Despite the current focus on resolving the initial hiccups, the long-term success of Hong Kong's new Chek Lap Kok (CLK) airport lies in keeping charges down.
Since its inauguration on 6 June, technical and logistical problems have caused long delays for passengers and freight forwarders.
But while these problems are likely to be resolved in the short term, a more permanent inconvenience arises from the sky-high aeronautical charges that have accompanied airlines on their move from Kai Tak to the US$20 billion CLK.
The Hong Kong Airport Authority (HKAA) claims it has raised charges by 20 per cent, but some calculations put fees closer to 40 per cent higher. According to Hong Kong-based Cathay Pacific, CLK is not only Asia's biggest, but also its most expensive hub. Cathay says its airport-related costs have doubled with the move.
The airline 'intends to make [Hong Kong] a bigger and better hub', says deputy chairman and chief executive David Turnbull, but adds that something will have to be done about charges. Turnbull 'does not believe' calculations by the HKAA to justify its downward revision of aviation charges late last year. These project that CLK's non-aviation related business will contribute 63 per cent of revenues.
Cathay's director corporate development Anthony Tyler accuses the government, which owns the HKAA, of being 'more concerned with getting a quick return on its investment'. He wants charges to be frozen at current levels.
For financially troubled airlines such as Garuda and Philippine Airlines 'these charges are going to be bad news', according to C J Wysocki, a Hong Kong-based aviation finance lawyer.
Cathay suggests that high charges could drive connecting traffic elsewhere. 'Kuala Lumpur, Singapore, Bangkok and Taipei are all after the same market,' says Tyler.
The airline's management has said it will not pass the costs on to the consumer, so higher airport charges will add to Cathay's costs.
Since the Asian economic crisis began in mid-1997, Cathay has suffered a 3-4 percentage point drop in load factors to 67 per cent and a fall in yields in excess of 2 per cent. Although still profitable, Cathay's margin dropped by 3.7 points in 1997, and Tyler predicts it will take at least two years to turn the carrier around.
Cathay continues to 'slash overheads' through 1,500 job cuts set for 1998, the disposal of its Boeing 747-200s, and a focus on the long-haul market.
Cathay is 'looking for revenue feed' from prospective alliance partners, adds Tyler. The carrier is in talks with the Star Alliance and the British Airways/American Airlines and KLM/Northwest camps. Meanwhile, a route-specific codeshare with Swissair to Zurich does not signify a strategic link, say the airlines.
Source: Airline Business
