Dubai nudging Hong Kong out as transit hub between Asia-Pacific and Europe

Runway boost unlikely to restore the city's role and competition is growing on mainland flights

PUBLISHED : Thursday, 13 February, 2014, 11:15am
UPDATED : Friday, 14 February, 2014, 5:25pm

Expanding the passenger-handling capacity of Hong Kong's airport, which is expected to run out by 2018, with a third runway - due to be completed 10 years from now - will fail to restore the city's role as a transit hub for flights between Asia-Pacific and Europe, analysts say.

Middle Eastern airports are muscling in on that turf, and Hong Kong may increasingly have to rely on traffic from the mainland, both outbound and inbound, to maintain its status as an air travel hub, remarks by analysts and airport management suggest - although here, as well, it is facing growing competition.

While traffic at Hong Kong International Airport showed lukewarm growth of 6 per cent last year to nearly 60 million passengers, that at Dubai International Airport jumped 15.2 per cent to 66.4 million. Dubai overtook Hong Kong as the third-busiest international airport in 2012.

Industry observers expect no additional landing slots will be offered at the Hong Kong airport from 2018 and airlines will be encouraged to optimise use of the limited space by consolidating routes and flying bigger planes.

Will Horton, a senior analyst at Capa, a Sydney-based aviation consultancy, said: "No amount of runway capacity at [the Hong Kong airport] or Singapore's Changi can compensate for what the Gulf carriers can offer in Europe by pooling traffic into a central hub and offering dozens of European destinations. But the third runway is, of course, still an urgent project and can ensure [Hong Kong] is a hub for Asia."

Hong Kong functions differently as a hub from Dubai, which is mainly a transit centre for air travel between East and West, as well as Europe and Africa. Two-thirds of the passengers at the Hong Kong airport, by contrast, are destined for or originate from the city. A majority of the remaining third are from the mainland.

"The hub function of Hong Kong is rather dictated by geographical factors," said a manager at Airport Authority Hong Kong. "We are well positioned to serve the mainland-Southeast Asia routes and the Australia-North Asia routes, although the latter is a very competitive market."

However, mainland carriers are aggressively expanding their international coverage at the same time as foreign players are adding flights to the mainland.

The gap between the number of international destinations served by Guangzhou Baiyun International Airport and the Hong Kong airport has narrowed substantially within just a few years. Guangzhou serves 80 overseas destinations now, two-thirds of the number served by Hong Kong.

Meanwhile, the rise of Middle Eastern carriers has diverted passengers away from Hong Kong as a transit point on flights between Australia and Europe - affectionately known as the kangaroo route, a term that Sydney-based Qantas trademarked for its Australia-Britain flights.

The number of kangaroo route passengers going via Dubai surged after Emirates and Qantas agreed to co-operate last year. Qantas dropped Hong Kong as a transit hub and started code-sharing with Emirates to channel passengers to Dubai.

Kangaroo route passengers making a hop in Dubai jumped 37.5 per cent year on year to 56,411 in October, while those going via Hong Kong slipped 17 per cent to 16,866, according to data from Amadeus, a global ticketing platform.

As Dubai's share of the kangaroo route leapt to 36.5 per cent in that month because of cheaper air fares and the shorter journey, Hong Kong's fell to 11 per cent.

While Cathay Pacific Airways is scheduled to add four more weekly flights to six Australian cities next month, Virgin Atlantic's decision to suspend its Hong Kong-Sydney route from May will reduce traffic from Down Under.