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Cathay Pacific losses of $2.05 billion: What went wrong at a once great airline?

by Trevor Bailey

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The bulk of Cathay’s fleet is now B777s and in economy they are going to squash you even more

Once upon a time the people of Hong Kong were proud of the airline they thought of as their own, Cathay Pacific. When you boarded the green and white aircraft with the attractive stewardesses in Manila or Bangkok you felt you were already at home. Then along came the accountants. They chopped everything. Economy class passengers found their noses seemingly nine inches from the greasy hair of the bloke in front. On short flights all you got to eat was a tepid chicken bun.

The customers voted with their feet.

Now Cathay Pacific has reported losses of $2.05 billion for the first half of the year. The directors are wondering what went wrong.

We can tell them. Your business plan is all wrong. Cathay is not one thing and it is not the other. Not Ryanair and not Qatar. It is not a budget airline and it is too Scrooge to be a good premium airline. It is floundering somewhere in the middle.

Chairman John Slosar told a press conference he doesn’t expect the red ink bleeding to stop in the second half.

Mr Slosar, we have news for you. The market has moved on, but Cathay hasn’t. Fare cutting and direct flights by mainland airlines, more budget carriers and quality competition from Middle East airlines have eroded your base. The two things you have still got going for you are CX’s reputation for safety and the hub, Chek Lap Kok, where Cathay dominates the landing and take-off slots. The latter may be temporary. Columnist Jake van der Kamp has repeatedly pointed out that Cathay does not deserve to dominate CLK because it is not Hong Kong’s airline at all, it is British and mainland owned.

When Colin Marshall took over as Chief Executive of the then badly managed British Airways in the 1980s, he said, “We are not in the business of operating aircraft, we are in customer service.” The lesson for Cathay is right there. At least until it starts a budget airline as well, perhaps after the third runway is operating.

Cathay wobbles on with its failed business plan. Most people travel by economy class. What is Cathay doing to you now? It is going to squash you even more. The bulk of the CX fleet is Boeing 777s. The number of seats in economy is increasing from nine abreast to ten. This will reduce your seat width to 17.2 ins.

What to do? Vote with your feet.

2 Comments on Cathay Pacific losses of $2.05 billion: What went wrong at a once great airline?

  1. No mention of fuel hedging losses?? “The real story is that management has been running a commodities hedge fund, instead of running an airline, and have lost vast amounts of their shareholders money in doing so. The scandal is even more acute given that CX shareholders own a minority interest in the airlines, and that management has little or no accountability to them.” http://liveandletsfly.boardingarea.com/2017/03/16/cathay-pacific-fuel-hedging/ And 2017? No different…

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  2. Tim Metcalfe // 21 August 2017 at 12:20 AM // Reply

    The real story is that management has been running a commodities hedge fund….indeed, and brought an airline to its knees. Catastrophic mismanagement. But I’m guessing whoever destroyed the airline is still sitting pretty….promoted to Mongolia or wherever. Swire princes can’t be seen to fail. Under new ownership in a year or two.

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