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In support of drive to turn Hong Kong into Asia's logistics hub

by Philip Chen
Mr. Philip Chen, Director & Chief Operating Officer of Cathay Pacific Airways, joined CX in 1977. Prior to his current appointment in July 1998, he was Deputy Managing Director from April 1997 to June 1998. Mr Chen was Chief Executive of Hong Kong Dragon Airlines from 1994-97, in a period when Dragonair became one of the most successful and profitable airlines in the world. Mr Chen was Regional General Manager Southeast Asia of CX, based in Singapore, in1992-94. From 1989 to 1992, he was based in Beijing as Chief Representative & General Manager
of Swire China. He has pursued academic activities and management studies at various universities, including Stanford University, INSEAD and Oxford University. He was awarded a Fellowship by the Royal Aeronautical Society of the UK five years ago. He is currently a Director of John Swire & Sons (HK) Ltd and John Swire & Sons (China) Ltd. He is a member of the Board of the Hong Kong Tourism Board and the Hong Kong Government Tourism Strategy Group. He is also a member of the Tourism Development Steering Committee, and an Honorary Adviser of Hong Kong Association of Registered Tour Co-ordinators Executive Committee.

Last year was a difficult year for the aviation industry. The world economic slowdown began towards the end of 2000, and over the ensuing months we saw a steady drop in both cargo and passenger traffic as demand weakened. The US economy showed consistent signs of weakness throughout 2001, while fragile Asian economies and the stagnant economy in Japan exacerbated the slowdown. Then, of course, came 11 September.

The terrorist attacks in the US had huge repercussions on the world's economy, and on the aviation industry in particular. It is clear the industry has been deeply affected and will take some time to recover. Cathay Pacific is no exception--we have seen a significant impact on our business, particular to key North American markets.

It was not all bad news in 2001. We were cheered by the announcement of China's accession to the World Trade Organisation, which we believe will have positive repercussions for Hong Kong and the local cargo market. The Hong Kong Government's initiative to accelerate the development of the local logistics infrastructure will certainly have a positive impact. Cathay Pacific has given its full support to the drive to turn Hong Kong into Asia's logistics centre.

Following the global economic downturn we can expect to see consolidation in the cargo industry, with airlines and freight forwarders merging in order to survive. Hong Kong airlines are run on a very sound financial basis but we are facing unfair competition in that many other airlines around the world are receiving government assistance to help them through these difficult times. I have termed this "Reverse Evolution" because the weak players will survive with the help of taxpayers' money or other forms of assistance.

The "invisible hand" is now very apparent and it begs the question whether there is fair competition and a true level playing field. Many airlines, because of weakness in their domestic and traditional markets, will seek to expand onto the home turf of others, often with the backing of their governments. As such the Hong Kong SAR Government must consider whether unilateral liberalisation of the airways is in the best overall interest of the SAR.

I think 2002 will certainly be a challenging year both for Cathay Pacific and the air cargo market in general. Hong Kong's move to become a leading logistics centre will of course have positive benefits, and we can take heart from the fact that Hong Kong International Airport continues to provide some of the best freight facilities in the world.

Cargo will continue to be a core part of Cathay Pacific's operations and we have every confidence that the investments we have made and the service we provide will stand us in good stead through the economic slump. We will always have the interests of shippers and the trade in mind because we believe that only when they prosper will the rest of us thrive. In today's world it is important for us to seek a "win-win" solution.

Cathay Pacific Cargo...Hong Kong's air cargo throughput expected to rise on average by 6% annually, says Dr David Pang, Airport Authority of HK's CEO