HK Express increases focus on interlines, to implement partnership with Virgin Australia

21 March, 2018

HK Express is working to implement an interline agreement with Virgin Australia as part of a new strategy by the Hong Kong based LCC to focus on high yielding interline traffic.

  • HK Express expects to soon roll out an interline with Virgin Australia and with Delta Air Lines;
  • Delta and Virgin Australia are its first two external interline partners;
  • HK Express began interlining with full service sister airlines and Virgin Australia codeshare partner Hong Kong Airlines in 2017;
  • HK Express was part of the strategic alliance along with Virgin Australia and Hong Kong Airlines that was forged in early 2017.

Virgin Australia forged an alliance in Feb-2017 with Hong Kong Airlines and HK Express ahead of Virgin's launch of services to Hong Kong. Hong Kong Airlines and its sister LCC, HK Express, are both part of China's HNA, which acquired a 13% stake in Virgin Australia in 2016.

Virgin Australia launched services from Melbourne to Brisbane in Jul-2017. Codeshare and interline sales with Hong Kong Airlines began in late Jun-2017. The codeshare covers Australia-Hong Kong services, domestic Australia services and Australia-New Zealand services, while the interline covers Hong Kong-mainland China services.

The alliance agreement included an interline with Hong Kong Express but has not yet been implemented. HK Express commercial director Jonathan Hutt told CAPA TV on 01-Mar-2018, that HK Express will soon roll out interlines with Delta Air Lines and Virgin Australia. Interlines is a new capability for HK Express, which initially followed a pure LCC model that typically does not include pursuing any interlines.

HK Express began interlining with Hong Kong Airlines in 2017. The interline, which initially only included HK Express' Hong Kong-Phuket route, with a focus on connections to Hong Kong Airlines flights from mainland China, was highly successful. It was recently extended to include three HK Express destinations in Vietnam - Da Nang, Nha Trang and Ho Chi Minh. "In a very short period of time, we've seen some very concrete and promising results," Mr Hutt said.

Focusing more on interlines both with Hong Kong Airlines and airlines outside the HNA Group - starting with Delta and Virgin Australia - is sensible as passengers connecting from full service airlines typically generate a much higher yield than a local passenger.

"I think originally, interline was something we weren't really focused on, but when we did actually start to really make it one of our core targets for 2017 and 2018, we saw some very, very strong revenue growth and revenue quality was much, much stronger," Mr Hutt said. "We have literally seen with the expansion of the interline with Hong Kong Airlines the volume hit close to USD200,000 additional revenue per month per route from that. Indeed, though it's quite small, this is happening within a very short period of time."

HK Express recently forged a partnership with Iceland-based flight comparison site Dohop, which will enable it to pursue more interlines without having to invest in the traditional technology. Mr Hutt said the Dohop platform is particularly attractive as it enables HK Express to work more closely with passengers and sell ancillaries as well as provide disruption notifications when needed. A more traditional GDS driven interline does not offer this and also can be expensive.

Once it starts working with Virgin Australia, HK Express will be able to offer passengers arriving on the Melbourne-Hong Kong service connections to eight destinations in Japan along with Taipei in Taiwan and Seoul in South Korea. For passengers connecting to mainland China, the focus will be on using Hong Kong Airlines as Hong Kong Airlines has 14 destinations in mainland China compared to only two for HK Express. HK Express also has six destinations in Southeast Asia but this is not relevant for Australia passengers.