Pilots fired as two small HK airlines merge

PUBLISHED : Saturday, 02 February, 2008, 12:00am
UPDATED : Saturday, 02 February, 2008, 12:00am

For some small operators, a merger is perhaps the best survival tactic in the cutthroat aviation industry.

Hong Kong's two small money-losing airlines, which have a common shareholder, are synchronising routes and integrating management and sales operations to seek elusive profitability, according to company sources.

Hong Kong Airlines has merged its management team with that of Hong Kong Express Airways, laying off 14 pilots in the process.

HNA Group owns a 45 per cent stake in each of both carriers while casino magnate Stanley Ho Hung-sun and other individual investors own the rest of Hong Kong Express. HNA also owns Hainan Island's Grand China Airlines and is planning to list it in Hong Kong.

To rationalise resources, the two carriers will combine their management teams and their sales and marketing functions. Under the new structure, Hong Kong Express president Ronnie Choi and Hong Kong Airlines chief executive David Lui will jointly handle corporate development.

Until now, the two airlines have competed for air rights and aircraft resources, even though they have a common shareholder.

Hong Kong Airlines rejected the suggestion that an expansion slowdown was behind the layoffs. Chairman Ren Weidong had unveiled a plan a year ago to expand routes to 30 cities and the fleet size to 40 aircraft by 2010.

The airline has committed to buying 51 planes from Airbus at a catalogue price of US$5.5 billion. It has a fleet of seven Boeing 737-800s, six in operation and one on wet lease to another carrier. It will be taking delivery of an additional aircraft on Monday.

'We still want to speed up our growth, and laying off less suitable pilots is one of the steps to take,' Mr Lui said.

The 14 first officers being laid off were still under training, not having enough flying hours to serve. Most of them flew turboprop aircraft, which are popular for domestic flights in Europe but seldom used in Asia. They would take a long time to adapt to operating jetliners.

Mr Lui said the company would hire other first officers with more flying hours on the right aircraft type to cope with the development plan, without specifying a number.

The last time a local airline laid off staff was in 2001, when Cathay Pacific Airways sacked more than 50 pilots to cut costs.

Hong Kong Airlines flies to 12 mainland cites including Qingdao, Tianjin and Xiamen, as well as Hanoi and Ho Chi Minh City in Vietnam. It will add routes to Manila and several Japanese destinations this year.

With four B737-800s in its fleet, Hong Kong Express serves Bangkok, Chengdu, Hangzhou, Guiyan, Ningbo and Xian. It will start services to Beijing and Shanghai at the end of next month and to Okinawa in April.