Hong Kong Airline Buys 27 Jets
HONG KONG (AP) -- Cathay Pacific Airways is ordering 27 new Airbus and Boeing jets to expand services after profit tripled last year to a record.
Hong Kong's biggest airline said Wednesday it signed a deal with Airbus SAS for 15 A330-300 airplanes and another with Boeing Co. for 10 777-300ER jets. Cathay has also agreed to lease two Airbus A350-900s from International Lease Finance Corp. -- adding this jet to its fleet for the first time.
The airline said the 27 jets are worth 51 billion Hong Kong dollars ($6.5 billion) at sticker prices but it's getting a big discount, a common practice in such deals.
The new jets will allow Cathay to continue expanding its passenger routes as well as help the airline save on fuel, its biggest cost, by retiring older, thirstier jets.
Cathay's Airbus A330-300s are primarily used on routes to Australia, India and other countries in Asia while its Boeing 777-300ER jets are mainly used on long-haul routes. All will be delivered by the end of 2015.
The announcement follows the airline's biggest ever order announced in September, for 36 aircraft, including 30 from Airbus and six from Boeing.
The airline is in talks to buy 14 more aircraft, but did not give any more details.
Cathay also said that full-year profit for 2010 tripled to a record 14.05 billion Hong Kong dollars ($1.8 billion) from 4.69 billion Hong Kong dollars in 2009.
The airline credited a recovery that began in late 2009 for helping its passenger and cargo businesses to bounce back strongly from the global recession.
Chairman Christopher Pratt said the result "represents a truly remarkable recovery from our low point in 2008" during the depths of the financial crisis.
The airline has been adding new routes, increasing flights to existing destinations and plans to hire 2,300 new staff this year, including 1,300 cabin crew and 250 pilots.
But Pratt warned that profits could be hit if fuel costs don't come down.
"Our business will also be quickly hurt if the increased price of oil leads to a reduction in global economic activity and a subsequent reduction in demand for air travel," he told reporters.
Cathay executives said the airline hedges about 20 percent to 30 percent of its fuel bill through the use of insurance policies and other financial devices to protect against rising prices. Fuel makes up about 40 percent of the airline's costs.
The airline is also set to start operating a cargo airline with Air China, one of Cathay's major shareholders, as it looks to capitalize on the demand for air shipments of goods manufactured in China for markets overseas.
The Shanghai-based joint venture has received formal approval and just needs a few more official "chops," or stamps before it opens for business, said Chief Operating Officer John Slosar.
Cathay's improved earnings in 2010 and its aircraft orders underline how surging Asian economic growth is spurring demand for air travel.
Both Airbus and Boeing predict that Asia will overtake North America and Europe as the world's biggest air transport market and account for a third of global aircraft demand over the next 20 years.
Cathay's order follows others from Chinese airlines announced Tuesday at an air show in Hong Kong.
China's HNA Group said two airlines it operates are buying 38 Boeing jets, and five each from Gulfstream and Dassault Falcon. Air China, which is the country's biggest airline and owns 30 percent of Cathay, said it's buying five Boeing 747-8 Intercontinental passenger jets.
ILFC on Tuesday said it's buying 100 jets from Airbus and 33 from Boeing.
Shares of Cathay, which also owns Dragonair, jumped 4.5 percent to close at 18.94 Hong Kong dollars.