Cathay Pacific 1998 Annual Report Download - page 9

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CATHAY PACIFIC AIRWAYS LIMITED ANNUAL REPORT 1998
the most impressive in the world. The ability to offer improved customer service and increased
capacity for expansion will serve Cathay Pacific well in the years ahead.
Despite the difficult market conditions we have continued to invest in our fleet, taking delivery of
ten new aircraft during the year. These included the world’s first Boeing 777-300, the longest
commercial aircraft in service. A further three new aircraft will be delivered in 1999. However, in view
of current weak demand and reduced growth forecasts, a decision was taken to remove seven
B747-200 aircraft from the fleet. In addition a further six B747-300 aircraft will be phased out in 1999.
As a result, we have incorporated in the 1998 accounts a provision of HK$607 million which
recognises the current market value of this fleet.
Another step we have taken to ensure our future has been to review our network in the light of
changing market demand. We have reduced frequencies to some regional destinations, and
increased services on key long-haul routes. We have also added two exciting new destinations,
Istanbul and San Francisco. The initial response to both services has been encouraging.
In addition to investing in our product we also took a major strategic initiative during the year by
becoming a founder member in a new global alliance oneworld. The alliance links five key airlines –
Cathay Pacific, American Airlines, British Airways, Canadian Airlines and Qantas Airways. We are
firmly of the view that the alliance route is the way of the future for the airline industry, and
becoming a member of oneworld is an important step in positioning ourselves for future global
competition. The alliance will enhance our presence in key global business markets and will
strengthen our competitive position and that of Hong Kong’s new international airport.
Consistent with our alliance plans we also unveiled a new frequent flyer programme. The new
programme, known as Asia Miles, replaced our previous programme
Passages , which was amicably
ended by the three partner airlines involved. Asia Miles is linked with our oneworld partners and
allows us to offer accrual of passenger miles in all classes and brings on board a wide range of non-
aviation service partners. We are confident the new programme will grow into a highly visible and
successful way of delivering greater benefits to our passengers and thereby will help to foster
greater loyalty.
Following difficulties experienced by Philippine Airlines in September, we responded to an
invitation from Philippines President Joseph Estrada to provide a temporary domestic charter service
for the country. For ten days in October we provided air links between Manila, Cebu and Davao,
adding a new chapter to our history in a market we have served continuously since we were
founded in 1946. We decided, however, not to pursue the opportunity to invest in and help manage
Philippine Airlines.
We realise that the Year 2000 or millennium date change is a significant business issue and we are
addressing it as a matter of priority. Further details are covered later in this report.
The year ahead is shaping up to be another difficult one for Cathay Pacific. All signs suggest the
operating environment will remain challenging and no significant improvement is expected in 1999.
Nevertheless, the measures we have put in place during 1998 will deliver increasing benefits as the
year progresses and I believe we have every reason to look to the future with some confidence.
Peter Sutch
Chairman
10th March 1999