De-facto flag carrier, Air Macau, hasn’t had to look for trouble and the twin effects of the cash crisis and the opening of direct Taiwan-mainland links has eaten into expansion plans despite budget airlines from elsewhere in Asia boosting in-bound travellers. We spoke to two top executives from the city’s two carrier to see what the future holds.

Born in a storm

Viva Macau’s executive director Ho King Lung believes breaking of the air traffic rights concession and greater co-operation between companies and the government can secure bright skies ahead for the airline industry

The birth of Macau’s only newly established post-handover carrier, Viva Macau, was anything but easy and many obstacles had to be cleared.
Founded in 2005, the company finally gained route sub-concession rights and had its maiden flight at the end of 2006. Two years later – along with everyone else – it faced ever rising oil prices and the controversy over traffic rights. In 2008 the price of oil slumped amid a global financial crisis which is still shaking the economic foundations.
It would be no exaggeration to say that Viva Macau has been besieged by both internal and external difficulties.
But at least the people at the top of the company have retained a sense of humour.
As Ho King Lun Viva Macau Airline’s executive director jokes: “At the end of this year, I could have become out of a job with every one else!!”
Of course, his comment is in jest and with the level of economic turbulence Viva Macau has had to fly through since its inception, you need to have a strong sense of humour.

Flock to Macau

When Macau’s casino monopoly was ended in 2004, Ho, who at the was time working for Hong Kong’s Cathay Pacific Airways – predicted that more and more international investors and tourists would flock to the city, greatly increasing the need for air transport.
Since Macau had no long haul flight routes, it was necessary to form an airline to operate primarily long haul routes. He envisaged another two carriers, each with its own route policy. If they could take shape, through mutual coordination, they might enable Macau’s aviation industry to build an international network consisting of long, mid and short distance air routes.
After long-stalled endeavours, Viva Macau finally acquired the sub-concession for several routes and launched its maiden flight at the end of 2006. However, the other two planned companies were aborted. Viva Macau was left to open up new routes by itself, including Sydney, the Maldives, Vietnam, Jakarta and Tokyo.

Oil prices

Despite the rising price of fuel in 2007, the ever increasing arrival of international tourists allowed the company to maintain a balance between income and expenses in the second year of operation. Up to today they have invested HK$700 million and own two aircraft each of which has a daily average usage of 13 hours.
“Given enough routes, the daily average usage could be 18 hours,” Ho said.
However, due to the restrictions of the air traffic rights concession the airline is unable to open up new routes, and as a result it is ultra-cautious about buying or leasing new aircraft.
“The reason why the other two planned airlines failed to materialise was mainly because of private concerns about the concession. Once a new route is successfully established, the concession holder may very likely take it back to operate it by itself. This makes the investment very risky,” said Ho.
He also pointed out that overseas tourists mostly plan their itinerary based on the availability of direct flights.
If coming to Macau means an extra hour transfering at Hong Kong, they will probably choose to fly directly to other cities. Therefore opening up air routes to target cities is an urgent priority for Macau.

Post-crisis

Ho says that when this financial crisis passes, Macau will need to be very pro-active in seeking out new tourist routes and providing more convenient transport facilities.
It is clear that low cost carriers have injected a new dynamic in the aviation industry, resulting in a clear rise in the number of tourists from South east Asia who are coming to Macau. But these companies are not local and focus on their country of registration. They will not see creating an integrated and booming Macau tourist infrastructure as a priority.
Ho gives the example of Japanese tourists. Ever since the launch of flights to Tokyo and Osaka by two local carriers, the number of Japanese tourists has increased rapidly.
“If we want to lure them to Macau, we certainly should provide convenient and efficient transport in order to bring them in. To expect that Japanese airlines might open up flights to Macau is just wishful thinking. Only Macau’s own airlines will take the initiatives to expand market and customer sources.
“When we open up an overseas market, our promotional activities in that destination will also help to promote Macau tourism. Japanese airlines want Macau people to travel to Japan. But Macau has a small population, after all. Therefore, as a local carrier, we think from Macau’s standpoint, and we will take initiative to open up these potential routes,’’ says Ho.

New order

Ordinary Macau people do not feel the same connection to the air concession as they do with concessions which touch their every-day lives, like telecommunications, electricity, water and TV relay. An open and booming air industry might bring the air concession closer to people’s every-day lives in terms of the development of the economy and the direct benefits to people that it brings, says Ho.
“We can only hope that the SAR government will consider, without delay, how to break the traffic rights concession,’’ he adds.
Ho remains optimistic about the problem being solved: “Before when the economy was generally good, each company would care solely about its own business. Now, as we face a decline in tourist numbers and the continued emphasis on diversification from the central government, local airlines are under more pressure and responsibility to work harder for economic development.
“Be it between companies or between enterprises and government, cooperation should be fostered, so as to create a win-win situation for the Macau aviation industry and for the whole economy,’’ Ho says.

Broader horizons

In the decade since the handover, Macau’s aviation industry has faced many challenges from the Asian financial crisis, to SARS and from oil price hikes, to growing direct China-Taiwan linksdirect flights and the global financial crisis. Air Macau has taken them all on the chin

In the mid 1990s, when she graduated from university, Macau’s aviation industry was in its infancy. But with a desire to experience new things, Lok Chi Wai decided to join Air Macau and hasn’t looked back.
Now, as Deputy General Manager of the airline, she revels in the fact that while life in Macau can be relaxing, quiet and sometimes narrow, working for an airline allows her to broaden her horizons by meeting different people and travelling to different countries.
Prior to the opening of the gaming concession, there were few foreign professionals in Macau. Seldom would you come across an international company with expatriate staff. Since Ms Lok likes broadening her vision and knowing different cultures, the airline position was perhaps “the most ideal job in Macau”, she says.

Concession in name only

The biggest bone of contention in the aviation industry is Air Macau’s exclusive concession to operate air services from Macau but Ms Lok believes its importance can be overblown.
“From the first day I joined Air Macau up to now, my personal belief and mission has remained unchanged, that is, the hope to open and operate more air routes from Macau airport in order to provide convenience for citizens to travel abroad and for tourist to come here,” she says.
“All of us (local airlines) have the same objective, that is, to promote routes from/to Macau. But each company has its own position and we should try our best to serve it. ”
What if, as some people suggest, the government moved to revoke Air Macau’s concession rights?
“First of all the so-called traffic rights concession doesn’t exist any longer in Macau,’’ she says without hesitation, adding: “(I) don’t think it will have any effect on Air Macau’s development (if it was revoked). The current challenge is not the sub-concession, nor oil prices, but the dwindling tourist numbers, caused by the China-Taiwan direct flights and aggravated by the global financial crisis resulting in less and less economic activity.”

Taiwan transit factor

Last June the oil price shot up to US$147 per barrel, putting a heavy burden on all carriers. It also posed a big financial strain on Air Macau, so much so, that it needed capital injection from its major shareholder Air China. However, real challenges lie ahead in 2009, the first being the sharp drop of Taiwanese passengers in transit in the wake of direct China-Taiwan flights.
Ms Lok says that pre-handover, Taiwanese passengers in transit accounted for more than 70% of Air Macau passengers. To face this challenge Air Macau has opened up routes to South East Asia, Korea and Japan. Since the official launch of China-Taiwan direct flights last year, the airline now has a passenger ratio of 50 percent Taiwanese transit passengers and 50 percent local ordinary passengers.
Nevertheless, there is a long way between the ideal and reality, so a step by step approach is required to grow business Ms Lok says. Air Macau hopes to open and operate a few international long haul routes to offer convenience to international tourists travelling to Macau and to diversify Macau’s tourist sources.
However, unfortunately, due to the small scale of the Macau market, merely depending on turnover from local residents is not enough to cover operating costs.

Feed off the hubs

She says that to resolve the problem of scarce long haul international routes, Air Macau is planning to cooperate with its mother company, Air China. The idea is to use Beijing and Bangkok’s big international airports as hubs and attract transit passengers for its Macau bound flights.
“The fares will be more competitive than flying to Hong Kong and transfering by ferry to Macau, and the process much more convenient for fliers,’’ she says.
The plan will be put into place starting from this summer and this is expected to give new wings to Macau’s aviation industry. “We hope to bring into Macau tourists from more diverse regions, and also offer a better choice to Macau residents who want to travel abroad.”
Finally, as a woman in a male dominated industry, does she find any personal barriers in her business dealings?
“I am mainly responsible for the administration and HR area. What matters most is that I like this industry and I have a sense of responsibility. So, I don’t feel any barriers communicating with colleagues who like planes as well, regardless of whether they are men or women. We share the same goal,” says Ms Lok.

by Wu Yu