business in hong kong

Air traffic growth slows

Passenger volume at Hong Kong International Airport (HKIA) grew 1.3%, to 4.5 million in July 2008 while cargo throughput rose 0.7%, to 317,000 metric tons compared to July 2007. Air traffic movements increased 2.1% from July 2007, to 25,895.

While the overall market slowed, there were a few bright spots. The small growth in passenger volume was attributable to the increase in transfer traffic related to North American and Australasian destinations while cargo transhipments also helped the growth in cargo throughput. Both cargo import and export recorded declines. July’s performance was consistent with the latest Airport Authority projections in light of economic uncertainties and the impact of high fuel price on travel and freight demand.

Chief Executive Officer of the Airport Authority Stanley Hui said, “Airports and airlines worldwide are feeling the effects of surging fuel prices and economic uncertainties, conditions we expect will likely continue. Airlines have started to reduce flight frequencies to contain losses. As a result, we anticipate a more difficult operating environment and slower growth for all categories of air traffic for the remainder of the year. HKIA will monitor closely changes in the market.”

Airline passenger growth posts gains

The combined July traffic figures for Cathay Pacific Airways and Dragonair show near double-digit growth in the number of passengers carried by the two airlines compared to the same month in 2007, along with a rise in cargo tonnage.

In July the two airlines carried a total of 2,308,738 passengers, a 9.7% increase year-on-year. July’s load factor fell 0.5% to 84.1%, while capacity, measured in available seat kilometers, rose 16.3% year-on-year. Passenger total grew 13.1% while capacity rose 14.6% year-to-date.

Both airlines carried a total of 142,770 metric tons of cargo and mail in July, up 5% year-on-year. Capacity for the month, measured in available cargo/mail tonne kilometers, grew 2.4% while the cargo and mail load factor dipped by 0.1% to 66%. Year to date, there was a 6.6% rise in cargo tonnage compared to a 6.2% capacity climb.

Cathay Pacific announces 2008 interim results

On August 6, Cathay Pacific Airways announced a loss of US$85 million in its 2008 interim results. This compares to a profit of US$330.89 million in the first half of 2007. The big change in the company’s financial performance is attributed to the relentless rise in the cost of jet fuel in recent months.

Group turnover grew 22.6% compared to the same period in 2007 to US$5.44 billion, with a significant increase in both passenger and cargo revenue. However, ever-increasing fuel prices completely undermined the airline’s business, with the average into-plane fuel price increasing by 60% to US$132 per barrel. As a result the fuel bill rose 83% from US$1.35 billion to US$2.47 billion.

Fuel as a percentage of total operating cost rose to 45.3% for the first half of 2008, compared to 33.6% this time last year. The steep rise in fuel prices was not matched by the increase in fuel surcharges. The fuel surcharges approved by the Hong Kong Civil Aviation Department in the first half were less than half of the increased fuel bill and were significantly behind those charged by major international competitors.

Passenger revenue for the Cathay Pacific Group increased by 21.9% to US$3,277.69 million and the Group’s two airlines, Cathay Pacific and Dragonair, carried a total of 12.5 million passengers in the first six months of the year, a 13.7% year-on-year increase. This compares to a 14.3% capacity increase. The overall passenger load factor rose by 1.9 percentage points to 80% in the same comparison period.

During the first six months of the year, the amount of cargo carried by Cathay Pacific and Dragonair grew by 6.8% to 828,399 metric tons, with demand more robust than originally anticipated. The cargo load factor rose by 1.1% to 66.4% against a capacity increase of 6.9%.

The Cathay Pacific Group continued to expand and modernize its fleet in the first half of 2008 with three more Boeing 777-300ERs, Extended Range passenger aircraft, arriving for Cathay Pacific plus two Airbus A330-300s. The current high fuel prices make it vital to operate the most efficient freighter fleet. In May, the airline took delivery of the first of six Boeing 747-400ERF Extended Range Freighters, which offer higher fuel efficiency. The group also has 10 new-generation Boeing 747-8F freighters on order and has begun a program to retire the older, more inefficient Boeing 747-200/300F “Classic” freighters in its fleet. Two are gone already — one from Cathay Pacific and one from Dragonair.

The Cathay Pacific Group remains committed to building Hong Kong’s position as a leading international passenger and airfreight hub and in the first half of 2008 undertook an important expansion of services to India. Cathay Pacific and Dragonair added a total of 27 more flights a week to and from the country, with two new destinations added — Bengaluru (Bangalore) and Chennai. The Group also announced that it will design, construct and operate a new cargo terminal at Hong Kong International Airport. Work on the project, to be operated under a 20-year franchise agreement, has begun already and the terminal will open in 2011 with an annual throughput capacity of 2.6 million metric tons.

In terms of product and service, more passengers are now benefiting from the ongoing rollout of new three-class cabin designs, which are now found on 28 of Cathay Pacific’s medium- and long-haul aircraft. The Group also opened new lounges in Beijing, Melbourne, Seoul and Shanghai as part of an ongoing commitment to improve passengers’ travel experience.

Cathay Pacific Chairman Christopher Pratt said global aviation is making a painful adjustment to the new reality of US$100-plus oil.

“Cathay Pacific is reducing other costs where it can but there is a limit to how much cost can be saved before quality and brand are compromised,” he said. “It is thus inevitable that fares for passengers and shippers will have to rise to reflect the new cost of operation. It is difficult to forecast with any degree of accuracy the extent to which these higher fares will reduce demand but thus far it has remained robust.”

Mr. Pratt added that despite the current difficulties, Cathay Pacific remains confident in its future. “Hong Kong remains Asia’s premier aviation hub and Cathay Pacific’s superb international network affords unrivaled connectivity to and from China. The company’s priority at this time is to protect the integrity of this network. There will be some redeployment of capacity within the network but it is not envisaged that the company will withdraw from any destination it now serves.”

Airline receives Skytrax awards

Cathay Pacific's First Class passengers sleep on one of the largest beds in the sky.

Cathay Pacific Airways has been named Best First Class Airline in the 2008 World Airline Awards run by Skytrax. The award acknowledges the airline’s efforts to provide a superior travel experience for its premium travelers and highlights the positive customer reaction to the new first class cabin designs introduced last year.

Cathay Pacific also took the Best First Class Catering award, while the overall quality of the airline’s product and service was reflected in it being named runner-up in the Skytrax Airline of the Year award.

Cathay Pacific Chief Operating Officer John Slosar said, “We are excited about receiving the Best First Class honor, which highlights the strength of our new cabin design, as well as the superior service provided by our cabin crew. For the premium market you have to provide something that really stands out from the crowd. And with our new first class — designed with the right balance of personal attention, interaction and privacy — we believe we’re providing a travel experience that exceeds all expectations.

“But while it’s our first class that’s taken the award, we are very encouraged by the positive passenger reaction to all three classes of our new cabin designs, which are being progressively rolled out across the fleet.”

Cathay Pacific is introducing new cabin designs into all three classes of travel at the same time across its entire medium- and long-haul fleet. A total of 86 aircraft will have the new designs in place by the end of 2012, including newly delivered aircraft and retrofits.

Cathay Pacific’s sister airline, Dragonair, was also honored by Skytrax, being named Best Regional Carrier: Southeast Asia for the first time.

The World Airline Awards are based on the annual World Airline Survey run by Skytrax, carried out between August 2007 and June 2008. More than 15 million respondents from more than 95 different passenger nationalities participated in the survey.