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To: Chris who wrote (5100)	1/23/1998 11:08:00 AM
From: Chris	Respond to of 42787

BOEING ARTICLE. think logically.. how are they going to pay for those big beautiful planes? Wing Tips: A Special Asian Edition: Troubles at Cathay, Order Jockeying and Atlas Air Warning By Holly Hegeman Special to TheStreet.com 1/22/98 11:03 AM ET If you've ever flown Cathay Pacific, you know that it is one of the finest airlines in the world. The service is impeccable, the planes well-maintained, the food service superb, and well, it probably doesn't hurt that it also flies to some of the most fascinating places on earth. Let's just say flying Cathay to Saigon has always been just a notch above throwin' back peanuts as you fly Southwest Airlines (LUV:NYSE) to Jackson, Miss. But Cathay, which trades on the Hong Kong Stock Exchange, is now facing the worst financial crisis in the airline's history. Based in Hong Kong, Cathay has perhaps been hardest hit of all the Asian carriers the last few months. Some of the dropoff in the company's revenue can be attributed to the perception that Hong Kong is a less desirable place to visit since its changeover to Chinese rule, company officials say. But the bigger impact appears to have come from Asian currency issues. Because the Hong Kong dollar is the only convertible Asian currency that has not devalued in recent months, this has caused tourist traffic from other Asian nations whose currencies have dropped to essentially dry up. Nowhere is this more clear than in Cathay's December financial report. In a company newsletter, Cathay described December as "a truly appalling month" for the airline. The carrier reported revenues from its South Korean routes were off 48% in December compared with December 1996. Taiwan? Off 14%. The carrier's entire Northern Asia sales territory? Off 51% compared with last year. Japanese traffic, which usually accounts for the heftiest yields in the Cathay route system, was nothing short of awful in December, with yen revenue 55% lower than in December 1996. The net effect of this loss was actually greater, however, as the yen continues to drop against the Hong Kong dollar. But loads from the U.S. to Hong Kong are not exactly ducky either. (This might give investors a reason to study Northwest Airlines (NWAC:Nasdaq) more closely. The company has a substantial Asian route system.) A call to check on a few of Cathay's flagship Los Angeles-Hong Kong flights this week revealed extremely weak loads. First-class and business-class traffic from Hong Kong to the Middle East, Singapore and China provided the only relatively bright spots in an otherwise bleak month for the carrier. Overall, the company's revenues were down 27% for the month year-over-year. Net profit at the carrier was already down 35% for the first six months of 1997, so the outlook for year-end figures is certainly not good. The company responded to the crisis this past week by firing 760 people immediately -- 460 in its main Hong Kong headquarters alone. This was the first time anything like this has ever happened in the history of the airline. One staffer based in Hong Kong whom I know personally broke down in tears as she said, "You have to understand. You in the United States may be used to this type of thing. But we are not. This is just horrible." And yes, in case you are wondering, Cathay does have some big planes on order. The airline has US$2 billion in firm orders that are due to be delivered in 1998 and 1999. These orders include seven Boeing (BA:NYSE) 777-300s and six Airbus aircraft. It also has another US$4 billion in options that include another 10 Boeing 777 aircraft and six Boeing 747-400s. Nine Airbus aircraft are also on option. I think some of these birds may be up for grabs sooner than later. I would not be surprised if Cathay tries to dispose of some of its existing fleet as well. * * * Wing Tips Asia Notes: While we talked last week about negotiations that were going on behind the scenes as Asian carriers jockey their new orders with Boeing, there is no longer any pussy-footin' around. Both Asiana Airlines and Malaysia Airlines are openly seeking airlines interested in leasing or buying ordered and/or existing aircraft. Asiana, based in South Korea, is looking for new homes for three Boeing 767-300 ERs and two 747-400s from its existing fleet, as well as two 777s it just deferred delivery on from Boeing. TWA (TWA:AMEX) is still a potential vulture buyer of these planes. Flight International magazine also confirmed what industry insiders were telling us -- Malaysia Airlines is talking to Delta Air Lines (DAL:NYSE) about delivery positions for five Boeing 777s. I can see this one happening in a heartbeat. This would allow Delta to get the 777 in the air before archrival American Airlines (AMR:NYSE). I'm hearing that it looks like 777s could be sporting that new Delta livery as early as this summer. One big loser I see in all this Asian turmoil? Atlas Air (CGO:NYSE). A couple of things are very obvious. First, used 747s are now, suddenly, very much available. (Atlas bit the bullet last year and committed to buying brand-new 747s because available ones were so tight.) Second, many of these Asian airlines are Atlas' customers. Third, I understand that Atlas still does not have customers for those new 747s coming online. And, finally, management turmoil continues to get worse at the once-shining cargo star. So, don't say you weren't warned!