Middle East to Hong Kong: 10% capacity growth in March; Cathay Pacific reduces capacity

Memmorandum of Understanding was signed by Joel Morgan, Seychelles Minister of Home Affairs, Environment, Transport and Energy; and James Hogan, Etihad Airways’ CEO

Just over a year ago, a MoU was signed by Joel Morgan, Seychelles Minister of Home Affairs, Environment, Transport and Energy; and James Hogan, Etihad Airways’ CEO. This game changing partnership now sees Air Seychelles prepare for the launch of services from Abu Dhabi to Hong Kong, one of Etihad’s unserved markets, in which the two carriers will codeshare beginning 24 March.

Gateway to financial China, Hong Kong has greatly benefited from the strong growth of trade and financial flows in the face of shifting of economic and political powers towards Asia. According to China Daily’s estimates, the Middle East area achieved growth of around 4% in 2012, providing many lucrative opportunities for companies based in Hong Kong, notably so for the financial and construction sectors. In fact, in the first six months of last year, Hong Kong exports to the UAE and Saudi Arabia grew respectively by 22.7% and 27.5% compared to the same period in 2011. While goods such as pearls, telecom items and computers flow westwards, Hong Kong has become increasingly attractive for Middle Eastern banks, with entities such the National Bank of Abu Dhabi establishing their Asian headquarters there. Excellent international and regional flight connections to Mainland China and the rest of Asia have been cited among the city’s crucial assets.

Middle East to Hong Kong capacity quadruples in a decade

2004-13 Middle East to Hong Kong market March seat capacity

Source: Innovata weekly average for March 2004 – 2013.

Examination of average weekly capacity data for March in the last decade shows fairly stable growth in terms of airline offering between the Middle East and Hong Kong. Around 4,000 weekly seats or 13 weekly frequencies, were offered in the market in 2004 by Cathay Pacific (Bahrain – 3 weekly frequencies, Dubai – 4, Riyadh – 2), Emirates (Dubai – 2) and El Al (Tel Aviv – 2). Over the next decade, capacity was growing at double-digit rates in all years except for in 2006 and 2009, owing respectively to the avian influenza outbreak and financial crunch. Even in the weak years however, the serving airlines increased seat capacity (3.4% in 2006 and 6.4% in 2009).

Cathay Pacific has 38% of the market; Emirates a close #2

In March 2013, more than 17,000 weekly seats are being sold by airlines in the market from the Middle East to Hong Kong, 10.3% more than in the same period last year. Cathay Pacific, Hong Kong’s based network carrier, offers by large the widest selection of routes, as it operates to four destinations. However, while it still commands 37.8% of the supply, the airline was the only operator in the market to reduce capacity (-12.2% vs. March 2011). Emirates Airline in turn increased the number of seats offered on the route to its Dubai hub by a third, and now has 57.8% of capacity between the two cities, and a 34.6% share in the market overall.

Chart: Middle East - Hong Kong Weekly one-way seat capacity

Source: Innovata weekly average for March 2013. *Air Seychelles: launches 24 March 2013.

Of the total of six Middle Eastern destinations available directly from Hong Kong, two are not served by Cathay Pacific in March 2012. Qatar Airways offers twice-daily frequencies to its Doha hub, up 27.3% on the same period in 2011. The A330-200-operated service was initially launched in April 2004 with daily flights. With less than half of the Doha weekly capacity is Tel Aviv, and it is the second of the Middle East markets in which Cathay Pacific is not present. In the course of last year, El Al introduced a fifth weekly flight on the route to Hong Kong, which it operates with 777-200s, bringing capacity offered up by a quarter.

Etihad stays away from Hong Kong; Saudia pulls out

While the economic links between Hong Kong and the Middle East are growing stronger, they might not produce quite enough demand to appeal to Etihad. The Abu Dhabi based carrier is the only MEB3 airline not to offer a link to Hong Kong from its hub. However, late March will see Air Seychelles (in which Etihad is a stakeholder) launch thrice-weekly flights on the route from Abu Dhabi to Hong Kong. Cathay Pacific, which has offered a similar service since June 2011, will have halved frequency in March 2013 compared to the previous year. Riyadh, another destination to see a capacity decrease from Cathay Pacific this March, was previously served by Saudia between April 2007 and March 2011 with twice-weekly departures.


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