Cathay Pacific CEO Sees 'Normal' Cargo Recovery In 2011
July 14 2011 - 1:50PM
Dow Jones News
The head of Cathay Pacific Airways Ltd. (0293.HK) said Thursday
he expects a "normal" second-half recovery in cargo traffic, with
new Boeing Co. (BA) freighters still expected to arrive this
year.
Hong Kong became the world's largest air freight hub last year
but Cathay carried 4.1% less freight in the six months to June 30
than the same period last year when the market rebounded after the
sharp falls seen in 2009.
Cathay is investing heavily in new cargo aircraft and a
dedicated terminal at its Hong Kong base to serve a market that is
typically weighted heavily towards business in the second half of
the year.
"We don't see anything that tells us it won't be a normal second
half," said Chief Executive John Slosar in an interview, referring
to feedback from clients and freight forwarders.
Slosar said Cathay expected to receive a new Boeing 747-8
freighter by late September or early October, the first of 10 due
by the end of 2012 following design and production delays to the
aircraft, which will initially be used on services to North
America. The first deliveries are expected to be financed using
guarantees from the Export-Import Bank of the U.S..
The relative weakness of the freight market in the early part of
the year has contrasted with the strength of premium passenger
traffic, buoyed by a revamp of its premium cabin.
Cathay is eyeing similar improvements to its coach product, and
Slosar dropped the strongest hint to date that this could include a
premium-economy product.
He said premium economy - an intermediate step between coach and
business class - had become "omnipresent" in the industry. "If it's
a global product, we'll be competitive," he said.
Slosar, who took charge in March, was in Chicago as Cathay
launched an expanded pact with Oneworld alliance partner American
Airlines - a unit of AMR Corp. (AMR) - ahead of starting service to
the Midwest city from Hong Kong in September.
He said Cathay would look at asset-backed financings in yuan to
hedge its Chinese currency exposure, though the market remains
immature.
The Hong Kong-based carrier's expansion into more Chinese
markets has made the yuan its single largest currency exposure, and
it has used non-deliverable forwards - which are linked to the
Chinese currency but settled in dollars - and other instruments for
a number of years.
"We expect to have surplus renminbi earnings for some time,"
said Slosar.
Slosar said in an interview that Cathay had monitored the
development of renminbi-based debt issuance - so-called dim sum
bonds - and saw potential for asset-backed deals.
"We would be very happy to finance some assets in renminbi," he
said. "But [the market's] not there yet."
-By Doug Cameron, Dow Jones Newswires; 312-750-4135;
doug.cameron@dowjones.com
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