• Sun
  • Dec 28, 2014
  • Updated: 9:59pm
Monitor
PUBLISHED : Tuesday, 11 June, 2013, 12:00am
UPDATED : Tuesday, 11 June, 2013, 6:30am

Stanley Ho's Jetstar move highlights folly of express rail link to Shenzhen

History shows Stanley Ho is a much better judge of what's a good investment than our government, and his Jetstar bet will do it again

Who has the greater business acumen, Macau gambling mogul Stanley Ho and his minions, or the Hong Kong government?

Ho's track record speaks for itself. Despite losing its monopoly 10 years ago, his casino company, SJM Holdings, has gone from strength to strength, generating three-figure earnings growth year after year.

The performance of his other main business, transport and property conglomerate Shun Tak, hasn't been quite as spectacular, but it's still turned in impressive earnings growth.

Shareholders have benefited accordingly. Over the last 12 months SJM stocks have yielded a total return of 54 per cent, while Shun Tak has returned 42 per cent.

The Hong Kong government's business ventures have been rather less successful. After years of losses, Hong Kong Disneyland, in which the government owns a majority stake, finally turned a modest profit last year.

The stock of Hong Kong Exchanges and Clearing, in which the government is the largest shareholder, is down almost 20 per cent from the price at which the government acquired its stake in 2007.

Thanks to its privileged position as a property developer, the MTR Corp, which is 76 per cent government-owned, has done better. Last year its shares provided a total return of 26 per cent.

That's not bad, but it's less than half the return generated by shares in Stanley Ho's SJM.

In short, in looks as if Stanley and his crew have a better nose than the Hong Kong government for a promising business opportunity.

So it's interesting to note that while the government is busy spending HK$67 billion of public money on the express rail link to Shenzhen, to connect Hong Kong to the mainland's high-speed rail network, Stanley Ho is investing in budget airlines.

Last week Shun Tak group bought a 33 per cent stake in start-up discount carrier Jetstar Hong Kong from joint venture partners Qantas and China Eastern Airlines.

Provided it can secure an operating licence, Jetstar plans to start offering cheap flights between Hong Kong and a selection of second-tier mainland cities.

It's a plan that makes a complete nonsense of the Hong Kong government's investment in high-speed rail.

To see why, simply compare ticket prices and journey times. The cheapest ticket on the mainland's new high-speed line between Beijing and Shanghai will cost you 555 yuan, or just over HK$700. A brand new bullet train will then whisk you the 1,320 kilometres between the two cities in 5-1/2 hours.

That's 100km less than the straight-line distance between Singapore and Bangkok. Today, Jetstar Asia, which operates out of Singapore, will fly you from the city state to Bangkok for just HK$518.

Admittedly, your seat might not be as comfortable and as roomy as it would be on a train. But the flight lasts just 2-1/2 hours.

Granted, fares and journey times for trips from Hong Kong wouldn't be exactly the same. But the general principle will still hold: even factoring in an hour to get through the airport at either end, for journeys of 1,000km or more, a budget airline will get you there far faster than a high-speed train, and at a fraction of the cost.

As a result, the advent of discount air services like Jetstar and possibly others threatens to completely undermine the Hong Kong government's business case for building its eye-wateringly expensive express rail link, as passengers will overwhelming choose the cheaper, faster and more flexible travel alternative offered by budget airlines.

So, once again, it looks as if Stanley Ho's companies are making the right call buying into budget air travel, while the Hong Kong government is pouring public money into a giant hole in the ground.

tom.holland@scmp.com

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mchurch
Not sure your assessment is correct on this. Best example of rail travel excelling over air travel is in Japan...airports tend to be well outside the cities, there's the hassle of arriving an hour before the flight, security clearance plus delays etc while the train takes you from one city centre to the other. The journey time might be longer by rail on a head-to-head comparison but when everything else is factored in, rail travel can - or at least should (and in Japan's case does) - bring greater convenience, particularly on medium distance journeys. If China can achieve that then investing in rail travel isn't such a mistake after all and having HK connected with that network makes sense. Not everyone wants to fly all the time.
mrgoodkat
I'm sorry but Mr. Hollands calculations aren't quite correct. Choosing the high speed train over any airline makes sense once you've taken the usual flight delays on Mainland flights into account. Your 2 1/2 hour flight might easily turn into 6 to 7 hours once the plan gets to sit around on the tarmac because of "air traffic control" reasons. Add to that the time it takes to go to the airport, going through security and board the plane it makes sense to pay a bit more for the train.
sklailee
One must think of strategic need rather than transport need when it comes to the fast rail in Hong Kong. Even a child in China knows that the Railway Ministry does not call the shots on where a railway should be built and where a station should be constructed. Since 1949, such decisions have been entirely in the hand of the People's Liberation Army (PLA). The fast rail in Hong Kong is but a minute appendix while the fast rail in Guangdong is the rest of the alimentary canal. Yet this short length in HK deserves a huge depot which, strangely, will be way from the main line and, by 'coincidence', on the perimeter of PLA's Shek Kong Airfield. The fast rail is actually built for HK's defence which entails lightning mobilization. So, it should be the last thing for use in a comparison with Stanley Ho's plan to run air routes between HK and the rest of China.
captam
Tom Holland has never been good at arithmetic which is why he draws all those silly charts and graphs, trying to fool you into believing that he has a valid point.
He claims a 1000’km flight lasts just 2 1/2 hours, downplaying the extra inconvenience of using airports: “even factoring in an hour to get through the airport at either end” suggesting such a flight would only take about 3 1/2 hours. This is of course nonsense. It’s an average of 1 hour to an airport, 2 hours ahead of departure time fighting your way through check-in, security, immigration/customs checks and then a 15min walk at each end to and from boarding gates. Add another 30mins delay in taking off and the same again circling around waiting for a landing slot. Next add 30 mins waiting to discover whether your suitcase has been stolen and then another hour to find your way in a taxi to the city you were really trying to fly to. So your “2 1/2 hour flight” actually takes about 8 hours door to door. I know which option sensible people will take. The pricing he suggests is also a fluke. He quotes the lowest special airfares which airlines tout to attract customers. Actually being able to purchase a ticket at these low prices is a feat of endurance. Airlines cannot actually operate profitable at these low fares. The “cheap” fares are a con and will not endure.
KwunTongBypass
You are absolutely correct - high speed trains su$k$. Better triple Hong Kong airport terminals, and build a couple of more runways - will need a bit of reclamation though, which I am sure Mr. Holland, and the Mister from Holland will fully support!
brad_emery
Don't large infrastructure projects like this create jobs, and spending through the multiplier effect?
kazu.nagai.7
struans, plse get your facts rite. The railway line/service from Malaysia into downtown Singapore used to be own by the Malaysians - same for the train station - as part of the terms of separation between both countries in 1965. No longer. Since 2011, the railway line has been dismantled as part of a land swap agreement between them. Two major poperties are now being jointly developed by both countries in downtown Singapore as part of this deal. A wellness resort is being developed in Johor, Malaysia for similar reason. The Malaysian rail service now terminates at a train station in Woodlands, very close to the causeway border separating both countries. This may also be the case for the high-speed train being mooted by the Malaysians to link up KL and Singapore in 90 minutes, or the service could extend all the way to downtown Singapore once again. The key difference now is that Singapore will own the Tanjong Pagar train station, railway lines and the land around it, not the Malaysians. Its the Lion City afterall, not Kuala Lumpur. Whether or not the high-speed rail will work between Singapore and KL depends very much on pricing. It's certainly going to be far more convenient than flying (at least 5 hours if you consider travelling to the airports ahead of check-in - at least an hour). In the case of HK-Shenzhen, the distance is one-tenth that of KL-Singapore. So to be honest, I doubt it makes much economic sense.
struans
" the Hong Kong government is pouring public money into a giant hole in the ground."
That's what governments are good at.
In any event, the express rail link was never about value for money or peoples travel plans. It's a political project. Think of the old Singapore station on the Malaysia rail network: "Welcome to Malaysia" right in downtown Singapore. It'll be the same here.
 
 
 
 
 

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