Cathay Pac. Airw. : Hong Kong Airlines to Suspend Hong Kong-London Gatwick All-Business-Class Service From September
08/08/2012| 06:51am US/Eastern
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--Hong Kong Airlines to end HK-London service from September
--Executive: Last London-Hong Kong flight Sept. 10
--Executive: Termination of service owing to poor demand
(Adds company statement, aviation authority comments, background)
By Joanne Chiu
HONG KONG--Hong Kong Airlines Ltd.--backed by Chinese aviation-and-leisure conglomerate HNA Group Co.--is suspending its all-business-class flights to London just six months into the much-touted service because of poor demand, dealing a blow to the its efforts to compete with well-established airlines on long-haul routes.
The decision follows a review of its European strategy in light of the weak economic outlook there.
"We believe that a regional model focused on Asia-Pacific is most appropriate for Hong Kong Airlines at this stage of our growth," said President Yang Jian Hong in the statement.
"Our key focus will be building our regional network and strengthening our business across China, Southeast Asia, Japan and Korea," he added.
"The last flight from London to Hong Kong will be on Sept. 10.," Hong Kong Airlines General Manager Albert Chan had told Dow Jones Newswires earlier Wednesday. The service is cancelled until "further notice," the statement added.
The carrier will redeploy three specially equipped Airbus A330s flying the route to charter flights, it said.
A spokeswoman for Hong Kong's Civil Aviation Department said it hasn't been notified.
A world-wide economic downturn and still-high fuel costs makes operating profitable long-haul services difficult, particularly for companies, like Hong Kong Airlines, without a significant cargo operation.
It is doubly difficult for a start-up carrier to maintain high utilization rates--which are key to profitability--on long-haul routes because of a smaller fleet.
Hong Kong Airlines wanted to capture business and premium-leisure traffic with lower fares. Analysts questioned the viability of an all-business-class service because most similar ventures have failed.
Round-trip tickets cost 29,090 Hong Kong dollars and HK$44,050 for a flat-bed seat, according to its website.
The route didn't catch on with business travelers traditionally concerned about reliability and connectivity. Reports of delays and cancellations were bad publicity for Hong Kong Airlines and its reputation took a further hit in July with its failure to clear a passenger backlog following cancellations as a result of a typhoon.
Started in 2006, Hong Kong Airlines now operates about 20 Boeing 737s and Airbus A320 and A330s between Hong Kong and other major Asian cities like Taipei, Bangkok, Okinawa and Osaka and Kunming, Guilin and Hangzhou.
Hong Kong Airlines, which has been struggling to put a dent in the dominance of rival Cathay Pacific Airways Ltd. (0293.HK), has tried long-haul flights before. Earlier this year it suspended flights to Moscow because of weak demand.
Write to Joanne Chiu at joanne.chiu@dowjones.com
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