Hong Kong airline Dragonair is to add 26 aircraft to its fleet by 2005 in an expansion connected to air services negotiations between Hong Kong and Beijing.
The first step will be an order for one Airbus A330-300 widebody, with two options, and five Airbus A320 family narrowbodies, due to be officially announced at the Asian Aerospace show in Singapore from 22-27 February. The carrier is also understood to be in talks with International Lease Finance (ILFC) and other lessors on more aircraft acquisitions.
The carrier operates an all-Airbus fleet of five A330-300s, five A320-200s and two A321-200s. A sixth A320-200 is due for delivery in late June and a seventh is leased to TransAsia Airways in Taiwan. In early January, Dragonair leased a third, ex-Monarch Airlines A321 from ILFC, for delivery in May.
The five new narrowbody orders are expected to be conversions of options Dragonair holds from its last A320 family order. Senior industry sources say the aircraft are to be delivered between 2002 and 2004, while the first of the A330s will arrive in 2001.
If the A330 options are converted, aircraft will be delivered in 2002/3. The A330s will be powered by Rolls-Royce Trent 700s. The narrowbodies will have International Aero Engines V2500s.
One source says Dragonair's expansion plan consists of 17 narrowbodies and nine widebodies of types it already operates.
The increase is believed to be connected with a relaxation of the bilateral air services memorandum between the Hong Kong Special Administrative Region and mainland China. Up to now, these have ensured that Chinese airlines operate two-thirds of the capacity on routes into the region, although talks are under way to change this in Hong Kong's favour.
According to Peter Negline, a Hong Kong-based equity researcher with Salomon Smith Barney: "Dragonair could only justify this fleet expansion if it has a new bilateral. The order would seem to indicate this will happen."
One source close to the airline says the bilateral issue should be resolved in the next two weeks, probably in Hong Kong's favour.
Hong Kong is also expected to drop its long-standing "one airline, one route" policy, opening the prospect of competition between Dragonair and Cathay Pacific.
Source: Flight International