Cathay Pacific Remembers The Dragon
Thursday, June 22, 2006SUSIE GHARIB: Boeing may be about to log off its in-flight Internet service permanently. The aircraft maker said today it is evaluating the service to decide what`s best for both the business and its customers. The comments came in response to published reports that Boeing may dump its connection service, because it hasn`t made money in six years. The service is estimated to have cost Boeing about a billion dollars so far. Connection lets users surf the Internet during flight. It`s currently used by a handful of international carriers on long-haul flights. Also today, Boeing announced that Hong Kong based Cathay Pacific Airways has ordered six of its 747 extended range freighter jets. KANGAS: Speaking of Cathay Pacific, the carrier is carving out airspace in mainland China`s tightly controlled aviation market. Cathay is spending nearly $1.75 billion to buy the shares it doesn`t already own in Hong Kong-based Dragon Airlines. That also doubles its stake in the mainland carrier Air China. As Mark Niu reports from Hong Kong, the deal could have a huge impact on just what carriers fly in the skies over China.
MARK NIU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hong Kong has long been considered the gateway to mainland China. But up until now, the territory`s flag-carrier Cathay Pacific has only been allowed to fly to three cities in mainland China. The Dragon air deal now gives them direct access to 20 other Chinese cities.
TONY TYLER, CHIEF OPERATING OFFICER, CATHAY PACIFIC: And that is the last piece of the jig saw that we needed to put together in order to be a true force in world aviation.
NIU: The deal also gives Cathay access to Air China`s network, which includes flights from city to city throughout the world`s most populous country. Cathay is doubling its stake in Air China from 10 to 20 percent. Cathay is the only non-mainland shareholder in a mainland passenger airline.
TYLER: Getting into an equity alliance, strong equity alliance with the biggest and most iconic airline from the world`s fastest growing market, and an airline that is in the earliest stage of development, with enormous potential.
NIU: And that potential for development is certainly making itself known, particularly in more mature commercial aviation markets. At (inaudible) airports in Hong Kong more than 40 million passengers pass through here every year. It`s by far the busiest airport in this southern China (inaudible) river delta region. But just across the border, only about an hour away from here, several mainland Chinese airports are quickly catching up.
Take Guang Cho`s Bayoun (ph) airport. Eight years ago, 12 million people passed through annually. Today that`s doubled to nearly 24 million. But aviation analyst Elizabeth Bosher believes the Cathay deal will only bring more traffic into Hong Kong and the rest of China.
ELIZABETH BOSHER, DIR. GENERAL, AEROSPACE FORUM ASIA: I think this is going to happen, is that international passengers coming in to Hong Kong will be able on one ticket, first of all to arrive in Hong Kong, then maybe to move into the mainland on Dragon Air to their first port of call, but then they can take Air China to a far wider range of destinations. NIU: But getting to those destinations might not be as simple as that, because while traffic in the skies may increase, traffic may also jam.
BOSHER: All of Chinese airspace is still under military control, but that certain corridors are opened up for use by civil aircraft. The problem is that these corridors, particularly between very-frequented points like Shanghai and Hong Kong, are simply not wide enough, large enough to cope with the amount of traffic that now wants to go through it.
NIU: And that traffic will grow. China`s other two national carriers are also likely to be looking for similar deals with foreign airlines, raising the stakes in the competition for a piece of China`s skies. Mark Niu, NIGHTLY BUSINESS REPORT, Hong Kong.
