This essay examines the challenges faced by Hong Kong’s full service airlines nowadays. Air transportation serves not only to encourage trade and growth in the tourism industry in Hong Kong, but also to improve people 's mobility and to form a modern society. In this essay, full service airline is defined as traditional airline that provides services such as allocated seat, transfer of baggage between flights, blankets and meals. Full service airlines suffer several challenges in the aspect of production cost for developing advanced system and competition with low-cost airlines nowadays. For this reason, I would like to investigate the challenges in depth according to the above aspects and figure out possible solutions.
Challenge 1: Low-cost airline invasion
In recent years, the airline industry has undergone a revolution caused by the growth in population of low-cost carriers, which are airlines that provide discounted fares and no-frills service to passengers, and the increase in the number of low-cost carriers caused a huge growth in departure and arrival of regional airports and established a brand new market in short-break tourism. While low-cost airlines are gaining an increased market share within the industry, the full-service airlines are struggling. Numbers of full-service airlines are on the edge of bankruptcy, and some even had to sign agreements or mergers to ensure their long-run existence. To compete with the no-frills airlines, some full service airlines had set up their own low-cost subsidiary, but a few of them ended up in operational losses, forced to sell their subsidiary.
Pels (2008) describes full service airlines as aiming to offer ‘quality’, whereas no-frills carriers aim to keep costs low. He states that although it may be difficult for low-cost airlines to earn money on ticket sales, they may gain profit on board by selling snacks and beverages, and from the airports
References: Cooper C. and et al. (1999) Tourism: Principles and Practice, 2nd ed., Longman Publishing: Harlow. Driver, J. (1999). Developments in airline marketing practice. Journal of Marketing Practice: Applied Marketing Science, 5 (5), 134–150. Law, R. & Leung, R. (2000). A Study of Airlines ' Online Reservation Services on the Internet. Journal of Travel Research, 39 (2), 202-211. Moiseiwitsch, J. (2012). Budget airlines find Hong Kong a tough market to crack. In South China Morning Post. Retrieved November 6, 2014 from http://www.scmp.com/business/companies/article/1404255/budget-airlines-find-hong-kong-tough-market-crack Pels, E. (2008). Airline network competition: Full-service airlines, low-cost airlines and long-haul markets. Research in Transportation Economics, 24 (1), 68-74. Sigala M. (2003) The Information and Communication Technologies Productivity Impact on the UK Hotel Sector, International Journal of Operations & Production Management, 23(10), 1224-45. Wang, J. & Lee, S. (2014). Asia 's Budget Airline Invasion. In Bloomberg Businessweek. Retrieved November 6, 2014 from http://www.businessweek.com/articles/2014-02-13/asias-budget-airline-invasion-cathay-pacific-defends-hong-kong