Hong Kong airline Cathay Pacific's chief executive Ronald Lam discusses growth and resurgence at Cathay’s passenger and cargo operations as well as at its LCC HK Express.
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Karen Walker: Hello everyone and welcome to Window Seat, our Aviation Week air transport podcast. I'm ATW and Aviation Week Network Air Transport editor-in-chief, Karen Walker. Welcome on board. Now, this week is very special indeed. I am absolutely delighted to be in Hong Kong, home of Cathay Pacific Airways. I'm especially thrilled to be joined by Cathay Group CEO Ronald Lam. Ronald, welcome and thank you so much for joining Window Seat today.
Now Ronald became CEO in January 2023. He's also chair of Hong Kong Express Airways—that's Cathay's low-cost carrier. And, of course, he's a director at Swire & Sons. So, it's a great privilege for me to be sitting with him and also to be in Hong Kong during a rather special week. That is the Lunar New Year celebrations. So, a special time for Hong Kong and a special time for Cathay, and there's certainly been a lot happening in your world of late, Ronald. So very much looking forward to hearing directly from you. Thank you for joining us.
Ronald Lam: Thank you, Karen. First of all, welcome to Hong Kong. What a great time for you to be in Hong Kong because we are about to celebrate our new year of the snake here in Hong Kong. So, welcome.
Karen Walker: Thank you indeed. Okay, when I look at the Cathay Group, and Cathay Pacific Airways specifically, it was really something of a turning point in 2024. You had much going on, much rebounding, much recovery post-COVID. Can you just talk a little bit through for me some of the financial highlights and the growth that you were seeing?
Ronald Lam: Sure. Last two years were two very special years for us because we were rebuilding from the pandemic. As all the industry experts know, we started late and we started slow in Hong Kong when it comes to aviation opening up. But the last two years we have caught up very well as a team. Last two years we went from only starting with 30% of our passenger flight capacity and ending the year last year, 2024, with 100%. So we have managed to rebuild successfully within just two years, which has been a record in our history, and we are so proud at this point that we completed the rebuild successfully.
So in 2024 alone, we carried around 28 million passengers, which was more than 30% growth from the year prior. And on the cargo front, we carried 1.5 million tons of cargo, which is more than 10% growth from the prior year. And from a workforce angle, end of last year, we grew back to having more than 30,000 employees across the whole group, which was a record. In terms of recruitment and training, we had to recruit and train around 7,000 people just in a single year and we've never done that before. And to be honest, at the beginning of last year we were a bit nervous whether that will be possible. But month by month I think we've made great progress, and by end of last year we have successfully completed those recruitment and training targets so that we have been able to reach 100% of flights successfully.
And we've also rebuilt financially. It was a big year the last two years and in particular last year. We have successfully repaid all the money that we owe the Hong Kong SAR government, who was very generous to help us out during the pandemic time. So we bought back all the preference share they have invested in us with dividends. We bought back the warrants from the Hong Kong government as well. And we have bought back a large chunk from the market of our convertible bonds as well. So I would say we have rebuilt very successfully from a financial angle. And we'll announce our 2024 financial results in March. And we have already told the market that the second half will be better than the first half. So overall I would say 2024, just like 2023, will be a very strong year from a financial angle. So on all fronts, I think our teams are very happy with the outcome we've achieved in the last two years in terms of rebuilding our airline group.
Karen Walker: Congratulations. It's been a lot of work, but as you say, a real turning point in '24, you started to really see the benefits of that work. And I just get the feeling that you're entering 2025 with confidence and optimism. Is that fair?
Ronald Lam: Yes. Absolutely. I think the foundation we've built over the last two years has set us on very strong ground into 2025. Well, first we don't need to worry again about rebuilding because we are already 100% of flights from January 2025. So the rebuild was behind us. And this year we're going to focus on what ... Our user knowledge internally is that now we are back to being a finalist in the world championship competition. But 2025, we need to move further to become a medalist in the world championship competition. Whether it's on our passenger business or in our cargo business. So this year we're going to focus on a lot of attention to details. Banking in the point-one seconds or 1 kg in a world championship competition. So we're going to focus on the detail, further elevate our products and services so that we can claim ourselves as one of the top airlines, whether it's come from premium travel or cargo side.
The other thing I will mention is that the three-runway system in Hong Kong International Airport was just opened end of last year. So 2025 is really a new milestone in Hong Kong's aviation industry. It's a new exciting starting point for all of us, which coincides with our completion that we built. So now I think we can look forward into our long-term plan in growing our airline group further. And with that actually we've done a lot of preparation already. And up to now we have already committed more than $HK 100 billion Hong Kong dollars ($12.8 billion USD) worth of investment into the future to further strengthen Hong Kong's status as an international aviation hub and further strengthen Cathay as a leading airline group of the world.
Karen Walker: So exciting times for Cathay and for Hong Kong. I'd like to just delve a little bit deeper into some of those items that you've just raised. Let's just start with some of the focus areas for you, maybe regionally and your network. There's a lot going on there. Where are the main destinations or focus areas for you as you look forward?
Ronald Lam: Well, first of all, when it comes to travel, we now adopt a dual-brand strategy. So Cathay Pacific, focusing on the premium end of travel, and then HK Express, our wholly owned subsidiary low cost carrier focusing on the LCC end of the spectrum. So in terms of development for 2025, we'll continue to expand both airlines. And Cathay will focus mostly on the long-haul routes. In particular, the Americas, Europe and Australia. We have a heavy growth plan in those places. In the North America, for example, we'll be growing our frequencies in all the eight points that we fly to in North America covering the US and Canada. And we are very excited that this year we'll introduce a new point in that region, which is Dallas-Fort Worth that we’ll be adding as a new destination. In Europe. We have already announced three new destinations for our European region, bringing our coverage to a total of 11 points. So the new points are Brussels, Munich, and Rome, all new destinations that will be adding later this year.
And India, we have one more new point for Cathay Pacific, which is Hyderabad. India is a big region for us and this will yet add to the wide coverage we already have in India. And then on the other hand of the spectrum, HK Express is a LCC focusing on Asian destinations where Hong Kong has the home hub. And this year they have huge plan to expand into new destinations, whether it's in Japan, in Korea, in Taiwan, in Vietnam, and in Chinese mainland, et cetera. So, so far they've announced two new destinations already this year. Sendai in Japan and Nha Trang in Vietnam, but this is only the beginning. I'm sure they will have a long list of new destinations to be launched within 2025, so stay tuned on that.
Karen Walker: I was talking to the CEO at HK Express earlier, and the growth story there is quite extraordinary and the opportunities as well, especially with what you call the GBA, the Greater Bay Area, and the opportunities that have come up because of the third runway, three-runway system in Hong Kong.
Ronald Lam: Exactly. HK Express, although they are starting from a smaller base than Cathay Pacific, but they boomed so fast. And in fact they already doubled the size compared to before the pandemic already. And they continue to grow in 2025 and beyond, leveraging the opportunity rendered by the three-runway system, because before the three-runway system, Hong Kong had only two runways and we were very constrained in terms of slots already. So, the growth potential, especially for low-cost carrier was pretty limited. But now with the three-runway system, there's ample opportunities for HK Express to grow into destinations and frequencies that we never dreamt of before. So it's huge opportunity for them. I'm very excited about their growth potential moving forward.
Karen Walker: Yeah. They're a high-energy company that's for sure, and very young and dynamic, so it's going to be interesting to see their growth pattern. Let's just talk briefly about cargo as well. Cargo has always been an important part of the Asia aviation industry, but very much so for cargo. There's a long history there. There's a lot going on at Cathay Cargo right now. And it seems to me like, again, there's a lot of investment, a lot of investment in technology and a lot of focus on really getting the high yield, the specialized high-value cargo there. Just talk a little bit about the ambitions on the cargo side.
Ronald Lam: Sure. Well, being based in Hong Kong, we are very fortunate because Hong Kong is the number one air cargo hub of the world. It has been the busiest air cargo airport for more than a decade. And being the home-based carrier here, Cathay Cargo is very fortunate to be based in Hong Kong. So riding on this advantage, we've been growing with Hong Kong in terms of air cargo transportation. In fact, I will say Cathay Cargo kept the whole Cathay Group going during the pandemic. And even after the pandemic, cargo business has gone from strength to strength. Traditionally we rely on more the traditional trade. Factories producing stuff and then they ship out in big lots. That has been our bread and butter for many decades when it comes to air cargo.
But in recent years, the other half of the cargo we ship come from e-commerce, cross-border e-commerce. Has been growing very strongly. And I will say roughly speaking now half of our cargo shipment comes from the traditional trade, the other half actually is from e-commerce. So, this is a very good combination. It helps to ease even now the seasonality throughout the year, throughout the week for us. So, it's fantastic news.
So, currently we are running on 20 [Boeing] 747 freighters, plus the other half of our cargo shipment goes into the passenger fleet belly. We have make new investments into our cargo fleet. We make announcements that we will be buying a number of [Airbus] A350 freighters, which are going to come into our fleet from 2027 onwards. So that will be our new generation freighter fleet, which will help us to strengthen Hong Kong's position as the leading air cargo hub, as well as Cathay Cargo's leading position as one of the best air cargo carriers of the world.
Karen Walker: Was there any consideration about anything ... As you looked to the new freighter to bring in, did the A350 freighter, which is relatively new, come out strongly as the one that you wanted?
Ronald Lam: Yeah. We have looked at different options. It was a very competitive process. And we are glad that we have come to a good conclusion by picking [the] A350 freighter. We already have a large A350 passenger fleet, 48 of them in our fleet, so we are very familiar with A350. And by having [the] A350 freighter, I think one added bonus is that from a pilot angle, we can do common flying between our passenger A350 fleet as well as our freighter fleets in future, further enhancing the efficiency and hopefully enriching the interests of life for the pilots because they can fly one day to a passenger destination, other days to more exotic freighter-only destination, as well.
Karen Walker: Interesting. You still have, as you said, quite a large number of aircraft on order. Where does that take you out to and do you have other campaigns going on for beyond then, in terms of fleet renewal?
Ronald Lam: Sure. I mentioned about our $HK 100 billion Hong Kong dollar investments for the next seven years after the three-runway system is open here in Hong Kong. And a large part of that $HK 100 billion involves investment into new generation fleet. And we have over 100 new generation aircraft coming on firm orders in the coming years. And we've got all sorts of orders now are yet to come. The largest being the [Boeing] 777-9 which will arrive hopefully in 2026. And we have ordered some regional widebody aircraft, [Airbus] A330neo aircraft as well, which are going to come from 2028. We have also got a large order of some Airbus narrowbody aircraft, the A320s and A321neos for both Cathay Pacific as well as HK Express. And right now, we are running yet another campaign to look at our new generation long-haul fleet as well.
So as I mentioned, we already got a large fleet of A350s right now and 777-9 is also coming. But we also have a large fleet of 777-300ERs, which are on average undergoing through their midlife at the moment. So in the next decade we'll need to replace many of them. So therefore we are now going out to the market to look at what replacement we'll get for them, plus a bit of growth for our long-haul fleet moving forward. We are not only a campaign on our long-haul fleet.
Karen Walker: So you could consider the 787 in that?
Ronald Lam: Yes. It will be all the usual suspects. Of course consider A350, more of A350, more of 777-9 we have already ordered, plus new possibilities like 787.
Karen Walker: You mentioned the 777-9 a couple of times. What is your confidence level? Broadly, we know all the supply chain industry issues that are going on—engines and aircraft—but what's your confidence level with the 777-9 in terms of delivery?
Ronald Lam: Well, we haven't got a firm delivery schedule yet, but we've been keeping very close contact with Boeing, our OEM, of course. Yeah, I think this is something we've been watching very closely, and I'm still hopeful that it will arrive within 2026. And it is important for it to arrive on time for us or according to the revised schedule for us, because that is the fleet that will hold our new generation first class product, which I think the whole of our team and our customers have been looking forward to. Yeah, I don't know yet and hopefully it will become clearer in the next few months. I heard that the test flying has resumed, so it has to be good news.
Karen Walker: Let's hope. And the other big investment you're making is in what I would broadly call passenger experience upgrades. You've got a new cabin rolling out. That's across business seats and premium economy and economy seats. So a lot going on there on the Wi-Fi side, entertainment side. I've got to put this into the recording that I flew on an A350-1000 from [New York] JFK to Hong Kong and was able to watch an entire UK football game live, and it worked beautifully at 34,000 feet over the Arctic. So a lot going on and I've just seen the new cabin layout, which is nice. What are the main things you're trying to achieve when you're looking at how to improve passenger experience?
Ronald Lam: Sure. Well, first of all, I'm so glad that you enjoy our live TV broadcasts on route from JFK into Hong Kong. Well, we are making a lot of investments into our customer experience and a large part of the $HK 100 billion Hong Kong dollar investment, apart from the fleet investment I mentioned, the rest actually goes into our cabin and lounge products investment. As I mentioned, I think we came out late from the pandemic, so we have quite a bit of catch up to do when it comes to our product life cycle. Whether it is our cabin products or our lounge products. But over the last two years, we have made a lot of major decisions to catch up on our product life cycle. The first major cabin product rollout is our retrofitted 777-300ER. And we have equipped this fleet with the world leading business class called Aria Suite, as well as brand new premium economy.
And currently we already got three aircraft flying on the London route on a daily frequency. And throughout the last few months by flying regionally, we've already received a lot of positive feedback and we have addressed a number of teething problems. So we will continue to receive more of such aircraft. The total fleet will grow to more than 30 aircraft in due course. So I think more and more customers will be able to enjoy this new generation product. And in fact, this new product has received a number of awards already. The DesignAir has named our Aria Suites the best new business class products as well as our new premium economy, the best new premium economy products already, from a design angle. So we are so pleased. But still early days.
Apart from that, I mentioned already on our 777-9 when the new fleet arrives in 2026, we'll have a brand new cabin, of course, including our new generation first class products. So that will be a very exciting product that our customers should look forward to. Apart from that, on our regional fleet, we are also investing to upgrade our cabin product. So from 2026 on our A330 aircraft, we'll equipping the aircraft with lie-flat business class, even for regional flying. He will all be lie-flat. So that will be a new product that will come up alongside with new economy class for that fleet, of course.
So a lot of exciting new products in the air, but we are also investing in our well-renowned lounge products worldwide as well. For example, in our country's capitol, Beijing Capital Airport, we are undergoing ventilation for our lounge to bring it to the highest standard as the pier in Hong Kong, which is well-renowned. So in Chinese mainland, we're going to have a world-class lounge in Beijing, in Pudong Airport in Shanghai, as well as a lounge at a ferry pier, Shekou ferry pier in Shenzhen. So it will be a very strong line for Chinese mainland.
And in the US, JFK is a very strategic port that we have been wanting to build our own leading lounge as well. And finally, we now got an opportunity because we are moving to a new terminal sometime end of this year. And alongside that, we are building our world-class lounge of our own in that new terminal as well. So by end of this year or early 2026, we also look forward to welcoming a new lounge in JFK. And back home we continue to upgrade our lounge in Hong Kong. Very soon, one of our lounges in Hong Kong International Airport, the wing will be undergoing renovation to bring it to the highest standard. Firstly with the first-class lounge and then followed by the business class lounge. So, quite a lot to look forward to, I would say these two years.
Karen Walker: Yeah. I saw the new cabin layout as I saw in the 777 and it's very, very nice. Doors in the business suite, a little door, and the premium economy cabin was very, very nice indeed. I suspect that's going to be very successful.
Ronald Lam: Yeah, thank you. And while we focus on these two cabin products and lounge products over the last two years, because the investment cycle is quite long, it takes two, three years to put these things in. But in the meantime, I think we also continue to invest in other areas like our in-flight entertainment, in-flight connectivity, our dining experience, and uplifting our cabin crew service as well. So all these are shorter cycle improvements we've been working on.
For example, you mentioned about our live TV on in-flight entertainment, and in fact, I think our in-flight entertainment library is something we are also very proud of. We have a wide range of library covering Western Hollywood type content as well as Hong Kong movies and dramas, as well as Chinese mainland content and a lot of Asian content. So, I think we have a very rich library. So much so that I think Skytrax has named us the best in-flight entertainment over the last year or so. In-flight connectivity is something we continue to invest in. Now we offer free Wi-Fi to our high tier members, the diamond members as well as first class and business passengers right now.
Karen Walker: That's becoming more of an expectation, I think hasn't it?
Ronald Lam: Yes, yes—but to be able to offer it consistently is not easy. And by middle of this year, 2025, all our fleet, all aircraft will be connected with Wi-Fi and a hundred percent Wi-Fi connected is not the world standard yet, I would say. Not many airlines would have connectivity on all the aircraft. So, we are very proud that by end of the middle of this year, we will have all our aircraft covered.
Karen Walker: Absolutely. A lot going on and really positive. So can we just talk about sustainability very quickly as well? We know how important this is to the industry. I know that Cathay is very committed to this. You've got your own Cathay Group goals when it comes to sustainability, your own targets, and then of course you're very actively supporting the industry-wide 2050 net carbon zero goal. How confident do you feel right now about both the Cathay goals and the wider industry goals?
Ronald Lam: Yes, first of all, we want to play a leadership role in the industry when it comes to sustainability, especially in the Asian region. And therefore we have put out a number of very aggressive goals. So, net zero carbon emission by 2050 is our ultimate goal. But shorter term, medium term, we have set other goals including aiming to uplift 10% of SAF by 2030. We have gone through quite a journey over the past few years and have learned a lot. And we have ups and downs, but we have learned a lot. And now we have got very strong knowledge about the worldwide SAF market, including in North America, in Europe, in Chinese mainland as well. I will say we remain committed. It's not going to be easy. The SAF journey is not going to be easy, but I think we remain committed and we are exhausting every ways to make our target possible.
One example is that we are gathering momentum on our corporate set program by working with our big corporate customers to help us with the SAF development. So in 2024 alone, just among our corporate set program, we managed to solicit more than 6,000 tons worth of SAF commitment from our corporate clients, which is a record year for us, and we'll do more in the coming few years. Also, we've been actively trying to procure more SAF worldwide by going to different markets. And we also have a co-investment fund with Airbus to invest in potential SAF ventures as well. So we're also actively looking into that. Full of challenges and we need all the stakeholders to go along this journey, including the fuel suppliers, the governments, the airports, et cetera, et cetera. So yeah, I think we are there to work with all the stakeholders on this journey.
Karen Walker: Yeah, but it's a complicated and very expensive challenge. And as you say, it takes everybody. It's no one person, no one organization.
Ronald Lam: Yes. But apart from SAF, I want to mention another sustainability aspect that is probably closer to home, something we can see and touch already, which is the reduction of single-use plastic, which we've been driving a lot of progress as well. So back in 2019, on average we used around seven pieces of single-use plastic per passenger across our airline. And in 2023, we've already brought it down to around three pieces per passenger. And in 2025, we're going to further the journey. We are aiming to bring it down to 1.5 pieces on average per passenger. A lot of efforts and a lot of investment by changing the material we use for customer-facing products over the past few years. Although it might mean in some cases higher cost for us, but we believe is very worthwhile investments when it comes to sustainability.
One initiative we've been working on, apart from that primary target, we also target to recycle one-third of all the water bottles, plastic bottles of our in-flight usage. And we've been making good progress. We've been collaborating with our cabin crew. Our ground-handling companies are making great progress right now, and it'll be great to see more and more of the water bottles getting recycled.
Karen Walker: So much going on. Just briefly to conclude, when you get to about this time next year, so as you're getting towards the end of this year, can you say one or two things that you'd most like to say, yeah, '25 was another even better year because of?
Ronald Lam: Yeah. My mental roadmap is quite simple and yet very exciting. So 2026, the Cathay Group will turn 80 years old, so it will be a huge milestone. We were established in 1946, so next year we'll be celebrating our 80th birthday. And what I want to see in a year's time by the time we celebrate our birthday is that when we look back in our 80 years’ history, yes, we might have three worst year[s] during 2020 to 2022 because of the pandemic, and Hong Kong and Cathay Group was the hardest when it comes to the pandemic. But we've grabbed the opportunity, survived—we fought hard to survive—but we've also taken the opportunity to transform ourselves to make ourselves better and stronger. And those transformations [have] been paying dividends already. If you look at the last two years as we share, we had two very successful years. And now our goal is very simple, is to make 2025 another successful year so that after three worst years in our history, we will have three best years in our 80 years of history. I think that will be our goal across the whole team. And we are all very committed and excited about this goal.
Karen Walker: Congratulations on what's already been achieved and through incredibly demanding and challenging times. And yeah, I wish you every success, continued success in 2025 and also a very happy Lunar New Year, successful, and it's going to be really interesting and exciting to see you through the 80th birthday. So thank you again for your time and insights today.
Ronald Lam: Thank you, Karen.
Karen Walker: And thank you also to our producers, Cory Hitt and Guy Ferneyhough. And of course, a huge thank you to our listeners for following Window Seat. Make sure you don't miss us each week by subscribing to the Window Seat Podcast on Apple Podcasts or wherever you like to listen and give us a review. This is Karen Walker disembarking from Window Seat.
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