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Cathay Pacific Plans to Expand Fleet

Hong Kong's dominant airline Cathay Pacific Airways said it is planning an annual capital expenditure of between HK$9.5 billion (US$1.2 billion) to HK$10 billion (US$1.28 billion) from now to 2009, on fleet expansion.

Cathay Pacific plans to spend at least HK$9.5 billion each year in 2007 and 2008, and a minimum of HK$10 billion in 2009, Chief Operating Officer Tony Tyler told an analyst conference late Thursday. Of the planned expenditure, the total to be spent on fleet expansion will be HK$7 billion this year, HK$6 billion in 2008 and HK$8 billion in 2009.

Cathay Pacific will add a total of 43 planes in the coming three years, Tyler added.

The company, which is 40% held by conglomerate Swire Pacific, said it expects its capacity growth to be 10% this year, 15% in 2008 and 10% in 2009. While capacity growth is mainly driven by cargo expansion, Tyler said the company sees "no sign of softening passenger demand" this year.

The capital expenditure is earmarked for both Cathay Pacific and Hong Kong Dragon Airlines.

Cathay became the sole owner of unlisted Hong Kong Dragon Airlines on completion of a complex shareholding restructuring in September.

As part of that deal, Swire Pacific's stake in Cathay Pacific fell to 40% from 46.3%, while another shareholder CITIC Pacific's interest in Cathay Pacific was reduced to 17.5% from 25.4%.

At the analyst conference, Swire Pacific reiterated it has no intention to further reduce its stake in Cathay Pacific.

To cut the risk caused by volatile oil prices, Cathay Pacific plans to hedge 40% of its fuel requirements through measures including financial derivatives to cushion any adverse impact should oil prices hit US$80-US$90 this year, Swire Pacific finance director Martin Cubbon said.