Chinese tycoon takes on Cathay with new airline in Hong Kong

Chinese tycoon takes on Cathay with new airline in Hong Kong

FILE PHOTO: A Cathay Pacific jet is seen in front of air traffic control tower at the Hong Kong International Airport, Hong Kong, China Oct 24 2020. (Reuters)
FILE PHOTO: A Cathay Pacific jet is seen in front of air traffic control tower at the Hong Kong International Airport, Hong Kong, China Oct 24 2020. (Reuters)

A new airline with ties to Beijing is trying to muscle into Hong Kong, a patch long dominated by stalwart Cathay Pacific Airways Ltd.

Founded by property magnate Bill Wong, Greater Bay Airlines has ambitions to fly to 104 destinations in mainland China and North, South and Southeast Asia, including Bangkok and Phuket. Scheduled flights haven’t begun yet, with the carrier only receiving its air operator’s certificate at the beginning of the month and an air-transport licence still to be procured. 

Starting an airline at the tail end of a pandemic that’s decimated travel worldwide may sound unwise. But 62-year-old Wong, dubbed the Li Ka-shing of Shenzhen for his expansive business empire across the border, isn’t a total novice. He already owns one carrier, Shenzhen-headquartered Donghai Airlines Co, which services a raft of Chinese cities as well as a few regional routes.

Greater Bay Airlines’ entry into Hong Kong also comes at a low point for Cathay, the iconic carrier controlled by conglomerate Swire Pacific Ltd, whose parent is UK-based private family group John Swire & Sons Ltd. Even before Covid, Cathay was impacted by its association with the 2019 pro-democracy protests in the former British colony, forcing a change in management. 

Hong Kong is sticking to a Covid Zero strategy, so Cathay can only watch on as carriers in neighbouring places such as Singapore and Indonesia prepare to ramp up international routes. With no domestic market and mainland China’s borders still closed even to Hong Kong, Cathay’s passenger traffic languishes at about 5% of pre-pandemic levels. 

“We’re starting from new, so we don’t have the burden or the baggage,” Greater Bay Airlines’ Chief Executive Officer Algernon Yau said, suggesting that Covid has levelled the playing field.

Greater Bay Airlines can be more agile and flexible than a legacy carrier like Cathay, he said. It also has a ready-made traveling public on its doorstep, considering the Greater Bay Area covers Hong Kong, Macau and municipalities in Guangdong province with a population north of 86 million.

“Now we’re all starting from the same line,” Yau said from an interview at his office overlooking a hazy Hong Kong Airport and its new third runway. “When business comes back, we can easily catch up and not be left behind.”

Wong declined to be interviewed.

Cathay, which is almost 30% owned by state-controlled Air China Ltd, seems unperturbed by the potential for more competition. “There’s a wealth of potential for both business and leisure travel as the region continues to develop,” a spokesperson said.

There have already been some setbacks, however.

Greater Bay Airlines, which has three Boeing Co 737-800 jets on lease and plans to grow its fleet to more than 30 by 2026, had hoped to begin operations on China’s National Day on Oct 1 with a symbolic flight to Beijing.

That never happened because it didn’t have a licence. Also, despite Cathay and Hong Kong Airlines Ltd not formally objecting to Greater Bay Airlines’ licence request, the two have tried to stall the approval process, the South China Morning Post reported, citing people it didn’t identify. A licensing hearing is scheduled for December.

Hong Kong Airlines is the city’s only other commercial passenger airline that doesn’t belong to the Cathay group. It’s been limping along since its parent, Chinese conglomerate HNA Group Co, buckled under a pile of debt at the start of the pandemic. 

Greater Bay Airlines is also unable to generate any cash at present because it can’t sell tickets. Wong told the SCMP almost a year ago that he expected to spend around HK$2 billion ($257 million) before obtaining regulatory approvals. Other details surrounding the airline’s financing are scant and Yau didn’t elaborate.

“Investing in an airline is a very costly exercise,” said Yau, an ex-Cathay executive who for a period ran the airline’s now defunct Cathay Dragon unit. “Our investor Mr Wong is a land developer in Shenzhen, so he has very strong financial support to this airline.” 

There’s also the question mark over Hong Kong’s future as an international aviation hub if the city’s strict quarantine measures don’t change. Although Hong Kong Chief Executive Carrie Lam pledged the city would retain that title in her annual policy address on Oct. 6, most travellers entering the financial hub still need to spend as long as 21 days isolating in a hotel.

“Demand for flights into Hong Kong remained very weak due to the strict quarantine requirements,” Cathay’s Chief Customer and Commercial Officer Ronald Lam said Tuesday, as the company released figures that showed it carried only 131,774 passengers in September. 

Despite the difficulties of the pandemic and Hong Kong’s Covid Zero approach, Greater Bay Airlines could benefit from its timing, with cheaper aircraft, less congested landing slots and plenty of available pilots, according to Brendan Sobie, Singapore-based consultant at Sobie Aviation.

Another factor going in Wong’s favour is his ties to the mainland. The businessman is a member of China’s key political advisory body, the Chinese People’s Political Consultative Conference. Yau said Hong Kong-Beijing would be a fitting first route.

“Greater Bay Airlines will probably be looked at by the regulators relatively favourably,” said Richard Harris, founder and CEO of Hong Kong-based Port Shelter Investment Management. “Cathay is partly owned by British interests, partly by a Chinese airline and partly by Qatar. But what it isn’t, it’s not linked to China as much.”

Yau said Greater Bay Airlines will be a “value carrier,” somewhere between a budget airline and a full-service one. Planes won’t have seat-back televisions and customers will be encouraged to use an app to customise their journey before boarding, including ordering food from McDonald’s, for example, or premium whiskey to be served in-flight.

Most pilots and cabin crew are Hong Kong citizens who used to work for Cathay, Dragon or Hong Kong Airlines, he said, adding that Greater Bay Airlines aims to have about 150 employees by December. 

“We’re quite aggressive with our plan,” Yau said.

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