Hong Kong aviation

Hong Kong risks missing out on golden age of Chinese travel, as Australia calls for ‘open skies’ deal

Minister for trade presses local officials on same day Virgin Australia unveils plan to take on heavyweights Cathay Pacific and Qantas

PUBLISHED : Thursday, 06 July, 2017, 8:00pm
UPDATED : Thursday, 06 July, 2017, 11:23pm

Australia is urging Hong Kong to open up its skies and agree a free trade deal on aviation as experts warn the city risks being left at a “disadvantage” in a golden age of outbound Chinese travel.

Beijing and Canberra last year negotiated an “open skies” deal to allow an unlimited number of flights between the two countries, but Hong Kong was not included as it negotiates its own air traffic rights under the Basic Law, the city’s mini-constitution.

On Thursday, Steven Ciobo, Australia’s minister for trade, tourism and investment, pressed Hong Kong authorities to secure a “more liberalised” air traffic deal, claiming an agreement could be reached within current free trade negotiations.

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“Hong Kong has a tremendous amount going for it, but one area I think Hong Kong could do better in, to be honest, is in air services agreements,” he said.

Ciobo was in town to support the launch of Virgin Australia’s direct flights between Melbourne and Hong Kong.

Under the current arrangement, air traffic rights heavily favour Cathay Pacific Airways, which has taken all the available locally allocated slots and effectively sidelines competitor Hong Kong Airlines from operating to Australia’s major cities. Hong Kong Airlines’ predicament illustrates its ongoing struggle to compete on an equal footing.

Cathay Pacific said it supported the government’s policy of progressive liberalisation.

“Traffic rights are an important asset not to be traded lightly,” an airline spokesman said. “Hong Kong enjoys an important geographical position, and foreign carriers are naturally always interested in trying to secure added advantages.”

Finding a way around existing rules, Hong Kong Airlines and Virgin Australia joined forces to serve the city and Australia. Last year, Hong Kong Airlines’ parent company, HNA, acquired a major stake in Virgin Australia.

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The two are arch-rivals of Cathay Pacific and Qantas, Australia’s national airline. On Thursday, Virgin Australia Group unveiled a plan to take on the two prestigious carriers in Hong Kong.

Its CEO John Borghetti said Sydney, Brisbane, and another unnamed city – possibly Perth or Adelaide – were being considered for new Hong Kong flights.

Our first stepping stone is clearly Hong Kong. Why? It’s such a geographically well-placed hub
John Borghetti, Virgin Australia Group

“The first priority is Melbourne, the second priority is Sydney or Brisbane, but knowing how cheeky we could be, we could go to a third city first,” he added. “The timing will dictate the city we will use, but our intention is to have widespread coverage across Australia.”

Hong Kong is seen as a natural gateway given the rising number of outbound Chinese travellers, Borghetti said.

“So our first stepping stone is clearly Hong Kong. Why? It’s such a geographically well-placed hub. Within five hours, you pick up half of the world’s population.”

Last year, 1.2 million Chinese tourists visited Australia. That figure is twice the number who came five years ago, and within 10 years, the total is expected to hit four million, according to Australian authorities.

In recent years, Hong Kong International Airport has been operating at nearly full capacity, making it difficult to add new flights. Borghetti said he was optimistic Virgin Australia would gain greater access into Hong Kong.

Ellis Taylor, of the aviation publication Flight Global, said “serious reform” of the city’s air traffic agreements was needed.

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“Given that Australia now has open skies with China, the present arrangement puts Hong Kong at a disadvantage, especially with the huge growth in passengers between China through to Australia,” he said.

David Flynn, of Australian Business Traveller, said it made sense to reform air traffic rights in light of Virgin Australia’s ambitions to quadruple its number of flights.

“I think this is one area where airlines and their passengers would be in complete accord, simply because a growing market needs room to grow.”