Cathay Pacific

1946–1960: The early years

Cathay Pacific Airways was founded on 24 September 1946 in Hong Kong. Sydney "Syd" de Kantzow, Roy Farrell, Neil Buchanan, Donald Brittan Evans and Robert "Bob" Stanley Russell were the initial shareholders. Buchanan and Russell had already worked for de Kantzow and Farrell at Roy Farrell Import-Export Company, the predecessor of Cathay Pacific, that was initially headquartered in Shanghai. Both de Kantzow and Farrell were Ex-Air Force pilots who had flown The Hump, a route over the Himalayan mountains. Farrell purchased the airline's first aircraft, a Douglas DC-3, nicknamed Betsy, at Bush Field, New York City in 1945.:?29? The company began freight services on 28 January 1946 from Sydney to Shanghai, after Farrell and Russell flew the plane to Australia and obtained a license to carry freight earlier that month.:?36–37? Its first commercial flight was a shipment of Australian goods.:?37? The profitable business soon attracted attention from the Republic of China Government Officials.:?44? After several instances where the company's planes were detained by authorities in Shanghai,:?44? on 11 May 1946 the company relocated, flying its two planes to Hong Kong. Farrell and de Kantzow re-registered their business in Hong Kong on 24 September 1946 as Cathay Pacific Airways Limited, while another sister company, The Roy Farrell Export Import Company Limited, was incorporated on 28 August 1946 and chartered some flights from Cathay.:?58

They named the airline Cathay, the ancient name given to China, and Pacific because Farrell speculated that they would one day fly across the Pacific:?56? . Moreover, to avoid the name "Air Cathay" as it had already been used in a comic.:?55? The Chinese name for the company was not settled on until the 1950s. It comes from a Chinese idiom meaning "Peace and Prosperity" and was at the time often used by other businesses called "Cathay" in English.

According to legend, the airline's unique name was conceived by Farrell and some foreign correspondents at the bar of the Manila Hotel,:?55? while another narrative was the name was taken in the Cathay Hotel in Shanghai Bund, during drinking and brainstorming, and choosing Cathay was to avoid the word China in the airline name.:?53? On Cathay Pacific's maiden voyage, de Kantzow and Peter Hoskins flew from Sydney to Hong Kong via Manila.:?53? The airline initially flew routes between Hong Kong, Sydney, Manila, Singapore, Shanghai, Saigon, Bangkok,:?58? with additional chartered destinations.:?59? The airline grew quickly. By 1947, it had added another five DC-3s and two Vickers Catalina seaplanes to its fleet.:?234?In 1948, a new legal person of Cathay Pacific Airways was incorporated, with John Swire & Sons , China Navigation Company, Australian National Airways being the new shareholders of the new entity, acquiring the assets from the old legal person; the old legal person, was renamed into Cathay Pacific Holdings, as well as retaining 10% shares of the new Cathay Pacific Airways. de Kantzow, Farrell and Russell were the shareholders of Cathay Pacific Holdings at that time. It was reported that the colonial British government of Hong Kong, required the airline was majority-owned by the British. Despite de Kantzow being a British subject through his Australian roots, Farrell was an American, thus forcing them to sell their majority stake.:?79? Under Swire's management, de Kantzow remained in the airline until 1951,:?123? while Farrell had sold his minority stake in Cathay Pacific soon after Swire's takeover in 1948, due to his wife's health problems.:?115? He returned to Texas and became a successful businessman.:?115?Swire later acquired 52% of Cathay Pacific Airways. As of 31 December 2017, the airline is still owned by Swire Group to the extent of 45% through its subsidiary Swire Pacific Limited, as the largest shareholder. However, Swire Group also formed a shareholders' agreement with the second largest shareholder, Air China , which Cathay Pacific and Air China had a cross ownership.:?41,?104?In the late 1940s, the Hong Kong government divided the local aviation market between Cathay Pacific and its only local competitor, the Jardine Matheson-owned Hong Kong Airways::?117–118? Cathay Pacific was allocated routes to the south , while Hong Kong Airways was allocated routes to the north . The situation changed with the establishment of the People's Republic of China and the Korean War, which reduced the viability of the northern routes. In 1959, Cathay Pacific acquired Hong Kong Airways, and became the dominant airline in Hong Kong.

Under Swire, another important sister company, HAECO, was established in 1950.:?130? Nowadays, it's one of the major aeroplane repair service companies of Hong Kong with divisions in other cities of China.

1960–1990: Expansion

The airline prospered in the late 1950s and into the 1960s, and it purchased Hong Kong Airways, on 1 July 1959. Between 1962 and 1967, the airline recorded double digit growth on average every year and became one of the world's first airlines to operate international services to Fukuoka, Nagoya and Osaka in Japan. In 1964, it carried its one millionth passenger and acquired its first jet engine aircraft, the Convair 880. In 1967, it became an all jet airline with the replacement of its last Lockheed L-188 Electra with a Convair 880.

In the 1970s, Cathay Pacific installed a computerized reservation system and flight simulators. In 1971, Cathay Pacific Airways received the first Boeing aircraft 707-320B. By 1972 it had five 707s. The new aircraft colour was known as Brunswick green. In July 1976 it began operating a Boeing 707 freighter from Hong Kong to Seoul, Bangkok and Singapore.In 1974, Cathay Pacific almost purchased the McDonnell Douglas DC-10 to open a new flight route. During the flight route application process with the British government, due to the pressure from the British government, Cathay Pacific changed the application to apply for a route from Hong Kong to London using a Boeing 747. The application was ultimately rejected. In 1979, the airline acquired its first Boeing 747 and applied for traffic rights to fly to London in 1980, with the first flight taking place on 16 July.

Expansion continued into the 1980s. In 1982, Cathay Pacific Airways introduced Cathay Pacific Cargo, which provided cargo service to ingratiate the trend of Hong Kong, becoming one of the largest re-export trading ports of the world. The airline's long-haul dedicated cargo services started a twice a week with Hong Kong-Frankfurt-London service operated jointly with Lufthansa. Cathay Pacific kept its service to Vancouver in 1983, with service on to San Francisco in 1986, when an industry-wide boom encouraged route growth to many European and North American centres including London, Brisbane, Frankfurt, Amsterdam, Rome, Paris, Zurich and Manchester.On 15 May 1986, the airline went public and was listed in the Main Board of the Stock Exchange of Hong Kong.

1990–2000: Rebranding, renewal, and Oneworld

In January 1990, Cathay Pacific and its parent company, Swire Pacific, acquired a significant shareholding in Dragonair, and a 75% stake in cargo airline Air Hong Kong in 1994. In 1994, the airline launched a programme to upgrade its passenger service, including a HK$23 million program to update its image. Its logo was updated in 1994 and again in 2014.The airline began a fleet replacement program in the mid-1990s, which cost a total of US$9 billion. In 1996, CITIC Pacific increased its holdings in Cathay Pacific from 10% to 25%, and two other Chinese companies, CNAC and CTS, also bought substantial holdings, while the Swire Group holding was reduced to 44%. According to the International Directory of Company Histories, the sale of a 12.5% stake of Cathay Pacific by Swire Pacific to a Chinese state-owned company was regarded "as evidence of China's sincerity in maintaining the prosperity of Hong Kong."In 1997, Cathay Pacific updated the registration numbers and flags on its fleet in conjunction with the handover of Hong Kong from the United Kingdom to China.

On 21 May 1998, Cathay Pacific took the first delivery of the Boeing 777-300 at a ceremony in Everett. On 21 September 1998, Cathay Pacific, together with American Airlines, British Airways, Canadian Airlines, and Qantas, co-founded the Oneworld airline alliance. Cathay Pacific temporarily took over the domestic and international operations of Philippine Airlines during its two-week shutdown from 26 September to 7 October 1998. The airline was hurt by the Asian financial crisis of the late 1990s, but recorded a record HK$5 billion profit in 2000.

Transfer to Chek Lap Kok and transpolar flights

On Monday, 6 July 1998, Cathay Pacific terminated flights from Kai Tak International Airport to London Heathrow Airport after over 73 years of operation. The next day, Cathay Pacific began flights from New York John F. Kennedy International Airport to the new Hong Kong International Airport at Chek Lap Kok. This flight was also the world's first nonstop transpolar flight from New York to Hong Kong.

2000–2010: Industrial troubles and acquisitions

The year 2000 saw the Cathay Pacific, experience labour relations issues while completing the acquisition of Dragonair.

The 49ers – employment dispute

In 2001, the Hong Kong Aircrew Officers Association launched a "work to rule" campaign to further its campaign for pay improvements and changes to roster scheduling practices. The action involved pilots refusing to work flights that were not scheduled on their roster. Although this alone did not cause extensive disruption, rostered pilots began to call in sick for their flights. Combined with the work to rule campaign, the airline was unable to cover all of its scheduled flights, and cancellations resulted. Cathay Pacific steadfastly refused to negotiate with the HKAOA under threat of industrial action.

On 9 July 2001, reportedly following a comprehensive review of the employment histories of all its pilots, the company fired 49 of its 1,500 pilots. This group became known colloquially as "the 49ers". Nearly half of the fired pilots were captains, representing five percent of the total pilot group. Of the 21 officers of the HKAOA, nine were fired, including four of the seven union negotiators.Then-HKAOA president Captain Nigel Demery took the view that "the firing was pure intimidation, a union-bust straight up, designed to be random enough to put the fear in all pilots that they might be next, no reason given". The dismissals were challenged in a number of legal proceedings, but none were reinstated. The airline later offered the 49 pilots it terminated in 2001 the chance to reapply for pilot positions with its cargo division, guaranteeing such applicants first interviews, subject to passing psychometric testing. Nineteen former employees applied and twelve were offered jobs.

On 11 November 2009, 18 of the 49ers succeeded in the Hong Kong Court of First Instance concerning their joint claims for breach of contract, breach of the Employment Ordinance, and defamation.

Judge Anselmo Reyes ruled that the airline had contravened the Employment Ordinance by dismissing the pilots without a valid reason, adding that they had been sacked primarily because of union activities. He also held that remarks by then-chief operating officer Philip Chen Nanlok and current chief executive Tony Tyler after the sackings were defamatory. The judge handed the pilots a victory in their long-running legal battle, with individual awards of HK$3.3 million for defamation together with a month's pay and HK$150,000 for the sackings.

On 24 December 2010, judges Frank Stock, Susan Kwan and Johnson Lam of the Court of Appeal overturned the judgment of the lower court to the extent that the claim for wrongful termination of the contract was dismissed. The finding that Cathay Pacific wrongly sacked the 18 pilots for their union activities was upheld. The court upheld the defamation claim but reduced the damages for the defamatory comments made by Cathay Pacific management. The judges also modified the judgment awarding payment of legal costs to the pilots and instead said that they should now pay some of Cathay's costs.The leader of the 49er Plaintiffs, Captain John Warham, launched a book titled The 49ers – The True Story on 25 March 2011.The pilots were awarded leave on 26 October 2011 to take their case to the Court of Final Appeal. The matter was heard before Hon. Mr. Justices Bokhary, Chan and Ribeiro who are all Permanent Judges of the Court of Final Appeal. The matters to be decided upon by the Court concerned wrongful termination of contract and the level of damages for defamation. The case was heard by the Court of Final Appeal on 27 August 2012.

On 26 September 2012, 11 years after they were sacked, the 49ers were finally judged to have won the 3 prime issues of their legal case: breach of contract, breach of the Employment Ordinance, and defamation. The Court of Final Appeal agreed with the Court of Appeal's methodology for reducing the defamation damages. However, it reinstated one month's salary for each of the 49ers.

Regarding breach of contract, the overall picture leading to dismissal and events immediately after were analysed by the courts, not just the dismissal letter. Regarding the Employment Ordinance, an important aspect was that the judge defined the scope of "union activities" and its protection for workers in Hong Kong. The Court concluded: "Accordingly, most union-sponsored action is potentially protected by s 21B, but if the action is not carried out "at appropriate time", it is excluded from the provision". There was no challenge by Cathay Pacific to the Court of Appeal's decision to uphold the original Judge's conclusion that the statements made by Cathay Executives were defamatory of the plaintiffs.

John Warham, referring to the effect the fight has had on pilots' families, said: "In terms of human life, three people are dead because of what Cathay Pacific did to us. That's on their conscience, I hope they can live with that."

Acquisition and downsizing of Dragonair

On 28 September 2006, the airline underwent a shareholding realignment under which Dragonair became a wholly owned subsidiary but continued to operate under its brand. Acquiring Dragonair meant gaining more access to the restricted, yet rapidly growing, Mainland China market and more opportunities for sharing of resources. CNAC, and its subsidiary, Air China, acquired a 17.5 percent stake in Cathay Pacific, and the airline doubled its shareholding in Air China to 17.5 percent. CITIC Pacific reduced its shareholding to 17.5 percent and Swire Group reduced its shareholding to 40 percent.

Dragonair had originally planned significant international expansion. It was already operating services to Bangkok and Tokyo, and was to have a dedicated cargo fleet of nine Boeing 747-400BCF aircraft by 2009 operating to New York, Los Angeles, Chicago, San Francisco and Columbus. It had also acquired three Airbus A330-300 aircraft to commence services to Sydney and Seoul.Following the acquisition by Cathay Pacific, Dragonair's proposed expansion plans underwent a comprehensive route compatibility analysis with the Cathay network to reduce duplication. Dragonair services to Bangkok and Tokyo were terminated, and new services launched to Sendai, Phuket, Manila, and Kathmandu. With the merging of similar departments at the two previously separate airlines, some Dragonair staff have had their employment contracts transferred to Cathay Pacific, except Dragonair Pilots and Cabin Crew and others made redundant due to the efficiencies gained in the merger. This resulted in an approximately 37 percent decrease in the amount of staff contractually employed by Dragonair.In January 2016, Cathay Pacific announced it was rebranding Dragonair as Cathay Dragon.On 21 October 2020, Cathay Pacific announced that it would shut down all operations of Cathay Dragon and merge it with its parent company due to the lack of customers and heavy economic problems brought by the COVID-19 pandemic. This merger marked the end for the subsidiary carrier after 35 years of operation. Cathay Pacific and its wholly owned subsidiary, HK Express, would take over Cathay Dragon's existing routes.

Economic challenges

To celebrate the airline's 60th anniversary in 2006, a year of roadshows named the "Cathay Pacific 60th Anniversary Skyshow" was held where the public could see the developments of the airline, play games, meet some of the airline staff, and view vintage uniforms. Cathay Pacific also introduced anniversary merchandise and in-flight meals served by restaurants in Hong Kong in collaboration with the celebrations.In June 2008, Cathay Pacific entered into a plea bargain with the United States Department of Justice in respect of antitrust investigations over air cargo price-fixing agreements. It was fined US$60 million. The airline has subsequently set up an internal Competition Compliance Office, reporting to chief operating officer John Slosar, to ensure that the Group complies with all relevant competition and antitrust laws in the jurisdiction in which it operates. The breaches for which Cathay Pacific Cargo were being investigated in the US were not illegal under Hong Kong competition law.In September 2008, three of Cathay Pacific's top ten global accounts, Lehmann Brothers, AIG and Merrill Lynch, hit financial trouble.

In March 2009, the airline reported a record full-year loss of HK$8.56 billion for 2008, which was also the carrier's first since the 1997 Asian Financial Crisis. The record loss included fuel-hedging losses of HK$7.6 billion and a HK$468 million charge for a price-fixing fine in the US It had to scrap its final dividend. The hedging losses were a result of locking in fuel prices at higher than the prevailing market price. As of the end of 2008, Cathay Pacific has hedged about half of its fuel needs until the end of 2011. The airline at the time estimated that it would face no further cash costs from the hedges if the average market price stood at US$75, enabling it to recoup provisions it made in 2008.The flattening out of fuel prices resulted in Cathay Pacific recording a paper fuel hedging gain for its half-year reports for 2009. However, as a result of the global economic situation, the Group reported an operating loss. Given the current economic climate, and in line with the steps being taken by other major airlines around the world, the airline has undertaken a comprehensive review of all its routes and operations. This has resulted in frequencies being reduced to certain destinations, ad hoc cancellations on other routes, deferred capital expenditure, parked aircraft and introduced a Special Leave Scheme for staff to conserve money. According to CEO Tony Tyler, the yield from passengers was "hugely down" and the airline had lost "a lot of premium traffic". He noted that it could take 20 passengers in economy to make up for the lost revenue of one fewer first class passenger flying to New York from Hong Kong.