Cathay Pacific to Spend Big on Fleet Expansion
Shanghai Daily | Jan. 13, 2007
Hong Kong's dominant airline Cathay Pacific Airways Ltd said it is planning an annual capital expenditure of HK$9.5 billion (US$1.2 billion) to HK$10 billion between now and 2009, mainly for fleet expansion.
Cathay Pacific plans to spend at least HK$9.5 billion each year in 2007 and 2008, and a minimum of HK$10 billion in 2009, Chief Operating Officer Tony Tyler told an analyst conference on January 11.
The total to be spent on fleet expansion will be HK$7 billion this year, HK$6 billion in 2008 and HK$8 billion in 2009.
Cathay Pacific will add 43 planes in the coming three years, Tyler said.
The company, which is 40 percent held by conglomerate Swire Pacific Ltd, said it expects its capacity growth to be 10 percent this year, 15 percent in 2008 and 10 percent in 2009.
While capacity growth is mainly driven by cargo expansion, Tyler said the company sees "no sign of softening passenger demand" this year.
The capital expenditure is earmarked for both Cathay Pacific and Hong Kong Dragon Airlines Ltd.
Cathay Pacific became the sole owner of unlisted Hong Kong Dragon Airlines Ltd on completion of a complex shareholding restructuring in September.
As part of that deal, Swire Pacific's stake in Cathay Pacific fell to 40 percent from 46.3 percent, while another shareholder CITIC Pacific Ltd's interest in Cathay Pacific was reduced to 17.5 percent from 25.4 percent.
At the analyst conference, Swire Pacific reiterated it has no intention to further reduce its stake in Cathay Pacific.
To cut the risk caused by volatile oil prices, Cathay Pacific plans to hedge 40 percent of its fuel requirements through measures including financial derivatives to cushion any adverse impact should oil prices hit US$80 to US$90 this year, Swire Pacific finance director Martin Cubbon said.
Benchmark crude oil prices have tumbled in recent months to US$51.80 a barrel, a level not seen since May 2005.