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He said that the application for Hong Kong Airlines was to list as a so-called "red chip" (overseas registered Chinese company) that had been approved by the State Council. They way, Grand China, which just two years ago called off a share sale plan due to the global economic crisis, is also the parent company of China Xinhua Airlines, Changan Airlines, and Shanxi Airlines ("Two airlines target," 2010)..
Hong Kong Airlines currently operates 18 aircraft and runs more than 30 routes which include routes to Beijing, Denpasar, Shanghai, Tokyo and Moscow. It also planned to use its IPO finances to fund its aircraft acquisitions. The company had ordered some 33 wide body Airbus aircraft for over a sum of $6 billion, according to Yang (ibid).
The Cathay Pacific Airways Slowdown.
Already, we noted above about the planned delivery of two additional 747-8F freighters from Boeing to Cathay Pacific Airways has been pushed to the year 2013. According to the company press release, this move will involve cutting its targeted cargo growth capacity by seven percent in the year 2012 from the original seventeen percent. Cathay Pacific, Airways the largest cargo carrier company in the world has ordered ten Boeing 747-8F planes. Four of these were delivered in the year 2011 with the delivery of the rest of them tentatively scheduled for 2012 ("Cathay delays 747-8f").
Cathay Pacific Airways spokeswoman Carolyn Leung said that the cargo carrier company would have the four aircraft delivered by the year 2012 and the remaining two later in 2013. Chief Executive John Slosar was quoted by the airline's monthly staff magazine CXWorld as saying that 2011 has been a tough year for the airline compared to its performance in 2010. Slosar also added that the passenger bookings for the Christmastime holiday were pretty good, although the usual end of year rush for the expected cargo runs were yet to kick off (ibid.).
Cathay Pacific Airway's hub airport, Hong Kong International recently saw an additional 8.2% fall in the demand for cargo. However, passenger traffic for October 2011 was up 5.9%. A drop in the cargo demand in the airport (partly fueled by the continuing poor economic performance in the Eurozone countries and the United States. This has had a very direct impact upon the cargo airlines and Cathay Pacific Airways has not been spared (ibid.).
Cathay Pacific Airways Stays the Course
While the Cathay Pacific Airways company is starting to become more cautious, it has further pledged to stay the course in 2012. According to an article in Aspire Aviation, the air cargo traffic just never came through this past Christmas season. Things are different however now than they have been in the recent past. There is now a sound and central business plan that is guiding the Cathay Pacific company in order to ride out the present rough economic times ("Cathay pacific stays on," 2012).
Things were much different in year 2008, when Cathay Pacific Airways was at a critical crossroads and was in the process of evaluating its commercial strategy and in going forward. It now presently has a sound and clear strategy to realize a bright growth potential. This potential is arguably the best in the airline industry in tandem with the world's manufacturing powerhouse (China) at its doorstep. Further, the purpose of moving forward now is to keep investments in the new cabin products such as the new Premium Economy Class and the Revamped Economy Class seats that Cathay Pacific is rolling out in March 2012 (ibid.).
The centerpiece of this master plan (considering the drop in air freight traffic for Cathay Pacific Airways is to focus in on the premium service for its upscale customers who can afford the frills. The Cathay Pacific Airways company intends to stay on the course of a further corporate expansion. Cathay Pacific Airways is Asia's is the largest international airline in the area of airline passenger traffic as well as the world's largest air cargo airline in terms of such traffic in year 2010 (ibid.).
A company this size has had bumps along the way. Certainly, they are not new nor are they unanticipated. Former chief executive officer Tony Tyler saw many of these ups and downs. He went on to become the director general (DG) of Geneva-based industry body International Air Transport Association (IATA). He remarked that "the one thing I have learned during my airline career is that just when you think things could not get worse, they usually do" (ibid.). With this in mind, the company intends to move forward.
This could not have been more true for the company. After enjoying a very robust year in 2010, it saw a record cargo traffic that drove the airline further to become the world's most profitable carrier posting a full-year end profit of HK$14 billion (U.S.$1.8 billion). Unfortunately, 2011 has proven to be a challenging year for Cathay Pacific Airways with the air cargo traffic accounting for thirty percent of its total revenues (measured in freight tonnage kilometers-FTKs) slumping for every month since April 2011. This was while the passenger traffic (measured in revenue passenger kilometers -RPKs) has continued to grow very steadily over the very same period (ibid.).
As the economy globally took a turn for the worse in the summer. The political impasse in Washington D.C. has lead to a historically unprecedented downgrade of the United States' coveted triple -- A credit rating in August of 2011. This has been followed by the European sovereign debt crisis that has dragged on since the global financial meltdown from 2007 to 2009. Overall, total market business confidence, to which the air freight cargo market is very closely linked, also took a hit when the International Air Transport Association (IATA) showed a 3.1% decline in the amount of air freight traffic in November 2011 versus the same month a year previously. This was whereas cargo capacity, which is measured in the available cargo and mail kilometers, grew by only 1.9% in that same month, thus resulting in a decline in the industry-wide cargo load factor to some 46.9% (ibid.).
With the Asia/Pacific carriers holding a whopping 40.5% total market share of the world's cargo traffic, these carriers a (including Cathay Pacific Airways) took a bigger hit than their rival European and North American counterparts in the present renewed cargo slump. This comes amid some global economic uncertainties that further led to a 4% lower than expected industry-wide cargo traffic when compared to the start of 2011 and also a 6% lower cargo load factor when compared to the mid-2010 peak in traffic (ibid.).
At the Cathay Pacific Airways company, the picture is nothing but bleaker as well. The typical pick-up in air freight cargo demand in the last quarter just before the holiday sales season did not materialize in the year 2011. This is simultaneously happening with Cathay's November cargo traffic slumping some 9.8% against the same month in 2011 following a 15.9% decline in that October's cargo traffic vis a vis the previous year. "Somebody cancelled Christmas as really the cargo volume has not been there," said Cathay Pacific' Airways chief executive said John Slosar told Bloomberg. He added that the air freight cargo traffic is likely going to be soft for the first quarter of year 2012. "Cargo was weak in the last quarter of this year  and I suspect it will carry on in 2012. It looks like the world economy is facing some challenges, so that is probably going to mean we will have some challenges too," remarked Slosar at an industry luncheon that was organized by the Pacific Asia Travel Association (ibid.).
Though there is a marked difference between the scenarios presently facing the Cathay Pacific company back in 2008 and coming year 2012. Unlike in 2008 (when Cathay Pacific Airways was placed at a crossroads evaluating its commercial strategy going forward), it now has a clear and sound strategy to realize its bright growth potential. This growth potential is arguably the best available in the airline industry with the world's manufacturing powerhouse China as its neighbor. This is keeping investment in the new cabin products such as the new premium economy class and the revamped economy class seats that Cathay Pacific Airways is rolling out in March 2012, in-flight connectivity with on-board wi-fi system, as well as the construction of a HK$5.5 billion dedicated cargo terminal that is going to enter into service in early 2013. Coupled with peak aircraft orders for 91 new aircraft, these continuous investments are meant to enable the Cathay Pacific Airways company stay the course in order to reap the benefits when the final turnaround in the global economy finally comes (ibid.).
The premium economy strategy is the best hedge against recession risks, boosts profitability. Since its revelation in August 2011 confirming the airline's intention to launch a premium economy class, the Cathay Pacific Airways company has…[continue]
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