Japan Airlines - Orient Aviation

admits Rex, which currently operates some1,200 flights a week to regional destinationssurrounding Sydney, Melbourne andPerth, is considering a move into southernQueensland. Typically, Rex operates on oneand half hour sectors.“We are not really focused like atraditional airline which always thinksabout growth. They can go too fast,” saidLim, who came out of semi-retirement toadd aviation to a list of investments, whichincludes interests in biotech and propertycompanies.“We want to be flexible, but you need agood organisation to scale up quickly, be itthrough pilots, mechanics or even planes.”Rex owns 15 of its aircraft outright and,with A$20 million in the bank, is able tomove quickly. “There are times we decidewe need a plane, we go and inspect it, paycash and one month later the plane is in thecountry,” said Lim.It is also funding the remaining 50%buy-out of Pelair, a Sydney-based freightand charter operator, with cash. Rex boughtanother 25% in January and will pay forthe final quarter this November. Pelair’soperations, usually utilising Metro Fairchilds– some of which came from Rex – to carrycargo at night, are seen as complementary toRex’s main services. Rex also owns Air Link,a one-time small competitor operating outof Dubbo in New South Wales, again usingMetros.‘We are not really focused likea traditional airline whichalways thinks about growth.They can grow too fast’Lim Kim HaiLoad factors on Rex’s 30-plus routes totowns typically with populations of 10,000to 25,000 are targeted at between 65% to70%. Extra capacity is brought in when theyincrease beyond that, through the addition offrequencies, but fares are also kept down tohelp fill the extra seats.“We are not focused on growth, we arefocused on profitability. We want an airlinethat is extremely profitable on margins. Ourmargins on revenues exceed 10% and veryfew airlines in the world can claim that,”said Lim, whose airline has been flying for15 years in its current and former guises.Nor has fuel been hedged. FollowingQantas’s lead on fuel surcharges has provedsufficient. “Our experience has shown us thatbecause we are so efficient in our fuel use,even today our fuel bill is only 20% of ouroverall costs,” said Lim.Rex’s main competition comes fromQantas Air ways’ regional offshootQantasLink, but that now only occurs ona handful of main routes as Qantas slowlywithdraws from commuter services.“We are in a quasi-monopolistic situation.But we don’t operate like a monopoly. We doCommuter boss calls for mergerthe opposite of what any monopoly woulddo,” said Lim.Lim was talking soon after the closureof Big Sky Express, the New South Walesoperator, after safety concerns also groundedTransair, the Brisbane carrier that suppliedBig Sky’s Metros. That leaves Fokkeroperator, Skywest, in Perth, Macair whichbases Saabs and Metros in Townsville,Cairns and Brisbane and Airnorth whichrecently announced plans to add an Embraer190 jet to its mixed turbo fleet in Darwin, asthe other carriers with some regional clout.T he Rex ch a i r m a n sees f u r t herrationalisation as QantasLink slims itsoperations, leaving only a couple of majorregional operators. “Regional aviation inAustralia is untenable. Hardly anybody canmake money. The small ones will just dropoff. Qantas will also continue the withdrawalthey have already started. Their cost base isvery high,” he said.And when QantasLink does leave thescene, it can be to the advantage of thecommunity, Lim argued, because rivalfrequencies in the same time slots canbe changed to a greater number spreadthroughout the day by a single carrier.Lim’s staff field many calls from townsand cities hoping for an air link in a countrywhere settlements are often far apart. “Wehave increased frequencies and, yes, we willexpand. But we are always very conservative.So we will expand slowly and carefully.”Hong Kong Airlines and HongKong Express are eachadding between four and sixB737-800s this year as theyphase out smaller commuteraircraft and beef up operations to mainlandChina and elsewhere.The aircraft are arriving on leasearrangements organized through HainanAirlines Group (HNA), which took a 45%share in each carrier last year. Hong KongAirlines, the former CR Airways, alreadyhas four B737s on its books and has appliedfor rights to a further 15 to 20 Mainland andSoutheast Asian destinations.It is also considering adding Beijingand Shanghai to its roster, putting it indirect competition with Hong Kong giantsDragonair, which serves both cities, andCathay Pacific Airways, which startedpassenger services to Shanghai in December.Hong Kong Airlines already flies to sevensecondary Chinese cities and, according tolocal media reports, has plans for a 30 to 50-strong fleet within five years.HNA, which late last year ordered 100Embraer commuter jets for its own use onMainland domestic routes, bought its stakein the then CR Airways from Robert Yip,who founded the carrier in 2001 with a singlehelicopter and later began Mainland servicesusing 50-seat CRJ200s. The remaining 55%of Hong Kong Airlines is now held by localinvestor, Mung Kin Keung.Hong Kong Airlines and Hong KongExpress are seen as rivals in the short-haul,Hong Kong to China business, even thoughthey have rights to different cities. AndHong Kong Express founder and managingdirector, Andrew Tse, admits that having thesame shareholder has caused some confusionin the marketplace.“There’s an obvious problem here,” hetold Orient Aviation. “Two subsidiaries areoffering a similar product. If we combined,we could offer a single product that would bebetter. But it’s beyond my jurisdiction. As ashareholder I would like to see a merger as amatter of synergy.”Hong Kong Express’s first B737 wasbeing re-painted at press time in the carrier’snew livery, which was due to be unveiled atthe end of January. Its four Embraer 170s willbe phased out by the end of the year.Traffic rights to further Chinese cities arebeing sought – it currently flies to four andhas rights to a number of others. Tse also iskeen to access Okinawa in Japan and turn thecarrier’s daily charter to Taichung in Taiwaninto a scheduled service.February 2007 ORIENT AVIATION 51