Cloud Cuckooland
19th Jan 2001, 15:10
Yesterday's I-Mail:
CATHAY Pacific Airways (0293) has put on hold its tender exercise for new aircraft ,including the double-deck Airbus A380, amid concerns that a looming slowdown in the US economy could adversely impact on passenger and cargo traffic. Both Boeing and Airbus have submitted proposals to Hong Kong's de facto flag carrier for a mix of new planes, including up to 10 Airbus A380s or stretched Boeing 747-400X plus other smaller types comprising 747-400 freighters, long-range Boeing 777-300s and Airbus A330s. Together these orders were worth up to US$5 billion (HK$39 billion). The aircraft manufacturers were expecting to start discussing details of the orders shortly with CathayPacific. The carrier was hopeful of placing orders by the end of March to enable either Boeing or Airbus to deliver the777s or A330s next year in time to handle a crunch in capacity.
The stretched 747s or the A380s would have been delivered from 2006-07. But in an interview, Cathay Pacific executive director
Corporate development Tony Tyler said: "There are concerns about the US economy. Before we order, we might as well wait to see indications which way it's going. It's hard to say if our decision is a deferment or not but it's certainly a review of our needs.''
Boeing and Airbus said they had a policy not to comment on talks with their airline customers.
Cathay Pacific planned to introduce the A380s or 747Xs on new non-stop routes between Hong Kong and New York and Toronto and augment existing trunk routes to London, Manchester and Paris. The 777s or A330s would be earmarked for services to Asian and Middle Eastern destinations. Cathay Pacific saw average passenger load factors of 76.5 per cent from January to November last year, a 5 per cent rise over 1999. Cargo traffic also grew by 15.7 per cent in the same 11-month period to more than 700,000 tonnes. If these growth rates continue, Cathay Pacific would
face a capacity crunch on some routes as demand outstrips the number of available seats or cargo space. Cathay will receive another 10 aircraft this year to augment its fleet of 67 planes or replace old jets. Cathay had said it planned to make a decision this quarter on how to expand its fleet by about 7 per cent a year to meet expected demand in the next three years and to match new non-stop flights planned by rival airlines. These include US carriers United Airlines and Continental Airlines which plan to start non-stop flights between New York and Hong Kong over the next threemonths.
New fuel-efficient planes would help the airline cut operating costs and offer improved services to compete with regional rivals Singapore Airlines and Qantas Airways. But Cathay's reticence to order new aeroplanes beyond those scheduled for delivery this year reflects concern that slowing global economic growth would hurt demand for travel and airfreight. With consumer spending in the United States slowing - fourth-quarter retail sales in the US posted the biggest drop in 10 years and the US economy probably grew atits slowest pace ince the second quarter of 1995 - travel and cargo demand is likely to slip for companiesin Asia as well. But these concerns have not stopped two major US airlines - Northwest Airlines, the world's fourth largest airline, and all-cargo carrier FedEx Express - from ordering a total of 42 aircraft in the last two days.
Cathay Pacific is also concerned about fuel prices, said its spokesman Nick Reynolds. The Organisation of Petroleum Exporting Countries (Opec) plans to cut supplies for the first time in two years to keep prices between US$22 and US$28 per barrel of crude. That would keep prices of refined products such as jet kerosene high. The price of jet fuel on Singapore's spot market ended last year at US$28.85 a barrel, from an average of US$34.45 all year and as high as US$47.55 in October. Cathay hedges on fuel price for about two-thirds of its needs but still saw fuel costs soar nearly 60 per cent in the first half of last year compared with January-June 1999. At the same time Cathay Pacific needs to maintain and improve its services to lure customers, who helped the airline chalk up record first-half profit. Cathay earned a record $2.18 billion, or 64.1 cents a share, in the first half, helped by Hong Kong's 12.6 per cent economic growth. It has said a full-year net income of $4 billion is likely.
Cathay shares fell as much as 1.6 per cent to HK$12.15 in Hong Kong. The stock had lost 14 per cent since the beginning of the year, compared with a 1.8 per cent gain in the benchmark Hang Seng Index.
CATHAY Pacific Airways (0293) has put on hold its tender exercise for new aircraft ,including the double-deck Airbus A380, amid concerns that a looming slowdown in the US economy could adversely impact on passenger and cargo traffic. Both Boeing and Airbus have submitted proposals to Hong Kong's de facto flag carrier for a mix of new planes, including up to 10 Airbus A380s or stretched Boeing 747-400X plus other smaller types comprising 747-400 freighters, long-range Boeing 777-300s and Airbus A330s. Together these orders were worth up to US$5 billion (HK$39 billion). The aircraft manufacturers were expecting to start discussing details of the orders shortly with CathayPacific. The carrier was hopeful of placing orders by the end of March to enable either Boeing or Airbus to deliver the777s or A330s next year in time to handle a crunch in capacity.
The stretched 747s or the A380s would have been delivered from 2006-07. But in an interview, Cathay Pacific executive director
Corporate development Tony Tyler said: "There are concerns about the US economy. Before we order, we might as well wait to see indications which way it's going. It's hard to say if our decision is a deferment or not but it's certainly a review of our needs.''
Boeing and Airbus said they had a policy not to comment on talks with their airline customers.
Cathay Pacific planned to introduce the A380s or 747Xs on new non-stop routes between Hong Kong and New York and Toronto and augment existing trunk routes to London, Manchester and Paris. The 777s or A330s would be earmarked for services to Asian and Middle Eastern destinations. Cathay Pacific saw average passenger load factors of 76.5 per cent from January to November last year, a 5 per cent rise over 1999. Cargo traffic also grew by 15.7 per cent in the same 11-month period to more than 700,000 tonnes. If these growth rates continue, Cathay Pacific would
face a capacity crunch on some routes as demand outstrips the number of available seats or cargo space. Cathay will receive another 10 aircraft this year to augment its fleet of 67 planes or replace old jets. Cathay had said it planned to make a decision this quarter on how to expand its fleet by about 7 per cent a year to meet expected demand in the next three years and to match new non-stop flights planned by rival airlines. These include US carriers United Airlines and Continental Airlines which plan to start non-stop flights between New York and Hong Kong over the next threemonths.
New fuel-efficient planes would help the airline cut operating costs and offer improved services to compete with regional rivals Singapore Airlines and Qantas Airways. But Cathay's reticence to order new aeroplanes beyond those scheduled for delivery this year reflects concern that slowing global economic growth would hurt demand for travel and airfreight. With consumer spending in the United States slowing - fourth-quarter retail sales in the US posted the biggest drop in 10 years and the US economy probably grew atits slowest pace ince the second quarter of 1995 - travel and cargo demand is likely to slip for companiesin Asia as well. But these concerns have not stopped two major US airlines - Northwest Airlines, the world's fourth largest airline, and all-cargo carrier FedEx Express - from ordering a total of 42 aircraft in the last two days.
Cathay Pacific is also concerned about fuel prices, said its spokesman Nick Reynolds. The Organisation of Petroleum Exporting Countries (Opec) plans to cut supplies for the first time in two years to keep prices between US$22 and US$28 per barrel of crude. That would keep prices of refined products such as jet kerosene high. The price of jet fuel on Singapore's spot market ended last year at US$28.85 a barrel, from an average of US$34.45 all year and as high as US$47.55 in October. Cathay hedges on fuel price for about two-thirds of its needs but still saw fuel costs soar nearly 60 per cent in the first half of last year compared with January-June 1999. At the same time Cathay Pacific needs to maintain and improve its services to lure customers, who helped the airline chalk up record first-half profit. Cathay earned a record $2.18 billion, or 64.1 cents a share, in the first half, helped by Hong Kong's 12.6 per cent economic growth. It has said a full-year net income of $4 billion is likely.
Cathay shares fell as much as 1.6 per cent to HK$12.15 in Hong Kong. The stock had lost 14 per cent since the beginning of the year, compared with a 1.8 per cent gain in the benchmark Hang Seng Index.