Cathay boss sees a "golden age" for Asian airlines

An article by Scott Rochfort in The Sydney Morning Herald today says that the Chairman of Asia’s third-biggest airline, Cathay Pacific, has shrugged off concerns the recent boom in aviation traffic and profits in the region has peaked, predicting the good times will continue towards the end of the decade.

“All I can say is that it seems to me that aviation is in something of a golden age at the moment,” said Christopher Pratt, the chairman of the airline and its parent, Swire Pacific.

“For the first time in a long time the industry has got some pricing power back, loads are good, yields are good, notwithstanding very high fuel prices.”

As for the failed Airline Partners Australia $11.1 billion private bid for Qantas, Mr Pratt said he was not surprised at “the types of investors looking at the [airline] business – it’s making decent returns”.

“It’s good, and I think it can stay good. Whether it gets better is dangerous to say.

Certainly in Asia more people can afford to fly,” Mr Pratt said.

Coincidently, Mr Pratt’s predecessor, David Turnbull, was a director of APA. 

Aside from being on the edge of one of the world’s fastest growing aviation markets – China – Mr Pratt said Cathay’s recent acquisition of the mainland-focused carrier Dragonair was already having very positive effects.

After opening Swire’s new Australian headquarters in Sydney last week, Mr Pratt was also in town to hear a request from his Australian regional manager, Ivan Chu, for more aircraft, thanks to what he called a “very strong year in Australia”.

“Our priority at the moment is to increase the flights from what we call the resource states, Western Australia and Queensland,” he said, crediting the strong mining industry-related demand for travel between Australia and China.

Some analysts have predicted the record loads and profits presently being enjoyed by some Asia Pacific airlines, Qantas included, will taper off when Airbus and Boeing start delivering their next generation long-haul jets – the A380 and B787 – in large numbers from late 2008.

But Mr Pratt believed the lack of landing slots at key airports would continue to constrain capacity for the next few years, adding, “Certainly within Asia, the demand for travel is increasing and will continue to increase and I think that demand outstrips the capacity of the major carriers to supply”.

But like most airline executives, Mr Pratt’s outlook came with a disclaimer, “You always need to remember with aviation it’s volatile, whether its SARS or 9-11 or just general economic recession, it reacts very quickly.”

Despite Cathay being one of the most active carriers to look for acquisitions or equity tie-ups (Dragonair and Air China), Mr Pratt played down the speculation – often touted by Qantas – that the Asia Pacific region could be the scene of mega-airline mergers, saying, “In the history of aviation those marriages tend not to be very happy, as far as I can see.”  “Successful ones are very much the exception to the rule.”

“Personally, I do not see a lot of major consolidation across the Asia Pacific, there will be start-ups … but I don’t see a lot of consolidation coming on.”

Mr Pratt also played down fears the recent downturn in air freight out of China, a staple for Cathay, could worsen, saying he believed it was only a “short-term blip” caused partly from the downturn in the demand for “must-have products” such as iPods and the swing towards sea freight.

Report by The Mole from The Sydney Morning Herald