Cathay chief steers airline through turbulent times
Even in a sector known for its volatility, the past two years brought unprecedented challenges for the airline industry. The effects of record-high fuel prices followed by the global financial crisis, which decimated passenger numbers and saw cargo tonnage shrink, created a series of nightmarish scenarios and pushed many companies to the brink.
As chief executive of Cathay Pacific Airways, Tony Tyler found himself right in the eye of the storm. But after a real annus horribilis in 2008, for which he had the unwelcome duty of reporting record annual losses of HK$8 billion, he has engineered a spectacular turnaround, announcing a best-ever half-year result of HK$6.8 billion in August this year and cementing plans for fleet expansion.
'For the first nine months of 2008, business was booming, but fuel costs were wiping out all that improvement,' said Tyler, winner of the DHL Executive Award. 'From September, the fuel price fell, but so did revenue as people stopped travelling. When the business collapsed, we had to take decisions to staunch losses and defer capital expenditure.'
Those key decisions included cutting routes and trimming schedules, especially on long-haul routes; suspending construction work on a new cargo terminal at Chek Lap Kok in Hong Kong; and 'parking' six passenger aircraft and five freighters for the duration. It was also essential to renegotiate dates and delivery terms for new planes already on order.
As the crisis escalated, one of the biggest decisions was what to do about people. Unlike many competitors, who saw large-scale layoffs as the only option, Tyler was determined to do everything possible to hold on to staff.
Drawing on experience of the Asian financial crisis, Sars and the bird flu scare, he was aware how quickly things could bounce back. The company therefore put in place a scheme for unpaid leave - with benefits and allowances maintained - and more than 90 per cent of employees signed up.
It was graduated so lower-paid staff gave up less in absolute financial terms, and senior management led the way by voluntarily forgoing bonuses. It was made clear redundancies would be the last resort.
'I have always been a passionate believer in the Asian aviation story and I wanted to keep the team together, otherwise the impact could last a generation,' Tyler said. 'Some cynics say we didn't save that much money [by doing this], but it showed we were all in it together and ready to make personal sacrifices.'
Initial glimmers of recovery brought a small operating profit by the end of last year. And as premium traffic and freight demand picked up, everything was well set to kick back into gear, providing an obvious competitive advantage.
Today the general corporate outlook is more than encouraging. Work has resumed on the HK$5.5 billion cargo centre and agreements have been concluded to purchase an additional 36 Airbus and Boeing aircraft, representing an investment of around HK$75 billion.
'At the trough of the cycle, it was about as bad as it can get,' Tyler said. 'A CEO can feel a bit beleaguered, but I got good encouragement from a couple of non-executive directors, which meant a lot at the time and which I will always remember.'
