00:00Let's talk about what you're doing at the airline because you're busy there as well.
00:03You've expanded rapidly, you're looking for new destinations.
00:06I'm wondering what the priorities look like for the rest of 2025.
00:10Where are you looking to keep the growth going?
00:12Yeah, yeah, great. I mean, in 2024, we are the world's fastest growing airline,
00:18achieving 46% impressive growth in terms of flight.
00:22And in 2025, our expansion will be prioritized in Southeast Asia and China mainland.
00:27Yeah, so these two regions, we have seen massive growth opportunity.
00:31For example, in Southeast Asia, three times the population of Northeast Asia excluding China.
00:37And China definitely is one of the largest population destinations.
00:40And not only the outbound market, we also see a strong inbound demand into these two regions.
00:47So for HK Express, last year we launched nine new destinations.
00:50This year, in just six months alone, we launched nine new destinations.
00:54And later this month, we will have three new destinations coming.
00:59So, and these including some promising destinations in China, in mainland China, as well as in Southeast Asia.
01:06For example, in April, we launched Nhajong, our fourth destination in Vietnam.
01:10And we doubled our capacity in Vietnam.
01:13And demand from Vietnam actually outpaced the capacity growth.
01:16So, isn't it...
01:17OK, let's talk about the capacity growth.
01:19You're putting a lot of aircraft to work very, very quickly.
01:21There's no kind of indigestion, there's no problem with the market absorbing all that capacity that you're putting in quite so quickly.
01:27Yes, so last year, I think Japan definitely is the start destination.
01:33But this year, we see actually Vietnam, South Korea are the emerging leisure market for the region.
01:40So, as I mentioned, Vietnam, we doubled the capacity, but the passenger demand outgrow the capacity growth.
01:46And in Korea, we also have more than 60% growth capacity, but with our low factor consistently exceeding 90%.
01:54So I think these are the emerging leisure destinations for HK Express.
01:58OK, so talk to me, therefore, about what I'm learning about consumer demand.
02:01But it sounds strong.
02:02Is that your read as well at the moment?
02:04And can you give me a bit of a sort of more nuanced sector or country by country kind of view of what is happening?
02:11Where is the consumer strong?
02:12Where is the consumer struggling?
02:13What is happening?
02:14Sure, I think the demand still holds on.
02:17But I would say the competition also has been very intensified in the last 12 months.
02:22Taking Hong Kong as example, last year, between Hong Kong and the regional destination, the capacity surged by almost 40%, adding 7.6 million seats into the market.
02:34That's more than the entire population of Hong Kong, right?
02:37So many of the carriers, including us, HK Express, we are building the capacity, capturing the opportunity of Hong Kong, the third runway system.
02:46But also this aggressive supply growth also put pressure on the air yield.
02:51So some area definitely, as I mentioned, showed a strong growth.
02:55But airfare, the yield is still very, the pressure is very big and showing the accelerating of the airfare normalization.
03:02Are you able to keep, what is happening with the fuel price?
03:04What do you do with hedging?
03:05Are you able to take advantage of some of the fuel price drop that we're seeing at the moment?
03:09Does lower fuel prices mean lower fares?
03:12And does that drive demand with those lower fares?
03:15Yeah, definitely.
03:15I think we have seen the jet fuel price trending downwards recently.
03:20And fuel is one of the largest cost items for airline.
03:24And we are benefiting because it's reduced our operating cost.
03:28But also, as you mentioned, because lower fuel costs, lower fuel surcharge, that means lower ticket price.
03:34And it will stimulate some demand for those price-sensitive passengers.
03:38But I think for the airline, the overall cost is also influenced by inflation, supply chain, rising labor costs.
03:43So fuel is just one component of this.
03:47So there are still lots of the economy uncertainty that will impact the airline cost.
03:52One of the questions that I talk about all the time is what is happening with the Chinese consumer.
03:57The government wants to stimulate the Chinese consumer.
04:00Everybody wants to see the Chinese consumer back and strong.
04:03Do you get a sense that that is the case right now?
04:06Just give me a temperature check on what is happening with the Chinese consumer.
04:09Yeah.
04:09I think China remains the most promising and exciting growth for the aviation market.
04:16I'll give you one example.
04:17I just back from an inaugural flight of Yiwu, our fifth destination in China.
04:23Yiwu is a world-known trading center.
04:25And, you know, on the street, I saw so many people from India, Middle East, Southeast Asia, going there to trading, to purchasing the goods and bring back to their country.
04:37These third-tier cities are actually a very emerging market.
04:41There are no international flights there.
04:44So we are the first carrier.
04:45So that's a business demand.
04:46Business demand, yeah.
04:47That's not a consumer demand.
04:48So you're seeing business demand quite strong as well.
04:50Yeah, yeah.
04:51And that's picking up.
04:52Is the dynamic changing as maybe actually tariffs start to have an impact and you're seeing maybe patterns of trade changing?
04:59Are you seeing that being reflected in the network?
05:01I think a tariff definitely brings some risk and uncertainty for the airline industry.
05:06But I think so far, I see China consumer outbound is still strong.
05:11The young demographics still looking for new destinations in Southeast Asia to explore.
05:17For example, our Greater Bay Area is our very important home market.
05:22One in four of our passengers coming from the Greater Bay Area region.
05:28So I still see there is a strong demand from the young consumers looking forward to exploring.
05:34Are they getting stronger?
05:34Is that demand getting stronger?
05:36Yeah, I'll give you one number.
05:38Our point of sales, Greater Bay Area, this first five months, grow to 60%.
05:43In terms of how you run the airline, are you concerned about any issues about the availability of parts, about the availability of engines?
05:52These are areas that are kind of coming under the spotlight as a result of the tariff story.
05:57Are you able to absorb some of those costs?
06:00Are you worried about the availability of engines coming in for your Airbus fleet?
06:04How are you managing that story and how are you planning for that?
06:09Yeah, definitely.
06:11We have the ongoing dialogue with Airbus regarding our future aircraft delivery schedule.
06:16So far, the impact to us is relatively small.
06:19But I think we also made a proactive approach in managing this.
06:23We made a provision to ensure continual alignment with our long-term fleet plan and also the growth plan.
06:28And I think talking about the engines, right, you know, half of our A320neo aircraft, five, totaling five aircraft, remained on ground because of the ongoing GTF issue.
06:39So I think this definitely impacted our overall aircraft utilization because the material supply chain is still the bottleneck.
06:47That's why the engine turnaround shock time is quite long.
06:50So we would like to see more clarity on this part.
06:54It's important for our flight restoration operation.
06:58So, yeah, this is the part of the challenge we see.
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