non-peak periods at Chek Lap Kok airport.

It was responding to a claim in a radio interview on Wednesday by of the Civil Aviation Department director-general Norman Lo Shung-man that the airport may not be a suitable place to develop budget flights.

Lo said on air that the existing two airport runways will be saturated within two to three years. As few timeslots are available, the development of low cost carriers in the SAR will not be practical as they focus on short-haul, high-frequency flights.

The number of flights at the airport has reached a record 370,000 over the past 12 months, with an average of 65 flights per hour, close to an upper cap of 68 per hour, Lo said.

A Jetstar Hong Kong spokesman countered that there is still much room for flights during non-peak hours, from midnight until the early hours.

Legislator Yiu Si-wing, who represents the tourism sector, also believes there is capacity for low-cost airline development. He said that budget airlines only account for about 5 percent of market share in Hong Kong. Other top airports have around 20 percent. But Lo stressed the need to build a third runway.

Jetstar Hong Kong said it remains confident of getting a license.

First up, this is bad news for Jetstar Hong Kong, given that its spokesperson seems to seriously think that the airline, if it ever gets its license, is somehow going to conduct most of its operations in a five hour period during which no-one wants to fly.

With that sort of genius thinking at work in Jetstar Hong Kong, the enterprise is stuffed before it even takes off, if it ever does.

Who could have imagined that the Ryanair model, which involves high utilisation over 24 hours 365 days a year could work in the ‘astronomically’ high cost environment of Hong Kong? Probably the same sort of genius that is ravaging the Qantas group in general, as it racks up previously unimaginable losses and runs begging for help to Government and the world’s largest foreign owned carrier Emirates because it had a lobotomy prior to embarking on a ruinous fare and capacity war with Virgin Australia.

But putting aside the lunacy of doing a low cost carrier in a high cost city with only about five hours a day of off peak opportunities at its airport,  what Mr Lo is reported as saying isn’t exactly good news for Cathay Pacific or any other established operator flying through or from a Hong Kong Hub.

Is it not time for a third runway at Chek Lap Kok, but a really, truly serious attempt at developing a means to efficiently access Shenzhen’s airport.  Shenzhen is contiguous with Hong Kong.  There are huge commuter/worker movements between the two jurisdictions, but for the Shenzhen Airport to work for non PRC or SAR citizens as an airport serving Hong Kong there would need to be some serious work on border protocols, transport access and so forth.

But maybe its time is coming. Maybe Qantas could blaze the way forward, and relocate its efforts to set up Jetstar Hong Kong to Shenzhen. Don’t laugh too much. It may be easier to do than Hong Kong itself.

Will a third runway at Chep Lap Kok really provide a longer term solution to Hong Kong’s needs? Something has to happen yesterday.  Or will Cathay Pacific have to order dozens of A380s for use in the 2020s to replace its A350s and 777s? This is not so much a joke, but a truly serious issue for all airlines flying or planning to fly to Hong Kong.