Bloomberg News

Hong Kong Air Seeks A380 Order Swap for Smaller Aircraft

December 05, 2012

Hong Kong Airlines Seeks to Swap A380 Orders for Smaller Planes

A Hong Kong Airlines aircraft prepares to land at Chek Lap Kok Airport in Hong Kong, China. Photographer: Jerome Favre/Bloomberg

Hong Kong Airlines, holder of the biggest backlog of Airbus SAS A380 orders in Asia, is seeking to swap some planes for smaller models because of a new focus on short-haul routes.

The carrier is discussing changing at least some of its 10 on-order A380s for A330s, and delaying deliveries, President Yang Jianhong said by phone yesterday, without giving a timeframe for when talks may be concluded. Airbus doesn’t comment on negotiations with customers, said spokesman Sean Lee.

Hong Kong Air, which is backed by China’s HNA Group, said in August it was reviewing the A380 orders after a slump in long-haul travel caused by slower growth in Europe. The slowdown has also forced Cathay Pacific Airways Ltd. (293), Hong Kong’s biggest carrier, to pare capacity and begin a cost-cutting drive.

“We won’t resume long haul routes in the short term,” Yang said. “Now, we are trying to do a better job in operations.”

Airbus, based in Toulouse, France, held 168 orders for A380s at the end of October, based on data on its website. That included the 10 from Hong Kong Air and five from Indian carrier Kingfisher Airlines Ltd. (KAIR), which suspended services in October. The double-decker plane carries about 525 passengers and has an average list price of $389.9 million.

Regional Focus

Hong Kong Air’s focus on regional services means it will make a profit this year, Yang said, without giving a detailed forecast. The closely held carrier is also winning back customers after disruptions during a typhoon, he said. Hong Kong’s aviation regulator capped the size of the airline’s fleet after the cancelations because of concerns about the carrier’s ability to manage a larger operation. There are no safety issues about its current size.

Hong Kong Air is also seeing “pretty good” travel demand for the Christmas period, except for Japan, Yang said. Cathay Pacific is facing possible industrial action by cabin crew then because a pay dispute.

Hong Kong Air ended an all-business class service to London earlier this year as it withdrew from long-haul routes. It has also delayed the arrival of six Boeing Co. (BA:US) 777 freighters to at least mid-2014 from next year. The carrier and affiliate Hong Kong Express fly to about 30 cities, mainly in China, based on its website.

Hong Kong Express will complete its transformation into a low-cost carrier by May or June, Yang said. The carrier will compete with Qantas Airways Ltd. (QAN) and China Eastern Airlines Corp.’s Jetstar Hong Kong, which is due to start flying in the first half of next year. Spring Airlines Co., China’s biggest privately-owned carrier, is also considering a venture in Hong Kong as part of an overseas expansion push.

To contact the reporter on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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