Hong Kong's leading airline, Cathay Pacific Airways flies passengers and cargo to about 120 destinations around the globe, including some served by code-sharing partners. (Code-sharing allows airlines to sell tickets on one another's flights and thus extend their networks.) Cathay Pacific's partners include fellow members of the Oneworld alliance, which is led by AMR's American Airlines, British Airways, and Japan Airlines. Overall, Cathay Pacific, regional subsidiary Dragonair, and majority-owned cargo unit Air Hong Kong maintain a fleet of about 130 aircraft. Airline operations account for nearly all of the company's sales; other Cathay Pacific units provide flight catering, maintenance, and related services.
Cathay Pacific will be offering its services on even more craft when it takes possession of 30 new Airbus A350-900s. The company agreed in mid-2010 to buy the aircraft, along with six Boeing 777-300ER aircraft (in addition to 18 other Boeing aircraft that it previously ordered). The Airbus aircraft will be delivered between 2016 and 2019. Cathay Pacific has been freeing up some general working capital to pay for the HK 75 billion (about $9.7 billion) purchase price. The company, together with Swire Pacific and CITIC Pacific, agreed in 2010 to sell their total 40% share in Hong Kong Air Cargo Terminals (Hactl) for more than HK$2.5 billion (approximately $328 million) to other existing shareholders of Hactl. Cathay Pacific will realize about HK$640 million (around $82 million) from the sale. The company also plans to make upgrades to its cabins, as well as ground services.
As many companies are looking to the East for new opportunities, Cathay Pacific is turning its attention to the West. In 2010 the airline entered into a code share arrangement with Mexicana Airlines. The deal brings several new destinations, such as Guadalajara, Mexico City, and Santiago to Cathay Pacific's itinerary. Additional new code share partners include Russia-based JSC S7 and in 2011, India's Kingfisher Airlines.
Additionally, in 2010 Cathay Pacific and mainland flag carrier Air China agreed to create a cargo airline using Air China's subsidiary Air China Cargo as the platform. The new airline, which is expected to begin operations in late 2011, will be based in Shanghai.
Cathay Pacific is working to integrate its operations more closely with those of subsidiary Hong Kong Dragon (Dragonair), a regional airline that offers passenger and cargo services to 10 countries with its fleet of about 30 aircraft. Cathay Pacific, which had owned a minority stake in Dragonair, took full ownership of the company in 2006 as part of an effort to gain access to more destinations throughout the Chinese mainland, where its coverage had been sparse.
The deal also expanded the relationship between Cathay Pacific and Air China, which had owned a stake in Dragonair through a subsidiary. Air China swapped its interest in Dragonair for a 17.5% stake in Cathay Pacific, and Cathay Pacific increased its stake in Air China from 10% to 17%. In mid-2009, Air China upped its stake in Cathay to about 30%, essentially buying out shareholder CITIC Pacific. Along with the cross-shareholding, Cathay Pacific and Air China are cooperating to market their services in mainland China and Hong Kong, Macau, and Taiwan.
The company's expansion comes after Cathay Pacific, along with its peers in the airline industry, was hit hard by the economic downturn. The carrier was hurt by its fuel-hedging contracts when fuel prices soared to unprecedented prices in mid-2008 and then dropped significantly by the end of the year. (Fuel-hedging is when airlines lock in a pre-determined price for future jet fuel purchases.) As the global financial downturn took hold in 2008, passenger and cargo demand plummeted. In April 2009, Cathay Pacific announced it would cut passenger and cargo capacity due to losses.
Cathay Pacific's involvement in an air-cargo price-fixing scheme also didn't help matters financially or from a public relations standpoint. In June 2008 Cathay Pacific paid a $60 million criminal fine to the US government for its part in the antitrust conspiracy. Other carriers that pleaded guilty and paid fines include Air France-KLM (which paid a whopping $350 million fine), Martinair Holland, SAS' Cargo Group, British Airways, Japan Airlines, Korean Air Lines and Qantas Airways.
Since 2007 Antony N. Tyler has flown the business of Cathay Pacific. The CEO retired in spring 2011, a month before the company-mandated retirement age of 56. He takes the same post at the International Transport Association (IATA). Besides Air China, Cathay Pacific's major shareholder is Hong Kong trading company Swire Pacific, which has a 40% stake. – less