The COVID-19 pandemic has caused unprecedented levels of damage to the commercial aviation industry. But with a new airline on the horizon in Hong Kong, is this actually the shrewdest time to enter the sector?
Amid an almost complete travel standstill in Hong Kong, a new carrier has applied for an air operator’s certificate (AOC), one of the many steps in its plan to become the city’s fifth airline.
Called Greater Bay Airlines, the firm appears to be pushing ahead with its preparations, despite the effects of the COVID-19 pandemic on the industry.
According to the South China Morning Post, the carrier’s application for an AOC was submitted last month and is being processed by the country’s aviation authority.
The new airline is thought to be exploring a low-cost operating model for flights between China, Southeast Asia, and Northeast Asia.
The paper also reported that Chinese businessman Bill Wong Cho-bau – who already runs Shenzhen-based Donghai Airlines – is behind this latest venture.
Is now a good time?
It would seem that of all the times to start an airline, now would be the worst choice. If you wanted to open gym or a hotel that would probably be true, but these businesses are different beasts altogether.
The main aspect to consider is that it takes a very long time to get all the paperwork, approvals and agreements in place to be able to launch a carrier.
Take ZIPAIR Tokyo, for example: they were founded at the end of July 2018 and it took them until June of 2020 to begin operations. Most estimates put the timescale from start to finish at around two to three years – depending on who is behind the venture and how much of a head start these connections provide.
Contrast this with the estimated recovery of the airline industry – which different estimates predict to be between 2022 and 2024 – and starting the process of setting up an airline today now begins to make sense.
The industry downturn will also allow the fledgeling carrier to have a stronger hand in negotiations with aircraft lessors, airports and ground handling contracts among other things. This indicates that they should be able to secure the best deals at the right cost.
No airline has been more vocal about this than European low-cost carrier Ryanair. Michael O’Leary, the firm’s CEO, told investors in May that there were “enormous cost opportunities” to be had in the medium term and that it was in active negotiation with “airports on stimulus measures” to improve its cost base.
“We will have lower cost fuel, lower cost labour and lower cost aircraft,” he said.
It could be concluded, then, that now is not a bad time to start setting up an airline. It would, however, almost certainly be an unfortunate time to commence operations as a new passenger carrier, as ZIPAIR Tokyo found out in June when it was forced to resort to carrying freight instead of travellers.
Whatever the answer, Greater Bay Airlines will certainly be one to watch over the next few years as it attempts to challenge the behemoth that is Cathay Pacific – on its home turf.