Cathay expands fleet with 27 new planes after record-breaking year
Cathay Pacific Airways splashed out yesterday to boost its fleet with deals for another 27 aircraft in a move that came as the airline reported a record-breaking 2010 with all-time highs for net profit, turnover, passengers and cargo.
The carrier's chairman, Christopher Pratt, said last year's profit of HK$14 billion meant Cathay Pacific was 'probably the most profitable airline' in the world.
The figures, which included a HK$2.5 billion profit contribution from Air China for the year to September 30, 2010 and HK$3 billion in gains from disposals, also buoyed the carrier's share price, which climbed 4.5 per cent to close at HK$18.94 yesterday. That compared to a 0.4 per cent gain in the Hang Seng Index.
Cathay Pacific had a 19.3 per cent stake in Air China but this was diluted to 18.3 per cent after the mainland airline issued new shares. Hong Kong's home carrier has bought further shares to take its stake to 18.7 per cent. Pratt did not rule out more share purchases. 'If we see value we continue the move we have already started to buy shares,' he said.
Analysts said the results, which included a 33.7 per cent rise in turnover to HK$89.5 billion, were higher than most forecasts although Goldman Sachs had tipped profit of HK$14.5 billion on revenue of HK$92 billion.
Pratt said the aircraft order comprised 15 Airbus A330-300s, 10 Boeing 777-300ERs and a lease deal for two Airbus A350-900s to be delivered by 2016. The 27 new planes have a list price of about HK$51 billion. The latest acquisitions came after the airline placed its largest ever order in September for 30 Airbus A350-900s and six Boeing 777-300ERs.
Cathay Pacific now has firm orders for 91 new aircraft, which Pratt said had a total list price of HK$185 billion, although the airline has received a considerable discount.
Pratt said Cathay and Dragonair would also recruit around 2,400 new staff this year, up from 1,600 in 2010, while aircraft maintenance company, Hong Kong Aircraft Engineering, would take on another 500 people to cope with future growth.
The recruits will comprise 1,300 cabin crew, 250 pilots and up to 850 ground and customer service staff to fill new and replacement positions. Chief operating officer John Slosar said some of these positions would provide 'entry-level jobs' for school leavers and college graduates.
Slosar added that some of the aircraft on order would be used to replace older, less fuel-efficient Boeing 747-400s which have an average age of around 20 years.
He said higher fuel prices meant the Boeing 777-300ERs the airline has on order had a seat cost that was 20 to 22 per cent lower than the 747s. The 91 aircraft on order, which would be delivered between the end of this month and 2019, would be used to increase existing frequencies and launch services to new destinations, Slosar said.
Pratt said: 'Our expansion plans are ambitious, but they need to be to keep pace with what we see as the growth of Hong Kong's economy and the increasing opportunities our integration with the mainland will bring over the coming decade and beyond.' But, sounding a note of caution, Pratt said: 'The recent spike in oil prices following instability in the Middle East is a real concern. If fuel remains at this level, or rises still further, we can expect an adverse effect on our profitability if the increased cost is not recovered through fuel surcharges or higher fares.'
James Hughes-Hallett, the airline's finance director, said Cathay would maintain its hedging policy, buying fuel at pre-determined prices on short- and medium-term contracts. He said the aim was to hedge 25 to 30 per cent of its fuel on one- or two-year contracts in an effort to deal with spiralling oil prices.
Pratt said passenger demand was expected to increase from last year. But Slosar added that airfreight volumes were not expected to be as strong as last year because uncertainty about the world economy 'put pressure on the cargo business'.
Slosar said the launch of Air China Cargo, Cathay's 49 per cent airfreight tie-up, 'was imminent' and was just a case of 'getting the right chops on the right pieces of paper' for business licences to be issued.
Typical cruising speed: 893km/h
Range: up to 13,427km
Weight: Empty from 160,120kg
Maximum for take-off: 263,080kg
Wing span: 60.93m
Flightcrew of two
Passengers: From 386 (three classes) up to 550 (all economy)
New orders announced yesterday:10
Maximum cruising speed: 880km/h
Range: up to 10,185km
Weight: Empty from 121,870kg
Maximum for take-off: 212,000kg
Wing span: 60.30m
Flightcrew of two
Passengers: From 295 (three classes) up to 440 (all economy)
New orders announced yesterday: 15