Macau's skies set to get crowded as three new airlines take wing

PUBLISHED : Friday, 12 August, 2005, 12:00am
UPDATED : Friday, 12 August, 2005, 12:00am

The dust appears to be settling on the airline shake-out in Macau, with three soon-to-be start-ups having carved out the niches they will serve - at least in principle.

Shun Tak Holdings managing director Pansy Ho Chiu-king is on the verge of getting a stake in an as-yet unnamed but nevertheless coveted low-cost carrier.

Shun Tak will share minority interests with Hong Kong-listed China National Aviation Co (CNAC).

Air Macau, which is majority held by CNAC Macau and which has been gracious enough - albeit with some state prodding - to surrender its monopoly in the city and negotiate sub-concessions with the newcomers, will receive 51 per cent.

According to people on the ground in Macau, Ms Ho's budget carrier has gained approval in principle to fly to 16 regional destinations, including cities in Vietnam, the Philippines, South Korea and on the mainland.

The same source told Below Deck the airline already had a deal in place for six Boeing 737 aircraft.

Ms Ho, the source said, was expected to make an announcement about the airline - and its closely guarded name - in a matter of days.

An executive who works for one of the shareholding companies was more cautious.

'We are about to submit all the legal documents and the sub-concession to the government,' he said.

'Until the government approves, we cannot announce other details. It is no secret that the low-cost carrier will be a subsidiary of Air Macau. But no final decision has been made on the number or type of aircraft.'

There had been speculation that the airline would favour A320 aircraft to capitalise on the benefits of sharing a common fleet with its majority shareholder; Air Macau has eight A320 family aircraft.

However, the executive did acknowledge that an agreement in principle had been reached with Air Macau on a route network.

That was all it took last week for Golden Dragon Airlines, the new airline controlled by Ms Ho's father, casino magnate Stanley Ho Hung-sun, to trumpet its arrival. So we could be hearing from Ms Ho's entourage soon.

None of the three Macau start-ups have signed a sub-concession agreement yet.

It is understood that a deal with the third new entrant, Wow!Macau, will be reached after Ms Ho's venture gets the requisite attention with its pending launch.

According to the source, Golden Dragon and Wow!Macau, which has been approved in principle by Air Macau's executive committee to serve destinations outside a four-hour flight zone, have agreed to a 10 per cent capital levy as a condition of their sub-concessions.

None of the contracts have received the government's stamp of approval, so it all remains up in the air.

But one would think that officialdom would be amenable to most arrangements, given Macau's acute need for more flights than its airline can offer.

Macau's Cotai strip is expected to see a sixfold increase in the number of hotel rooms on offer in the next five years to 70,000.

Most of the rooms will be high-end and will require a different mix of clientele than those who now frequent Macau. At present, the average length of stay for a Macau visitor is 1.3 days, compared with 3.7 days in Las Vegas, the city it aspires to emulate.

Only 6 per cent of visitors to Macau arrive by air, against 50 per cent in Vegas.

Macau needs to liberalise its aviation regime to attract a higher calibre of visitor.

As the monopoly carrier for the city, Air Macau utilises only 25 per cent of its 42 air service agreements with other countries.

A dose of competition will be just what the doctor ordered to awaken the sleepy enclave.

China, of course, is the market with the most potential visitors. With Ms Ho's airline apparently destined to compete on some of the eight mainland routes recently awarded in principle to Golden Dragon, there is even the prospect of market-regulated ticket prices. They are targeting different markets - Golden Dragon is more a premium economy provider with its 76-seat Embraer aircraft, however, there should be some overlap.

Wow!Macau, on the other hand, looks well positioned for the longer-haul market.

'It looks initially to be a crowded environment with four carriers,' Wow!Macau chief executive Andrew Pyne told Below Deck last month.

'There could be quite a tangle in terms of the two- to three-hour short sectors. But I think we're a little further afield and that is one of the strengths of our business plan.'