Cathay Pacific struggles to attract top-end of market

Cathay Pacific struggles to attract top-end of market

Cathay Pacific is slipping in its efforts to get passengers to pay more for its premium services in a test for new Chief Executive Officer Rupert Hogg as the company reported back-to-back losses.

The marquee airline on Wednesday reported 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. That compares with the median HK$1.2 billion loss forecast in a Bloomberg survey of three analysts.

Passenger yields continued to decline in the first half of the year, led by its services to North America and Europe, as discounts to help fill seats took a toll on the key metric of profitability. The measure – the money earned from carrying a passenger for one kilometer – declined 5.2 percent to 51.5 Hong Kong cents, hovering around the lowest level since 2009, Cathay said in a statement Wednesday.

Undergoing its biggest revamp in two decades, while being buffeted by budget carriers and deep-pocketed competitors on the mainland, Cathay is at the crossroads.

It risks being eclipsed by Chinese airlines that offer cheaper, direct long-haul flights from cities like Shanghai, Guangzhou and Shenzhen, bypassing Hong Kong, whose prominence as a hub has declined relative to the burgeoning wealth of the surrounding cities in southern China.

“We do not expect the operating environment in the second half of 2017 to improve materially,” Hong Kong-based Cathay’s Chairman John Slosar said in the statement. “We expect to see the benefits of our transformation in the second half of 2017, and the effects will accelerate in 2018.”

Cathay isn’t the only airline feeling the heat of competition. Singapore Airlines, under pressure from rivals such as Emirates  and Etihad Airways, said in June jobs are likely to be cut as part of a review it said had started more than six months earlier.

Hogg, who took over as Cathay’s CEO on May 1, announced the elimination of 600 jobs the same month as part of a three-year transformation program Asia’s biggest international airline revealed earlier in the year.

Cathay has had to resort to seasonal discounts for its front seats after saying last year that premium travel was slumping, causing passenger yields to decline.

Cathay 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.

 

13 comments

  • Flying Fish

    AWA2602

    16 Aug, 2017 10:34 pm

    Could there be an opportunity for CX, MH and QF to form an Asia-based strategic partnership in a similar vein to the EK-QF and (proposed) AA-QF partnerships?
    No member give thanks

  • reeves35

    reeves35

    17 Aug, 2017 07:46 am

    QF and CX would be unlikely to gain competition approval for any JV alliance due to their combined dominance between AU and Hong Kong.  

    Their only chance of approval would be to give up a huge number of their slots in both HKG and SYD/MEL to airlines such as HX and VA.
    No member give thanks

  • Brayden

    ThePerthTrav

    16 Aug, 2017 11:00 pm

    Could be because people are trying to save their money. For example, I can fly from Perth-Hong Kong with Cathay in J for $6000, return. I can fly Perth-Singapore-Hong Kong with SIA in J for $4100.
    Member who gave thanks

    ozind95

  • lafleche

    lafleche

    17 Aug, 2017 02:39 am

    I think CX has always been overpriced for the hard product in premium classes. I know many rave about them but as a single female traveller I found that I was invisible in J or F on CX flights while male travellers received much more attentive service. They have not been competitively priced while their rivals have improved in both hard product and service levels.
    No member give thanks

  • ryanpst

    ryanpst

    17 Aug, 2017 08:04 am

    Could it be that’s the CX website is horrible for bookings! I tried to book on there in the past and being able to get the price advertised was as bad as clicking each individual flight combination to find it. In the end I went back and booked with QF.

    Fix the website and people may actually book with them
    Member who gave thanks

    matifsami

  • kimshep

    kimshep

    17 Aug, 2017 02:48 pm

    If you think the website is bad, you ought to try their Android mobile / tablet app. It makes the website look positively stellar.

    Years ago, CX's website was one of the best in the industry for user interaction. I suspect that 'outsourcing' and lack of adequate inhouse user-testing has resulted in their substantial fall from grace.

    No member give thanks

  • Atif Sami

    matifsami

    17 Aug, 2017 03:44 pm

    Absolutely correct. There have been numerous times I simply gave up booking a flight on CX. And even sometimes the prices would be exponentially higher than if I book the same flights from their code share airlines 
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  • Rkwm

    Rkwm

    17 Aug, 2017 08:54 am

    Supported without question CX for 30 years , no longer. Last year they re-engineered their loyalty Club and as a result lost most of its loyal base . The Club is now simply uncompetitive and rather than ensure loyalty is retained it had the reverse results especially Hong Kong based members . 
    Tweek the Club to recognize loyalty and the support base  will return .

    No member give thanks

  • readosunnycoast

    readosunnycoast

    17 Aug, 2017 08:55 am

    I flew JFK>>HKG>>BNE  about ten days ago in Business. I was totally underwhelmed. Having flown with SQ a couple of weeks earlier, it was like chalk and cheese.  The catering on CX reminds me of economy offerings from them from about 30 years ago. The seating is "adequate" but certainly not "marquee" as the story suggests.  I have wondered if the change in HKG status 20 years ago has had something to do with the running.  To ensure that I wouldn't do it again, I overlooked the fact that HKG>>BNE has a stop off in CNS for an hour or so. The facilities in CNS are not up to much.
    No member give thanks

  • Shingi Sa

    davidzuo

    18 Aug, 2017 08:48 pm

    CX cuts its catering budget, very deep. C Class' current menu is fairly similar to that of its W's. And the much loved potato salad has long gone. Security line at transfer in HKG can get unreasonably long, regardless of the class you are flying with. FA service standard not consistent, sometimes they are quite unfriendly - even in C. Oh, if you speak only Mandarin, good luck... Sometimes I still fly CX's W by using QFFlyer points. I like Cathay, don't get me wrong - it used to be my absolute favourite, but now, it's getting really hard for me to continue the sentiment. Service standards on SHA/PVG/PEK - HKG routes are not as good as that of the KA's, lots of attitudes, rushed and uncaring. HK-Australia sees much better service. I always put my parents in C whenever they visit me. Mum was once asked to switch seat, so two off-duty pilots can sit together. Dad didn't like the reverse herringbone - "not enough leg room", as he put it bluntly. Then I switched them to QF, they both loved the airways, miles more. I was surprised considering CX stands for Cathay Pacific (Cathay is an ancient word that means China), later I realised that QF has one FA on-board who can communicate with my parents without any language hesitation, whereas CX's FA insisted speaking in English to my father who can only count 1, 2, 3 in English... I believe the contrast says something. It's never just the competition, it's the seat, food, service and PPR, in my opinion, that make or break an airlines. 
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  • Freqtraveller

    Freqtraveller

    17 Aug, 2017 09:34 am

    A few years ago, CX's business class seat and service was one of, if not the best, offering for long haul international travel - and my favourite. However, since then competition from other airlines have ramped up and CX has not kept up with its overall offering (whilst trying to maintain its premium pricing). Tweaking the business class seats on the A350s is fine but, for me, CX needs to significantly improve their J class food and beverage service (which, I agree with another commentator, has gone backwards in quality and equivalent toeEconomy class meals on SQ and other ME airlines), drop the "trolley food service", improve in flight amenities and change back the regional business class seats to lie flat seats. I have bought a return J ticket on CX to Europe for Xmas this year but only did it when they offered a significant price discount and due to my desire for a stopover in HK. Otherwise, I would have chosen Qatar (which also had a similarly priced discounted fare).
    No member give thanks

  • Anthony Thompson

    triumph8

    18 Aug, 2017 03:38 pm

    i flew cathay A350 business from brisbane to london return in july, it was the best business experience i have had in several years and better than Qantas first, several US carrier firts and much better than Singapore business (my previous favorite) how they cant get a premium fare ofr this product is beyond me.
    No member give thanks

  • PineappleSkip

    PineappleSkip

    18 Aug, 2017 09:50 pm

    I flew Cathay A350 for the first time in July. The hard product was falling apart! I missed the A330s. Hope they get it back together soon. Still love CX, and never had an issue with booking on their website.
    No member give thanks

Guest

18 Jul, 2019 05:30 pm

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