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Cathay Pacific Hopes For Third Runway In Hong Kong

Cathay Pacific is back to pre-crisis capacities in Hong Kong

Luc Citrinot, eTN  Sep 21, 2010

HONG KONG (eTN) - Competition is increasingly tough for Cathay Pacific as Chinese carriers continue to develop their fleet, join alliances, and set up hubs all across Mainland China. However, the Hong Kong flag carrier is used to an extremely competitive environment.

Hong Kong is currently served by 84 airlines offering some 5,800 passengers and cargo flights each week to 154 destinations worldwide. With its affiliate regional carrier Dragonair, Cathay represents close to 44 percent of all air movements at the airport, a market share broadly in line with Singapore Airlines/Silk Air in Singapore or British Airways at London Heathrow.

After shrinking its offer over the last two years to answer the most severe downturn in recent airline history, Cathay Pacific feels again that the market is growing. This then explains the decision in August by the airline to increase its capacities.

In a statement Cathay Pacific chief executive Tony Tyler said: “We aim to increase overall passenger capacity by about 4 percent for the Cathay Pacific Group, returning to 2008 pre-financial crisis levels. The increased frequencies will offer passengers greater choice and further strengthen connections through Hong Kong. Together with our new Milan and Moscow services, these service enhancements will certainly boost Hong Kong’s position as one of the world’s leading aviation hubs.”

Cathay will in particular boost frequencies in November to Australia (Brisbane, Cairns, Perth, and Sydney), as well as to Toronto, Osaka, and Auckland in New Zealand. In December, the carrier will boost its frequencies to Paris to 11 flights per week. Dragonair just launched a daily service last week to Shanghai Hongqiao airport, near the city center.

Although acknowledging the surge in competition from other large Chinese airports, James Barrington, Cathay Pacific director of corporate development, looks at the differences which still makes Hong Kong a leading hub today: “Although some Chinese cities such as Beijing or Shanghai have more passenger traffic than Hong Kong, our traffic remains vastly international in contrary to those airports. We work to maintain Hong Kong’s position as the primary intercontinental hub between China, Asia, and the rest of the world."

Connecting more international destinations continues to be a focus for Cathay Pacific. The carrier concentrates mostly on serving long-haul markets and the most important regional markets, while Dragonair has served Cathay group to assess its presence in China. Mr. Barrington continued: “However, we now see increasingly Dragonair serving secondary destinations in regional markets such as Bangalore, Phnom Penh, or Phuket.

"Dragonair is a premium brand, which ideally complements Cathay Pacific's own network. It is likely that the airline will add a couple of more regional points in the near future. However, we will mostly consider flying to destinations where there is a need for business class travels, as well as cargo.

"Cathay and Dragonair's combined network make Hong Kong a perfect hub between North America and Asia, including India, between Europe and Australia/New Zealand, as well as between Europe and Greater China. We serve, for example, with Dragonair, up to 17 times daily [to] both Taipei and Shanghai."

To consolidate its hub, a third runway at the airport will be of crucial importance. “Everyone is conscious that Hong Kong could have not turned into a major financial international hub without its intercontinental airport,” added Mr. Barrington. “We also know that we approach saturation at Hong Kong airport. Although civil aviation authorities continue to work at implementing more efficient solutions to increase capacities, it is not sustainable in the long term, as the airport is becoming quite full. Hong Kong needs then its third runway to offer even more connectivity.”

Hourly air movements on the current two runways can go close to 60 with the government studying the possibility of increasing it to 68 until 2015, when Hong Kong airport will open a new midfield terminal. The airport would then have an annual handling capacity of 70 million passengers and 6 million tons of cargo, which is expected to cope with air traffic demand up to 2020.

“However, improving air movements through new air traffic equipment would only delay the day the airport becomes fully slot constrained,” added Mr. Barrington. Debated since 2006, the costs of a third runway, however, remains a sensitive issue. The third runway would request between US$3.8 to 5.5 billion but could boost air movements to 80 per hour. “We are confident that the government will consider all the positive aspects of such a development for Hong Kong people and the local economy,” said James Barrington.

And if nothing happens? Cathay Pacific would probably have to change its fleet strategy. Arriving aircraft over the next years will, in fact, see Cathay receiving Airbus A350 and Boeing 777, a smaller capacity aircraft aimed to replace its ageing Boeing 747-400. “An important driver of [our] customers' preference is for us to offer multiple frequencies per day with smaller aircraft, over one daily flight on a large aircraft. And our assumption would, of course, go to the construction of a third runway. Of course, if the airport is getting full, we will then certainly look at acquiring larger aircraft to cope with growth,” concluded Mr. Barrington.

Cathay Pacific is back to pre-crisis capacities in Hong Kong
Boeing 747-400 Cathay Pacific / photo by L. Citrinot

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