Hong Kong Airlines targets Cathay Pacific's core business market

HONG KONG (Reuters) - Hong Kong Airlines, part-owned by Chinese conglomerate HNA Group, plans to target business travelers from small and medium sized companies as it launches new long haul routes to North America and Europe, its vice chairman said on Wednesday.

FILE PHOTO: A Hong Kong Airlines passenger plane taxies on the tarmac at Hong Kong Airport in Hong Kong, China September 11, 2013. REUTERS/Tyrone Siu/File Photo

Hong Kong Airlines and sister budget carrier Hong Kong Express Airways have been expanding rapidly in a challenge to Hong Kong's dominant airline, Cathay Pacific Airways 0293.HK, which has a strong grip on the corporate market.

Last month, Cathay reported its worst first-half loss in at least 20 years after competition cut fares.

“As a full service airline our strategy is to attract business travelers as well as family travelers,” Hong Kong Airlines Vice Chairman Tang King Shing told Reuters. “Our theme is luxurious affordable tickets. You don’t have to be a CEO of a big company to enjoy our business class service.”

Virgin Atlantic once pursued a similar strategy competing against British Airways and Virgin Australia Holdings Ltd VAH.AX more recently did so against Qantas Airways Ltd QAN.AX. Both challenger brands eventually captured a share of larger corporate accounts as they expanded their network and frequencies.

Hong Kong Airlines, which flies to nearly 40 destinations with 31 passenger aircraft, last week took delivery of its first A350 aircraft for long-haul routes and opened a new premium lounge at Hong Kong International Airport.

The carrier, which already flies to Auckland and Vancouver in competition with Cathay Pacific, is launching flights to Los Angeles from December and plans to expand to San Francisco, New York and London next year.

“Certainly, this will impact demand for Cathay’s offerings on the same routes due to increased supply, especially since Hong Kong Airlines will be operating a relatively newer fleet,” UOB Kay Hian Asia transport research director K Ajith said. “Cathay’s yields on the routes will be adversely affected.”

Hong Kong Airlines, which is not listed and does not disclose its earnings publicly, has 21 A350s on order with Airbus SE AIR.PA and third-party lessors that are expected to be delivered over the next three to four years.

“We are also looking to have other types of aircraft as well but no firm decision at this stage,” Tang said.

Sister carrier HK Express, which targets the low-cost market, on Tuesday said it would add widebody aircraft to it fleet eventually to make use of limited airport slots and allow for growth to longer-range destinations.

Despite both being part-owned by HNA Group, the carriers do not coordinate their route choices or flight timings because they target different market segments.

Reporting by Jamie Freed; Editing by Elaine Hardcastle