New York Times CX article
Thread Starter
Join Date: Jul 2006
Location: Helping out on the 3rd floor
Posts: 67
Likes: 0
Received 0 Likes
on
0 Posts
New York Times CX article
After a Bad Year, an Airline Picks Up Speed - NYTimes.com
January 29, 2010
After a Bad Year, an Airline Picks Up Speed
By BETTINA WASSENER
HONG KONG — On a scale of one to ten, six is not exactly great. But in the airline industry, a self-declared confidence level of six is almost gushingly positive. Especially when it comes from Tony Tyler, the chief executive of Cathay Pacific, one of the largest and most established airlines in Asia and a bellwether for the entire region.
“I have been down in the twos and threes, so that’s a big step forward,” Mr. Tyler said in an interview in his office at Cathay’s headquarters at the Hong Kong airport last week, looking considerably more relaxed than he has been for many, many months.
Since the beginning of the fourth quarter last year, he said, Cathay has seen premium passenger travel and cargo demand start to recover. “And we’re still seeing some fairly good signs in the first quarter of this year.”
Indeed, business has picked up so much that a program under which Cathay Pacific’s more than 18,000 employees were asked to take unpaid leave will most likely not be extended: “It’s a one-off,” Mr. Tyler said, in a clear sign to the airline’s still-worried staff that they would not have to forgo as much as four weeks of pay for a second year running.
Several of the other cost-cutting measures Cathay announced at the height of the global financial crisis last year have already been rolled back: a previously idled freight aircraft has recently returned to service, and a passenger plane that was to have been parked is still in action.
Many scaled-back routes and frequencies have been reinstated. Jidda, Saudi Arabia, was added to Cathay’s network last October, and direct flights to Milan start in March. “One or two other destinations,” including Moscow, are on Cathay’s radar.
The comments from Mr. Tyler, a towering but approachable 54-year-old who occasionally plays guitar in a band called Night Flight, add to a steady trickle of evidence that the airline industry, mauled by the global economic turmoil last year, is now finally on a steadier path.
Korean Air, the largest cargo carrier among the world’s commercial airlines, announced last week that it had returned to profit during the final quarter of 2009. Singapore Airlines, which like Cathay is highly oriented toward premium travel, last month said it was reinstating some flights and would add Munich to its network starting in March. The major U.S. carriers, including Delta Air Lines, Continental Airlines and Southwest Airlines, also have said they were seeing business pick up, albeit slowly.
Japan Air Lines, which filed for bankruptcy protection last week, is the most notable exception to the trend in Asia.
Much depends on how the global economy develops, cautioned Mr. Tyler, who 10 months ago announced the airline’s biggest annual loss, for 2008, and pushed back some major spending plans amid the turmoil.
Founded in 1946 and operating out of the financial hub of Hong Kong, Cathay Pacific caters to the world’s jet-setting banking community and Asia’s increasingly affluent travelers, with upscale service standards to match. So the collapse in business- and first-class travel — one premium passenger gives Cathay about as much revenue as five economy passengers — hit Cathay Pacific especially hard, as did a drop in freight traffic.
Now, it seems, those same areas are set to rebound especially strongly this year. Asian carriers like Cathay, Singapore Airlines and Korean Airlines are well positioned to benefit as growth in Asia, and China in particular, accelerates more sharply than any other region in the world, say analysts like Mark Webb at HSBC in Hong Kong.
As a result, Asia-Pacific carriers are expected to see their losses narrow considerably this year to $700 million, from $3.4 billion last year, the International Air Transport Association estimates.
“We talk to our customers, the big banks, the other big corporate accounts: they all seem to think that they are going to see much more traveling this year than last, so that helps build our confidence,” said Mr. Tyler, the Cathay chief.
So is the airline industry out of the woods? Industry watchers like Peter Harbison, chairman of the Center for Asia Pacific Aviation, a consulting firm in Sydney, do not think so. And Giovanni Bisignani, director general of I.A.T.A., said this week that “the worst is behind us, but it is not time to celebrate.”
For one thing, the world’s airlines are expected to lose a total of $5.6 billion this year, $4.5 billion of that in Europe and North America, according to I.A.T.A. forecasts. (That would still be an improvement the $11 billion loss in 2009.)
Uncertainty about fuel prices remains a perennial worry for the industry. Strikes by disgruntled staff loom at carriers like British Airways.
And while the global economy is now in recovery mode, some observers worry that another dip could still materialize. Mr. Tyler, too, cautioned that it remained unclear whether the current recovery was just a blip.
“We’ll get a better view after Chinese New Year, which is always a bit of a watershed,” he said, referring to a holiday that this year falls in mid-February.
Finally, low-cost, no-frills carriers — long an established player on the American and European air travel stage — are now gaining traction in Asia too.
Just under one in six passengers, or 15.7 percent of people flying, in the Asia-Pacific region were carried by low-cost carriers last year, up from 1.1 percent in 2001, according to the Center for Asia Pacific Aviation.
Despite the growing popularity of budget carriers, Mr. Tyler plans to keep Cathay Pacific firmly in the premium market. A recent review of Cathay’s business model has so far yielded only minor changes — tweaks to seating configurations to shrink some premium cabins, and changes to the network — rather than a full-scale strategy shift, he said.
This will dismay some analysts, who argue that Cathay should have long ago reacted more aggressively to the growing challenge of budget airlines, possibly by setting up its own no-frills offshoot. That strategy has been pursued by Singapore Airlines (with Tiger Airways, which staged a successful market listing last week) and Qantas of Australia (with Jetstar).
Some analysts say that budget carriers like AirAsia and Jetstar present little danger to Cathay Pacific. Mr. Webb, the HSBC analyst, said Cathay could take on low-cost carriers through competitive fares.
“Full-service carriers like Cathay in Asia tend to be much more efficient than those elsewhere, meaning the differences between their fares and those offered by low-cost competitors are not as big as in other regions of the world,” he said. “In addition, the greater distances flown in Asia-Pacific mean the likes of Cathay deploy larger, wide-body planes, which are cheaper to operate, per passenger, than the narrow-body aircraft that the low-cost carriers tend to fly.”
So for now, at least, Cathay is sticking firmly with its strategy: “We don’t intend to pull out of the first-class market,” Mr. Tyler said. “We’re not a no-frills carrier, were a frills carrier.”
January 29, 2010
After a Bad Year, an Airline Picks Up Speed
By BETTINA WASSENER
HONG KONG — On a scale of one to ten, six is not exactly great. But in the airline industry, a self-declared confidence level of six is almost gushingly positive. Especially when it comes from Tony Tyler, the chief executive of Cathay Pacific, one of the largest and most established airlines in Asia and a bellwether for the entire region.
“I have been down in the twos and threes, so that’s a big step forward,” Mr. Tyler said in an interview in his office at Cathay’s headquarters at the Hong Kong airport last week, looking considerably more relaxed than he has been for many, many months.
Since the beginning of the fourth quarter last year, he said, Cathay has seen premium passenger travel and cargo demand start to recover. “And we’re still seeing some fairly good signs in the first quarter of this year.”
Indeed, business has picked up so much that a program under which Cathay Pacific’s more than 18,000 employees were asked to take unpaid leave will most likely not be extended: “It’s a one-off,” Mr. Tyler said, in a clear sign to the airline’s still-worried staff that they would not have to forgo as much as four weeks of pay for a second year running.
Several of the other cost-cutting measures Cathay announced at the height of the global financial crisis last year have already been rolled back: a previously idled freight aircraft has recently returned to service, and a passenger plane that was to have been parked is still in action.
Many scaled-back routes and frequencies have been reinstated. Jidda, Saudi Arabia, was added to Cathay’s network last October, and direct flights to Milan start in March. “One or two other destinations,” including Moscow, are on Cathay’s radar.
The comments from Mr. Tyler, a towering but approachable 54-year-old who occasionally plays guitar in a band called Night Flight, add to a steady trickle of evidence that the airline industry, mauled by the global economic turmoil last year, is now finally on a steadier path.
Korean Air, the largest cargo carrier among the world’s commercial airlines, announced last week that it had returned to profit during the final quarter of 2009. Singapore Airlines, which like Cathay is highly oriented toward premium travel, last month said it was reinstating some flights and would add Munich to its network starting in March. The major U.S. carriers, including Delta Air Lines, Continental Airlines and Southwest Airlines, also have said they were seeing business pick up, albeit slowly.
Japan Air Lines, which filed for bankruptcy protection last week, is the most notable exception to the trend in Asia.
Much depends on how the global economy develops, cautioned Mr. Tyler, who 10 months ago announced the airline’s biggest annual loss, for 2008, and pushed back some major spending plans amid the turmoil.
Founded in 1946 and operating out of the financial hub of Hong Kong, Cathay Pacific caters to the world’s jet-setting banking community and Asia’s increasingly affluent travelers, with upscale service standards to match. So the collapse in business- and first-class travel — one premium passenger gives Cathay about as much revenue as five economy passengers — hit Cathay Pacific especially hard, as did a drop in freight traffic.
Now, it seems, those same areas are set to rebound especially strongly this year. Asian carriers like Cathay, Singapore Airlines and Korean Airlines are well positioned to benefit as growth in Asia, and China in particular, accelerates more sharply than any other region in the world, say analysts like Mark Webb at HSBC in Hong Kong.
As a result, Asia-Pacific carriers are expected to see their losses narrow considerably this year to $700 million, from $3.4 billion last year, the International Air Transport Association estimates.
“We talk to our customers, the big banks, the other big corporate accounts: they all seem to think that they are going to see much more traveling this year than last, so that helps build our confidence,” said Mr. Tyler, the Cathay chief.
So is the airline industry out of the woods? Industry watchers like Peter Harbison, chairman of the Center for Asia Pacific Aviation, a consulting firm in Sydney, do not think so. And Giovanni Bisignani, director general of I.A.T.A., said this week that “the worst is behind us, but it is not time to celebrate.”
For one thing, the world’s airlines are expected to lose a total of $5.6 billion this year, $4.5 billion of that in Europe and North America, according to I.A.T.A. forecasts. (That would still be an improvement the $11 billion loss in 2009.)
Uncertainty about fuel prices remains a perennial worry for the industry. Strikes by disgruntled staff loom at carriers like British Airways.
And while the global economy is now in recovery mode, some observers worry that another dip could still materialize. Mr. Tyler, too, cautioned that it remained unclear whether the current recovery was just a blip.
“We’ll get a better view after Chinese New Year, which is always a bit of a watershed,” he said, referring to a holiday that this year falls in mid-February.
Finally, low-cost, no-frills carriers — long an established player on the American and European air travel stage — are now gaining traction in Asia too.
Just under one in six passengers, or 15.7 percent of people flying, in the Asia-Pacific region were carried by low-cost carriers last year, up from 1.1 percent in 2001, according to the Center for Asia Pacific Aviation.
Despite the growing popularity of budget carriers, Mr. Tyler plans to keep Cathay Pacific firmly in the premium market. A recent review of Cathay’s business model has so far yielded only minor changes — tweaks to seating configurations to shrink some premium cabins, and changes to the network — rather than a full-scale strategy shift, he said.
This will dismay some analysts, who argue that Cathay should have long ago reacted more aggressively to the growing challenge of budget airlines, possibly by setting up its own no-frills offshoot. That strategy has been pursued by Singapore Airlines (with Tiger Airways, which staged a successful market listing last week) and Qantas of Australia (with Jetstar).
Some analysts say that budget carriers like AirAsia and Jetstar present little danger to Cathay Pacific. Mr. Webb, the HSBC analyst, said Cathay could take on low-cost carriers through competitive fares.
“Full-service carriers like Cathay in Asia tend to be much more efficient than those elsewhere, meaning the differences between their fares and those offered by low-cost competitors are not as big as in other regions of the world,” he said. “In addition, the greater distances flown in Asia-Pacific mean the likes of Cathay deploy larger, wide-body planes, which are cheaper to operate, per passenger, than the narrow-body aircraft that the low-cost carriers tend to fly.”
So for now, at least, Cathay is sticking firmly with its strategy: “We don’t intend to pull out of the first-class market,” Mr. Tyler said. “We’re not a no-frills carrier, were a frills carrier.”
Join Date: Dec 2007
Location: MARS
Posts: 156
Likes: 0
Received 0 Likes
on
0 Posts
“We’re not a no-frills carrier, were a frills carrier.”
Join Date: Feb 2009
Location: Lion rock bottom
Posts: 174
Likes: 0
Received 0 Likes
on
0 Posts
"we're a frills carrier"
Join Date: Dec 1998
Posts: 116
Likes: 0
Received 0 Likes
on
0 Posts
BA and Virgin will operate A380's on their LHR-HKG routes later next year....then we will see them quake in CX city. The business class seats on the 380 are better than our first! But of course, the 777 will be what the pax want to fly on...NOT.
Join Date: Feb 2009
Location: Lion rock bottom
Posts: 174
Likes: 0
Received 0 Likes
on
0 Posts
Other airlines got the A380 to offer a better product to their pax. CX got the 777s so they could save money, since we don't do 'good customer product' anymore. I'm amazed they haven't gone 10 abreast on those like EK.
They'd rather carry less pax at a higher yield than seek to increase traffic. Now here's a strategy for the future...
Here's a tip for the 8th floor. Get Dragonair's A320s to fly to LHR. Honestly, those things cost nothing to run... They'd have to stop twice for gas but who cares since we're not out to please the pax anymore? Imagine the operational savings!
They'd rather carry less pax at a higher yield than seek to increase traffic. Now here's a strategy for the future...
Here's a tip for the 8th floor. Get Dragonair's A320s to fly to LHR. Honestly, those things cost nothing to run... They'd have to stop twice for gas but who cares since we're not out to please the pax anymore? Imagine the operational savings!
Join Date: Aug 2007
Location: VMC on top
Posts: 31
Likes: 0
Received 0 Likes
on
0 Posts
LHR after 2012
Yep 400 Roller's not compliant from 2012 i believe(confirmed by LON ENG)
I understand the bigger issue for the 400 is paying for any life extension. The old girl is fast approaching the end of her service life, so the cheaper solution must be to replace them. The million dollar question is which aircraft? We can probably fill 400+ seats in and out of LHR, so surely it must be bigger than a 300ER. I would think the B747-8 would be the most flexible contender (can still be used around the region during the day) but 380's may be going cheap. Who knows. I don't have the big picture.
Join Date: Jul 2008
Location: Asia
Posts: 89
Likes: 0
Received 0 Likes
on
0 Posts
Scope?
This will dismay some analysts, who argue that Cathay should have long ago reacted more aggressively to the growing challenge of budget airlines, possibly by setting up its own no-frills offshoot. That strategy has been pursued by Singapore Airlines (with Tiger Airways, which staged a successful market listing last week) and Qantas of Australia (with Jetstar).
Do we have any protection at all to fly these planes?
Join Date: Feb 2008
Location: Economy
Posts: 32
Likes: 0
Received 0 Likes
on
0 Posts
They just make Dragonair a low cost carrier. I think that's been part of their plan all along. The DFO has said many times a low cost model won't work in HKG due to slot availability and high airport fees. Well that has been proven wrong.
Join Date: Mar 2000
Posts: 19
Likes: 0
Received 0 Likes
on
0 Posts
Define LCC
The populist view of a LCC is a "no-frills" airline.... peanuts, limited customer service and these savings magically allow a 5 quid airfare and bumper profits.
I think a more serious definition of a LCC is a carrier that flys between 2 big (enough) population centres, probably already served by a carrier. The LCC gains a comparative advantage over the established carrier by operating on a lower cost by using secondary airports with a greater aircraft utilization and it would seem, although vehemented denied, receiving "inducements" from local governments and businesses to use that secondary airport.
Applying the LCC model to HK is difficult because there is no viable secondary airport to many of the region's main population centres.... HK, SIN, TPE.... Equally, CX is not bad at aircraft utilization. As for staff costs; apart from us overpaid expats, the staff costs must be fairly competitive by global standards.
I really do not buy into the argument that bumper profits will come by CX rebranding a few aircraft with gawdy advertisements and have minimal F/As chucking out peanuts, all funded by 150 HKD100 airfares.... the maths just don't add up....
I think a more serious definition of a LCC is a carrier that flys between 2 big (enough) population centres, probably already served by a carrier. The LCC gains a comparative advantage over the established carrier by operating on a lower cost by using secondary airports with a greater aircraft utilization and it would seem, although vehemented denied, receiving "inducements" from local governments and businesses to use that secondary airport.
Applying the LCC model to HK is difficult because there is no viable secondary airport to many of the region's main population centres.... HK, SIN, TPE.... Equally, CX is not bad at aircraft utilization. As for staff costs; apart from us overpaid expats
, the staff costs must be fairly competitive by global standards.I really do not buy into the argument that bumper profits will come by CX rebranding a few aircraft with gawdy advertisements and have minimal F/As chucking out peanuts, all funded by 150 HKD100 airfares.... the maths just don't add up....
AQIS Boigu
They may not present themselves as Low Cost to the public but they are Low Cost in terms of staff remuneration. Even with the lowest staff costs for an airline based out of HK and probably the region they still can’t make money. The reason is as Liam has stated. No viable secondary airports and in the case of HKA/HKE probably low/poor aircraft utilization.
My point was directed to "Dead Head's" quote:
Contrary to his remarks the DFO’s remarks haven’t been proven wrong.
They may not present themselves as Low Cost to the public but they are Low Cost in terms of staff remuneration. Even with the lowest staff costs for an airline based out of HK and probably the region they still can’t make money. The reason is as Liam has stated. No viable secondary airports and in the case of HKA/HKE probably low/poor aircraft utilization.
My point was directed to "Dead Head's" quote:
The DFO has said many times a low cost model won't work in HKG due to slot availability and high airport fees. Well that has been proven wrong.
Join Date: Feb 2008
Location: Economy
Posts: 32
Likes: 0
Received 0 Likes
on
0 Posts
Air Asia- low cost model- based KUL and fly to BKK and HKG
Tiger Airways -based out of SIN and partly owned by Singapore and Tony Ryan (Air)- also low cost
What do you think the intent of the North Satellite Concourse? (designed for narrow body aircraft)
DFO was wrong on this one.
I've flown Air Asia and BKK-HKG and was impressed.
Didn't we just start charging for emergency exit seats? What's next?
Tiger Airways -based out of SIN and partly owned by Singapore and Tony Ryan (Air)- also low cost
What do you think the intent of the North Satellite Concourse? (designed for narrow body aircraft)
DFO was wrong on this one.
I've flown Air Asia and BKK-HKG and was impressed.
Didn't we just start charging for emergency exit seats? What's next?
Dead Head
And which of those airlines are based out of HK with all their flights either origination or finishing out of HK?
As for the intent of the North Satellite. Yes it was intended for regional LCC’s. Only problem is that the HK airport authority charges them the same as everyone else and have absolutely no intention of changing that. The reality is that most narrow body operators use it. Infact I haven’t yet seen a LCC use it yet.
Singapore has a LCC terminal and charges accordingly. BKK and KUL charge their LCC’s cheaper rates than the full service carriers. As for Ryan Air. Have a look where they fly to. Do a little investigating on how a great deal of these secondary airports got them to fly there in the first place and you will find they get paid by these airports to operate there.
Actually no. We have started charging for bulkhead seats. There is a difference.
Air Asia- low cost model- based KUL and fly to BKK and HKG
Tiger Airways -based out of SIN and partly owned by Singapore and Tony Ryan (Air)- also low cost
Tiger Airways -based out of SIN and partly owned by Singapore and Tony Ryan (Air)- also low cost
What do you think the intent of the North Satellite Concourse? (designed for narrow body aircraft)
Singapore has a LCC terminal and charges accordingly. BKK and KUL charge their LCC’s cheaper rates than the full service carriers. As for Ryan Air. Have a look where they fly to. Do a little investigating on how a great deal of these secondary airports got them to fly there in the first place and you will find they get paid by these airports to operate there.
Didn't we just start charging for emergency exit seats? What's next?
Join Date: Mar 2000
Posts: 19
Likes: 0
Received 0 Likes
on
0 Posts
Deadhead
Don't get too bogged down in the LCC mantra of no-frills and extra charges make a sound business model. LCC's are far more sophisticated than that.
The North Concourse is still owned and administrated by the HK govt and I believe they will price it's useage at what's best for HK, in terms of revenue received and also jobs (preferrably skilled) that any so called LCC will bring to HK. The HK govt has no motivation to see a foreign airline succeed at the expense of a HK airline.
As for setting up a HK LCC; it's a big risk because your investment is based upon the whim of the HK govt.... if the political breeze changes direction, you lose your house.... just ask Oasis....
The North Concourse is still owned and administrated by the HK govt and I believe they will price it's useage at what's best for HK, in terms of revenue received and also jobs (preferrably skilled) that any so called LCC will bring to HK. The HK govt has no motivation to see a foreign airline succeed at the expense of a HK airline.
As for setting up a HK LCC; it's a big risk because your investment is based upon the whim of the HK govt.... if the political breeze changes direction, you lose your house.... just ask Oasis....