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Russell Barling

The news that Qantas Airways is the target of a takeover bid from a consortium led by Macquarie Bank and the Texas Pacific Group is a clear indication airlines, especially those in the Asia-Pacific region, are again being seen as attractive investments.

The skyrocketing price of aviation fuel may have decimated the bottom lines of many airlines  in recent years but when the 'experts' congregated in Singapore earlier this month, much of the talk centred on how positive that had been for the industry.

In a nutshell, a doubling of fuel costs forced a level of operational discipline on the industry that is now at the core of the revival of most players.

Even if you don't have a spare US$100 million to jumpstart your own carrier, there have been opportunities for the small investor recently. Airline stocks are on the bounce almost across the board.

Shares in Cathay Pacific Airways, for example, have jumped 49.4 per cent from their June nadir of HK$12.57.

The price for a barrel of jet kerosene, the fuel used in aircraft, has fallen 25.8 per cent since reaching a high of US$93 on August 8.

Overall, it is a good time to be an established airline owner. But that does not necessarily translate into it being a good time to finance a start-up, especially in Hong Kong.

Oasis Hong Kong Airline's very public troubles getting off the ground continue to haunt the carrier and its backers.

Oasis management insists it did everything by the book in negotiating and applying for the right to  fly over Russian airspace on its scheduled trips to London; permission was apparently revoked by the authorities in Moscow at the last minute.

It is now forced to fly a longer route south of the Himalayas until the matter is resolved, a diversion costing the carrier market confidence and about HK$40,000 per flight in extra fuel costs alone.

Low-cost carriers must control their expenses to survive, which is why many fully hedge their anticipated fuel needs each year - to assure cost certainty.

Another basic tenet of the low-cost operating credo is high aircraft utilisation. While the southern route may put Oasis' planes in the air for more hours each day, the diversion has had less desirable consequences.

Last week, Oasis told travel agents that the 'higher utilisation rate' of its fleet would lead to maintenance on the aircraft being brought forward, resulting in the cancellation of flights on November 27 and 28 and December 5, 11, 19, 24 and 29 in both directions.

The late arrival of the company's second aircraft has not helped the situation, either.

China Rich Airways, which is now majority held by Guangdong businessman-cum-Hong Kong-permanent-resident Mung Kin-keung, is also going through some growing pains, albeit far less public.

A month after long, secretive deliberations led to the government finally approving a shareholding structure with the airline's former chairman Robert Yip Kwong as majority controller, Mr Yip transferred his shares to Mr Mung.

CR Airways is still trying to explain how that shift did not put its status as a Hong Kong carrier in jeopardy.

Unperturbed, on Tuesday it will announce a name change to Hong Kong Airlines, despite nagging questions about its local eligibility.

The re-branding, too, was not without controversy.

CR Airways, which initially has regional network aspirations, had planned to call itself Hong Kong Air, until legal representatives at Air Hong Kong, majority held by Cathay, took exception.

Several formal letters were exchanged and suddenly 'Airlines' sounded just as marketable.

For its part, the government remains determined that the public not know about the backroom deals that are being struck to use money from the Hainan Airline Group to establish CR Airways in Hong Kong.

'This is quite a sensitive subject,' an official from the Economic Development and Labour Bureau told Below Deck yesterday while at the same time declining to reveal the government's position on CR Airway's new shareholding structure.

Well, yes it is sensitive, which is why all these dealings need to be done in the public theatre to make sure there's no hanky panky going on.

That way Hong Kong, too, can be a more attractive place for punters, big and small, to invest in the airline industry's recent turnaround.



Airlines industry starting to encounter some clearer skies