Wirraway
12th Aug 2004, 15:27
Fri "The Australian"
Cathay's master class in survival
By Geoffrey Thomas
August 13, 2004
FOR many years Cathay Pacific Airways wooed passengers with the promise of "arriving in better shape" because of its award-winning customer service and cabin amenities.
Today, director of corporate development Tony Tyler brags that "no airline is in better shape", given the turbulence that the Hong Kong-based carrier has endured.
Cathay has survived the 1997-98 Asian currency crisis, avian flu, the handover of Hong Kong to China, the transition to the new Hong Kong International Airport in 1998, a long-running dispute with its pilots that flared into open warfare in 1991 and 2001 and, to top it off, last year's devastating SARS outbreak.
Despite all this, the company has made money in nine of the past 10 years, sliding into the red only in 1998.
JP Morgan airline analyst Peter Negline describes Cathay's management team as "one of Hong Kong's best", and it proved it last year when SARS struck and Hong Kong was Disease Central.
In a matter of weeks, traffic fell from 40,000 passengers a day to just 5000. "On many flights, we had more cabin crew than passengers," director Philip Chen said at the time.
During May 2003 Cathay's load factor was just 41.4 per cent and by the end of the month it had parked 22 aircraft as capacity dropped 42 per cent.
"We really couldn't cut back any further without closing down the airline," Mr Tyler said.
Fortunately the carrier was sitting on a "pile of cash" as a result of frugal management, and Mr Tyler claims it would have been able to survive without passengers for up to 18 months.
But he admits that it crossed his mind that SARS could kill Cathay.
The airline's turnaround in the final six months of last year was remarkable. After a first-half loss of $HK1.24 billion ($223million), it bounced back to end 2003 with a profit attributable to shareholders of $HK1.3 billion and shareholders even received a small dividend.
This year the news is even better, with the airline reporting on Wednesday a first-half profit attributable to shareholders of $HK1.77 billion.
Turnover was 48 per cent higher at $HK18.2 billion and passengers carried increased by 59.3 per cent to 6.4 million.
In stark contrast to the bleak days of SARS, Cathay set passenger records in July this year. The airline carried 1,268,634 passengers last month, a new one-month record, up from 1,142,345 carried in June.
It also set a new one-day passenger record of 45,803 on July 4, beating a week-old record of 45,331 passengers set on June 27.
The record high passenger numbers were produced by an 81.3 per cent load factor, the highest this year.
Cathay also carried 80,811 tonnes of cargo in July, up from 76,769 tonnes in June, and it was cargo that rescued the airline last year. Cargo generated $HK9.91 billion in revenues last year, up 5.6 per cent over 2002, and accounted for around 33 per cent of total turnover.
The extraordinary passenger recovery, supported by the robust cargo sector, gave Cathay's management the confidence to resume its focus on Hong Kong as Asia's premier hub. More than 50 per cent of the airline's traffic transits through Hong Kong.
"Hong Kong has half the world's population within five hours - there is great potential," Mr Tyler said.
That strategy has numerous facets.
First out of the blocks in January this year was the 747-400 Special Freighter program with an order to convert at least six and as many as 12 747-400 passenger aircraft. The first is expected to be completed in December 2005, with five others by 2007.
To support new routes into China and increase regional flights to destinations such as India and the Middle East, Cathay ordered two 777-300s and six A330-300s in April for delivery between 2005 and 2007.
This week Cathay announced an order for eight used 747-400s to be used for both passenger and cargo.
The airline is also interested in yet another version of the 747-400, dubbed the 747 Advanced, which will have 7E7 Rolls-Royce Trent 1000 engines and carry an additional 30 passengers. It is considering an order for more A340-600s and/or the 777-300ER.
In contrast to SIA and Qantas, Cathay is far from convinced about the potential for low-cost carriers in Asia. Executives highlight as limiting factors the distances, multitude of countries, lack of major secondary airports and aeropolitical constraints.
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Cathay's master class in survival
By Geoffrey Thomas
August 13, 2004
FOR many years Cathay Pacific Airways wooed passengers with the promise of "arriving in better shape" because of its award-winning customer service and cabin amenities.
Today, director of corporate development Tony Tyler brags that "no airline is in better shape", given the turbulence that the Hong Kong-based carrier has endured.
Cathay has survived the 1997-98 Asian currency crisis, avian flu, the handover of Hong Kong to China, the transition to the new Hong Kong International Airport in 1998, a long-running dispute with its pilots that flared into open warfare in 1991 and 2001 and, to top it off, last year's devastating SARS outbreak.
Despite all this, the company has made money in nine of the past 10 years, sliding into the red only in 1998.
JP Morgan airline analyst Peter Negline describes Cathay's management team as "one of Hong Kong's best", and it proved it last year when SARS struck and Hong Kong was Disease Central.
In a matter of weeks, traffic fell from 40,000 passengers a day to just 5000. "On many flights, we had more cabin crew than passengers," director Philip Chen said at the time.
During May 2003 Cathay's load factor was just 41.4 per cent and by the end of the month it had parked 22 aircraft as capacity dropped 42 per cent.
"We really couldn't cut back any further without closing down the airline," Mr Tyler said.
Fortunately the carrier was sitting on a "pile of cash" as a result of frugal management, and Mr Tyler claims it would have been able to survive without passengers for up to 18 months.
But he admits that it crossed his mind that SARS could kill Cathay.
The airline's turnaround in the final six months of last year was remarkable. After a first-half loss of $HK1.24 billion ($223million), it bounced back to end 2003 with a profit attributable to shareholders of $HK1.3 billion and shareholders even received a small dividend.
This year the news is even better, with the airline reporting on Wednesday a first-half profit attributable to shareholders of $HK1.77 billion.
Turnover was 48 per cent higher at $HK18.2 billion and passengers carried increased by 59.3 per cent to 6.4 million.
In stark contrast to the bleak days of SARS, Cathay set passenger records in July this year. The airline carried 1,268,634 passengers last month, a new one-month record, up from 1,142,345 carried in June.
It also set a new one-day passenger record of 45,803 on July 4, beating a week-old record of 45,331 passengers set on June 27.
The record high passenger numbers were produced by an 81.3 per cent load factor, the highest this year.
Cathay also carried 80,811 tonnes of cargo in July, up from 76,769 tonnes in June, and it was cargo that rescued the airline last year. Cargo generated $HK9.91 billion in revenues last year, up 5.6 per cent over 2002, and accounted for around 33 per cent of total turnover.
The extraordinary passenger recovery, supported by the robust cargo sector, gave Cathay's management the confidence to resume its focus on Hong Kong as Asia's premier hub. More than 50 per cent of the airline's traffic transits through Hong Kong.
"Hong Kong has half the world's population within five hours - there is great potential," Mr Tyler said.
That strategy has numerous facets.
First out of the blocks in January this year was the 747-400 Special Freighter program with an order to convert at least six and as many as 12 747-400 passenger aircraft. The first is expected to be completed in December 2005, with five others by 2007.
To support new routes into China and increase regional flights to destinations such as India and the Middle East, Cathay ordered two 777-300s and six A330-300s in April for delivery between 2005 and 2007.
This week Cathay announced an order for eight used 747-400s to be used for both passenger and cargo.
The airline is also interested in yet another version of the 747-400, dubbed the 747 Advanced, which will have 7E7 Rolls-Royce Trent 1000 engines and carry an additional 30 passengers. It is considering an order for more A340-600s and/or the 777-300ER.
In contrast to SIA and Qantas, Cathay is far from convinced about the potential for low-cost carriers in Asia. Executives highlight as limiting factors the distances, multitude of countries, lack of major secondary airports and aeropolitical constraints.
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