Hong Kong aviation

Tiny Hong Kong must not overlook the dangers of open skies agreements

Albert Cheng says Hong Kong has to mind its geographical constraints before any open skies agreement, and urges better use of the new air traffic control system and two existing runways, along with more coordination with the government

PUBLISHED : Thursday, 13 July, 2017, 5:55pm
UPDATED : Thursday, 13 July, 2017, 7:26pm

At the launch of Virgin Australia’s direct flights between Melbourne and Hong Kong, Steven Ciobo, Australia’s minister for trade, tourism and investment, urged Hong Kong to open up its skies and agree on a free trade deal. He said Hong Kong could do better in aviation if the government were more liberal about air services agreements.

China and Australia last year signed an “open skies” agreement to allow an unlimited number of flights between the two countries. Hong Kong is not a part of the deal, as it negotiates its own air traffic rights under the Basic Law. The deal paves the way for China-based carriers to cater for their rising number of frequent travellers and boost revenues further, as increasing numbers of Chinese travel overseas. So opening up the skies is a win-win for both China and Australia.

Opening up the skies without fair negotiation would expose aviation to vicious competition

Yes, a more liberal aviation policy would appear at face value to bring more opportunities and revenue, and many regions have been adopting an open skies policy. However, Hong Kong’s aviation industry is a totally different case, due to geographical constraints.

According to most open skies agreements, the two countries only agree on international flights between them, and the domestic aviation market is not open to foreign airlines. Such an agreement is fair for most countries, as their airlines can expand their outbound business while balancing out the overseas competition by protecting their own domestic aviation market.

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If Hong Kong were to conclude an open skies agreement with Australia, Australian airlines would be free to operate here, while Hong Kong would gain no equal benefit, as the ultra-tiny city does not have a domestic aviation market. As a Cathay Pacific spokesperson put it, “Traffic rights are an important asset not to be traded lightly. Hong Kong enjoys an important geographical position, and foreign carriers are naturally always interested in trying to secure added advantages.” Hong Kong is an international aviation hub and the government should handle its invaluable traffic rights with care.

Hong Kong should not rush to open up its skies, but adopt progressive liberalisation

Virgin Australia CEO John Borghetti said Hong Kong was “a geographically well-placed hub. Within five hours, you pick up half the world’s population”. That is exactly why the city should not rush to open up its skies, but adopt progressive liberalisation. The government should facilitate competition and market development, while adhering to the principles of mutual benefit, equity and reciprocity.

Supporters of the open skies policy strongly criticise Cathay Pacific, claiming that current air traffic rights arrangements heavily favour the aviation giant, which has taken allocated slots and sidelined local rivals. They argue that by gaining access to more international routes, local budget carriers like Hong Kong Airlines can grow their business. They seem to have overlooked the underlying dangers of open skies agreements.

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Opening up the skies without fair negotiation would expose aviation to vicious competition. Airlines from all around the world would flock to Hong Kong to operate here. They are all renowned and well-established corporates, some even backed financially by their governments. Hong Kong’s privately owned carriers would then be forced to cut costs by all means, with large-scale layoffs unavoidable. An open skies deal would put the entire aviation industry here at risk.

Aviation is a highly competitive sector with huge operational costs, but it has been one of the fastest-growing businesses over the past three decades. To help Hong Kong retain its position as an international aviation hub, the government should draw its focus back to improving the air traffic control system, which has come under heavy criticism over multiple technical faults since being introduced in November.

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The Civil Aviation Department should make the best use of the new system to fully utilise the capacity of the two existing runways. Last week, it announced that the Hong Kong airport has expanded its capacity by more than 7,000 extra flights a year, and aims to increase this to 18,000 within the next three years.

This is a positive sign. Even without the third runway proposal and opening up the skies, a lot more can be done within the region if the industry comes together and joins hands with the authorities.

Albert Cheng King-hon is a political commentator. [email protected]