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Canwest News Service
This story was first published in The Province Oct. 1, 2004
Standing at the edge of a fish pond that wraps around the tastefully- decorated house, David Ho looks content, feeding the latest additions to his family.
“There are quite a few fish now,” says Ho, smiling despite the nagging pain in his shoulder. Last year, the pond was ravaged by raccoons and seagulls. But, somehow, some of the carp survived and have given birth to more.
The carp have won nature’s version of a David and Goliath battle. It is a tale of triumph over adversity, not unlike the aviation adventures of the man who is feeding them.
As the story goes, in November 2001, David Ho Ting Kwok and his then 10-year- old daughter Kristen were stranded for some 18 hours at the Kahului Airport in Maui, Hawaii. Waiting for a flight to get home, Kristen asked: “What are you going to do about it, dad?” Ho retorted: “What do you want me to do about it?” Kristen told him to start his own airline — and he did. Three months later, the cynical, the curious and the hopeful gathered at Vancouver’s international airport to find out more about the “crazy man” who, at that time, had no planes or schedules, yet was launching an airline called HMY (now Harmony Airways) at the behest of his daughter. Understandably, scepticism permeated the air of festivity that was fuelled by a Mariachi band, hula dancers and tropical treats.
Here was a businessman, with a solid track record, launching an airline in a country that had seen 28 airlines go broke, in a post 9/11 era when air travel was declining, and at a time when Air Canada, the nation’s largest carrier, was seeking a financial parachute to stave off bankruptcy. But a confident Ho reached into Longfellow’s “A Psalm of Life” and told the assembled crowd that his airline would be like the poet’s “footprints on the sands of time” — a legacy Vancouver would be proud of.
“They did not know who I was,” Ho tells Asia Inc in an interview at his Vancouver home, as he recalled the early turbulence of his foray into the skies.
Ho was not just unknown to aviation experts; they had no clue as to the depth of his pockets and knew nothing about his global connections. One University of British Columbia aviation expert said shortly after the launch that HMY was too small and would not get passenger recognition.
Jacques Kavafian, aerospace analyst at Octagon Capital Corp in Toronto, was quoted as saying HMY’s future in the crowded Canadian market was bleak. “The chance of survival is slim.”
While critics continued to pour cold water on the fledgling airline, Ho and his crew worked frantically behind the scenes, armed with money from Ho’s own pocket, personal guarantees and lines of credit. “At some points during the start-up, it was so depressing and, once, I asked my daughter, ‘Why did you make me do this?’” recalls Ho. “She said it served me right for listening to a 10-year-old.”
Teething pains came in all forms. The spring and summer of 2002 saw HMY change its plans from leasing aircraft to buying two modified Boeing 757s that had fewer seats and were compatible with five-foot, eight-inch Ho’s business philosophy of giving passengers more leg room.
Then came the battle with intransigent Canadian regulators, manoeuvres around bureaucrats who sympathised but were unable to do anything about Catch- 22 situations and the all-important “show me the money” stage.
The Canadian Transportation Agency — which had seen its fair share of entrepreneurs ejecting from airlines, leaving creditors, employees and passengers in the lurch — wanted absolute compliance with its stringent rules. Ho had to show that he had enough money to cover all the start-up expenses and operating costs for 90 days. He did, with a little help from his friends.
After passing the financial-fitness test, Ho and his lieutenants moved to set up a sister company, Companion Holidays, to sell tickets because charter airlines in Canada are not permitted to do so. Then it was time to look for pilots and flight attendants in a highly-unionised industry.
It was both a troubling and opportune year to look for staff and inventory. The charter airline Canada 3000 had just taken a nosedive right into the North American airline graveyard and there was a ready pool of experienced cabin crew. Many had the experience and wanted jobs. But they did not want Ho and his people telling them what to do.
Travel agents, who bore the brunt of stranded passengers left in the wake of crippled airlines, were wary of dealing with another new start-up.
Airports that were left unpaid by Canada 3000 and others like it were demanding letters of credit before they would let any of Ho’s planes near their runways. Transport Canada employees also went on strike around the same time, delaying certification runs and pilot tests. “It felt like whatever could go wrong went wrong,” says Ho.
The Nov 1, 2002 inaugural flight date came too quickly. HMY could not take off. Approval to use airports in Mexico and the US was still pending. Passengers had to be refunded and it was back to the drawing board for HMY’s maiden voyage. “I don’t know how we did it but we survived,” says Ho.
On Nov 22, 2002, around 10am, just over a year after Kristen told her dad to start an airline, Ho gathered up a small crowd of employees to watch the first HMY Airways flight leave Vancouver International Airport for Mazatlan, Mexico.
“It was a proud day for me and the people who helped make this happen,” he says.
At the end of a cherry blossom treelined street in Vancouver’s tony South Granville district, the threatening barks from a guard dog greet visitors to the two-storey mansion that serves as David Ho’s personal office and residence.
Two flags, one of Canada and the other of the Republic of Seychelles, flutter in the hot summer sky above a police cruiser, parked conspicuously to display VIP protection.
“Dr Ho is the honorary consul for Seychelles in Vancouver,” says personal assistant Liza Lau, addressing her boss by his honorary doctorate in commercial science from the University of Richmond in Virginia.
“If you ask us what we do as personal assistants… we do everything… [from making] sure he is fit and ready to take on his business needs to looking after his personal appointments,” says Lau. “We work in a family atmosphere and he is a great boss… he is full of surprises, so we always expect the unexpected,” she adds.
Ho has always surrounded himself with family, friends and experts to build his business empire. His guanxi is strong, with connections to world leaders, tycoons and decision makers.
“I was never very good at school,” says the 52-year-old president of the Hong Kong Tobacco Co, which was founded by his grandfather Ho Ying-chie or “Uncle Ho”, one of the former British colony’s most illustrious philanthropists.
There is a movie somewhere about David Ho and his schooldays, marked by episodes that end with a trip to the headmaster’s office and a date with the cane. What he lacked in academic achievements, Ho made up for with entrepreneurial flair: He once ran a thriving underground cafeteria making hotdogs and steaks on a hotplate out of his boarding-school room.
“The business was good until a teacher came to the room, ordered up a steak and shut us down,” says Ho.
While his businesses, especially the airline and its sister company, Companion Holidays, have hogged the headlines, the Hong Kong-born entrepreneur guards his private life jealously.
Ho visited Vancouver for the first time in 1984, while on tobacco business, and fell in love with the Canadian west coast city. A year later, he relocated with his family.
Once in Vancouver, Ho became a Canadian citizen and went on a buying spree, purchasing a majority stake in the posh University Golf Club in Vancouver and then, among other things, a luxury automobile dealership with rights to the Jaguar, Porsche, Land Rover and Rolls-Royce brands, a security firm, a fitness centre, a yacht brokerage company, a freight forwarding/warehouse servicing operation, and a greenhouse company.
He also set up DTKH Robson Developments, a property development and management firm, and an ad agency in Vancouver while making millions flipping a local bottling plant. Ho bought the plant, Gray Beverage Inc, in 1987 and sold it in 1998 to Pepsi. He has not said how much he made from the sale but one report pegged the figure at C$300 million. Gray is a manufacturer and distributor of soft drinks, juices and bottled water. Its brands include Pepsi- cola, 7Up, Hires, Crush, Mountain Dew, Capilano Springs and Sun-Rype.
Between 1988 and 1990, Ho served on the Vancouver Police Board, something he says he wants to do again.
Ho has three children — Kristen, who is in high school in Vancouver, Cynthia, who is completing her studies at the University of British Columbia and Stephen, who recently joined dad’s business operation after a stint with Merrill Lynch.
His ex-wife Rita Fung lives in Vancouver with Kristen. Since his divorce in 1995, Ho himself has not remarried. Insiders say Ho was shattered when his mother died shortly after his grandfather passed away in 2000 as he was very close to both of them. His brother Charles and father, with whom he maintains a close relationship, are based in Hong Kong.
Family is written large on almost everything Ho does. His airline was originally to be called MY Airways, a reference to his mother, May Ying. He later added an H, to acknowledge the family name. His 94ft Sunseeker yacht is called MYCKD for May Ying, daughters Cynthia and Kristen and himself. Several of his business ventures in Canada carry the family initials.
Ho is well-known in Canada among the political elite and for his charitable acts. At the last municipal elections in Vancouver, his donations as an individual were more than anyone involved in civic politics can remember. Ho forked out close to C$100,000 in political donations to federal politicians. He joins a long list of Asian tycoons like Li Ka-shing and Stanley Ho who donate to Canadian politicians.
While some segments of Canadian society, including opposition members of Parliament, have voiced concerns that such donations are meant to gain influence with politicians, Ho believes that helping individuals with strong values get into political office is one way for him to give back something to Canada.
In the mid-1990s, donations by Asian tycoons to Canadian politicians came under the scrutiny of the Canadian Security Intelligence Service (CSIS). Government analysts prepared a secret draft report called “Project Sidewinder”, which raised concerns that tycoons like Li Ka-shing and Stanley Ho had become an overly influential presence on the political and economic landscape of Canada at the provincial and federal levels. Ho was not mentioned in the report.
The report, obtained by Asia Inc, noted that tycoons “have learned that a quick way to gain influence is to provide finance to the main political parties. Most of the companies identified in this research have contributed, sometimes several tens of thousands of dollars, to the two traditional political parties”.
The Sidewinder report, which was leaked, raised a storm of questions inside the Canadian government, which later scrapped the project, saying the draft report was laced with “unfounded rumours and conspiracy theories”.
“I don’t understand politics and I am not a politician… I am a businessman. .. I select people based on their performance,” says Ho.
Philanthropy runs in the Ho family, which has donated a DC-10 aircraft to ORBIS, the non-profit organisation that flies eye doctors, nurses and health workers to developing countries. It is the world’s only eye flying hospital and has circled the globe more than a dozen times to carry out more than 450 sight- saving programmes in 80 countries.
For a man born into a life of privilege, David Ho shows a profound understanding for the needs of the little guy. In the burgeoning no-frills North American airline industry where dry sandwiches and Tetra-pak drinks have to be picked up from a bin before you squeeze yourself into a seat that seems to have been designed with torture in mind, Ho’s philosophy of “bringing back the grand old days of flying” is proving to be a major success.
“I want to see people get into my planes smiling and leave smiling,” he says. He has ripped out seats in his 757s to create more leg room and seen to it that passengers get hot meals, wine, entertainment and, most importantly, low fares.
“It is so nice to get a hot towel, a decent hot meal and pleasant service while travelling,” says Ho, who has been on the receiving end of some nasty in- flight service. He was once greeted by police at the Las Vegas airport because he objected to a flight attendant’s insistence that he return a plastic cup of water. Ho was thirsty and wanted the water. The flight attendant wanted the cup back because the plane was landing. Nothing came of it except perhaps the resolve to keep his airline flying. “Low prices do not need to mean poor service,” he says.
While his in-flight service was bringing in satisfied repeat customers, attracting new passengers for the airline was a slow process, owing to a lack of name recognition. There was also the lingering consumer hangover caused by other budget carriers that had stopped flying.
So last June, Ho called on his buddy of 27 years, Hong Kong’s gravity- defying superstar Jackie Chan, to don an airline uniform and become his honorary captain. The action hero, who appears on the airline’s promotional items and website, provided it with the required marketing boost.
In May this year, in preparation for launching its new service from Vancouver to Honolulu and Maui, HMY changed its name to Harmony Airways. Says airline president David Sylvester, a 10-year airline analyst who specialises in young airlines, in a statement: “Dr David Ho set up HMY Airways in the first place to provide better service than what he personally experienced on other low-fare air carriers. With new destinations coming online and a third jet in service, we’re now raising the bar to defy our customers’ expectations. We want them to know Harmony is more than just a new label, it’s our promise.”
The name change also silenced a bothersome lot who was giving the PR types nightmares by referring to HMY as “h-my” instead of saying the letters.
Harmony, the airline born out of frustration at a Maui airport, came full circle in June this year with its new service from Vancouver to Honolulu and Vancouver to Maui (Kahului Airport, where it all began). “In my experience, other carriers seem to treat customer service as an afterthought. After a particularly negative experience returning from Hawaii, I was inspired to create an airline that was affordable but, more importantly, that treated customers with respect,” said Ho after Harmony’s June 25 inaugural flight to Hawaii.
After three years of confounding critics and testing the depths of Ho’s pockets, Harmony looks set to start making money with the Hawaiian destinations. “In some months, we lost up to C$10 million,” says Ho, who rarely talks about his financial bleeding — which aggravates aviation pundits.
Flying in the red was not the only problem. The steady growth of Harmony Airways also spurred envious rivals into action. “There were two incidents when our plane was hit on the runway by trucks towing other planes and left with holes,” says Ho. “In one case, a guy was complaining loudly about the service, upsetting the passengers… we found out later he was with a competitor… At another crucial moment, we had a senior staff tell us he had to quit because of health reasons, and then walk over to a rival.”
But Ho, who has a track record of turning obstacles into opportunities, not only survived — he thrived. On July 30, Harmony announced an expanded schedule of service to Hawaii, including flights from Toronto and the city of Victoria, and added seven additional flights to Honolulu and Maui from Vancouver.
Harmony also offers service from Vancouver to Toronto, Los Angeles and Las Vegas and several Mexican sunspots.
Ho says he is planning to acquire or lease four more planes and to drop the Mexican destinations as he pilots Harmony into what he describes as the airline’s “new era”.
After a tumultuous takeoff, Ho is now beginning to enjoy the ride as a successful flyboy — a rarity in today’s troubled aviation industry. The question is where he is planning to touch down next.
Macau, says David Ho emphatically, when asked about the new horizon for Harmony Airways.
With 286 staff and plans to increase his fleet of long-range planes, Ho has set his sights firmly on the skies of Asia, which is getting increasingly crowded with low-cost carriers.
There are now at least 13 budget Asian airlines in existence or about to launch, including Malaysia’s AirAsia, Australia’s Virgin Blue, Singapore’s Valuair and Tiger Airways, and Thailand’s One-Two-Go.
Some analysts say only the most cost-conscious can survive, given the rising price of oil. Others say the budget airlines are only scooping up about 1% of air traffic in Asia. Ho agrees with the latter.
“There is a lot of room there for good service at low prices,” says Ho, who is looking at Harmony’s maiden trans-Pacific voyage within a year.
The innovations of Richard Branson’s Virgin Atlantic Airways is a model for Harmony. It already has a bilateral interline traffic agreement with Taiwan’s China Airlines. The agreement enables Harmony to capture Taiwanese passengers who want to fly to other parts of Canada, or take holiday detours to Las Vegas, Los Angeles or Mexico. But it is the passenger and cargo market, with Macau as the hub, that holds the most potential for Ho.
“The government of Macau, led by Edmund Ho [no relation], is very business- friendly… They understand what we need and do not let bureaucracy stand in the way,” says Ho, who has been crossing the Pacific frequently to set the stage for a Vancouver-Macau service. He has two other feeder destinations in Southeast Asia in mind but does not want to talk about it just yet for competitive reasons.
Harmony’s objective of getting non-stop flights from Vancouver to Macau, Asia’s gambling mecca, is to gain a foothold in the lucrative East Asia-North America market. Macau, with its low airport fees, allows Harmony into a closed trans-Pacific club dominated by industry giants like Cathay Pacific, Japan Airlines or Singapore Airlines.
Using Macau as a base, Harmony will be able to scoop up customers heading to and from nearby Hong Kong, which is a ferry ride away, and mainland China’s Zhuhai-Guangzhou corridor, which is connected to Macau by the Lotus Bridge. “This is a hugely healthy market,” says Ho, whose other potential trans-Pacific destinations in China could include Xi’an, Dalian, Tianjin and Harbin — major cities in central or northern China that are not serviced from Vancouver by scheduled carriers. Harmony’s trans-Pacific plans look promising, given that Lufthansa and Air France are already boasting 80% to 90% passenger loads on their recently-expanded flights from the Guangzhou area to Europe.
While providing “terrific service at low prices” has propelled Harmony Airways to new heights, Ho is contemplating adding a business-class category on his flights. “If you fly now, it is the business- and first-class seats that seem to be sold out first,” he notes.
Harmony’s three 757s now have a premium economy class with 36 seats, in addition to the 161 in economy class. The plan on the drawing board is to convert the premium economy class into a full-fledged business-class section with a pricing strategy that would be near the 50% mark of a major carrier’s executive seat.
Large carriers charge between C$6,000 and C$7,000 for a Vancouver-Hong Kong return trip and economy seat rates range from C$1,200 to C$2,300.
Harmony is also thinking cargo in a big way. The tomatoes and bell peppers from Ho’s greenhouse business — South Alder Greenhouses Ltd, a high-tech greenhouse operation for horticultural vegetables — in the greater Vancouver area are likely to be winging their way soon to Hawaii on Harmony’s expanded winter schedule.
The flow of goods from the Zhuhai-Guangzhou corridor along the West Bank of the Pearl River Delta of South China to Macau is another cargo flashpoint for Harmony. The Pearl River Delta is among the world’s busiest manufacturing areas and only two hours away by road to Macau’s international airport.
“Cargo, passengers, charters… everything is on the table all the time… you never know when you need it or when you can use it. I believe that you can work hard all your life but if you do not have some luck and some timing, you cannot be successful,” says Ho, as he prepared for a short Alaskan vacation to go glacier skidooing. When he returns, there will be a Maui trip. Then it will be back to figuring out Harmony’s advent in Asia.
With industry reports indicating that the region’s big carriers have started cost-cutting drives to lower fares to compete with budget airlines, soaring oil prices and possible attrition caused by the fierce competition between budget carriers, Harmony’s future in Asia is less than predictable.
One thing, however, is a certainty.
When Harmony Airways comes to Asia, David Ho will be doing what he does best — confounding the critics and silencing the cynics.
Document AIWINC0020041124e0a10001g
Cover Story
Eyeing international routes
328 words
1 October 2004
Asia Inc
English
Copyright 2004 Asia Inc. All Rights Reserved.
Harmony Airways is a different kind of animal in the low-cost, low-fare market in Canada, says Rick Erickson, an independent airline analyst.
Unlike the other major discount carriers in Canada — West Jet, Jetsgo and Canjet, all of whom focus on domestic and transborder routes — Harmony has set its sights on expanding the low-cost, low-fare model on international routes. This is where it is likely to come in for fierce competition from the nation’s largest carrier Air Canada.
Market estimates indicate Air Canada’s domestic share has slumped to 58% in recent years from a high of 85%. The airline is in court protection from creditors and has lost about C$4 billion (US$3.1 billion) in the last five years.
It has already publicly indicated that the strategy is to redirect capacity to international markets and not focus on maintaining domestic market share.
Erickson tells Asia Inc that discount carriers will rule Canadian skies when it comes to domestic routes, with Air Canada’s future profitability lying in international travel. If this is the case, Harmony is in for a David-versus- Goliath battle with Air Canada.
There is talk that Air Canada, which last month shut down its discount carrier Zip, will try an international budget airline. The possible routes include Toronto-London, Montreal-Paris and Vancouver-Hong Kong. This move will leave the domestic market to be serviced mainly by low-cost carriers.
Erickson says Harmony’s biggest competition will come if Air Canada decides to go with discounted Trans-Pacific tickets. “Otherwise, they have created a niche market with creature comforts that are likely to keep them flying for some time,” he adds.
Despite the current financial woes that airlines in Canada face and the unpredictable fuel prices, Erickson says air travel is coming back to pre-9/11 levels. “The market, especially in Asia, is expected to grow by about 5%,” he says.
