C-152Captain
21st Jun 2007, 04:10
By Jim Glab
Air Transport World, September 2006, p.57
Look back into the history of any large company and odds are you will find some ironies lurking in its past. Cathay Pacific Airways, celebrating its 60th birthday this month, is no exception. Here's one: Although its name is virtually synonymous with Hong Kong, the two men who initially got it off the ground were from Texas and Australia. Here's another: What they really wanted to do was to start a trading company, not a passenger airline.
But it was aviation that brought them to Asia in the first place, that and World War II. The roots of Cathay Pacific can be traced back to the legendary airlift operated by Allied forces shuttling supplies from British India to the beleaguered forces of Chiang Kai-shek in China. The heart of the route, from Dinjan in northeast India to Kunming in China, required pilots to straddle the Burmese border, always on the lookout for Japanese fighters, and to lift their unpressurized DC-3s and C-47s over higher and higher mountain ranges, up to 14,000 ft. That supply route gained notoriety as The Hump, taking the lives of scores of fliers.
Two pilots who flew it countless times and survived were Roy "Pappy" Farrell from Texas and Syd de Kantzow from Australia. Both were flying for the China National Aviation Company, a joint venture of the Chinese government and Pan American Airways that still exists today in a different form, when the war and the Japanese invasion of China put them into uniform.
During their hours in the air or waiting for their next mission, Farrell and de Kantzowwho actually met during down time on a tiger hunthad plenty of time to contemplate their postwar future, and China played a major role in these musings for both. Based on his experience, Farrell saw China as a huge market that would need tons of commodities from the US when hostilities ended. (He initially planned on developing this trade by ship rather than air.) De Kantzow harbored similar thoughts, but with his eyes on Australia as the supplier.
They returned to their home countries when the war ended and Farrell immediately started looking for a way to transport a load of consumer goods back to China. In New York he scouted for a ship, but vessels were in short supply. He was drinking with a friend at the Lexington Hotel when the latter suggested what should have occurred to a pilot without prompting: Buy an airplane. The friend told him the military was selling much of its wartime fleet in Augusta, Ga., so Farrell hustled down there and bought a C-47 for $30,000.
A Legend is Born
He flew the plane, which he named Betsy and which today resides comfortably in the Hong Kong Science Museum, back to LaGuardia and essentially bribed some TWA mechanics to convert it into a DC-3 for civilian use, with extra tanks for transpacific flying. He loaded her up with goods, hired a crew and took off via the South Atlantic, Egypt and India to Shanghai. But when he took a close look at the market, he found American goods already flooding in so he shifted his attention to Australian commodities instead. Armed with a landing permit for Darwin, he opened a small office in Shanghai and hung up a shingle as the Roy Farrell Export-Import Company. He was authorized to haul freight, but not passengers, between Australia and China.
In February 1946, his first flight took Australian woolen clothes to China and brought back Chinese silks, fishing tackle and other goods. The trading business took off, buoyed by strong demand at both ends. One day his old flying buddy de Kantzow walked into the Shanghai office and became a minority investor and partner on the spot. Together they plotted the company's growth, adding a C-47 and four DC-3s over the next two years. They transported whatever the market would bear: Hats, pig bristles, live chicks, costume jewelry, hairnets, table linens, leather goods, even fresh Sydney Rock Oysters for restaurateurs in Hong Kong.
Because Hong Kong was situated roughly in the middle of their trading network, Farrell and de Kantzow made it their base of operations. They also divided responsibilities, with Farrell concentrating on buying and selling goods and de Kantzow overseeing the air operations. Eventually they separated the aviation division from the trading company, not only because de Kantzow had his eye on the passenger market but also because British law required aircraft operators to be two-thirds controlled by British citizens. So de Kantzow and another Aussie, Neil Buchanan, became two of the three directors; Farrell was the third and retained control of the trading company.
This cleared the way not only for their Hong Kong base but for passenger operations. They incorporated in September 1946 under the name Cathay Pacific Airways (they originally wanted to call it Air Cathay from the comic strip "Terry and the Pirates," but Farrell discovered that name was already in use). The new airline started flying charters all over Southeast Asia, occasionally getting caught up in political intrigues and dangers such as shuttling Emperor Bao Dai out of Vietnam during the Viet Minh uprisings there and taking on assignments from Indonesian nationalists despite an air blockade imposed by their Dutch colonial rulers. Two aircraft went to Burma to carry men and materiel for the government in its battle against insurgents; one was captured by the rebels, who forced the pilots to transport their troops to help capture a key town.
Cathay set up a Macao subsidiary in 1948, buying a pair of Catalina seaplanes to ferry shipments of gold for Hong Kong traders. One of these became the object of what is believed to be the first hijacking in aviation history. Four armed men, one trained to fly PB4Ys, boarded a flight, intending to divert it to a secret landing spot and take its gold. But one hijacker ended up shooting the pilot, who fell onto the controls and sent the plane crashing into the waters off Hong Kong.
Farrell's and de Kantzow's days at Cathay were numbered when the British government in London became more insistent about wanting British ownership of all communications and transportation companies in the empire for reasons of national security. It became apparent they would have to sell.
A New Owner
The airline's history for the next few decades was affected by a new player entering the stage: John (Jock) Swire, scion of a long-established British shipping and trading company, John Swire & Sons. Jock's father had extended the business to the Far East in 1866 when he set up a China office with a partner named Butterfield; the Chinese operation was called Butterfield & Swire. By the time Jock took it over, it had passenger ships running along China's coast and up its rivers as the China Navigation Company; other businesses included a sugar refinery and a dockyard in Hong Kong.
As World War II was breaking out in Asia, one of Jock Swire's lieutenants floated the idea of getting involved in air transport. Swire's Asian businesses, both ships and land-based facilities, were devastated by the war and Jock's interest in air transport increased once Japan was defeatedespecially since his biggest competitor, Jardine Matheson, was thinking along the same lines. It started its own airline company, Hong Kong Airways, just after the war.
Rather than start an airline, a business in which his company had no experience, Jock Swire decided to shop for one. Cathay was an attractive target, especially since de Kantzow had strong personal connections with the Hong Kong aviation authorities who approved routes and licenses. Swire forged a partnership with executives of Australian National Airways, which was trying to secure a Hong Kong-Australia service, relying on its aviation expertise in bidding for Cathay. In 1948 they concluded a deal giving 35% of Cathay to Swire's China Navigation Co., another 35% to ANA, 10% to Swire & Sons and 10% each to de Kantzow and to Farrell's company. Shortly thereafter, Farrell sold his stake and went back to Texas; de Kantzow stayed on as operational head for a few years, but he didn't like the sluggishness of a large corporation so he returned to Australia.
Another key moment in the company's future came in 1949 when the colony's authorities carved up route rights between Cathay Pacific and Hong Kong Airways, which by then was owned by British Overseas Airways Corp. Cathay got the plum routes to the south, which it was already flyingBangkok, Manila, Singapore, Saigon and so on. HKA got rights to the northto China, which was wracked by civil war and a Communist takeover, and to Japan, just starting to recover from its defeat and destruction. HKA clearly got the short end of that stick: Within a decade, BOAC traded HKA to Cathay for a 15% stake in the latter and a seat on its board.
When de Kantzow left the company in 1951, Cathay had two DC-3s (Betsy and Nikki) and a 43-passenger DC-4 Skymaster that was in such constant use that it suffered from recurring maintenance problems. Meanwhile, the airline was suffering significant losses, in large part because Chinese passenger traffic throughout the region dropped off after the revolution on the Mainland. Cathay needed investment capital, and it got some from British shipping giant P&O, which acquired a 31% stake.
Helped by the infusion, it muddled along without incident until 1954, when it lost its DC-4 in a serious international incident: The aircraft was shot down over international waters by Communist Chinese fighter planes on a flight from Singapore to Hong Kong but a few passengers and two crewmembers, including the pilot, survived to tell what had happened. Faced with international outrage, the Beijing government claimed the DC-4 was mistaken for a Nationalist spy plane from Taiwan and paid full reparations. Cathay quickly leased another DC-4 from Canadian Pacific Airlines, then bought a DC-6 from Pan American-Grace Airways. In 1955 it sold its first aircraft, Farrell's beloved Betsy, to a small New Guinea airline.
The airline's fortunes got a boost in 1958 when Hong Kong opened a new 8,350-ft. runway at Kai Tak Airport, making it accessible to larger, longer-range planes, and again in 1959 when Kai Tak added runway lights and opened up to night operations. Cathay acquired a DC-6B and put it onto the Kong Kong-Taipei-Tokyo route it acquired when it took over HKA.
In 1959 it added its first non-Douglas plane, a two-class, 78-passenger Lockheed Electra, which it deployed on the Singapore route. A second Electra soon followed. It also added more routes in its corner of the world, starting service to Calcutta and Sydney, although it was driven out of the latter shortly thereafter when Qantas put 707s into service between Hong Kong and Sydney.
The Jet Age
That experience with Qantas and the rush among the world's airlines in the early 1960s to acquire jets convinced even the conservative Swire management that fleet renewal was urgently needed, so between 1962 and 1968 Cathay made a swift transition to an all-jet fleet. It sold off its last DC-3, its DC-6s and DC-4 and then its Electras, turning to a single aircraft type, the Convair 880. It acquired eight in six years and kept flying them into the next decade. Business flourished in the 1960s thanks to a growing Hong Kong tourist boom, economic growth in its key markets and its strong reputation for technical excellence and quality service that continues today.
By the time Jock Swire retired in the late 1960sreplaced on the Swire and Cathay boards by his two sons, John and Adrianthe airline had carried more than a million passengers and grown to a staff of more than 1,300. (By 1973 it was carrying a million passengers a year.) While its top management and pilots remained British and Australian, employees were a diversified lot from countries all over the region, and so were its passengers. The company itself had diversified as well, with operations including a major maintenance base at Kai Takthe well-known Hong Kong Aircraft Engineering Companythat served scores of airlines, a catering company and a joint venture that provided ground handling services at the Hong Kong airport.
In the early 1970s, Cathay turned to Boeing equipment for the first time, acquiring a dozen 707s and using them to revive the Australia route it had ceded to Qantas years earlier. New technology started coming onboard, like its first flight simulators and its first computerized reservations system. It extended its route network west of India in 1976-77, adding service to Bahrain and Dubai.
It was time for the carrier to add widebodies to its fleet and it initially settled on the DC-10. But after a last-minute pressure campaign from the British government, it decided to go with the L-1011 powered by Rolls-Royce engines. It took on nine TriStars by 1979 but also added its first Boeing widebody that year, a 747-200B.
It was 747 service that Cathay proposed in applying for rights to London via the Middle East in 1979. However, the UK licensing authority denied it the new service, giving it exclusively to British Caledonianwhich, ironically, argued for the superiority of its planned service by noting it would use the same DC-10s that the government had persuaded its rival not to buy. However, the UK Minister of Trade overturned the licensing body's ruling and Cathay began flying to London in July 1980.
Going Global
The world's airlines enjoyed a traffic boom in the 1980s and Cathay, in the midst of an Asian economic surge, shared in the prosperity as its reputation for excellence continued to grow. Although Jock Swire always had been wary of extending the carrier's range beyond the region, the new management undertook a wave of global expansion, adding one or two 747s a year, both passenger and freighter versions. In 1982 it added Auckland, in 1983 it started transpacific service to Vancouver and began flights to Frankfurt, in 1986 Rome, Amsterdam, Paris and San Francisco joined the network and in 1988 Zurich.
As Cathay's passenger traffic grewfrom 1 million in 1973 to 5 million annually by 1987so did its freight tonnage. In 1988 it set up a separate division just for cargo and two years later it created a global cargo logistics partnership called TRAXON with Air France, Japan Airlines and Lufthansa.
It never was an airline to stick with a single manufacturer and that continued into the 1990s. Besides ordering a number of 747-400s and 777s for intercontinental services, it turned to A330s and A340s to replace its aging fleet of TriStars on regional routes. It got its first 777 and first A340 in 1996.
Like most businesses in the region, Cathay was hurt by the Asian currency crisis of 1997-98 and the following year it posted its first annual loss in 35 years. But much larger issues loomed during that decade: Its home base of Hong Kong reverted to China in 1997, a development that brought with it a complex web of ownership transactions. In fact, those changes started several years earlier in the run-up to the political changes.
Just as the British government had been unprepared to accept the presence of a foreign-controlled airline in 1947, the Chinese government in the maneuvering up to the handover of Hong Kong made it clear that the ownership of Cathay would need to reflect coming political reality. The carrier had conducted an IPO in 1986, but Swire maintained a controlling interest. However, in 1996 it agreed to reduce its stake from 53% to 44% while CITIC, the HK-based investment arm of the mainland government, boosted its 10% stake to 25%.
The second part of the deal involved Dragonair, of which Cathay and Swire had acquired control in 1990. CNAC (remember them?) was permitted to acquire 36% of that airline while CITIC saw its stake reduced from 46% to 29% and Swire/CPA dropped from 43% to 26%. (Ironically, earlier this year Cathay repurchased Dragonair).
After the handover, the first major project in the new Hong Kong Special Administrative Region opened in 1998 in the form of Hong Kong International Airport at Chek Lap Kok, which replaced old and highly constrained Kai Tak. Cathay invested more than HK$1 billion in the new airport, moving its operations and headquarters there. Its Cathay Pacific City at HKIA is home to some 4,000 permanent staff and the base for 5,000 cabin and cockpit crew.
Despite the political changes in its home market, the airline continued to become ever more global in its business outlook. In 1998 it became a founding member of the oneworld alliance along with British Airways, American Airlines and Qantas. In 2000 it signed a comprehensive codeshare pact with American. As the new century began, it moved ahead with fleet modernization and passenger-friendly technological innovation. It ordered 15 new widebodies from Boeing and Airbus and said in 2000 that all its new planes will have in-seat power ports and inflight e-mail capability. It also installed wireless Internet service in The Wing, its premium lounge complex at HKIA. In 2001 it was one of the first to debut online check-in and self-service airport kiosks.
SARS
But in early 2003, disaster struck. It had the acronym SARS (severe acute respiratory syndrome) and it devastated the airline business in East Asia. SARS-wary passengers stayed away in droves, forcing Cathay to slash its schedule by a staggering 45% as traffic fell off as much as 75% from 2002 levels. At the height of the crisis, with 22 aircraft parked and others flying nearly empty, it asked its workers to take a month's unpaid leave, subsequently cut to three weeks. By year end, however, traffic had recovered and it was able to pay them all for the "extra holiday."
Since it lost control of Dragonair, Cathay had been maneuvering for its own rights to the Chinese mainland and it made a breakthrough in 2003 when it was allowed to start flying to Beijing. In 2004 it began direct service to Moscow through a new codeshare with Aeroflot, and that same year it took another global stride by launching transpolar nonstops between New York JFK and Hong Kong using an A340-600 for the 14-1/2 hour journey.
Late in 2004, China gave Cathay expanded passenger rights to Beijing, new passenger authority for Xiamen and rights to operate cargo flights into Shanghai. The airline had been cultivating good relations with the mainland government: It agreed to provide management training to CAAC and invested $384 million for a 10% stake in Air China, forging a codesharing and frequent-flier partnership in the process.
All of this would pay off by 2006 with a major new Cathay-Air China partnership that has seen Cathay repurchase control of Dragonair and boost its stake in Air China to 20% while Air China will hold 17.5% of Cathay on its own and through CNAC. Cathay Chief Executive Philip Chen said the two moves "will reinforce Hong Kong's role as the premier aviation hub in the Asia/Pacific region and create one of the world's strongest airline groupings."
Today, Cathay Pacific has a fleet of 101 aircraft, all widebodies, with several more on the way over the next two years. It carried more than 15 million passengers in 2005 and placed its biggest aircraft order ever for up to 36 777-300ERs and three A330s. In terms of revenues, it is the 18th-largest passenger airline in the world, had the ninth-highest net profit and is the sixth-largest in stock market value. Earlier this year, the editors of ATW named it the 2006 Airline of the Year, the second time it has earned ATW's highest honor. It's come a long way since Roy Farrell ferried his little DC-3 halfway around the world to start flying out of Shanghai in 1946.
Readers interested in learning more about Cathay Pacific's early history should read Beyond Lion Rock by Gauin Young (Hutchinson, Ltd., 1988). Unfortunately, the book is out of print.
Betsy Comes Home
The World War II surplus C-47 that Roy Farrell bought in Georgia in 1945 and converted to a DC-3 nicknamed Betsy in New York before flying it to Shanghai disappeared from history after Cathay Pacific sold it off in 1955 to a small airline in New Guinea. But somehow in the mid-1980s the aging aircraft resurfaced, this time hauling freight around the Outback of Australia. When Cathay learned that Betsy was still aroundand still flyingit quickly purchased the plane and brought it back to Hong Kong. Fully restored and painted in her original livery of the 1940s, Betsy today hangs from the ceiling of the Hong Kong Science Museum.
Air Transport World, September 2006, p.57
Look back into the history of any large company and odds are you will find some ironies lurking in its past. Cathay Pacific Airways, celebrating its 60th birthday this month, is no exception. Here's one: Although its name is virtually synonymous with Hong Kong, the two men who initially got it off the ground were from Texas and Australia. Here's another: What they really wanted to do was to start a trading company, not a passenger airline.
But it was aviation that brought them to Asia in the first place, that and World War II. The roots of Cathay Pacific can be traced back to the legendary airlift operated by Allied forces shuttling supplies from British India to the beleaguered forces of Chiang Kai-shek in China. The heart of the route, from Dinjan in northeast India to Kunming in China, required pilots to straddle the Burmese border, always on the lookout for Japanese fighters, and to lift their unpressurized DC-3s and C-47s over higher and higher mountain ranges, up to 14,000 ft. That supply route gained notoriety as The Hump, taking the lives of scores of fliers.
Two pilots who flew it countless times and survived were Roy "Pappy" Farrell from Texas and Syd de Kantzow from Australia. Both were flying for the China National Aviation Company, a joint venture of the Chinese government and Pan American Airways that still exists today in a different form, when the war and the Japanese invasion of China put them into uniform.
During their hours in the air or waiting for their next mission, Farrell and de Kantzowwho actually met during down time on a tiger hunthad plenty of time to contemplate their postwar future, and China played a major role in these musings for both. Based on his experience, Farrell saw China as a huge market that would need tons of commodities from the US when hostilities ended. (He initially planned on developing this trade by ship rather than air.) De Kantzow harbored similar thoughts, but with his eyes on Australia as the supplier.
They returned to their home countries when the war ended and Farrell immediately started looking for a way to transport a load of consumer goods back to China. In New York he scouted for a ship, but vessels were in short supply. He was drinking with a friend at the Lexington Hotel when the latter suggested what should have occurred to a pilot without prompting: Buy an airplane. The friend told him the military was selling much of its wartime fleet in Augusta, Ga., so Farrell hustled down there and bought a C-47 for $30,000.
A Legend is Born
He flew the plane, which he named Betsy and which today resides comfortably in the Hong Kong Science Museum, back to LaGuardia and essentially bribed some TWA mechanics to convert it into a DC-3 for civilian use, with extra tanks for transpacific flying. He loaded her up with goods, hired a crew and took off via the South Atlantic, Egypt and India to Shanghai. But when he took a close look at the market, he found American goods already flooding in so he shifted his attention to Australian commodities instead. Armed with a landing permit for Darwin, he opened a small office in Shanghai and hung up a shingle as the Roy Farrell Export-Import Company. He was authorized to haul freight, but not passengers, between Australia and China.
In February 1946, his first flight took Australian woolen clothes to China and brought back Chinese silks, fishing tackle and other goods. The trading business took off, buoyed by strong demand at both ends. One day his old flying buddy de Kantzow walked into the Shanghai office and became a minority investor and partner on the spot. Together they plotted the company's growth, adding a C-47 and four DC-3s over the next two years. They transported whatever the market would bear: Hats, pig bristles, live chicks, costume jewelry, hairnets, table linens, leather goods, even fresh Sydney Rock Oysters for restaurateurs in Hong Kong.
Because Hong Kong was situated roughly in the middle of their trading network, Farrell and de Kantzow made it their base of operations. They also divided responsibilities, with Farrell concentrating on buying and selling goods and de Kantzow overseeing the air operations. Eventually they separated the aviation division from the trading company, not only because de Kantzow had his eye on the passenger market but also because British law required aircraft operators to be two-thirds controlled by British citizens. So de Kantzow and another Aussie, Neil Buchanan, became two of the three directors; Farrell was the third and retained control of the trading company.
This cleared the way not only for their Hong Kong base but for passenger operations. They incorporated in September 1946 under the name Cathay Pacific Airways (they originally wanted to call it Air Cathay from the comic strip "Terry and the Pirates," but Farrell discovered that name was already in use). The new airline started flying charters all over Southeast Asia, occasionally getting caught up in political intrigues and dangers such as shuttling Emperor Bao Dai out of Vietnam during the Viet Minh uprisings there and taking on assignments from Indonesian nationalists despite an air blockade imposed by their Dutch colonial rulers. Two aircraft went to Burma to carry men and materiel for the government in its battle against insurgents; one was captured by the rebels, who forced the pilots to transport their troops to help capture a key town.
Cathay set up a Macao subsidiary in 1948, buying a pair of Catalina seaplanes to ferry shipments of gold for Hong Kong traders. One of these became the object of what is believed to be the first hijacking in aviation history. Four armed men, one trained to fly PB4Ys, boarded a flight, intending to divert it to a secret landing spot and take its gold. But one hijacker ended up shooting the pilot, who fell onto the controls and sent the plane crashing into the waters off Hong Kong.
Farrell's and de Kantzow's days at Cathay were numbered when the British government in London became more insistent about wanting British ownership of all communications and transportation companies in the empire for reasons of national security. It became apparent they would have to sell.
A New Owner
The airline's history for the next few decades was affected by a new player entering the stage: John (Jock) Swire, scion of a long-established British shipping and trading company, John Swire & Sons. Jock's father had extended the business to the Far East in 1866 when he set up a China office with a partner named Butterfield; the Chinese operation was called Butterfield & Swire. By the time Jock took it over, it had passenger ships running along China's coast and up its rivers as the China Navigation Company; other businesses included a sugar refinery and a dockyard in Hong Kong.
As World War II was breaking out in Asia, one of Jock Swire's lieutenants floated the idea of getting involved in air transport. Swire's Asian businesses, both ships and land-based facilities, were devastated by the war and Jock's interest in air transport increased once Japan was defeatedespecially since his biggest competitor, Jardine Matheson, was thinking along the same lines. It started its own airline company, Hong Kong Airways, just after the war.
Rather than start an airline, a business in which his company had no experience, Jock Swire decided to shop for one. Cathay was an attractive target, especially since de Kantzow had strong personal connections with the Hong Kong aviation authorities who approved routes and licenses. Swire forged a partnership with executives of Australian National Airways, which was trying to secure a Hong Kong-Australia service, relying on its aviation expertise in bidding for Cathay. In 1948 they concluded a deal giving 35% of Cathay to Swire's China Navigation Co., another 35% to ANA, 10% to Swire & Sons and 10% each to de Kantzow and to Farrell's company. Shortly thereafter, Farrell sold his stake and went back to Texas; de Kantzow stayed on as operational head for a few years, but he didn't like the sluggishness of a large corporation so he returned to Australia.
Another key moment in the company's future came in 1949 when the colony's authorities carved up route rights between Cathay Pacific and Hong Kong Airways, which by then was owned by British Overseas Airways Corp. Cathay got the plum routes to the south, which it was already flyingBangkok, Manila, Singapore, Saigon and so on. HKA got rights to the northto China, which was wracked by civil war and a Communist takeover, and to Japan, just starting to recover from its defeat and destruction. HKA clearly got the short end of that stick: Within a decade, BOAC traded HKA to Cathay for a 15% stake in the latter and a seat on its board.
When de Kantzow left the company in 1951, Cathay had two DC-3s (Betsy and Nikki) and a 43-passenger DC-4 Skymaster that was in such constant use that it suffered from recurring maintenance problems. Meanwhile, the airline was suffering significant losses, in large part because Chinese passenger traffic throughout the region dropped off after the revolution on the Mainland. Cathay needed investment capital, and it got some from British shipping giant P&O, which acquired a 31% stake.
Helped by the infusion, it muddled along without incident until 1954, when it lost its DC-4 in a serious international incident: The aircraft was shot down over international waters by Communist Chinese fighter planes on a flight from Singapore to Hong Kong but a few passengers and two crewmembers, including the pilot, survived to tell what had happened. Faced with international outrage, the Beijing government claimed the DC-4 was mistaken for a Nationalist spy plane from Taiwan and paid full reparations. Cathay quickly leased another DC-4 from Canadian Pacific Airlines, then bought a DC-6 from Pan American-Grace Airways. In 1955 it sold its first aircraft, Farrell's beloved Betsy, to a small New Guinea airline.
The airline's fortunes got a boost in 1958 when Hong Kong opened a new 8,350-ft. runway at Kai Tak Airport, making it accessible to larger, longer-range planes, and again in 1959 when Kai Tak added runway lights and opened up to night operations. Cathay acquired a DC-6B and put it onto the Kong Kong-Taipei-Tokyo route it acquired when it took over HKA.
In 1959 it added its first non-Douglas plane, a two-class, 78-passenger Lockheed Electra, which it deployed on the Singapore route. A second Electra soon followed. It also added more routes in its corner of the world, starting service to Calcutta and Sydney, although it was driven out of the latter shortly thereafter when Qantas put 707s into service between Hong Kong and Sydney.
The Jet Age
That experience with Qantas and the rush among the world's airlines in the early 1960s to acquire jets convinced even the conservative Swire management that fleet renewal was urgently needed, so between 1962 and 1968 Cathay made a swift transition to an all-jet fleet. It sold off its last DC-3, its DC-6s and DC-4 and then its Electras, turning to a single aircraft type, the Convair 880. It acquired eight in six years and kept flying them into the next decade. Business flourished in the 1960s thanks to a growing Hong Kong tourist boom, economic growth in its key markets and its strong reputation for technical excellence and quality service that continues today.
By the time Jock Swire retired in the late 1960sreplaced on the Swire and Cathay boards by his two sons, John and Adrianthe airline had carried more than a million passengers and grown to a staff of more than 1,300. (By 1973 it was carrying a million passengers a year.) While its top management and pilots remained British and Australian, employees were a diversified lot from countries all over the region, and so were its passengers. The company itself had diversified as well, with operations including a major maintenance base at Kai Takthe well-known Hong Kong Aircraft Engineering Companythat served scores of airlines, a catering company and a joint venture that provided ground handling services at the Hong Kong airport.
In the early 1970s, Cathay turned to Boeing equipment for the first time, acquiring a dozen 707s and using them to revive the Australia route it had ceded to Qantas years earlier. New technology started coming onboard, like its first flight simulators and its first computerized reservations system. It extended its route network west of India in 1976-77, adding service to Bahrain and Dubai.
It was time for the carrier to add widebodies to its fleet and it initially settled on the DC-10. But after a last-minute pressure campaign from the British government, it decided to go with the L-1011 powered by Rolls-Royce engines. It took on nine TriStars by 1979 but also added its first Boeing widebody that year, a 747-200B.
It was 747 service that Cathay proposed in applying for rights to London via the Middle East in 1979. However, the UK licensing authority denied it the new service, giving it exclusively to British Caledonianwhich, ironically, argued for the superiority of its planned service by noting it would use the same DC-10s that the government had persuaded its rival not to buy. However, the UK Minister of Trade overturned the licensing body's ruling and Cathay began flying to London in July 1980.
Going Global
The world's airlines enjoyed a traffic boom in the 1980s and Cathay, in the midst of an Asian economic surge, shared in the prosperity as its reputation for excellence continued to grow. Although Jock Swire always had been wary of extending the carrier's range beyond the region, the new management undertook a wave of global expansion, adding one or two 747s a year, both passenger and freighter versions. In 1982 it added Auckland, in 1983 it started transpacific service to Vancouver and began flights to Frankfurt, in 1986 Rome, Amsterdam, Paris and San Francisco joined the network and in 1988 Zurich.
As Cathay's passenger traffic grewfrom 1 million in 1973 to 5 million annually by 1987so did its freight tonnage. In 1988 it set up a separate division just for cargo and two years later it created a global cargo logistics partnership called TRAXON with Air France, Japan Airlines and Lufthansa.
It never was an airline to stick with a single manufacturer and that continued into the 1990s. Besides ordering a number of 747-400s and 777s for intercontinental services, it turned to A330s and A340s to replace its aging fleet of TriStars on regional routes. It got its first 777 and first A340 in 1996.
Like most businesses in the region, Cathay was hurt by the Asian currency crisis of 1997-98 and the following year it posted its first annual loss in 35 years. But much larger issues loomed during that decade: Its home base of Hong Kong reverted to China in 1997, a development that brought with it a complex web of ownership transactions. In fact, those changes started several years earlier in the run-up to the political changes.
Just as the British government had been unprepared to accept the presence of a foreign-controlled airline in 1947, the Chinese government in the maneuvering up to the handover of Hong Kong made it clear that the ownership of Cathay would need to reflect coming political reality. The carrier had conducted an IPO in 1986, but Swire maintained a controlling interest. However, in 1996 it agreed to reduce its stake from 53% to 44% while CITIC, the HK-based investment arm of the mainland government, boosted its 10% stake to 25%.
The second part of the deal involved Dragonair, of which Cathay and Swire had acquired control in 1990. CNAC (remember them?) was permitted to acquire 36% of that airline while CITIC saw its stake reduced from 46% to 29% and Swire/CPA dropped from 43% to 26%. (Ironically, earlier this year Cathay repurchased Dragonair).
After the handover, the first major project in the new Hong Kong Special Administrative Region opened in 1998 in the form of Hong Kong International Airport at Chek Lap Kok, which replaced old and highly constrained Kai Tak. Cathay invested more than HK$1 billion in the new airport, moving its operations and headquarters there. Its Cathay Pacific City at HKIA is home to some 4,000 permanent staff and the base for 5,000 cabin and cockpit crew.
Despite the political changes in its home market, the airline continued to become ever more global in its business outlook. In 1998 it became a founding member of the oneworld alliance along with British Airways, American Airlines and Qantas. In 2000 it signed a comprehensive codeshare pact with American. As the new century began, it moved ahead with fleet modernization and passenger-friendly technological innovation. It ordered 15 new widebodies from Boeing and Airbus and said in 2000 that all its new planes will have in-seat power ports and inflight e-mail capability. It also installed wireless Internet service in The Wing, its premium lounge complex at HKIA. In 2001 it was one of the first to debut online check-in and self-service airport kiosks.
SARS
But in early 2003, disaster struck. It had the acronym SARS (severe acute respiratory syndrome) and it devastated the airline business in East Asia. SARS-wary passengers stayed away in droves, forcing Cathay to slash its schedule by a staggering 45% as traffic fell off as much as 75% from 2002 levels. At the height of the crisis, with 22 aircraft parked and others flying nearly empty, it asked its workers to take a month's unpaid leave, subsequently cut to three weeks. By year end, however, traffic had recovered and it was able to pay them all for the "extra holiday."
Since it lost control of Dragonair, Cathay had been maneuvering for its own rights to the Chinese mainland and it made a breakthrough in 2003 when it was allowed to start flying to Beijing. In 2004 it began direct service to Moscow through a new codeshare with Aeroflot, and that same year it took another global stride by launching transpolar nonstops between New York JFK and Hong Kong using an A340-600 for the 14-1/2 hour journey.
Late in 2004, China gave Cathay expanded passenger rights to Beijing, new passenger authority for Xiamen and rights to operate cargo flights into Shanghai. The airline had been cultivating good relations with the mainland government: It agreed to provide management training to CAAC and invested $384 million for a 10% stake in Air China, forging a codesharing and frequent-flier partnership in the process.
All of this would pay off by 2006 with a major new Cathay-Air China partnership that has seen Cathay repurchase control of Dragonair and boost its stake in Air China to 20% while Air China will hold 17.5% of Cathay on its own and through CNAC. Cathay Chief Executive Philip Chen said the two moves "will reinforce Hong Kong's role as the premier aviation hub in the Asia/Pacific region and create one of the world's strongest airline groupings."
Today, Cathay Pacific has a fleet of 101 aircraft, all widebodies, with several more on the way over the next two years. It carried more than 15 million passengers in 2005 and placed its biggest aircraft order ever for up to 36 777-300ERs and three A330s. In terms of revenues, it is the 18th-largest passenger airline in the world, had the ninth-highest net profit and is the sixth-largest in stock market value. Earlier this year, the editors of ATW named it the 2006 Airline of the Year, the second time it has earned ATW's highest honor. It's come a long way since Roy Farrell ferried his little DC-3 halfway around the world to start flying out of Shanghai in 1946.
Readers interested in learning more about Cathay Pacific's early history should read Beyond Lion Rock by Gauin Young (Hutchinson, Ltd., 1988). Unfortunately, the book is out of print.
Betsy Comes Home
The World War II surplus C-47 that Roy Farrell bought in Georgia in 1945 and converted to a DC-3 nicknamed Betsy in New York before flying it to Shanghai disappeared from history after Cathay Pacific sold it off in 1955 to a small airline in New Guinea. But somehow in the mid-1980s the aging aircraft resurfaced, this time hauling freight around the Outback of Australia. When Cathay learned that Betsy was still aroundand still flyingit quickly purchased the plane and brought it back to Hong Kong. Fully restored and painted in her original livery of the 1940s, Betsy today hangs from the ceiling of the Hong Kong Science Museum.