Cathay CEO Tyler Bequeaths Closer China Ties, Higher Stock Price
Cathay Pacific Airways Ltd. Chief Executive Officer Tony Tyler will leave after three years in the job having navigated the slump, extended the carrier’s reach in China and outshone Singapore Airlines Ltd. in the stock market.
Tyler, 55, will depart the world’s third-biggest airline by market value to become head of the International Air Transport Association trade body, according to a statement yesterday. He’ll be replaced by Chief Operating Officer John Slosar.
During his time as CEO, Tyler has spent billions of dollars on planes from Airbus SAS and Boeing Co. while returning Cathay to profit following the first loss in a decade as deeper ties to mainland China helped it weather the recession. That has helped shares of the carrier jump 21 percent since he became chief on July 1, 2007, compared with a 10 percent drop at Singapore Air.
“Beyond all the other challenges involved in running an airline, Tyler has had to manage the relationship with China,” said Tim Coombs, managing director at Aviation Economics in London. “Cathay was an offshoot of a big British trading company with a massive history, and he had to manage it into something quite different culturally and from a business point of view.”
Tyler joined Cathay Pacific in 1978 and rose to become COO in 2005 before replacing Philip Chen as CEO. His resignation will take effect on March 31 and the executive will join IATA on July 1, succeeding Giovanni Bisignani, the Italian former CEO of Alitalia SpA who has held the post since 2002.
“Tyler is a good choice for IATA, bringing an Asian perspective,” said John Strickland, an aviation analyst and director of JLS Consulting Ltd. “It will be good to have a growing part of the world more strongly represented.”
Cathay said on Nov. 15 that its net income will more than double to a record HK$12.5 billion ($1.6 billion) this year as Asian travel demand rebounds from the slump. The carrier posted a profit in 2009 after falling demand and wrong-way bets on fuel prices pushed it to a HK$8.7 billion loss a year earlier.
The stock has gained 63 percent this year, valuing the company at HK92.8 billion. That’s the sixth-best performance on the 15-member Bloomberg Asia Pacific Airlines Index and the best outside mainland China. Singapore Air has advanced 5.6 percent.
Tyler has expanded Cathay’s reach by boosting ties with Air China Ltd., with which it’s due to commence a cargo venture in the next month that will give access to hubs in Beijing and Shanghai. Air China, the nation’s largest international carrier and world No. 1 by market value, raised its stake in Cathay to 30 percent last year. Cathay owns a 19 percent reciprocal stake.
Coombs of Aviation Economics said Tyler has shown himself to be “a very good communicator” in his dealings with China, while John Leahy, sales director at Airbus, said in a telephone interview that the executive has “renowned diplomatic skills” that will make him “a great asset” for IATA.
Cathay announced the purchase of 30 Airbus A350-900 wide- body planes on Aug. 4 after choosing the model over the Boeing 787 Dreamliner. It also ordered six 777s from the U.S. company.
Tyler delayed plans for a new freight hub in Hong Kong by two years to 2013 last year as he cut costs to withstand the global recession. He also parked freighters, offered staff unpaid leave and slashed capacity at mainline passenger operations and local unit Hong Kong Dragon Airlines Ltd. Tyler, Slosar and Chairman Christopher Pratt also waived their bonuses.
Demand has rebounded in 2010, with Cathay’s passenger total increasing 9.2 percent over the first 10 months and cargo volumes up 20 percent, putting it on track to surpass Korean Air Lines Co. as the world’s No. 1 international cargo carrier.
“He’s had quite a difficult period, there’s no doubt about that, but it’s now coming back in a big way in what is probably one of the few markets that’s going to come into ascendency over the next 20 to 30 years,” said Laurie Price, director of aviation strategy at Mott MacDonald Group Ltd. in London.
“Tony’s leadership of Cathay Pacific through challenging times prepares him well for the job,” said David Bronczek, IATA’s chairman and the CEO of FedEx Express, the world’s largest cargo carrier. “His global experience gives Tony the right perspective for our global organization.”
Tyler, who was raised in Britain, said it will be “a wrench” to leave Cathay but that he’s confident Slosar, 54, “will lead the airline to even bigger and better things.”
Andrew Orchard, an analyst at Royal Bank of Scotland Plc in Hong Kong, said Slosar’s involvement with day-to-day operations at the airline makes him the “logical choice” to take charge. Cathay will announce a successor to Slosar “in due course,” it said in the statement.
“It will be a smooth transition and there won’t be drastic changes,” said Orchard, who has a “buy” rating on Cathay.