Cathay Pacific reports $1.26 billion HKD ($161 million USD) loss

[gabemempin]

Cathay Pacific Airways reports its first back-to-back loss since the company’s founding in 1946. Last year, the carrier reported an estimated $500 million HKD and today, it is now triple that. The carrier blames the losses to its competitors in Hong Kong and China. The total loss sums up to $1.26 billion Hong Kong dollars ($161million USD). Cathay Pacific is also on its 3-year cost-cutting phase. According to the chairman, he said: “Our priorities for 2018 are our transformation program, changing the way that we work, so as to better contain costs which will strengthen our passenger’s business further.” What do you think of the current state of the airline and its struggles?

Sources- BBC, AFP

[RedBulbBlueBlood9911]

I’d recommend you convert it to USD in the title as well. I got the surprise of the week just seeing that. Anyways, What caused this? The global economic slowdown?

[Thomas]

Edited it. I was surprised too.

[anon31652286]

Honestly, not surprised. I think they’ve been spending a lot on their branding (for example the livery update). There’s an immense amount of competition in that area, and they’re all becoming stronger competitors to the larger airlines every year.

[gabemempin]

I’m sorry about the title hahaha, anyways, the loss was caused by more low-cost airlines in Asia, mainly China, as well as increasing fuel prices and operation costs, which is already happening in virtually every airline in the world.

[GaplessHiding]

:( Cathay is one of my favorite airlines! It’s sad to see this

[chiabi1998]

Well, that’s pretty intriguing. From a simple competition-based standpoint it’s quite weird to read that CPA might be losing business to ‘local’ carriers. They are pretty much the leading airline for Hong Kong with a much wider route network than any other carrier. You can pretty much rule out other major Chinese airlines such as Air China/China Eastern etc as being direct competition because they don’t serve Hong Kong. Perhaps the losses can be tied to their increased spending given the limited size of the Hong Kong air travel market? (As compared to the rest of China, that is)

[George]

Also according to some of sources I’ve read, this loss is also contributed by a fine that Cathay Pacific had to pay to European Union Comission

Aside from increased competition and the influx of low-cost carriers, there are also a number of one-off fines that also affected the airline’s earnings, mainly a $498 million HKD ($63.5 million USD) fine from the European Commission and a $224 million HKD ($28.5 million USD) fine for redundancy payments.

Source

[Ishan_S]

😬 that’s a big blow…

[UpgradeMe]

You can pretty much rule out other major Chinese airlines such as Air China/China Eastern etc as being direct competition because they don’t serve Hong Kong.

[Matthew_Chan]

Not surprised because of the Ivan Chu management team. They’re trying to cut their costs from several aspects(Buy on board menu for their redeye Asian flights, 3-4-3 new seating on the 77W). Let’s see if they can bounce back with route fixes and their new change

[chiabi1998]

Those are all domestic/short haul routes. CPA pretty much has a monopoly on the global route network from Hong Kong. By “they are the only airline serving Hong Kong”, I meant they are the only airline based out of VHHH (obv along w some other carriers that are too minor for us to consider) Hence my point about the limited size of the market for international/long haul routes from HKG—a niche that only CPA fills as of now. Compared to the cumulative demand for flights to Europe or the US from Beijing, Shanghai, etc., the demand from Hong Kong would be much lower (imo).

[Chatta290]

Hmm it might not be totally bad. This loss could be for many reasons, I never knew about them struggling especially seeing as they have been buying shiny new planes. Maybe this also contributed along with the rebranding.

[UpgradeMe]

What routes do Cathay have monopolies on? Certainly wouldn’t have many on U.S./Europe routes.

[chiabi1998]

Well, they don’t have monopolies on any routes in the purest sense of the word as major European and American carriers offer services to hubs in their countries from HKG. What I meant was that CPA has a distinct edge over any other local carrier in the region when it comes to international/long-haul routes, which is what the article in question claims CPA is losing business to. You don’t see China Eastern or Air China flying from Hong Kong to Chicago or Hong Kong to London, do you? Now those services might be offered by UAL and BAW respectively, but they’re not local competition for Cathay. It works both ways. If Cathay has a hub at HKG and United flies there from Chicago (as an example), Cathay flies to Chicago despite the fact that it is United’s hub, offering United competition in their own market.