(Bloomberg) -- HK Express, the low cost arm of Cathay Pacific Airways Ltd., says it’s willing to sacrifice profitability as it expands to capitalize on the enlarged Hong Kong International Airport.
HK Express Chief Executive Officer Jeanette Mao vowed to make more investment in planes and routes during a press conference Monday to mark the carrier’s 11th anniversary. This year will see 10 new routes launched for HK Express, the most in its history.
“If you ask me whether we’re eyeing profitable growth, I will say this year, and in the upcoming one or two years, we’re in the stage of investment for growth,” Mao said. “With the third runway, we expect regional short-haul capacity will continue to grow.”
HK Express’s 10th new destination this year is Shizuoka in central Japan. That takes the number of destinations in Japan alone to 11 across 300 flights a week, making it HK Express’s single-largest market.
Short-term demand is giving “us great confidence in the market outlook,” Mao said. Japan is popular with the weak yen while there’s been a strong pick up in bookings originating from neighboring mainland Chinese cities Shenzhen and Guangzhou, she said.
The budget airline, which runs an all-Airbus SE fleet, has also taken delivery of more jets, enabling it to add capacity. It expects to finish the year with a fleet of 40 after taking delivery of two new planes in November. A further five will be delivered in 2025, and another 17 between 2026 and 2029.
As such, HK Express, which last year generated a post-tax profit of HK$433 million ($55.7 million) on almost HK$5.5 billion in revenue, is on track to finish the year operating at 180% of pre-pandemic levels — or over 800 flights per week, better than what it forecast in February.
Although like many other airlines HK Express has been hampered by the Pratt & Whitney engine issues that have grounded hundreds of planes worldwide, the first of its 10 such affected jets has re-entered service, while five are currently grounded. If it wasn’t for the grounding of those five jets, capacity could have been at 200% of pre-Covid levels by year-end, Mao said.
In the first half of this year, HK Express slumped to a HK$73 million loss, 122% down on the same period of 2023, owing to the grounding of some jets with Pratt & Whitney engines.
HK Express also expects to extract an extra 10-15% more flights out of its existing aircraft with the additional runway capacity by re-timing some services. Hong Kong International Airport’s third runway should be fully operational in 2025.
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