CARRIERS redeploying aircraft to the improving economies of Asia will face tough times raising their yield, according to Cathay Pacific director of corporate development Tony Tyler.
He warned that Asia should not be seen as a money-spinner despite the region enjoying an economic revival after three years of tough trading conditions.
Tyler said: “Many North American carriers are looking to switch their capacity from high-density international markets to Asia.
“You are very welcome to bring your planes over and I wish you luck, but there are easier ways to make money.”
Speaking on meeting the challenge of increased competition, Tyler said Cathay underwent tough and painful restructuring to improve its bottom line.
And despite seeing strong improvements, he warned there were still more measures needed to meet targets.
Cathay started to experience difficulties in 1997 when it saw a slump in traffic and revenue in many regional and global markets, including its number one market, Japan.
“Our Japanese revenue was 20% of Cathay’s total, but this fell to 8% and I don’t think we will ever be able to recover this,” said Tyler.
“Cathay had to do something serious to get back into shape, but it will still be a few years before we get back to the traffic revenues of 1996.”
Cost-cutting measures taken included renegotiating pilots’ contracts to lower wages in return for share options, redundancies, a recruitment freeze, outsourcing in-house services, axing unprofitable routes, reducing capacity and selling surplus older aircraft.
Tyler said: “This was not easy. It is not fun to shed 25% of the worldwide workforce. It was the first time we took such steps and we are determined not to do it again.
“Our unit costs are still above our target, but we are in better shape now than two years ago.”
Tyler added that restructuring had meant Cathay was able to introduce a fresh operational strategy, including a product upgrade across its three-class fleet of aircraft.
Cathay could no longer afford to only market Hong Kong as a destination, prompting moves to introduce a US-style hub-and-spoke system to capitalise on transfer traffic.
He said it was part of the airline’s strategy to claw back trade since the market took a severe downturn with the handover of Hong Kong to Chinese rule two years ago.
“From summer 2000, we are going to have five waves of inbound and outbound services offering enhanced connectivity between flights and greater competition in more international markets,” said Tyler.
“This will mean shorter connecting times between flights and more choice for passengers.
“It is a tough market out there and getting tougher, but we are on the right track,” he added.