Hong Kong Express Airways to reposition itself as an LCC

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Hong Kong Express Airways is working towards relaunching itself as a low-cost carrier by October this year.

The airline made the decision to to follow the new strategy after it and sister carrier Hong Kong Airlines completed a two-year strategic review, says Hong Kong Express' commercial director Steve Allen.

"[The two carriers] came to a decision to embark on a twin brand strategy as a way to better position both carriers into separate segments," he says. Hong Kong Airlines will focus on the premium segment, while Hong Kong Express will target the price sensitive market such as leisure and labour traffic.

Allen says that the airline has already started moving towards a low-cost operation and expects the process to take a number of months.

"Here we are effectively unbundling an existing operation, mindful of the fact that it is an existing airline, with existing passengers and existing staff," he says. "The reengineering into an LCC operation will take a number of months, it's just underway now."

The airline aims to have a soft launch during the winter schedule with five Airbus A320 aircraft in a 174-seat, all-economy layout. The fleet is expected to grow to 11 A320s by the end of 2014, and 30 aircraft by 2018, says its general manager for marketing and communications, product and ancillary revenue Charles Johnson.

The airline has not yet identified which destinations it will fly to, but Johnson says that it will focus on destinations within a 5h flying radius, largely countries in North and Southeast Asia.

However, Johnson notes that the airline could reach destinations as far as Indonesia, Japan, Russia and Nepal with the A320s.

Hong Kong Express will also be able to leverage its existing traffic rights and slots at Hong Kong International Airport, where it already operates daily Hong Kong-Beijing, Hong Kong-Sanya, Hong Kong-Nanning and twice daily Hong Kong-Taichung services, according to its network schedule.

Hong Kong Express plans to work together with Hong Kong Airlines to manage its costs by leveraging the existing procurement arrangements and will pursue other synergies with the HNA Group.

HNA Group, the parent company of Hainan Airlines, holds a 45% stake in Hong Kong Express. It also owns Chongqing-based West Air, which repositioned itself as a low-cost carrier last year. Hainan Airlines owns around 19% of Hong Kong Airlines.

Allen notes that Hong Kong Express will place focus on building up its ancillary revenue streams and adopting best practices used by other low-cost carriers.

"We're not reinventing the wheel," says Allen. "We are learning from those who had gone before us, and [relying on] the expertise of the management team to help drive a lot of these efficiencies across the board."

He adds that the airline intends to keep the Hong Kong Express name in English, but is looking at an alternative Chinese name. This is part of its rebranding exercise which will be unveiled later.

Hong Kong Express Airways began scheduled services in September 2005. Flightglobal's Ascend Online Fleets database shows the airline now has two Airbus A320s in service.