Cathay Pacific is the oldest player in the Hong Kong aviation industry. The airline was founded in 1946 and had relatively little competition until recently. In 2003 Hong Kong Airlines became Hong Kong’s third certified airline. Fast forward 15 years and a new threat has just emerged. Yesterday a high-speed railway opened, linking Hong Kong with the rest of China’s existing network. All this is causing the Cathay Pacific market share to become smaller.
High-Speed Rail – A New Threat?
The launch of the new high-speed connection to mainland China didn’t go unnoticed. In fact, thousands queued to use the service on its first day of operation. At a cost of $10bn, the new railway link extends 16 miles to connect to China’s high-speed network at Guangzhou. The opening of this new link will be of particular concern to Cathay Pacific, who now have direct competition on 11 of their domestic routes. In addition to offering direct journeys to much of mainland China, the train departs right from the city centre. It takes 24 minutes just to reach the Airport by train. This is following the relocation of the airport from a location in the city centre in 1998.Cathay Pacific recently took delivery of their first A350 aircraft. Photo: Airbus
Long Haul Competition
While Cathay Pacific has for a long time fought off competition in the long-haul sector, the expansion of Hong Kong Airlines is becoming a significant threat. In late 2017, Hong Kong Airlines decided to show Cathay Pacific that they were a threat. Hong Kong to Los Angeles is one of Cathay Pacific’s flagship routes. The airline operates 3 flights a day on the route representing over 800 seats. Each is served by a Cathay Pacific B777 aircraft. Additionally there is one American flight, however, this isn’t much of a worry for the Hong Kong carrier. Traditionally passengers will book to travel with the carrier in their home country, not their destination country. However, what does worry Cathay Pacific is the daily flight operated by Hong Kong Airlines. Operated by an A350, the flight is direct competition, targeting the same market share as Cathay Pacific.
The story doesn’t stop there. In addition to competition from United and Hong Kong airlines to San Francisco, Cathay Pacific also has to deal with a fifth freedom flight. Singapore Airlines operates a flight from Hong Kong to San Francisco. As a fifth freedom flight, this comes up significantly cheaper than the other operators in most searches, making it the obvious choice for travellers looking for the cheapest fare.
Is Change Needed?
Cathay Pacific is used to being relatively unchallenged. The arrival of the high-speed rail link, in addition to the expected expansion of Hong Kong Airlines, will mean that the carrier has a lot more competition. It is unlikely that the airline will change overnight, but it could be necessary for change to adapt to the new market conditions. The airline will have to come to terms with increased competition and less market share, however, it will likely manage this exceptionally well.
What do you make of the change in the Hong Kong travel market? Let us know below!