Cathay to Rely on Long-Haul Planes to Boost Routes

Tony Tyler, CEO of Cathay Pacific Airways Ltd.
Tony Tyler, chief executive officer of Cathay Pacific Airways Ltd. Photographer: Daniel J. Groshong/Bloomberg

Cathay Pacific Airways Ltd., the world’s fourth-biggest airline by market value, plans to boost operations in Asia with the “intelligent misuse” of long-haul aircraft rather than building up a fleet of single-aisle planes.

The carrier will continue flying widebody planes on Asian routes as these aircraft would otherwise be idle during the day after making overnight intercontinental trips, outgoing Chief Executive Officer Tony Tyler said in an interview yesterday in Hong Kong. The airline last year ordered 36 Airbus SAS A350 and Boeing Co. 777-300ERs to expand its fleet.

“A lot of the capacity for these long-haul aircraft will be used in the region,” said Tyler, who will leave Cathay on March 31 to become head of the International Air Transport Association. “What we’ve done over the years, quite successfully, is what we called the intelligent misuse of aircraft.”

The carrier will transfer some widebody A330s from its mainline fleet to regional unit Hong Kong Dragon Airlines Ltd. as it boosts China services, Tyler said. By largely shunning narrowbodies, the carrier pares costs and increases capacity for carrying passengers and freight on regional routes, he said.

“It’s prudent for Cathay to put capacity in Asia where there’s growing demand,” said Kelvin Lau, an analyst at Daiwa Capital Markets Hong Kong Ltd., who has a “hold” rating on the carrier. “The U.S. and European markets aren’t recovering as quickly at this stage and uncertainties over demand remain.”

Visitor arrivals in China, the world’s fastest-growing major economy, rose 5.9 percent in the first 11 months of 2010.

New Planes

Cathay Pacific is due to take delivery of nine widebody passenger planes this year -- three Airbus A330-300s and six Boeing 777-300ERs -- helping it boost capacity about 11 percent. As of June, the carrier’s mainline unit operated 128 planes, all of which were widebodies. Dragonair had a fleet of 30 planes, including 16 single-aisle aircraft. These planes are generally used to start services on new routes, Tyler said.

“I don’t see Dragonair becoming a huge operator of narrowbodies,” he said. “The economics of those aircraft are not great.”

Cathay rose 0.5 percent to close at HK$22.50 in Hong Kong. The stock climbed 48 percent in 2010, compared with a 5.3 percent gain for the benchmark Hang Seng Index. Cathay Pacific has a market value of $11.4 billion.

The airline has so far rejected ordering Airbus’s double-decker A380 to instead build its fleet around 777s. The carrier opted for these smaller aircraft as they let it offer greater frequencies on long-haul routes, Tyler said.

The airline may eventually look at adding A380s, especially if Toulouse, France-based Airbus can make the plane more efficient through the addition of new engines or the introduction of a stretched version, Tyler said.

“We would like to see it improve as an aircraft,” he said. Still, “I’m sure Cathay Pacific will one day have another really good look at it.”

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