Cathay keeps faith with business model

Singapore
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Cathay Pacific Airways will not substantially tweak its business model, with the strong recovery in the airline industry this year prompting the carrier to shelve the contingency plans it drew up after the economic downturn of 2008-09.

The carrier set up a team to examine its strategy last year after the worldwide slump in both premium class travel and cargo. This team studied if the changes in the airline industry were cyclical or structural, and if Cathay's business model - which hinged on premium seats, a full load in economy class and full-belly of cargo - was sustainable.

"We have always been big in the business end of the market. We were worried, after the downturn, that the market would never come back. We did some contingency planning in relation to that," says Cathay's chief operating officer John Slosar.

"In 2010, the airline business came back strongly. The change has not happened, and we decided that we did not need to work on that contingency. The airline business is constantly changing, and the travellers are changing too. We will adapt to that."

One of these is the possible introduction of premium economy seating on its aircraft, in response to the demand for the product on long-haul flights. The carrier believes that there is a market for an "intermediate product" on long-haul flights, especially as the divergence between business and economy class products has widened.

The airline will also roll out a new business class product shortly. This will be a "major announcement" that will cater to an important market segment, reaffirming the carrier's faith in its model, says Slosar. Cathay will continue offering a first class product, but only on aircraft that serve its high-yield markets like London Heathrow.

Cathay has also reaffirmed its faith in the cargo business. It has invested in a Shanghai-based joint venture with Air China, will take delivery of its Boeing 747-8 freighters from late 2011, and plans to open its own cargo complex at Hong Kong International Airport in 2013.