Swire Group

Cathay, Air China to work closer on passenger flights

PUBLISHED : Wednesday, 04 May, 2011, 12:00am
UPDATED : Wednesday, 04 May, 2011, 12:00am

Cathay Pacific Airways is seeking to forge closer links with mainland flag carrier Air China over passenger services after the inaugural service of their cargo joint venture last month.

The move is one of the initiatives to develop stronger ties between the two firms outlined yesterday by new Cathay chief executive John Slosar.

Slosar took over on March 28 from Tony Tyler, who quit pending his formal appointment as director general and chief executive of the International Air Transport Association.

'Air China is our strategic partner' and the two carriers wanted to deepen that relationship, Slosar said.

While the next focus would be on developing the two airlines' passenger business, Cathay would also carry on with 'opportunistically adding to its Air China shareholding', he said. Cathay was doing research on how the passenger opportunities could be developed and there was no firm plan, but 'we get on very well'.

Slosar said the mainland market was growing rapidly and accounted for '10 per cent plus' of passenger sales last week for the Cathay Pacific group, including Dragonair. By comparison, Hong Kong accounted for about 25 per cent of sales.

'China's links with the rest of the world are still developing,' he said, forecasting that by the end of this decade 'the biggest travel story' would be the way China's global outbound travel market developed.

Iata has forecast that China would be the world's fastest-growing global passenger market between now and 2014, with the number of mainland passengers travelling to international destinations climbing 10.8 per cent a year to 82.1 million by 2014.

Slosar said the goal of Cathay, Dragonair and Air China was to think how the three carriers could make the best of that opportunity. He said nobody else in the world was better positioned 'than the three of us'.

Asked if Cathay and Dragonair would shift from the oneworld group to the Star Alliance or whether Air China would move from Star to oneworld to enhance airline links, Slosar said: 'It's an interesting question. And I don't know.'

He said membership in rival alliances 'hasn't interfered with us taking advantage of the market' and Air China was allowed to take part in the Cathay-backed Asia Miles scheme.

Slosar said while Cathay and Air China would still compete, potential co-operation included working on itineraries for foreign tour groups visiting the mainland and Hong Kong. He said they could fly from Europe to Beijing via Air China before visiting Hong Kong and return on Cathay to Europe. 'The two of us can do it more efficiently.'

Turning to the airfreight joint venture, Air China Cargo - in which Cathay has a 49 per cent stake - Slosar said he expected the airline to develop its own global routes from Shanghai, Chengdu and other manufacturing hubs, rather than compete directly with Cathay.

Bearing this out, the inaugural flight operated from Dalian to Frankfurt via Shanghai on April 15, which was also the first time freighter services had been launched between Dalian and Europe.

He said Air China Cargo would have 12 freighters in about a year, including Boeing 747-400s converted from passenger to cargo planes sold by Cathay. He said he expected Air China Cargo to build up business over the next three to five years and acquire more aircraft.

Outlining prospects for Cathay, Slosar said passenger loads were set to average 79 to 80 per cent this year, 'which was more normal' after the 84 per cent load factor in 2010.

Commenting on the Japanese market, which previously accounted for 7 to 8 per cent of passenger revenue, he said: 'We hope things will stabilise mid-year or the second half', noting that passenger loads were down to 50 per cent, against 75 to 80 per cent before the earthquake.

The carrier is mulling a new service to South America, an eighth daily flight to Singapore and more flights to Taiwan.

Rising market

Hong Kong made up about 25 per cent of passenger sales in the Cathay Pacific group last week

The percentage of sales attributed to the mainland market is more than: 10%