Air Macau set to cede exclusive rights

PUBLISHED : Monday, 18 April, 2005, 12:00am
UPDATED : Monday, 18 April, 2005, 12:00am

Air Macau has begun negotiations with management from at least two airlines with a view to surrendering its exclusive right to operate from the former Portuguese colony.

The carrier, majority-held by the state-owned China National Aviation Corp, held talks last week with China-backed start-up Golden Dragon about a sub-concession agreement - a move that would loosen its stranglehold on services from Macau, said a Macau-based source close to the talks.

Management at Air Macau has held intermittent discussions with a subsidiary of Australian budget carrier Virgin Blue about a similar deal and is believed to be close to giving newcomer WOW!Macau a seat at the same table.

'Discussions have already begun with Golden Dragon and the government's position is that all three sub-concessions should be negotiated and subsequently awarded at the same time,' the source said.

But the concessions are expected to differ. 'Some may involve the payment of a royalty to Air Macau for its perceived loss of commercial opportunities and we expect that the applicants will also be requesting different route rights,' he said.

Preliminary talks have raised the spectre of a royalty payment for the first seven years of the franchises but their levels also may be influenced by the route applications. For example, there was a question over whether royalties were justified on routes that Air Macau had neither the intention nor the capability to serve and they could vary depending on the routes' commercial value, the source said.

It is believed Golden Dragon - which is expected to be run by Hong Kong Express management - and the Virgin spin-off are keen to serve mainland routes from the growing Macau metropolis.

The Virgin sub-concession might see Air Macau take a stake in the entity, the source said. WOW!Macau, backers of which include William Ho, brother of Macau chief executive Edmund Ho Hau-wah, is looking to serve regional and intercontinental destinations from the city by November.

It is thought to be eyeing Manila via the former Clark Airforce Base in the Philippines - a key cargo hub - and secondary cities in India such as Chennai and Goa. It is also believed to have designs on Brussels, Lisbon, Milan, secondary airports in London and Manchester.

'We've ruled out Taiwan and mainland China markets for the time being, which frankly represented a sizeable opportunity for us,' WOW!Macau chief executive Andrew Pyne told the South China Morning Post last week. 'That is because we see Air Macau as a strong partner for us in those markets.'

Stronger competition among south China's airports is putting pressure on Macau to increase the number of airlines serving the city.