Ordinary Gweilo

A new deal has been struck to allow more flights on what is (I believe) one of the most lucrative set of routes in the world, between Hong Kong and Sydney/Melbourne.  It is profitable in part because the only airlines currently allowed to operate these routes are Qantas and Cathy Pacific, who are both members of the OneWorld alliance.  Now Dragonair is being allowed to join the party, and Australian airlines will be able to fly on to Europe through Hong Kong.  Predictably, the parties to the negotiation are claiming this is good for everyone:   

“This will enhance competition on this popular route and the traveling public will certainly benefit from the deal,” said Wilson Fung, an economic official who led Hong Kong’s side in the negotiations. 

“This is good for Hong Kong as an aviation hub and for the traveling public,” said Dragonair Chief Executive Stanley Hui.  

Do we really care whether Hong Kong is an aviation hub?  The benefits to Hong Kong of a few extra passengers being in transit at Chek Lap Kok for an hour or two seem very marginal.  Dragonair are obviously happy to be allowed to compete with Cathay Pacific on another route, but it’s not clear what benefit this will bring to the travelling public. Instead of the Qantas and Cathay duopoly, we are back to three airlines again (as it was until Ansett went bust), but the report ominously mentions that

[the agreement] provides for “code-sharing” arrangements between airlines from the two sides.  

What do customers get out of code sharing?  The minority who travel in Business Class may get lounge access, but last time I flew on a codeshare flight (I think it was a Malaysia Airlines ticket for a flight operated by Cathay) the weasels wouldn’t give me any frequent flyer miles!

One marvellous example of code-sharing is the recently announced arrangement beween Cathay Pacific and Aeroflot.  You will soon be able to buy tickets from Cathay (undoubtedly one of the top airlines in the world) for flights operated by Aeroflot (one of the worst airlines in the world) that will also be allocated a CX flight number.  Of course most travellers will realize what they are getting, but there will inevitably be a few people who will get an unpleasant surprise when they board the plane. 

Why compete when you can carve up the market?  Alliances such as OneWorld and Star Alliance ostensibly exist so that airlines can cut costs by sharing airport lounges and getting better deals with suppliers.  Customers are supposed to benefit from common frequent flyer programs, more lounges, etc.  However, when two members of the same alliance dominate or control a popular route or airport, customers actually have less choice. 

As well as allowing for doubling in capacity to Sydney, Melbourne, Brisbane and Perth, the agreement sets up a “completely open regime” for air services between Hong Kong and all regional points in Australia, including Adelaide and Cairns.  In other words, for the cities that people most want to visit there are still restrictions, but airlines can operate as many flights as they like between Hong Kong and Cairns.  Gee, thanks.

There is no mention of Virgin Atlantic’s request to be able to operate from London to Sydney via Hong Kong, which is presumably still waiting for approval.  I can’t help feeling that this would be much more likely to introduce some real competition (though probably still only to a limited extent).  If Hong Kong really wants to be a leading aviation hub, what is stopping the government from approving this route?  As always, although governments talk about wanting to be more liberal they still worry unduly about the commercial interests of the national carriers.  So in this case there has to be something in it for Cathay or Dragonair, even though they are both independent of the HKSAR government.  No-one really cares about what would benefit the consumer!