U.S.-Japan Investing

Summary transcript of program broadcast September 1, 1999

Subject: "Cathay Pacific's Bid for Asia"

Host, Dr. Dennis Laurie and guest Dennis Owen, Sales Manager, Cathay Pacific Airways

Dennis Laurie: The next time you are involved in investing or business activity in Japan or Asia, my guest would have you fly Cathay Pacific. It might be a good idea as you will conclude before this show is over. My guest is Dennis Owen, Sales Manager, Cathay Pacific. First, let's make clear that Cathay Pacific (CP) shares are traded on the Hang Seng Hong Kong Index, but are available to the audience over the counter. How did 1998 and 1999 fare for CP?

Dennis Owen: 1998 was a tough year. We had our first loss in 35 years because of the Asian currency problems and all the associated problems. All of the Asian carriers had a very difficult year in 1998. In 1999 we are seeing an upswing and we did make a profit for the first six months. And we will expect to make a profit for the end of 1999.

Laurie: Currently, CP is owned by a British company, the Swire group, I believe.

Owen: Yes, the Swire group owns 43% of the Airline. And the Chinese investment arm of the government owns 25%.

Laurie: In July 1997 Hong Kong passed British colonial status to China. How is the company operation different today, if at all, compared to British domain?

Owen: In terms of the handover and CP, nothing has really changed. We still operate the same way, we still have the same philosophies. So we don't really see change in that regard.

Laurie: So the China policy of "one country two systems," from your viewpoint, seems in fact to be the way things are now evolving.

Owen: I think actually it has gone very smoothly over the last two years. Unfortunately, the whole handover issue is clouded by the economic problems in Asia.

Laurie: Let's talk now about the routes that CP flies. One of the most important routes, especially for our viewers, is LA nonstop to Hong Kong. You've got 50% of that market share, which is really good.

Owen: That is correct. We do quite well out of the LA market. We have ten flights a week from here. We have a non-stop flight from San Francisco once a day as well as a direct flight from New York. We also fly out of Vancouver and Toronto on a daily basis.

Laurie: Hong Kong serves as essentially a hub for CP.

Owen: It is our only hub, so when you are traveling within Asia a majority of the flights go through Hong Kong to other destinations.

Laurie: Now in addition to the reach of your hub, essentially every international carrier now is joined in alliance, recognizing you can't play this game alone. You are part of One World alliance, and American Airlines is one of the participants. What are the others?

Owen: Canadian TM Airways, British Airways, Qantas, and we are adding Finnair and Iberia Air as of today as a matter of fact.

Laurie: Now from the standpoint of benefits for our flyers, what do you get out of flying any one of those members including CP? Frequent flyer miles I would think.

Owen: One great thing about the alliance is frequent flyer miles. You can accrue and use your miles on any of those carriers, and secondly lounge access all around the world. If you are in the One World Alliance, as a member, you can use all those lounges. And for instance if you are an important person to American Airlines, you are now an important person to CP and all these other carriers as well. You will be treated like a preferred client all over the world with the alliance.

Laurie: Every airline claims it has special features. But in fact you may indeed have special features that make flying CP a little bit more special.

Owen: I think we do. I think CP is different in that, particularly for those who have never gone to Asia before, there is an exotic feel about it. The minute you step on board our airplane, you get that feeling. Unlike any other carriers I know of, we have flight attendants from eleven Asian lands that we fly to. Each wears a flag from a particular country, which gives just a different flavor of all of the countries that we fly to, as well as our in-flight product. In terms of seats, we have footrests in all classes including coach. We have private TVs in all classes including coach. So we do a lot of extra things on the airplane for people.

Laurie: Let's talk about pricing. You have a thing called the "All Asia Pass."

Owen: The All Asia Pass is one of the best deals out there. For 999 dollars you can travel to up to sixteen cities, all for the same price, and that includes the flight from the U.S. to Asia. It's a great opportunity for Asia.

Laurie: You have very strong competitors flying across the Pacific. For our viewers the next time they have a business activity abroad, why fly CP?

Owen: I think, for one thing, we have the most flights to Hong Kong from North America. We are associated with the American Airlines advantage program as well and our in-flight service is, I think, the best out there.

Laurie: And let us also add an extraordinary 50 plus year history of successful flying.