One-on-one: John Slosar, CEO, Cathay Pacific Airways

25 May 2011

How has the feedback been on the new business class seats?

The surveys have been very positive.  Our passengers are now telling us that we’ve got the right balance in our seats – there is space, privacy, a great seat, a great bed (for an overview of feedback from CX’s long-time Marco Polo members, click here). This is good, because we spent around two years working on them. We wanted our seats to be the best ones flying.

What is the timetable for getting the new seats on aircraft across fleet?

We got our first aircraft with the new business class product – an A330 at the end of February, then two B777-300ERs and more will follow this year and up to 2012. We also have 90 planes on order. Towards the end of this year, we’re going to start reconfiguring existing aircraft. By the end of 2012, if you’re a passenger with us, you will probably experience a new plane, a new type of seat, new IFE, wifi access and the like – on the “new Cathay” as I call it.

We’ll eventually have a fleet of 46 B777-300ERs by 2015, which will make us the biggest operator of that type in Asia. I need to rave about that airplane as it’s really the most efficient flying today, it burns 25 percent less fuel per seat than a B747. With fuel being US$120 a barrel (at press time), that’s a lot!

When people feel you’re doing new and interesting things, they will be attracted to your product. And business travellers, if you don’t get them the first time, they don’t come back and that’s a big failure. We want the business traveller who comes again and again.

By the way, those seats are expensive bits of hardware and costs as much as a luxury car.

What is being done to improve economy class?

We’ve spent a couple of years improving business class, so we’re now looking hard at the economy cabin as some people have challenged us, saying they think we can do better. We are working to improve that part of the plane.

Any progress on the premium economy front?

A few years ago, this was just a niche market, available in the UK, Australia and New Zealand and on mostly long-haul routes. But going forward, a growing number of airlines seems to be moving into it, and it’s becoming a general product now, available in more places. If that is the trend, then we will compete in that space. And when we come to do it, we will do it well and make sure it follows Cathay’s high standards and offers good value. We have been doing some work in this area.

What is the state of business travel? Has it bounced back in your opinion?

So far, this year has been quite strong, which plays in the direction that’s good for Cathay Pacific and Dragonair (our subsidiary) since we’re both big business airlines. That’s one of the reasons we launched the new business class product – to attract business travellers, as well as the fact that one of the best hedges during high fuel prices is a new and modern fleet because it makes use of the most fuel-efficient aircraft.

Hong Kong’s continuing strength as an international financial centre has been fantastic for its economy as well as China’s increasing links with the rest of the world. I believe that at the end of this decade in 2020, when everyone looks back, the development of China as an international outbound market will be the biggest travel story. Now, our goal with partners Dragonair and Air China is how the three of us can take advantage of this opportunity. How? I still don’t have the answers, but we will figure out just what it takes to achieve that.

But the more the local stock exchange draws foreign companies to list here and the more China’s economy is integrated with the rest of the world, the more people will visit this area. Recently, we increased our service to New York to four times daily (see news here), and those flights have been doing really well. What’s made this happen is Hong Kong’s amazing development as a world financial centre – it’s created this bond between the big banks and financial companies here and in New York.

Based on the service’s success, we’re looking at probably adding another flight.

I’ve lived in Hong Kong continuously since 1992, and I remember all the doom and gloom before 1997 (the Handover), so who would have predicted that after 14 years, Hong Kong would be the biggest capital raising market in the world? One of my key goals [during my term as Cathay Pacific’s CEO] is to build up further our Hong Kong hub. The city is already a great destination, but we want to make it even more convenient for people to come to Hong Kong or go through Hong Kong to get to other places. We want more flights and better schedules.

We would like to apply for more frequencies to Taiwan. After the Cross Straits (opening up) happened, our business came down a bit. After all, if you’re going to Shanghai, it’s faster to go direct than via Hong Kong, so we reduced flights. But interestingly enough, the Taiwanese still want to come to Hong Kong – they have their favourite restaurant or store; they have friends here. The traffic is still pretty substantial so our flights are again back up.

Your thoughts on Hong Kong getting its third runway?

That’s going to be a significant issue this year that will debated in public. I think it’s right people should understand what the situation is and give their opinion. But even if the decision to build it now is made, it will still take another 10 years before it’s put into place.

You’ve stepped into the job and are already facing tremendous challenges. Name the most pressing.

Oil is the single biggest cost of an airline and we have to deal with this in an effective manner, and that includes hedging, and as I said earlier, a modern, fuel-efficient fleet.

We’re also watching how quickly Japan comes back – it constitutes 7 to 8 percent of our total business. Hong Kong people love going to Japan; it’s such a popular destination with them. We’ve tried to help Japan recover, mounting extra flights during that time when people wanted to leave; our employees raised HK$10 million (US$1.2 million) in donations, which the company matched; and we’ve run extra cargo flights to get the supply chain materials out. Things seem to have stabilised, but when the country will start to climb up again is still not sure.

Margie T Logarta

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