The perfect excuse to end HKG flights?

[Melburnian1]

VA's load factors on its financially disastrous foray to HKG have been improving, but those statistics do not reveal yields. I assume 'low' and overall, with VA's relatively high costs meaning continuing high losses per available seat.

CX has already said it is suffering a 'double digit' fall in ticket sales to HKG, but it claims this is economy class travellers, not premium fare payers:

Fall in ticket sales overshadows Cathay’s return to profit as protests bite

Medium-term bookings down but airline’s chairman John Slosar confident performance can continue to improve for rest of year.

www.scmp.com

The ongoing, understandable protests by young Hong Kongers scared of their future against the authoritarian, repressive mainland Chinese communist government may continue for some time. There's little sign that millions of Hong Kongers will give up their fight, difficult as it is. CX staff already effectively joined the protest by not showing up for work one day recently in their hundreds, as did 50 per cent of ATC staff in HKG.

Given VA's urgent need to improve its abysmal overall financial performance and how the VAi operations are a real drag on what is at times a marginally to reasonably profitable domestic airline operation, the conditions in Hong Kong may be the perfect excuse for VA to walk away from these HKG routes, even though it commenced SYD - HKG fairly recently, adding to MEL - HKG.

There's no question the J experience on VA widebodies, whether A332 or B773ERs, is good. It has received a lot of praise from travellers. Punctuality is fair to good, and at times better than QF with all its timekeeping problems, and CX.

Is this a move new CEO Paul Scurrah will make as he seeks to improve upon the disastrous financial legacy of the previous CEO?

Or are too many egos involved, and VA's tieup with Virgin Atlantic a more hopeful sign of things to come for VA users?

 

[Doctore1003]

I think they will wait to see how the VS tie-up goes. It hasn't fully kicked into gear yet.

 

[docjames]

Agree, they aren’t going to abandon it just yet with the formal VS tie up yet to prove it’s worth (or otherwise).

 

[AustraliaPoochie]

The protests is the thing that could put VA to suspend flights.
Looks like the protests are in for the long run, unless China does that same thing it did in Beijing all those years ago.
Who knows what they will do to quell the uprising.
O/T, **((my holidays are short, and the protests do deter me from visiting HK or using it as a stepping stone to Japan/Korea.
Otherwise, without the protests, I would certainly ink HK into my 1/2 year ahead visit plans, to use up my VFF points.))**

 

[jakeseven7]

I suspect they will hold on for dear life to see if VS can give them some lifeblood, but VS are hardly a huge player either.... Fingers crossed they stay because their product is good.

 

[Pleb Status]

If HNA sells their ~20% shareholding in VA, IMHO HKG will be dropped soon after. I would be surprised if VA do not already have a HKG withdrawal plan developed.

I cannot see the VA/VS tie up saving HKG once HNA are out of the VA boardroom.

Expect prices on QF/CX to 'normalise' very quickly after any withdrawal announcement. So even the Qcult/Qsheep would like to see VA continue on HKG in the future....

 

[HS-TQE]

Weiss and Scurrah recently had just applied for the VS/VA JV, so an immediate withdrawal is very unlikely at this point. My guess is the VS/VA JV is a "backup" for the possible HX collapse (and subsequent HNA sell-off of their VA stake), likely with Branson's blessing so they can advertise the "Virgin" brand on the Kangaroo route (although operated by two carriers).

If VA does eventually withdraw from HKG, it would likely be at the same time that VS withdraws as well, considering VS is basically "Delta UK". Even DL couldn't make HKG work on their own metal and have left HKG to their other Equity/JV partner KE (via ICN).

 

[Isochronous]

They have the best product on the route (although I'm not sure what the HK Airlines Bauhinia Lounge is like in HKG, or what they use in SYD/MEL) but every time I try to book a J award I always have better luck getting QF availability than VA, which is odd given that there should be more QFF members + oneworld members with points chasing QF seats compared to VA's smaller membership base.

 

[jase05]

They have the best product on the route (although I'm not sure what the HK Airlines Bauhinia Lounge is like in HKG, or what they use in SYD/MEL) but every time I try to book a J award I always have better luck getting QF availability than VA, which is odd given that there should be more QFF members + oneworld members with points chasing QF seats compared to VA's smaller membership base.

The Club Autus lounge in HKG is excellent IMO

 

[eastwest101]

They have the best product on the route (although I'm not sure what the HK Airlines Bauhinia Lounge is like in HKG, or what they use in SYD/MEL) but every time I try to book a J award I always have better luck getting QF availability than VA, which is odd given that there should be more QFF members + oneworld members with points chasing QF seats compared to VA's smaller membership base.

Best product on the route won't save it if the airport is closed or the tanks roll into the streets of HGK, there are already travel advice warnings for non-essential travel to or via HGK. The Chinese and HGK economies are slowing with mainland capital outflow controls and the mainland government devaluation the Yuan, and VAs mainland partner airlines are looking like the final stages of a ponzi scheme.

The VS link up is an excellent idea about 7 years too late. It's an idea that's so mis-timed and late that QF and CX even had time to make nice and I expect they'll be able to cut capacity and co-ordinate any future negative developments.

Those A330s would have been handy being in Australia recovering the schedules from the debacle of SYD and MEL airports in the last few days rather than flying to and from HGK empty.

The frequency business model of sweating the assets and flying B738s every 30min between curfew capacity constrained private monopoly shopping centre owners seems to all fall over into chaos with the slightest breeze in a major hub (or two like today), and it's interesting that both duopoly airlines in Australia have been suffering from lots of aircraft, crew and passengers all out of position and no real capacity to recover or operate their schedules.

What's the definition of insanity again?

 

[kelvedon]

Best product on the route won't save it if the airport is closed or the tanks roll into the streets of HGK, there are already travel advice warnings for non-essential travel to or via HGK.

)

Whilst DFAT has issued a “High degree of caution” warning, that level of caution also applies to Belgium and France,

 

[N860CR]

)

Whilst DFAT has issued a “High degree of caution” warning, that level of caution also applies to Belgium and France,

And probably applies to anywhere outside of the useless ministers suburban Queensland hole.... can’t say I’d hug anything DFAT has to say any credit

 

[eastwest101]

)

Whilst DFAT has issued a “High degree of caution” warning, that level of caution also applies to Belgium and France,

While personally I'd feel safe going to HKG at the moment and take your point that it's statistically more likely to be hurt in a car accident on the way to the airport in Australia or possibly a slightly higher risk of being involved in a terrorist attack in Europe I think the real risk is being stuck there when/if the mainland government comes out with a disproportionate response. Nightly news footage of civil unrest in the streets and the airport being affected must focus the mind of anyone considering travel to or via HGK.

In 2012 this would have been the right aircraft on the right route with a logical partner (VS & HX) with air travel between China and Aus booming, in 2019 it's looking like an open ended commitment to lose money in my opinion.

 

[nlagalle]

The frequency business model of sweating the assets and flying B738s every 30min between curfew capacity constrained private monopoly shopping centre owners seems to all fall over into chaos with the slightest breeze in a major hub (or two like today), and it's interesting that both duopoly airlines in Australia have been suffering from lots of aircraft, crew and passengers all out of position and no real capacity to recover or operate their schedules.

What's the definition of insanity again?

The slots are a constraint by the government not the airport, they'd much prefer more aircraft movements. As for yesterday, any airline would have struggled with the winds that were in SYD and MEL... I couldn't see any airline coping with it.. no airline has spare aircraft lying around just waiting for something to go wrong.

 

[eastwest101]

As far as SYD & MEL is concerned constrained is constrained, and remember the constraint in SYD is plane movements per hour (with the definition of a plane being anywhere from a A380 down to a Metro or Saab 340 size to totally illogical) within a nonsensical curfew, in MEL its possibly more about ground infrastructure constraints (i.e.gates and bays) By accident or by choice both SYD and MEL immediately fall short of runway capacity when strong westerly winds blow over south-eastern Australia and both airports having insufficient capacity to deal with single runway operations and with nearly every domestic aircraft in the QF and VA network touching SYD or MEL at least once in its daily schedule - the result is a bad day at both SYD and MEL means that you are guaranteed that 100% of your domestic fleet is impacted by rolling delays that spread throughout the whole domestic network. either get the government out of the way or get larger aircraft, make your fleet and network more flexible or able to recover, or do nothing and accept the poor network reliability and increased fuel costs.

I find it highly intriguing that both VA and QF are so determined to ignore other options or operational models. Operating their fleet and crew at 101% without much slack or margin for error means that a trivial event at one airport will cascade into much bigger delays down the track. The "just in time" or lean manufacturing theory may work great in a strictly controlled environment like the Japanese manufacturing industry, but in an industry like aviation then reality has a bit of a habit of blowing your meticulous plans away in an instant.

 

[nlagalle]

As far as SYD & MEL is concerned Constrained is constrained, either get the government out of the way or get larger aircraft, make your fleet and network more flexible or do nothing and accept the poor network reliability and increased fuel costs.

I find it highly intriguing that both VA and QF are so determined to ignore other options or operational models.

So what are the other options or operating models?

 

[Isochronous]

And probably applies to anywhere outside of the useless ministers suburban Queensland hole.... can’t say I’d hug anything DFAT has to say any credit

When did Marise Payne become a Queenslander?

 

[Melburnian1]

...In 2012 this would have been the right aircraft on the right route with a logical partner (VS & HX) with air travel between China and Aus booming, in 2019 it's looking like an open ended commitment to lose money in my opinion.

eastwest101, you are not a frequent contributor but so often you are accurate.

This was one of my points in the original post. We don't yet have access to full year 2018-19 figures, and they are typically, for VAi (or QFi), not disaggregated by route, but the HKG foray must have cost VA at least A$20 million so far with no end in sight to losses.

Mind you, load factors have improved (through perhaps forward bookings are now crashing with the demonstrations and as you suggest huge threat of the jackbooted Marxist mainland Chinese government overhanging).

So what are the other options or operating models?

The obvious move is to increase capacity per plane and to some extent decrease frequency in peak periods, maybe capacity rising marginally to c.220 seats per aircraft, or higher, but the duopoly seems reluctant to do this. If we must travel by unreliable airlines, widebodies are more pleasant than narrowbodies.

The lack of investment in the last few years by both legacy airlines in their domestic fleets (notwithstanding that VA placed an order for B737MAX) is hanging over their balance sheets. Some of these aircraft are 17 years old. While they may be well maintained, fairly soon they need to be replaced one might think.

The sadness for business and leisure travellers is that if we had high speed rail between the lower east coast capitals, so many flights up to the distance of MEL - SYD/NTL or SYD - OOL/BNE could be replaced by a far more reliable, comfortable and punctual mode as has or is increasingly occurring overseas. A lot more efficient than 'upgauged' aircraft.

When did Marise Payne become a Queenslander?

He may have been referring to The Hon Peter Dutton MP, who has many Australians' gratitude for staying in touch with what Australians, as reflected at the May ballot box, actually want.

Mr Dutton overall is doing a very good job, despite the venom from Nine Group newspapers, and recently sensibly backed Andrew Hastie MP when the latter made some apposite comments about the threat that mainland China poses.

 

[JohnPhelan]

And probably applies to anywhere outside of the useless ministers suburban Queensland hole.... can’t say I’d hug anything DFAT has to say any credit

Marise Payne is the Foreign Minister (responsible for DFAT) and she's from NSW. You look foolish calling others useless when you say things that are just factually wrong.

And how exactly do you "hug" anything that DFAT has to say?

 

[Saab34]

Two flights a day and losing tens of millions? Such a token part of the business seems quite an excessive estimate.

They need BNE and a second Sydney and the tide should turn. More frequency will only just pull from CX which they are probably not doing currently.