Jeanette Mao, CEO, Hong Kong Express Airways, tells Graham Newton that regional challenges won’t stop the airline’s ambitious plans.
Can you tell us about your growth plans for HK Express?
After a long pandemic, our borders opened in early 2023. We then went from 10% of our pre-COVID traffic levels to 100% in just seven months. That set the stage for future growth.
In April 2024, we were at 140% of our pre-COVID traffic and we’ll reach 170% by the end of the year. Obviously, we need to add to the fleet to achieve that. HK Express is taking delivery of a new aircraft every 40 days. We have 36 aircraft in the fleet as of April 2024, including five new A321neos. The fleet will be 40-strong by the end of the year.
This means our network is expanding from 23 to 30 destinations in 2024. And at that point the third runway at Hong Kong International Airport (HKIA) will be fully operational. Taken together, it gives us a unique opportunity to grow.
Why is your on-time performance so important to you?
The on-time performance makes us really proud. We are top of the rankings in Asia and third in the world among low-cost carriers (LCC). On-time performance is paramount for a LCC because we need to maximize utilization and minimize delays.
And this is not only about our efficiency—we know every minute counts for our customers too. So, this is a key differentiator for us and an important reason why our customers choose us.
Of course, it takes a relentless effort behind the scenes, but a reliable, punctual seamless operation is an important key performance indicator (KPI) for a LCC. We believe it is one of our main competitive advantages.
Why is now the right time to expand and what are the opportunities in the Mainland China market?
As mentioned, we have completed our recovery, there is a third runway and there are plenty of other developments in the Greater Bay Area (GBA), such as the Hong Kong-Zhuhai-Macao bridge, which are bringing people into HKIA. We see this as a golden period for growth and, as the only LCC based out of HKIA, we must exploit that opportunity.
The GBA is an extended market for us with a population of 86 million. And we are witnessing significant growth with about 150,000 passengers coming from GBA to travel with us every month. That’s 1 in 4 of our passengers.
At the same time, there is huge demand for air travel generally and Asia will drive that growth in the years ahead. The demographics are changing, disposable income is increasing, and LCCs are increasing their share of their market. So, HK Express is well placed.
In Mainland China, some 340 million people have taken a flight at some point. But that means more than 1 billion people haven’t! The percentage of people who have flown is therefore much lower than the global average. Mainland China is a huge market with enormous potential, especially for a LCC that is focused on competitive fares as we are.
We’re also seeing an easing of visa requirements between Mainland China and Southeast Asian countries. That will further stimulate the market.
A final element to this is the need for a more balanced network. Right now, 70% of our flights are to North Asia, 25% to Southeast Asia, and just 5% to Mainland China. We have recently announced Beijing Daxing and Sanya as Mainland China destinations, with the addition of Bangkok Don Mueang in Thailand, so we are trying to find a better balance.
Are you confident that you can attract enough staff, including pilots, to fuel your growth?
We only have a population of 7 million in Hong Kong, so China is not just a promising consumer market but also a good market for us for staff. About 10% of our crew are from Mainland China.
We need to recruit about 500 crew and pilots this year but by end April 2024 we had already hired about 160, so we are on track. And we are not just recruiting from Hong Kong or China. We search for talent wherever it may be.
Moreover, HK Express is an attractive proposition. It has a bright future with a young, diverse team. There are 45 nationalities among our 1,400 employees.
This ability to overcome the manpower shortage is another competitive advantage for us.
Can you tell us about your experience as a female airline CEO and your recommendations for improving diversity in the industry?
At HK Express, our overall team composition is about 50-50 but, of course, we want that across every department at every level.
Female airline CEOs are still a minority, but at the last IATA AGM I was pleased to meet several other female CEOs. We had interesting discussions on how to improve female numbers in senior management.
Several studies have shown that diversity improves your bottom line. It is a smart business decision. But we do need more flexible working policies. Most women would appreciate a better understanding of their needs and an appropriate balance between their personal and professional life.
We also need more role models so that young women can aspire to similar positions in their organizations. There must be more good news stories about women in business and more mentors. I have joined a mentorship program at a local university to help.
What is the secret to keeping costs low and where are the opportunities for cost savings in future?
As a LCC, we fully recognize that effective cost management and having a competitive cost base is of paramount importance. So, one of our six strategic pillars is a relentless cost and lean focus. Not cost reduction, but an increase in cost efficiency.
The key to increasing cost efficiency at HK Express lies in our adherence to three principals: simplicity, efficiency, and agility.
Simplicity is the key for a LCC. Focus on the direct sales channel, have minimal fleet types, a single cabin, and so forth. This naturally leads to cost efficiency, but you must examine all other aspects of the business too, such as increasing aircraft utilization and productivity. And agility is about being quick in the market and responding appropriately.
Cost consciousness is part of our culture. It starts with me and goes throughout the organization. We are all held accountable for costs and have clear KPIs at every level.
Finally, you will never know how good you are unless you look out. Benchmarking regularly is really important to understand where you might have gaps. Always look out for best practice.
What technologies excite you and what would like to see implemented as soon as possible?
I think my excitement extends beyond a single technology. Rather, I am excited by the culture of innovation. We leverage artificial intelligence and data to enhance operational efficiency, deepen our insights into customer behavior and preferences, and improve the customer experience.
Technology must serve a business purpose. It must help us overcome the business pain points.
In general, do governments understand aviation?
We are lucky that the Hong Kong Government is committed to strengthening Hong Kong as a leading international aviation hub. It is a priority for them, and aviation is also emphasized in the central government’s 14th Five-Year Plan.
But we operate throughout Asia and need the other end of journey to support what we are doing if the aviation ecosystem is to develop fully and be efficient.
Governments need to understand the industry’s challenges and look at its evolution, such as increasing the use of self-service options and other digital transformations to tackle manpower shortage issues.
It is also observed that there has been a notable rise in customer acceptance and willingness to engage with these self-service technologies post-pandemic. I think active engagement between governments and the industry is important as this promotes understanding and cooperation.
How important is sustainability and what efforts are you making in this regard?
A LCC is sustainable by design. We maximize operational efficiency and minimize waste.
HK Express is committed to a sustainability future through continuous improvements in fleet modernization, greener operations, waste management, and customer engagement.
The most important element for us is our new aircraft, which offer up to 20% improvement per seat in fuel efficiency. But we have many other initiatives too, such as introducing carbon reduction initiatives into pilot operation procedures, eliminating single use plastics, and recycling materials inflight and at the office. We also encourage customers to pre-order food to eliminate as much food waste as possible. And we have run an offset scheme for customers since October 2023 that has offset 1,570 tons of CO2 so far.
As for sustainable aviation fuels (SAF), the Cathay Group has a target of making SAF 10% of total fuel consumption by 2030. HK Express is still exploring its opportunities. SAF supply is limited, so the price is high. And as mentioned, we are very cautious about cost. SAF is only about 0.2% of total global fuel, so we need more supply and more choices to bring the price down.
Again, it requires collaboration between governments, industry, and regulators on a global scale to make this happen.
What other regional challenges would you highlight?
The first is the normalization of passenger yields. We have handled the pent-up demand following the pandemic and yields are on a downward trend. But I wouldn’t describe it as a reduction, more a normalization.
However, costs are rising. We see operating costs going up. Inflation, fuel, staff wages, and supply chain issues are all pushing up cost.
Then there is the geopolitical situation. Airline performance is clearly linked to geopolitical and economic uncertainty, and there are a lot of unknowns at this moment in time.
But I am sure we have the right business models to respond. Cathay acquired HK Express in 2019 as part of its dual-branding strategy to serve the full spectrum of travel needs. Cathay Pacific remains a premium, full-service carrier and we serve the more fare conscious market. That gives us a strong platform and a strong brand identity.
We will continue to navigate the complex aviation landscape with a focus on a safe, sustainable, and efficient service.
Credit | HK Express
