Grant Bradley

Aviation, tourism and energy writer for the Business Herald

Cathay Pacific optimistic over NZ

Airline undergoing multibillion-dollar refit of its cabins - including premium economy to Auckland.

Cathay Pacific's Rupert Hogg says it is code-sharing with Air NZ to grow frequency on the Auckland-Hong Kong route. Photo / Greg Bowker
Cathay Pacific's Rupert Hogg says it is code-sharing with Air NZ to grow frequency on the Auckland-Hong Kong route. Photo / Greg Bowker

A top ranking Cathay Pacific executive is upbeat about the airline's New Zealand route and its global strategy despite flying into a rough financial patch in the first half of the year.

The Hong Kong-based airline will announce its full-year result this week after slumping to a HK$935 million ($146 million) interim loss, its biggest since 2003 when the Sars outbreak discouraged flying.

Cathay's director of sales and marketing Rupert Hogg said the airline was sticking to its premium full service model and remained confident passengers would be prepared to pay for it.

"That gives us fares and yields if we can do it well. If you've got a brand and deliver what you say you can, people are discerning and will make a choice - it's not just about price."

Cathay also had the advantage of being seen by mainland Chinese as a prestigious international brand and had crew who spoke their language.

Hogg, in Auckland yesterday, said Cathay was undergoing a multibillion- dollar refit of its cabins - including premium economy on aircraft that fly to New Zealand.

It also had 84 new aircraft on order before 2020.

"The cabins become the platform for the service style developed on what our customers tell us they want. It's about personal relationships and treating customers as individuals."

Cathay had a workforce of just under 20,000 and was "recruiting for attitude".

"If we get that right ... it's very difficult to emulate and we see it as our strong, competitive advantage. We have our style and Singapore Airlines has its style, and we're both fixated by that."

The airline has been flying to New Zealand for the past 30 years and operates up to two flights a day between Auckland and Hong Kong during the summer peak season.

"We're bullish on the long-term future of New Zealand in the long-term travel market."

Hogg said New Zealanders naturally travelled frequently and more were going to China and other parts of northeast Asia.

Inbound tourism from China was also booming - Chinese were now the second biggest visiting group behind Australians - and there was no sign of any let-up.

"I see that going almost as fast or as slow as New Zealand wants. There are some infrastructure issues - hotels and language capabilities - but I think New Zealand and Australia will remain top destinations rather than fads."

Cathay could capitalise on the outbound Chinese market through its Dragonair subsidiary, which flies 400 times a week to 21 mainland destinations.

Chinese tourists wanted to go places that were clean, offered scenic beauty and where they felt safe, he said.

The airline and Air New Zealand have just started a strategic agreement where they code-share on the Auckland-Hong Kong route.

The agreement had come into play in January and although it was early days, Hogg said it was working well.

"What we're trying to do is to develop the route so we can grow frequency quicker than we could alone - we can give, at each end, connectivity."

Cathay has also replaced Air New Zealand on its loss-making Hong Kong-London service, leasing its Heathrow slot which has given it a fifth daily service to London.

Hogg was unable to talk about Cathay's upcoming result, but industry group the International Air Transport Association's current outlook is for an US$8.4 billion ($10.18 billion) industry profit on US$659 billion in revenues during the next year.

It added that airlines were faced with continuing high fuel prices.

Hogg said Cathay, like Air New Zealand, was an ultra long-haul carrier carrying fuel to burn to get to its destinations.

"On our very long-haul routes fuel would be up to 50 per cent of operating cost."

Jet-fuel prices reached record average levels last year, up on the previous year's average, which had also been a record.

The new generation aircraft promise fuel savings of up to 25 per cent, which would make a big difference to Cathay. It has opted for the yet-to-fly Airbus A350 ahead of Boeing's Dreamliner, in what Hogg said was a close call.

Europe's economic slump had hit its performance as one of the world's biggest cargo carriers, and any slowdown in China hurt revenue. Up to 30 per cent of its revenue came from cargo.

"When China's manufacturing, and the rest of the world is buying, then we're in an extremely good place. For the last year or two, because the world has been fragile, the export volumes out of China have been down and that hits us a bit," he said.

At its half-year results, the airline said it would implement cost-saving measures including reducing frequencies on long-haul routes to North America and Europe, reducing passenger and cargo capacity, accelerating the retirement of fuel-guzzling Boeing 747s, a hiring freeze on ground staff and offering voluntary unpaid leave for cabin crew.

Cathay Pacific

*Operates a fleet of 140 wide-body aircraft.
*Has 84 aircraft on order for delivery through to 2020.
*Flies to 174 destinations in 41 countries.
*Started flying to NZ in 1983.

Rupert Hogg

*Director of sales and marketing.
*Aged 51.
*Started work 27 years ago for Cathay's major shareholder, Swire Group, and has had stints running a haulage company in Australia and tea plantations and a cut-flower operation in 2008.
*Married to New Zealander Sarah with four children

- NZ Herald

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