What on earth is going on at Cathay Pacific Airways? Once a much loved iconic Hong Kong company, it is now facing criticism from a growing number of its customers and is shrouded in a feeling that it has lost direction.
It has just reported a profit slump of almost 110 per cent with a loss of HK$575 million for last year and there is no general expectation of improvement.
Indeed, when presenting the results, Cathay chairman John Slosar emphasized how difficult things are and spoke of the need for economies.
Lying in the shadows is the most enormous management bungle of getting its oil hedging wrong at a time when oil prices were plunging. Last year alone, this resulted in a loss of some HK$14 billion – a staggering sum, with hedging losses set to continue for the current year.
To be fair to Cathay, predicting oil prices is an extremely difficult business and as fuel is one of an airline’s biggest costs, it is understandable that hedging needs to be undertaken. However other airlines are doing exactly the same thing and have not made similar eye watering losses.
But there is a bigger fundamental question at Cathay that the management seems unable to answer; namely, what kind of airline service are they running?
Clearly it is one of the world’s better known legacy airlines and equally clearly it is not going into the cut-price airline business. That said, it is having a great deal of trouble maintaining its premium first and business class business, and incidentally, it is also suffering a downturn in its cargo business.
Slosar cites competition from a growing number of mainland airlines but this is mystifying as no premium customer in their right mind is likely to opt for a mainland carrier when Cathay offers an alternative. These carriers may well have upped their game but they remain in a different league to Cathay.
However, on the long-haul routes Cathay is under much more understandable pressure from increasingly impressive Gulf-based carriers and some European airlines that are providing a premium service at well below Cathay’s prices.
Cathay, it should be stressed, is generally speaking an excellent airline with a good safety record.
However, having established itself as one of the world’s better airlines and having been the unchallenged market leader in Hong Kong, there is a sense of arrogance surrounding Cathay that manifests itself in a number of ways, not least in an extreme reluctance to compete on price.
Moreover, Cathay seems to take its frequent fliers for granted as it has just made its Marco Polo frequent flier program considerably more unattractive by raising the bar for membership and making redemptions more costly.
On board, Cathay remains head and shoulders above many of its rivals but standards are slipping, the quality of the food and drink seems to be in a spiral of decline and the cramming of more seats into economy class has hardly gone unnoticed.
As it happens, I was recently on a Cathay flight that was delayed by about an hour. This is no big deal but many passengers were perhaps surprised by the number of times the captain apologized and stressed that the airline was committed to a high level of service.
I was less surprised because I spotted Slosar boarding the plane in a typically unassuming way but it was clear to me that not a single crew member would have been unaware of his presence. By fluky coincidence, my return flight was delayed by a similar amount of time. With no Cathay chairman on board, there was only a perfunctory apology and that was that.
The conclusion seems to be that an airline that will only express concern for a service failure when the boss is to hand is an airline that needs to look again at its attitude.
Somehow Cathay needs to persuade its existing and future customers that it really cares. I maybe suffering from unwarranted nostalgia but it seems to me that there was a time when this was the case, now, like many other customers, I do not automatically think of Cathay when planning a trip.
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