Cathay 'cautiously' bullish on 2010

The Cathay Pacific counter at Chek Lap Kok International Airport in Hong Kong. The airline has trimmed its domestic flights in China. (AP)

Cathay Pacific Airways is "cautiously confident" about 2010, as the Hong Kong-based airline looks at increasing its Middle East network, which accounts for five to 10 per cent of the carrier's global revenue or 15 per cent of its revenue per kilometre.

The group, which returned to profitability last year after recording a $52.7 million (Dh193m) operating profit, up from a $369m loss in 2008, will increase its Jeddah flights to daily from March 28, along with looking further afield for opportunities.

"At this point we are studying new markets and we have highlighted the usual suspects in the region," said Clement Au, Country Manager, UAE and Oman. "The usual suspects such as Kuwait, Doha, Beirut and even parts of Iraq are destinations that make sense. However, it is too soon to comment." The airline, which recently announced it would discontinue the popular Dubai-Mumbai sector citing changes in flight times, also has plans to jet into Milan and Moscow this year.

"Cathay has been operating to Milan for freight operations and it was a natural progression to move into passenger flights," said Au. "As for Moscow, while it is too soon to make an announcement, it has been a destination the airline has been eyeing for a while. In fact, we had previously announced our intentions to fly into the city, but had to scrap those plans. This time, we are confident about going ahead."

Other emerging markets the carrier has earmarked for 2010 include Africa and India. After trimming down its domestic flights in China, along with operations to parts of North America and Europe, Au agrees that Cathay was also affected by the global aviation slump that shook the industry in 2009, causing nearly $11 billion in losses according to the International Air Transport Authority.

But Au states even in the worst times, the Middle East region fared better in 2009 than the rest of the world, largely due to the load factor, which stayed above 80 per cent – two per cent up from 2008. However, he believes business is slowly creeping back as people show confidence in resuming travel.

"It is also important to note that even in 2009, Cathay didn't have difficulty filling its planes," he said. "The lower fuel prices ensured ticket prices were lower and that bumped up demand. Now, however, as demand and fuel prices increase, ticket prices are also on the rise. The ideal situation would be if we can get back to how things were in 2008."

Analysts say Cathay's profitability for 2009 comes on the back of fuel hedging, while scrapping popular routes such as the Dubai-Mumbai sector and diverting its resources to its hub in Hong Kong is an indicator of a weakness in the airline's core operations.

Au rubbished such claims, saying: "You cannot say fuel hedging was paying off. Actually, at the beginning of 2009, fuel was more favourable to the aviation industry as prices were down. It was only by Q4 that they slowly crept back up.

"In terms of hedging, it may have helped us even things out a bit by mid-year, but hedge or not, high prices can never be good for the airline industry."

Regarding the Dubai-Mumbai sector, Au said that the tag time was simply not working out for the airline. "Initially, the flight would arrive from Hong Kong into Mumbai at 3.15am – a time that wasn't suitable for passengers. Because the plane sat on the tarmac for nearly 12 hours before turnaround, we initialised a tag flight to Dubai. But as we switched the timings on the primary flight, which is Mumbai-Hong Kong, a Dubai tag cannot be possible.

"However, we have not given up the traffic rights as yet and chances are we could look at ways to reintroduce that flight in future."

Au said that because Cathay was predominantly a network-based carrier, the airline had to weigh the pros and cons and decided to feed traffic from the rest of the network.

He said early signs indicate Q4 of 2010 and 2011 should see an almost normalcy in travel patterns. However, Cathay is not looking at adding on planes to its order book, he added.

 

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