ABTN speaks with Philippe de Gentile-Williams, General Manager Europe, Cathay Pacific Airways
What has been the reaction of passengers to the new cabins?
Overall, we are extremely pleased with the passenger response to the new Economy, Business and First class products, which has been very positive. The recent results of a random sample of over 1,400 individuals demonstrated a substantial and statistically significant increase in the number of ”totally satisfied” and ”mostly satisfied” respondents across almost all measures. In particular, satisfaction with the sleeping position has increased from 62% in the original arrangement to 88% with the new lie-flat product. We are continuing to monitor the satisfaction rating of our passengers with the products.
Essentially we have achieved our primary objectives of introducing a lie flat bed in Business class and delivering more privacy in all classes. We judge the success of the product on the volume of snoring heard on overnight flights!
Are they installed on all UK routes now?
We introduced the new product in 2006, and will roll it out across our long-haul fleet. The new product was introduced on the London ” Hong Kong route in 2007 and currently covers 50% of the route. We plan to introduce new products on flights on the route by February 2009.
Considering you fly some of the longest routes in the world, what measures are you taking in the face of record-high fuel prices? Will you cut capacity?
There is no denying that fuel remains a very serious concern to the airline business and we are no exception. We will continue to review areas with revenue earning potential and redeploy capacity to fly on routes where demand is high in order to maximise revenue. We are studying the flight dynamics of all destinations to ensure our fleet is flying the most suitable and economic routes for each of our aircraft types.
In the long term there is no doubt that there will be a shift of supply and demand as the high costs of providing a service will have to be met by the customer. The trick will be to continue to deliver value though superior levels of service and product.
Are you seeing business travel is more effected by economic downturn, or leisure?
Neither business nor leisure travel is currently being seriously affected in the UK, but we are monitoring the situation carefully. At present, Leisure sales for Cathay Pacific remain strong with our trade partners remaining cautiously optimistic about the market. We will continue to work hard with our partners to ensure this continues to be the case.
The Asia market remains strong for leisure travel and we continue to grow in the Australian market due to a 25% increase in capacity. We also have a fantastic sales team, which continue to drive the business forward with the support of the travel trade.
Our Corporate revenue continues to increase year-on-year, with forward bookings looking strong. Despite the economic crisis, key sectors such as finance are continuing to travel. Economic activity in Asia is still robust and trade strong, we are fortunate in this respect. Obviously clients are becoming more vigilant, for example reviewing the needs for business trips and consolidating travel where they can. We always work closely with clients to help them achieve the best value for money.
Any alliance news?
Cathay Pacific continues to benefit from the synergies resulting from its association with the Oneworld Alliance. Earlier in 2008 Oneworld operations at both Beijing and Shanghai airports were realigned to provide a convenient service for transfer passengers. Dragonair, Cathay Pacific”s sister airline, became a member of the Oneworld alliance on 1st November 2007. Dragonair further expands our network across the Asia-Pacific region, offering a total of 35 destinations, of which 21 are in Mainland China.
Any news on FFP programme?
We have recently announced a strategic alliance to launch co-branded credit cards in Asia Pacific - the American Express Cathay Pacific Elite Credit Card and the American Express Cathay Pacific Credit Card. The two new cards will offer an array of rewards and special offers for our passengers. The cards are being launched initially in Hong Kong and Taiwan, with plans underway for other Asian markets.
Fleet acquisition plans? Are you affected by Dreamliner/Airbus delays?
Our recent investment in an order for 30 777-300ER aircraft reflects our long-term confidence in the future of both the cargo and passenger markets. Currently at 163, our fleet will reach 200 by 2012 ” continuing our plan to increase capacity at an average of 6 to 7% per annum.
We are not affected by the Dreamliner or Airbus delays as we have none on order. The 777-300ER is a proven aircraft that can operate even our longest routes non-stop without payload restrictions. We are very pleased that it will form the backbone of the Cathay Pacific long-haul fleet. It offers both greater fuel efficiency than previous generation aircraft and lower levels of noise & carbon emissions.
At Cathay Pacific, we take our environmental and social responsibilities seriously. We acknowledge the adverse consequences of greenhouse gas emissions on the climate, ecosystems and communities and are committed to taking action to address this important issue. We have implemented a range of measures to reduce our emissions to improve the environmental performance of our aircraft and ground based activities.
Our FLY greener carbon offset programme gives passengers the opportunity to reduce their carbon footprint. This is an entirely voluntary scheme; passengers wishing to participate are invited to opt in by using cash or Asia Miles to offset the carbon dioxide emissions of their flight. The contribution is a fraction of the ticket cost, but it provides you with a means to make a difference.
How is your hub at Chep Lap Kok going?
We are delighted to have seen an 8.3% increase in passenger numbers at Hong Kong International Airport (HKIA) for May 2008, taking the total number of passengers to 4.1million. Cathay Pacific is responsible for much of this, where we reported a 16% rise in capacity, measured in available seat kilometres.
HKIA handled 49 million passengers in the past 12 months. Since opening in 1998 the airport has grown faster than even the most optimistic projection. HKIA has won numerous awards including best airport in the world repeatedly. Terminal expansion is currently underway and plans for a third runway are also under consideration.
How well is Cathay placed in these uncertain times for aviation?
We have robust cost management systems and continue to closely reviewing our expenditure. While we are controlling our cost diligently, we never lose sight of opportunities, most recently in China and India. We are well positioned with an industry leading China network and frequency and with a solid reputation and strong trade & corporate relationships.
Do you see consolidation working for some of the big US carriers?
Consolidation, if managed properly, can bring about synergies such as a stronger network and cost saving opportunities. I think the industry, particularly in Europe, has witnessed some success stories. However, it is too early to say whether or not consolidation would work in the US, but at current fuel price consolidation is probably inevitable.
Do you see more airlines going bust?
If the fuel price shows no signs of adjusting then I think it”s fair to say we”ll see a number of airlines suffering as a result and a number of insolvencies. Whether major carriers are allowed to fold and whether national governments will choose to step in will again be a matter of considerable debate.
What markets will you look at re network expansion?
Our current priorities are the consolidation of our China and India networks and monitoring current activity in the face of rising fuel prices. Having said that, it has always been our objective to develop new destinations and add frequencies to our major routes so as to provide passengers with greater choice and flexibility in connecting through the Hong Kong hub.
Europe is one of the most important markets in Cathay Pacific's network - the EU market performance has indicated reasonable growth both in passenger numbers and revenue in recent years. We will continue to thicken trunk routes and look to add new destinations, though the current economic climate does add considerable risk.
Is there much business traffic on sister airline Dragonair? Does it have a dedicated corporate product?
Dragonair, our sister airline, is owned by Cathay Pacific so the corporate product is integrated. An increasing number of corporate accounts are adding China destinations to their contracts ” both primary and secondary cities. UK traffic to China is increasing in all sectors, with a year to date growth of +26% on 2007. Across the network interline traffic between Cathay Pacific and Dragonair has doubled since the acquisition, demonstrating the strength of the network synergies.
How are industrial relations? And what is the latest with ownership, and Swire?
We continue to have very healthy dialogues with our staff members, and notably with the AOA (cockpit crew union) and the FAU (cabin crew union). Our staff have historically been very supportive of the business, particularly in difficult times and this is a great strength of Cathay Pacific.
Swire Pacific remains the major shareholder, holding a 40% stake in Cathay. Our shareholding structure hasn't changed since our integration with Dragonair and cross-shareholding with Air China. The Swire Group remains firmly committed to the airline for the long term.