Cathay Pacific CEO bets big on service

Cathay Pacific CEO bets big on service

Cathay isn’t going to embrace the discount-fare revolution.

Undaunted by the worst half-year loss in at least two decades, declining passenger numbers and cheaper fares, Cathay Pacific's new Chief Executive Officer Rupert Hogg emphatically rejected suggestions for a budget carrier.

Instead, he plans to focus on better services such as new lounges in major airports, offering Wi-Fi on board planes, more dining options and self-check-in facilities to nurse the carrier back to financial health.

“Broadly speaking, we have no plans to start a low-cost airline,” Hogg, 55, said Wednesday.

“But we compete with low cost carriers on lots of different routes and clearly we have to have a proposition that price sensitive travelers, new travelers and first time travelers find attractive and prefer to fly on our airline relative to the alternatives.”

Cathay Pacific CEO Rupert Hogg says better services are vital to the airline's turnaround.

Analysts have suggested that Cathay needs to take a leaf out of rival Singapore Airlines' playbook and start a budget a carrier, or turn its affiliate Cathay Dragon into one, to keep a grip on Hong Kong passengers.

Singapore Airline has operated a low-fare airline for about a decade from its base in Changi Airport, where about 50 percent of all travelers are now taking a budget carrier.

“They still believe they have this unique market position,” Shukor said about Cathay Pacific, Asia’s biggest international airline. “They don’t realize that the way things were done doesn’t work anymore. Their reluctance to change is very disturbing.”

Gaining altitude in 2018

Hogg took charge in May after Cathay announced a three-year corporate transformation program, the airline’s biggest in 20 years. He also cut 600 jobs that month as the airline struggles in the face of low-cost operators and mainland competitors offering cheaper, direct long-haul flights.

The effects of the revamp will be felt in the second half of this year and more in 2018, the company said.

The marquee airline reported Wednesday a net loss of HK$2.05 billion (US$262 million) for the six months through June, potentially putting it on course for the first back-to-back annual losses in its 70-year history.

Average fares declined, mainly on services to North America and Europe, in part due to Chinese travelers going directly from the mainland and skipping Hong Kong.

No slots

Hong Kong has been suffering from capacity constraints. The airport recently started construction of a third runway and a passenger building to address this problem.

“Hong Kong and other regional airports don’t have the slots that would allow a new LCC to make an attempt - period,” said Will Horton, senior analyst at CAPA Centre for Aviation.

Cathay Pacific has reported losses only for three years since it was founded in 1946 – once in 1998 in the aftermath of the Asian financial crisis; again, in 2008 as the global credit crisis unfolded; and, last year as a result of fuel-hedging bets gone wrong and intensifying competition.

Last month, Singapore Airlines returned to a profit in the quarter through June after a surprise loss in the previous three months. The city-state’s flag carrier has embarked on a business review. It’s facing pressure from rivals such as Emirates and Etihad Airways at the premium end, and a host of budget carriers at the lower end.

For Cathay, the declining prominence of Hong Kong relative to the burgeoning wealth of surrounding cities in southern China is also a threat.

With the rise of hubs such as Shanghai, Guangzhou and Shenzhen, Cathay risks being eclipsed by competitors on the mainland such as China Southern and China Eastern that offer cheaper, direct and long-haul flights.

To take on rivals, Cathay needs to make sure it’s as productive as possible and serve customers better, Hogg said.

“It’s making sure we really understand what customers want and that we can deliver it in a productive way and that we get leaner and more efficient in that market,” he said.

 

19 comments

  • Dale

    Dale

    18 Aug, 2017 10:17 am

    Was flying in PE with CX, but the fares went up from $3000 to $4000. Not worth the money, the service is poor. But for me it's the cost.
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  • Shingi Sa

    davidzuo

    18 Aug, 2017 09:36 pm

    Mr Hogg is spot on - service and hard product will mark Cathay's first wave of much needed transformation. Inevitably, we will see a price drop on its HKG-Australia routes. Then, political influence from the North is critically important as well, I am not sure how Cathay, on its own, is able to handle it. Among other things, can Cathay first call off its downgrade to 10-abreast on its 77W fleet? If it goes ahead, will only further dampen the already fragile and sensitive Y group of passengers and won't increase capacity as naively hoped by the airways. JAL has transformed, more or less, over the past seven years, and is now the new black horse on the horizon. CX shall learn from her, 34" pitch, 2-4-3 configuration on 777s, magnificent food, reasonable fares (sometimes), the lot. Swift action and transformation is the only hope for amending a slippery reputation, especially in a fierce world of aviation. Don't learn from EK, learn from the better ones.
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  • John

    akronflyer

    19 Aug, 2017 08:03 pm

    Flew three sectors  with CX recently in J , one had the old regional  configuration  which was a bit  average.
    The lie flat were comfortable  
    Food was OK and service  was efficient  but lacked  warmth 
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  • melbcollege

    melbcollege

    19 Aug, 2017 10:18 pm

    CX is not a Chinese Airline, not an English Airline. Who is CX? it is a confused airline. There is no soul of CX. Staff are so snobbish, service is going down, price is going up. Good luck Mr Hogg, I hope you are right!

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  • Joe

    Joe

    19 Aug, 2017 11:10 pm

    Just flew CX SYD-HKG-SYD in J. Give me Qantas anyday. Cabin crew robots, attention focused on Chinese pax(high yield perhaps), food sub-par and lounges clearly not as well kept. Food portions in the First Pier lounge woeful! 3-4 years ago I would have called anyone writing the above a plain lier. 
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  • Keen Poon

    Keen

    1 Sep, 2017 01:41 am

    Mate portions at the Pier are great, you get to try lots of the different things...and even have room for their amazing burgers! You do realise you can order more of anything anytime right?
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  • andyhui01

    andyhui01

    30 Aug, 2017 03:23 pm

    Sure. Focus on being a service oriented airline. Then can CX please explain why 77W's are getting 10 abreast seating? Good luck competing on "Service" when HKG gets its 3rd runway and more slots are available to your competitors.
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  • Kaine Sherwood

    KaineS

    30 Aug, 2017 03:43 pm

    In March/April, we flew with Qatar Business from Sydney to Doha, Doha to Tokyo. Best experience, we then flew with Cathy First Tokyo to Hong Kong, Business from Hong Kong to Brisbane.

    CX First class was worse than Qatar Business, CX Business was terrible, I get much better experience in economy on Singapore. CX have a long way to go to get back to their famous service standards.
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  • Mark R

    Mark R

    30 Aug, 2017 04:06 pm

    One of the moves made by Cathay in last 18 months that totally flaws me is making it so much harder to qualify for the Marco Polo club elite levels. Been diamond for last 7 years. Most years I end up 30- 40% above the target. This year I flew more than normal,  am one day from end of qualifying year, and still need 45 points. Had to go grovelling to the help line to get a couple of weeks grace period. 

    Talking about service, and retaining the real road warriors that contribute mightily to the bottom line, why not go ahead and just piss them off!  

    Was told how much better the new plan will be. I think I got two lounge passes that I never used and barring that, no change so far as I could see. 
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  • Scepticalflyer

    Scepticalflyer

    30 Aug, 2017 04:29 pm

    They will go down the gurgler.  They have the worst regional business class and frequently downgrade aircraf, so despite booking a lie flat seat on overnight services I have been switched to the regional business product a number of times. Service is barely passable. Having flown Cathay business numerous times the planes all seem old and flea ridden and service standards below qantas, emirates and JAL. 
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  • Phillip Maguire

    Felipe

    30 Aug, 2017 04:50 pm

    Are you listening Cathay Pacific....?   After flying several times from Sydney to Toronto via HKG, I have 2 BIG suggestions for CX, as I have outlined on Trip Advisor.   Please increase leg room in the economy section, and replace those uncomfortable slim line seats with something more comfortable.     I don't mind paying a little extra, but I will not do that trip again, squashed up as I did, especially on the A330 from SYD to HKG.    Far too cramped, and I am only a small skinny guy, with a height of 170cm.   Even the B.777 from HKG to YYZ was still a little cramped.    All other aspects of the flight were good, but I am looking at going on another carrier more direct, (and less time), if I have to feel squashed up like a sardine in a can.     Or better still, just going on a 4 hour flight to the South Pacific or elsewhere nearby.    I really hate long-hauls now, because of the cramped conditions, and those damned uncomfortable slim line seats.    Please get rid of those slim line seats, that feel like an ironing board and make the bum go numb.  No wonder passengers become so irritable and restless.   Your cramped planes with ironing board seats make it impossible to enjoy.
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  • Manni Aquilina

    maq

    30 Aug, 2017 04:59 pm

    I flew CX PE in July 2017 MEL-HKG-AMS. I was disappointed with the inconsistency of service of the two legs. MEL HGK was quite good, however on the next leg, l felt l was invisible in PE and paid a premium for nothing as Y would have been better. There was no dedicated cabin crew member and the service we received in PE was sporadic, with a crew member from either  C or Y class 'popping in to check in on us. Generally, the crew on CX need to cheer up and smile more, not walk the aisle with their head down, evading any passenger interaction/request. It's the job you're paid to do - do it properly (eg. SQ). Take note Mr Hogg..
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  • Miccopvg

    Miccopvg

    30 Aug, 2017 06:56 pm

    For those of you whinging about the service on CX, I can assure you that it's far superior to the mainland carriers.  I'm based in Shanghai  and the J class products in China Eastern are dreadful.  While the hard product is sound (e.g., comfortable flat beds) the soft product is dreadful.  Flight attendants are clearly chosen for looks and they are unable to deal with passengers in an assertive manner.  Agreed: CX would do well to reconsider a low cost subsidiary, but I am happy to fly via Hong Kong to avoid the inexperienced and confusing service of the big three mainland carriers.  
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  • Paul Rowland

    Paul Rowland

    31 Aug, 2017 12:31 am

    Indeed, mainland carriers, in my limited experience, are worse but that is not the point. The comparison I make is between CX today and CX a decade ago. Apart from the hard product (I have flown Y, J and F in recent years) the difference is in the cabin service. CX used to be in the same category as SQ with a premium feel and genuinely warm, personalised service. I frequently still get that on CGK-HKG segments but, ironically, on the long hauls to YVR or YYZ, the service is still correct but lacks warms and attentiveness. Fewer smiles, fewer trips around the cabin with water, less recognition of loyal customers.
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  • D L

    Buggbear

    30 Aug, 2017 09:29 pm

    I have been a most loyal CX flyer for years. However, the service has deteriorated so much that it is slightly better than a budget airline. I recently flew PE to HKG and was offered a rock hard pannini. Really? Where is this service Mr Hogg is pertaining to. Even a snack on virgin domestic would have been better. And the lounges in HKG used to be the best around, but no more. It is sad but I do not have high hopes for this airline anymore.
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  • zoomzoom

    zoomzoom

    30 Aug, 2017 09:40 pm

    JAL is the model to follow, excellent product and sharp prices. 
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  • 1Worldfreqflyer

    1Worldfreqflyer

    31 Aug, 2017 04:16 am

    Flew CX too many times in preference over my own carrier QF and certainly BA but have noticed a huge decline in quality. The first class lounge used to be run by the Peninsula and the food was impeccable, it then changed to save costs to Premium Plaza and the food is substandard and the staff have no idea and not too refined. Their first class lounge now lacks the wow factor it used to have. CX needs to retrain their ISMs (inflight service managers) they are often rude and will only care if one flies first or biz but couldn't care less if you're in economy. I don't fly any of the Chinese carriers as they're a nightmare if your flight is delayed en route to Europe or the USA or elsewhere as their airport staff are rude and don't speak English. In fact, many of their flight attendants have very little English and are poorly trained. We are stuffed with QF which is overpriced, their crew too long doing the job and couldn't care less, aircraft often dirty, biz claas has no glamour or refinement they lack the wow factor, BA equally bad if not terrible across all classes. We seem to be doomed with all Oneworld carriers except for AY who have the newest fleet and are cheap although their biz claas service is only in name and is not worth the extra money. So where does that leave us if one is Emerald Oneworld? Move to Star Alliance with Singapore Airlines or else migrate to Etihad and not be part of any alliance and miss out on the extra benefits (routes, lounges, extra baggage allowance etc) I have had mixed experiences with Emirates, they can be very mean, their 'Pursers' often hideous and it's pot luck with the crew from the nicest ever to the meanest and obnoxious at worst! I often get better and more comfortable seats and seevice with low cost carriers such as AirAsia and last trip from Madrid to Marrakesh with EasyJet was outstanding yet dirt cheap on the way over and horrid crew on the way back. So it's not always about money but a question of luck and the problem with both lowcost carriers and other premium airlines like QF is that they seem to fly smaller aircraft and having got used to the Dreamliner and the A380 it does become a bit of a problem.... sorry about the whinge but CX will certainly need to work on quality and service and provide a unique product not found elsewhere to reconquer its fo
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  • 1Worldfreqflyer

    1Worldfreqflyer

    31 Aug, 2017 04:17 am

    Its former position and claim back the glory it once enjoyed!
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  • mike kearney

    Bonzer Mike

    31 Aug, 2017 05:26 pm

    I only fly CX when i have no other option and in my opinon they are one of the worst airlines in asia.The planes are old and the seating is very poor quality very uncomfortable.The staff are cold towards you and are not flexible or willing to give you the service you expect after paying the higher price ticket. The treatment they dish out to their passengers is very military style you cannot do this or that without a smile.
    if they are going to improve their service they need to do it with a smile and be generous about it. 


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23 Jul, 2019 11:53 pm

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