Thu, Jul 18, 2002 page11

• Dragonair eyes higher revenues from flight deal

  Dragon Airlines Ltd, the only other Hong Kong airline besides Cathay Pacific Airways Ltd to service the passenger route to Taiwan, won big in the recent renegotiations of the air service agreement. Stanley Hui, Dragonair's CEO, spoke with `Taipei Times' staff reporter Richard Dobson about the company's future

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  Taipei Times: How will the launch of the flights between Taipei and Hong Kong impact Dragon Airlines' (港龍航空) revenue?

  Stanley Hui (許漢忠): Very positively. The additional flights at the end of the day will amount to 42 passenger flights and another five more cargo flights per week in the coming two years. For the time being revenue from the Taiwan area contributes about 26-27 percent to the company's total. The Taipei operation plus the freight could very well double what we now have from Taiwan. It's very significant.

  TT: What did you think about the way in which the negotiations of the air services agreement were dragged out over political disputes as opposed to the comparatively smooth signing of the original deal between the carriers in 1996?

  

  Stanley Hui, CEO of Dragonair, says the new Taiwan-Hong Kong flight accord is very significant for his company.

  PHOTO COURTESY OF DRAGONAIR

  Hui: The negotiation model was determined by the authorities on the two sides of the Strait and we just have to follow that. One thing we have to recognize and accept at the end of the day is that traffic rights are controlled by the government. Taiwan didn't want to go along because they wanted to use the same old model with the four airlines doing the renegotiating but eventually they adjusted their position. I think there was less political consideration in the end and that helped put the deal together. I just wish that the agreement had been concluded a year earlier.

  TT: With such low flight frequencies compared with the other major carriers on the route, Dragonair will have a tough time competing. How will your unique position of being the only airline among the cross-strait carriers permitted to fly from Hong Kong into China help?

  Hui: We will compete mainly on our connectivity to China that we have through Hong Kong and our reputation for service and not so much on pricing. Frankly, pricing may in some ways reflect your competitive position but it's not the only consideration for everyone. The Taiwan-mainland China market is very important to us, but obviously there is only so much we can do with only three flights per day from Taipei. For the time being it's only on the flight from Hong Kong to Shanghai where passengers can stay onboard the plane for the short stopover that we can really provide more convenience to passengers.

  We see pent-up demand on the route for services from Taipei to Hong Kong, and we also believe Dragonair's mainland connectivity will give us a real competitive edge in the marketplace for those passengers who transit Hong Kong and travel onward to cities in mainland China. Given the volume to Shanghai, that will remain the focus and, maybe eventually also Beijing.

  TT: So cutting prices won't be a main part of your competitive plan?

  Hui: We are positioning ourselves in accordance with our competitive position in the market. We should be pricing ourselves at about the same level as the other leading carriers but I think between Taipei and Hong Kong, given our inferior frequencies, we could well be pricing lower than the dominant carriers.

  TT: While Hong Kong and Taiwan-based airlines dominate cross-strait travel, how do you see Dragonair's position changing if and when direct air links are opened between China and Taiwan?

  Hui: The market will be a lot bigger for everyone so there could well be a short-term dip but overall there will be a much bigger market when that happens and we will continue to play a very important role in that relationship.

  TT: According to a report in the `South China Morning Post' on Wednesday, Dragonair will spend up to US$150 million to buy three to five regional jets to expand its network within China to include smaller destinations. Is this the case?

  Hui: Dragonair has for some time been studying the viability of operating small jets to mainland destinations. The study is ongoing and therefore no decision on deploying such aircraft has been made. Dragonair has always operated services on the basis of market demand and this continues to be the case.
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