Cathay Pacific remains coy about which global alliance grouping it will ally itself with as speculation mounts over potential bedfellows.
Cathay's alliance talks are progressing with virtually all major carriers and groupings in the industry, and a decision will be made within six to nine months, says Cathay managing director David Turnbull. The airline says it is looking for a deal that will give it the best route network as part of a long-term strategy.
A Cathay spokesman stresses that the airline will not be rushing into anything although many in the industry believe there are only two real contenders for Cathay's hand - the proposed British Airways/American Airlines alliance or the Star Alliance. Cathay has also been talking to KLM/Northwest Airlines. Swissair is another name linked with Cathay as it trawls Asia for route-specific alliances. A Swissair spokesman declines to mention which carriers or routes are on its wish list but does say the airline is talking to several Asian carriers and will make an announcement within the next few weeks.
Analyst Tom Folinsby of Caspian Securities tips the BA/AA partnership as the most likely candidate for Cathay. He believes Cathay is in a strong position due to its strong Hong Kong hub and access to the lucrative Chinese market.
However, Folinsby and other analysts question whether the acrimonious break-up of Cathay's codeshare with American Airlines might have left a sour taste in Cathay's mouth. Solomon Smith Barney's Peter Negline says: 'Cathay has only recently made the decision to commit to an alliance, however at the moment Cathay has more to gain than to offer given the weakness of Asian traffic in the current economic conditions.'
One source says Cathay might have 'outsmarted itself' and left matters too late. In recent years Cathay has been pursued by a number of potential partners and remained unenthusiastic. But the airline is now keen to get everyone around the table again. The source says, 'Cathay was like the girl at the party chased by all the guys but is not so sought after now'.
Folinsby on the other hand is more bullish, describing Chek Lap Kok as an ace up Cathay's sleeve. He says the airline's shares are trading at a 20-30 per cent premium which still represents a bargain to the average investor.
As speculation continues over Cathay's next bedfellow, the airline is busily trying to reduce its staff costs. Turnbull says he hopes to reduce staffing levels by 5 to 7 per cent over the next year, translating into some 1,000 job losses. Turnbull stresses that the job cuts will come from natural wastage rather than enforced job cuts and predicts that the moves should save the airline approximately US$64.5 million per year.
Source: Airline Business
