Dive Brief:
- Cathay Pacific has entered into a memorandum of understanding (MoU) with DHL to acquire its 40% share of Air Hong Kong, the Loadstar reported Monday.
- The purchase should be completed by year's end in 2018, coinciding with the expiration of the pair's joint-venture and block space agreement.
- Together, DHL and Cathay developed the airline and network in 2002. Since then it's expanded to serve Bangkok, Penang, Singapore, Taipei, Narita, Kansai, Nagoya, Seoul, Shanghai, Beijing and Manila. To better serve Singapore, Narita and Shanghai dry-leases three converted 747-400Fs.
Dive Insight:
Cathay Pacific has undergone numerous industry changes throughout its 71-year history, from an austere post-war beginning to a luxurious middle period. Its current direction, however, remains unclear: is it hedging its passenger airline bets with increased cargo transport capacity, as evidenced by its intended buyout of DHL?
Recent air cargo rates have shown positive growth, with freight demand surging in May. Though this could indicate that growth within the transport sector will remain strong, the International Air Transport Association (IATA) has suggested that the "best of the cyclical upturn may have passed." Basing their prediction on several factors, such as the recovered ocean cargo transport industry's lower rates and the rarity of disruptions such as malware attacks and port workers' strikes, the IATA makes its case against continued air freight industry growth, at least at rates like May's 12.7%.
Yet Cathay may simply be simply seeking balance between passenger and freight transport. At present, the airline is investing in greater passenger economies such as increased seating capacity and a diminution of services that contribute to a higher cost per passenger. Though it also faces increased competition from numerous bargain carriers within China, the pending addition of a third runway at Hong Kong airport will allow the line to add to its current roster of destinations and flight numbers.
Finally, despite layoffs, worker confidence remains high, citing the airline's longevity and resilience.
