Cathay Pacific is one of the best airlines in the world. They have a solid business class and first class product.The internet rumor mill has been abuzz with information on Cathay Pacific’s potential investment in Hong Kong-based LCC HK Express. The airline issued a press release indicating that they were interested in purchasing a stock in the airline, but they have yet to announce an offer. With Cathay Pacific turning profitable again this year, I suspect that the airline is looking to get rid of competition by buying them out. But will Cathay Pacific invest in HK Express?
Who is HK Express?
Hong Kong Express Airways (aka HK Express) is a Hong Kong based LCC that operates short haul flights within Asia. It is owned by the HNA Group, parents of Hainan Airlines. Another airline that HNA controls is Hong Kong Airlines, a full service airline based at HKG as well. The two carriers do not codeshare, and do not have any cooperation between them except management.
HK Express flies to regional destinations in Asia, with its farthest reach in Japan. They fly with a mix of Airbus narrow bodies, mainly A320s and A321s. The airline is also a founding member of the U-Fly Alliance, a group of low cost carriers in Asia that cooperate among each other.
What does Cathay Pacific Benefit?
Cathay Pacific is a primarily long-haul carrier. They have some short haul routes, but they do not have their own narrowbody fleet. The airline has a full service subsidiary, Cathay Dragon, which mainly flies to China and other lower yield routes. This airline does have narrow bodies, such as A320s and A319s. Neither airline is specifically targeting the LCC market, and they do not have a product they can make to be as low cost without affecting their brand image.
By Cathay investing in HK Express, the airline would gain a new door into a previously untapped market. HK Express could offer CX a new opportunity to get into the LCC ecosystem without the startup costs and with a brand image. I suspect that the airline would keep HK Express as a separate arm, maybe renaming it Cathay Express. I agree with Lucky, from OMAAT, that the airline is best suited to benefit from keeping HK Express as a separate entity.
How Can This Benefit Consumers?
This will be a big win for Cathay Pacific fliers, as I suspect that HK Express will be brought into the Asia Miles program. This may not be a big win for OneWorld members, because I do not expect the new addition to be made a OneWorld partner, or even an affiliate. HK Express may become a feeder airline for Cathay Dragon and CX’s long haul flights. I suspect the airline will have codeshare agreements with CX and that they will fill in gaps with CX’s network. Regarding route overlap, they will likely maintain HK Express service where it is financial feasible, and redeploy the excess aircraft to new routes.
I am very excited to see what will happen with HK Express if Cathay does decide to invest. The airline competes with its own cousin Hong Kong Airlines, which itself has not been doing so well. If CX acquires HK Express, I suspect that Cathay will solidify its role as the leading carrier in Hong Kong, and it will be able to better weather the market fluctuations. Hopefully, the HK Express purchase will also be a good benefit for a China Southern cooperation.