Hong Kong Express Airways is to join Jetstar Hong Kong in a foray into the low-cost carrier market.
The move by both is expected to help Hong Kong reclaim ground lost to other Asian airports, which already have robust low-cost carrier markets.
Hong Kong Express, which is controlled by the HNA Group, would transform into a low-cost carrier by September, said Jeff Sun Jianfeng, the chief operating officer of sister company Hong Kong Airlines.
HNA is the fourth-largest airline group on the mainland.
At least four Airbus 320s operated by Hong Kong Express will be reconfigured this year to remove all the business class seats. That will make room for 22 extra seats, bringing the number of seats on each aircraft to 174.
Hong Kong Express currently flies to regional destinations on the mainland, Taiwan and southeast Asia but Sun said the new low-cost carrier would fly to tourist cities. Hong Kong Airlines will ply lucrative routes, such as Taipei, Beijing and Shanghai, which have more business travellers.
The business model and management style involved in running a full service carrier compared to a budget carrier is quite different. Hong Kong Express had hired former executives from budget carriers to lead the transformation, Sun said.
Jetstar is expected to have a big impact on Hong Kong Airlines and Hong Kong Express, as it aims to operate regional routes within five hours of Hong Kong, overlapping with their services.
Low-cost carriers account for 5 per cent of the aviation market in Hong Kong but provide nearly 20 per cent of seats in Asia overall. Some critics attribute slower passenger growth at Chek Lap Kok airport to the low penetration by low-cost carriers. The average yearly growth in passenger numbers in Hong Kong was 3.7 per cent from 2008 to 2011, against 7.3 per cent in Singapore and 11 per cent in Kuala Lumpur.
Jetstar, a low-cost joint venture between Shun Tak, Qantas Airways and China Eastern Airlines, has applied for an operating licence from the Air Transport Licensing Authority (ATLA).
However, it could still face some hurdles. In 2005, Cathay Pacific Airways filed an objection with the authority to block Hong Kong Oasis Airlines' application. Cathay said Oasis, which went bust in 2008, did not have an air operator's certificate, considered a prerequisite to gaining an ATLA licence. The authority overruled the objection.
Jetstar has yet to secure an air operator's certificate from the Civil Aviation Department. The Transport Bureau said it had received an application for an ATLA licence, which would be gazetted in due course.