CCA
18th Apr 2002, 00:07
Thursday, April 18, 2002
Cathay, DHL unite to launch carrier fleet
RUSSELL BARLING and JOSEPH LO
The express cargo terminal to be built at Chek Lap Kok will host a fleet of mid-range freighter aircraft co-owned by Cathay Pacific Airways and express carrier DHL International.
According to a source close to the companies Cathay and DHL intend to start a dedicated regional express cargo joint-venture which could be ready by the end of the year. The new venture depends on DHL's successful tender for the new terminal.
However, as DHL is the only bidder for the terminal and since the Airport Authority (AA) has made the express-cargo sector a priority, it is thought success of its tender is a virtual fait accompli.
Cathay and DHL are negotiating a new three-year agreement that would expand an existing venture that puts DHL cargo in the belly-hold of overnight Cathay passenger flights to Osaka, Seoul, Taipei and Singapore. The old venture, signed in 2000, is due to expire in March next year.
The source said the deal would require the purchase of eight freighter aircraft, probably either the Airbus A-300 or Boeing B-757F, each of which cost an estimated US$100 million to $125 million brand new. The agreement may also give Cathay financial support from DHL for the aircraft purchase.
The new terminal will serve as the hub for the fleet, which is to be painted in Cathay colours. The cargo-only aircraft would be used to fly express mail between the region's key business cities, including the potentially vibrant China market. The new venture will also feed cargo into Cathay's international long-haul network.
Onward access through Hong Kong to the mainland was already being discussed with China Southern Airlines, for the south, and China Eastern Airlines for Shanghai-linked volume, the source said.
"The profit margins for general air cargo have been on the decline for the past few years, so this is way for Cathay to secure its future in the high-margin sector of the industry," the source said.
"The proposed three-year contract is to allow the network to mature before a mid-way assessment of the business model will trigger discussions on a longer-term extension."
Both the A-300 and the B-757 are smaller medium-range aircraft which would be more economically operated on shorter intra-Asia routes than Cathay's existing fleet of much larger, long-range planes such as the B747 jumbo.
However, given the large number of aircraft grounded in the past year because of the industry downturn, Cathay probably could assemble a fleet of used aircraft for nearly half what it would cost to buy new.
Cathay has long wanted to launch a regional cargo fleet, given the industry trend favouring premium express products.
According to Washington-based consultancy MergeGlobal the intra-Asia small-package express market is expected to show an 11.8 per cent compound annual growth rate from 1999 to 2005, outstripping anticipated general air cargo growth.
The airline's contribution to revenue from cargo activities has shrunk from 30 per cent in 1999 to about 27 per cent last year. Its contribution will have been even worse since September 11.
In mid-2000 Cathay said it was considering purchasing A-300s or B-757s to tap more of the regional Asian markets.
Both Cathay and DHL deny any firm deal has been struck.
DHL director of operations for Asia-Pacific and the Middle East Ross Allen said: "We have no commitment with Cathay on the formation of an express fleet.
"We continue to have dialogue with them over the future of our intra-Asia network but our focus right now is on discussions with the AA about our bid for the new express centre, and they will be for the next few months."
Cathay, DHL unite to launch carrier fleet
RUSSELL BARLING and JOSEPH LO
The express cargo terminal to be built at Chek Lap Kok will host a fleet of mid-range freighter aircraft co-owned by Cathay Pacific Airways and express carrier DHL International.
According to a source close to the companies Cathay and DHL intend to start a dedicated regional express cargo joint-venture which could be ready by the end of the year. The new venture depends on DHL's successful tender for the new terminal.
However, as DHL is the only bidder for the terminal and since the Airport Authority (AA) has made the express-cargo sector a priority, it is thought success of its tender is a virtual fait accompli.
Cathay and DHL are negotiating a new three-year agreement that would expand an existing venture that puts DHL cargo in the belly-hold of overnight Cathay passenger flights to Osaka, Seoul, Taipei and Singapore. The old venture, signed in 2000, is due to expire in March next year.
The source said the deal would require the purchase of eight freighter aircraft, probably either the Airbus A-300 or Boeing B-757F, each of which cost an estimated US$100 million to $125 million brand new. The agreement may also give Cathay financial support from DHL for the aircraft purchase.
The new terminal will serve as the hub for the fleet, which is to be painted in Cathay colours. The cargo-only aircraft would be used to fly express mail between the region's key business cities, including the potentially vibrant China market. The new venture will also feed cargo into Cathay's international long-haul network.
Onward access through Hong Kong to the mainland was already being discussed with China Southern Airlines, for the south, and China Eastern Airlines for Shanghai-linked volume, the source said.
"The profit margins for general air cargo have been on the decline for the past few years, so this is way for Cathay to secure its future in the high-margin sector of the industry," the source said.
"The proposed three-year contract is to allow the network to mature before a mid-way assessment of the business model will trigger discussions on a longer-term extension."
Both the A-300 and the B-757 are smaller medium-range aircraft which would be more economically operated on shorter intra-Asia routes than Cathay's existing fleet of much larger, long-range planes such as the B747 jumbo.
However, given the large number of aircraft grounded in the past year because of the industry downturn, Cathay probably could assemble a fleet of used aircraft for nearly half what it would cost to buy new.
Cathay has long wanted to launch a regional cargo fleet, given the industry trend favouring premium express products.
According to Washington-based consultancy MergeGlobal the intra-Asia small-package express market is expected to show an 11.8 per cent compound annual growth rate from 1999 to 2005, outstripping anticipated general air cargo growth.
The airline's contribution to revenue from cargo activities has shrunk from 30 per cent in 1999 to about 27 per cent last year. Its contribution will have been even worse since September 11.
In mid-2000 Cathay said it was considering purchasing A-300s or B-757s to tap more of the regional Asian markets.
Both Cathay and DHL deny any firm deal has been struck.
DHL director of operations for Asia-Pacific and the Middle East Ross Allen said: "We have no commitment with Cathay on the formation of an express fleet.
"We continue to have dialogue with them over the future of our intra-Asia network but our focus right now is on discussions with the AA about our bid for the new express centre, and they will be for the next few months."