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Tiger Airways is also operating to Macau at least partly due to cost.
However, it should be noted that many other LCCs in the region are operating into HKG without any problems. Orient Thai (from Bangkok and Phuket), Valuair (from Singapore), JetStarAsia (from Singapore) and Australian Airlines (from Cairns) apparently are comfortable with the high cost and find the business to be still profitable.
Thus for HKAA, there isn't seem to be a reason to lower the fees for AirAsia if other LCCs are happy with what it is charging them. As for whether the competitors of HKG would catch up by welcoming the LCCs in, yes they would, but you don't see Frankfurt-Hahn destroying FRA or Stansted or Luton destroying LHR by their "catching-up" either, do you?
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