Destination China

?We are doing what just about every Hong Kong business does and look to China," says Simon Heale, Dragonair's chief operating officer. "That is where the future of Hong Kong lies, both economically and politically… and on top of that China has been growing at a rate faster than anywhere else in Asia."

China now represents more than eighty per cent of Dragonair's business. "We are fundamentally a China carrier from Hong Kong with a rather smaller set of services to secondary cities in Asia," says Heale. The airline has now clocked up 13 destinations around the mainland ? Beijing, Changsha, Chengdu, Dalian, Guilin, Haikou, Hangzhou, Kunming, Nanjing, Shanghai, Tianjin, Xiamen and Xian ? and the 14th takes off on June 7th to Ningbo.

Why did the airline choose Ningbo? "There are a lot of Ningboese who live in Hong Kong. It is near Shanghai, it is flourishing and perhaps most relevantly, CAAC were happy' to talk to us about starting, services.

"In practice, that is how it works. We find out from CAAC which cities are possible. Our basic view is that economic links between Hong Kong and China are expanding, and that most of the major cities in China can sustain certain air services. So, it is more of a question of deciding in conjunction with CAAC what is possible, rather than directly focusing in on one or two that may not be possible for a variety of reasons."

It is still a fairly lengthy process securing routes within China. This is not only due to the country's famous bureaucracy. A number of the airports belong to the military and are therefore a concern, while others do not have proper customs, immigration and quarantine facilities.

Heale is confident, however, that Dragonair is in a strong position to get the quickest service possible. This he puts down to the airline's experience in China, the contacts it has made and the fact that its biggest shareholder is CITIC Pacific, the I–Tong Kong arm of the hugely influential China International Trust and Investment Corporation.

"It is' important to have connections," says Heale. "It is important to know how to present your case and who to present it to."

But he is not over-troubled by the pace of business in China, and his attitude is calmly pragmatic.

"There is a difference between what I would call the Hong Kong approach to business, which is ? do it by yesterday ? and dealing with the government departments in China. At Dragonair, we are small and we can therefore respond very quickly. China is a massive country, with many different people to consult. Inevitably things are slower, and I think some-times it is good for us in Hong Kong to realise that the Hong Kong way of doing things and the Hong Kong speed isn?t normal. We just have to make the neccessary mental adjustments."

Grumbles in the industry about inadequate airport infrastructure are not a concern for Dragonair either.

"It is not a problem yet," says Heale. "If you look at the overall context of China and how many cities they have, I think it is remarkable how much they are investing and how quickly it is going. They have built a new airport at Xian, they are building one at Wuhan, they are talking about building one in Sanya in Hainan island and they have built a new terminal at Shanghai. Let me be somewhat provocative here ? compare that to the UK, and I frankly think that the Chinese have done pretty well."

One airport that will make an enormous difference to the carrier is of course, Hong Kong's troubled and still incompleted Chek Lap Kok. When the existing Kai Tak has only one runway that has a curfew and a capacity of 24 million, it is easy to see the flexibility that a second airport with two runways, no curfew and a capacity of 80 million passengers will give a Hong Kong based airline.

Hong Kong's return to Chinese rule in1997 does not threaten any major disruptions, says Heale. "As far as we are concerned, I don't think it will make any difference at all. I really think that everyone in Hong Kong is working in business terms towards 1997 and I think it will be a very smooth transition."

That is not to say, however, that all users of Dragonair are businessmen. In fact, it is tricky job classifying the typical Dragonair passenger.

"It depends on the destination," explains Heale. "Places like Shanghai and Beijing have a high proportion of business traffic. Somewhere like Guilin is exclusively tourist. We have three sorts of passenger. The first is the businessman, the second is the overseas Chinese returning home, and the third is what I would call the non-Chinese overseas tourist. And it depends route by route which category you carry. The third category is the smallest group."

A key issue in attracting these passengers, is surely a high profile. Heale is confident that the Dragonair name is well known. "I would like to think that the people of Hong Kong are now very aware of Dragonair. It has changed radically in the last two years. They have seen us invest in a lot of new equipment, in expansion, in new services. I think we have managed to publicise that quite effectively.?

The airline is going through enough changes at the moment to attract some attention. On the first of January this year, Dragonair had five 737s and one Tristar. By the 31st December, it will have six brand new A320s and two Tristars, and recent reports have detailed announcements of a seventh A320 being delivered in the first half of 1994.

"We are fortunate that China traffic is still growing very strongly, so that the sixth A320 could be brought forward from 1994."

Dragonair's shareholders are also crucial to the airline's high profile, as well as its credibility. "I think that the Cathay Pacific connection is important," says Heale, "and I think that the CITIC connection is very important. But that is not to forget the Chao family who founded the airline. They are still involved and still very influential. We are fortunate that our three biggest shareholders are well known, influential and work well with us." *