Feedback on airline licences under review

The government is studying different views on proposed changes to the way licences are issued to local airlines for new services and routes following a consultation this year.

The proposed changes to the Air Transport Licensing Authority partly reflect a rapidly evolving aviation market and public concern over failed local start-up Oasis Hong Kong Airlines. Red tape has apparently dogged attempts by local carriers like Hong Kong Airlines and Hong Kong Express Airways to grow their network of routes with a regulatory regime that seems overly cautious after being embarrassed by the 2008 collapse of Oasis.

According to the proposals, the government hopes to get Legislative Council clearance to require airlines applying for a licence from the authority to demonstrate that they have sufficient financial resources to cover at least the first three months of costs assuming no income, and a business plan for the first two years.

Law Cheung-kwok, associate director of the Aviation Policy and Research Centre of the Chinese University of Hong Kong, which participated in the consultation, said new licence applicants tend to be optimistic in their forecasts on market share, costs and profitability.

But Law said it should be made clear whether airlines need to start operating a certain route within a specified time period. The authority typically grants licences for five years.

'Currently, it makes economic sense for airlines to hold as many licences as possible in order for them to respond quickly to any potential or future business development, even if the licences are not intended to be used immediately,' the centre's submission said.