13-Jun-2006 11:25 AM
Cathay Pacific to outrank SingAir after Dragonair deal
Analysis
Hong Kong (XFNews-ASIA) - US-based research group Globalysis Ltd said Cathay Pacific Airways Ltd s likely to outrank Singapore Airlines in terms of profitability when the Hong Kong carrier has taken over the operations of Dragon Airlines Ltd (Dragonair) as planned.
"With the acquisition of Dragonair, Cathay may soon be in a good position to eclipse Singapore Airlines to possibly become the most profitable airline in the world," Globalysis said.
Globalysis said Cathay's acquisition of Dragonair will enable the airline to become the largest airline group in the Asia-Pacific, surpassing Qantas and Singapore Airlines.
It said Cathay's takeover of Dragonair may trigger "more mergers and acquisitions (M&A)" in the coming years.
The spate of M&A activity will come "as the regional airline industry could head for consolidation in order to manage costs better, especially with increasing risks from high and volatile oil prices, airborne disease like SARS and bird flu, and terrorism which could severely affect the airline industry."
"Consolidation will bring a little more security as bigger airlines may have deeper pockets to reach into should tough times hit, and economies of scale could help reduce operating costs, increase profitability as we may see happening with the new Cathay Pacific," Globalysis said.
The US house said an expanded Cathay penetration of the China's aviation market will open vast opportunities for the Hong Kong carrier.
It noted that China, by passenger volume carried is the second largest aviation market in the world, and by far the largest in Asia.
Globalysis believes that China passenger volume growth looks set to continue its surge with near 20 pct annual growth over the next five years.
"By 2019 there will be 100 mln outbound Chinese passengers," it said.
Dragonair already has access to 23 destinations in China including access to key markets such as the lucrative Hong KongShanghai route.
Cathay's access to these markets now puts the Cathay Pacific group in very strong competitive standing in the years to come, Globalysis added.