Daily frequency is the key issue facing Australia's Ansett International on the hotly competitive route between Sydney and Hong Kong, says the airline's general manager international, Craig Wallace. With five B747-300 flights a week, the carrier needs the flexibility of daily schedules to compete against the tough opposition - Qantas and Cathay Pacific - and attract its fair share of higher yield business traffic, adds Wallace.
The carrier may have to wait some time. There is no spare capacity left under the Australia-Hong Kong bilateral and talks on extending the agreement are on hold following a spat last year over Qantas' beyond rights through Hong Kong.
Ansett launched to Hong Kong in September 1994 with three services a week, which were increased to five last year. Before that the carrier's experience of international routes was limited to Bali in Indonesia, almost totally leisure orientated. Hong Kong and Kansai, Japan were its first two major regional routes, carefully chosen because research clearly showed they offered commercial viability for an Australian international startup.
In its first 10 months of operations, between September 1994 and June 1995, Ansett carried 83,532 passengers to and from Hong Kong. Qantas carried almost 218,000 and Cathay over 194,300, giving the newcomer a 17.6 per cent share of the market. During the first six months of 1995/96, ending 31 December, Ansett carried 61,066 passengers to and from Hong Kong. But load factors were averaging 54.9 per cent, well below those of its rivals.
Meanwhile Cathay operates daily B747-400 services (2,786 seats weekly) and Qantas offers double daily flights, one using B747s non-stop and the other a connecting flight through Brisbane with a B767 flight to Hong Kong (approximately 4,270 weekly seats).
Ansett has, however, put a lot of effort into establishing a permanent presence, going to great pains to attract ethnic or Chinese traffic and outdo the opposition. Realising it could not compete with Qantas and Cathay schedules, Ansett offered more space in first and business class and took innovative measures to offer the highest levels of service.
These included hiring chefs and training them as flight attendants, as well as recruiting Chinese-speaking cabin crew in Hong Kong. The airline ran a course for crew to ensure they understood the cultural differences in the Chinese market.
Ansett also overcame potential brand recognition problems by developing extensive relationships with the Hong Kong travel agency community, conducting a lot of Chinese language marketing and hiring a Chinese public relations firm and a locally based advertising group. The carrier has successfully penentrated the so-called 'astronaut' traffic segment <\#208> the large numbers of Hong Kong Chinese with family connections in Sydney's Chinese community. They work in Hong Kong but travel to Australia as often as six times a year to visit relatives.
Frustratingly, Hong Kong provides plenty of opportunity for growth, says Wallace. Unlike Japan, sustained almost entirely by Japanese package tourists, Sydney-Hong Kong has substantial outbound traffic at both ends and a good mix of business, leisure and VFR passengers.
Ansett has extended its reach beyond Hong Kong through a marketing agreement with Virgin Atlantic on its services from Europe, a connection which provides some feeder traffic both ways but remains a small contributor to total traffic. Cathay Pacific is also a member of Ansett's Frequent Flyer scheme. 'It is still a developing route from our point of view,' says Wallace.
As the two major operators on the route, Qantas and Cathay tend to set ticket pricing. Ansett is not interested in discount wars, although it uses 'spot specials' to stimulate traffic in slow periods, preferring to build a reputation as a quality airline rather than as a low cost airline.
The lack of daily services has made the route a particular challenge, adds Wallace. At present, however, Ansett has little choice but to await developments on the bilateral front in the hope of adding the two extra frequenies as soon as possible. Until then the carrier will continue to be restrained in competitive terms and is unlikely to see its market share grow significantly.
Tom Ballantyne
Tom Ballantyne
Source: Airline Business
