Eight months after beginning operations in Israel, Cathay Pacific is planning to operate a daily flight next year on the Tel Aviv-Hong Kong route, instead of 4-6 weekly flights, as at present. The airline is planning to open an official office in Israel, Jonathan Bailey, Cathay Pacific's manager for Israel, told "Globes."
Next April, the company will increase its weekly flights on the route to six. All of the flights will be on the state-of-the-art Airbus A-350-900 airliner. Bailey says that the company will receive an even more advanced plane next year - the A-350-1000, with 10% more seats, and will potentially use it on the Tel Aviv-Hong Kong route.
"The company's agenda is to allocate airliners to destinations for which we see strong demand, and it can therefore be assumed that we will also increase the frequency of the flights to daily," Bailey says, mentioning the high proportion of available tickets sold on the route.
"Globes": Were you surprised at the response and the demand?
Bailey: "Before we entered the Israeli market, we conducted studies, and predicted that there would be demand for competition on the route. We expected to take a share of the existing passengers on the route, but we also knew that we had a strong point - continuation flights from Hong Kong to Australia and Japan with the same company, and most of our passengers do continue on connection flights. The segment that surprised us was business class, both in comparison with other countries and with the forecasts. Demand for business class was huge. The feeling is that the passengers, especially businessmen who fly a lot, appreciate what they get for their money. We brought a service and product here on a level that was previously unknown on this route."
Did you take market share away from the competitor on the route (El Al), or did the number of passengers flying to Hong Kong increase?
"Both of those are true. We are experiencing an increase in the number of people flying to Hong Kong, but we'll take action to further increase this number and promote Hong Kong as a leisure tourist destination, not just for a business customer. Hong Kong offers beaches, topnotch hotels, and entertainment for the whole family, including a Disney park. At the same time, we'll increase traffic to destinations in northern Asia on continuation flights. Here, for example, we were surprised at the number of passengers who continue with us to Japan. Our prediction did not match the actual number which was double as a second leading destination for us after Hong Kong. These are mostly leisure tourism passengers on group trips. The low exchange rate of the yen may be contributing to this." Other prominent destinations on continuation flights mentioned by Bailey are Australia, Singapore, and New Zealand.
What about incoming tourism to Israel? Have you noticed an increase in this segment?
"Yes, especially by Chinese tourists, and recently also Australian tourists. There have recently been flights on which more than a third of the passengers were Australians coming to Israel."
Should we assume that the high occupancy that you describe will eliminate the bargains and discounts on the route that you offered when you first entered Israel?
"We still find a need to offer bargains. Demand in September-October and March April is strong for both leaving and arriving in Israel, but there is still a need to work hard on the other months, especially those regarded as weak. The goal is to also market Hong Kong as an alternative to the US, Europe, and Thailand, which Israelis love so much. Hong Kong is a destination that Israelis are missing out on."
You can't compare the prices of a vacation in Hong Kong to a vacation in Thailand.
"It's true that the prices of a family vacation in Thailand are even lower than the Philippines. Hong Kong is more expensive, but the quality and the value for money is incomparable. Another destination that we're trying to promote as a cheap alternative for the Israeli market is Vietnam."
Cathay Pacific's competitor on the Hong Kong route is El Al Israel Airlines Ltd. (TASE: ELAL), which had a monopoly on direct flights on the route until Cathay Pacific started flying there. Next March, El Al is expected to introduce its Dreamliners on the route to Hong Kong, enabling it to compete with the product offered by Cathay Pacific, which uses newer planes than those currently employed on the route by El Al. "We don't see competition, because for us, the more Hong Kong is exposed as a destination, the more we profit. Cathay Pacific is Hong Kong's main to base carrier, and we want this market to be dominant for us on the route to Israel."
Cathay Pacific will soon say goodbye to Tal Aviation, which represented it in Israel, and open its own official office in Tel Aviv. "In places regarded as strategic destinations, Cathay Pacific operates directly, now through a local representative. We started with Tal Aviation; they were wonderful, and helped us succeed. This is the right time for us to push forward," Bailey says.
What does opening an official office mean for Israeli passengers?
"It shows the confidence we have in the market and our confidence that with our team, we'll be able to sell more and establish our name among as many passengers as possible."
Another Asian airline that has been successful in Israel is Chinese carrier Hainan Airlines, which already operates direct flights to three destinations in China. Do you regard it as your competitor?
"Hainan Airlines' expansion is also good for us, because the more Israelis travel to China, the more they will create demand for not only the main cities to which Hainan flies. Here we enter the picture as a company that flies via Hong Kong to quite a few cities in China. We can fly directly only to Hong Kong, but a network of flights to destinations in northern Asia puts us in a competitive position vis-a-vis the other airlines in the region."
Published by Globes [online], Israel Business News - www.globes-online.com - on November 19, 2017
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