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Cathay Pacific

What Cathay Pacific Will Do Instead of Launching A Budget Airline

What Cathay Pacific Will Do Instead of Launching A Budget Airline
Jennifer Billock

Hong Kong-based Cathay Pacific is struggling on paper – the airline recently faced the first back-to-back annual loss in the history of the company. But Rupert Hogg, the airline’s new CEO as of last year, has a three-year plan to change that trajectory, and it’s already showing results.

Last year, Cathay Pacific faced a loss of about $160 million. It was an especially impactful loss, because it reflected the state of the company – that $160 million was the second half of the airline’s first back-to-back annual loss ever. Rupert Hogg was appointed as the new CEO last year, and he is trying to change the trajectory of the airline. He’s leading a three-year restructuring program designed to reorganize the company for profit and efficiency. And it’s working, too. Even through that loss, Cathay’s stock is up 24 percent since October 2016.

The stock increase is due in part to a new fuel hedging strategy, fewer employees, and improvements to the business class and air cargo sectors. Hogg has also tossed around the idea of starting a low-cost carrier to help bring Cathay into a higher level of competition, but according to a recent interview with Skift, it’s not on the radar for any time soon.

“I think we’re approaching a sort of binary fool’s choice between low-cost carriers and what we call premium or legacy carriers because you see it’s a hybridization going on,” Hogg told Skift. “So definitely there is a price symmetry end of the market, isn’t there? And I think the low-cost-carrier model has proven that to be the case. I think carriers like us will always want to be in that market and to have keen prices. But we’re wide-bodied with a lot of seats in the economy class and the marginal cost of production over a three-hour sector is quite low. You can have a full range of fares … But there is a reality for us, which is that our airport is essentially full. If you were to start second carrier under any model or a new brand it would be very difficult anyway until there’s more capacity.”

[Photo: Shutterstock]

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2 Comments

  1. LukeO9

    June 13, 2018 at 12:29 am

    Sorry? What will Cathay do instead of launching a budget airline?

  2. jmayo

    June 14, 2018 at 2:32 am

    @LukeO9….I was about to ask the same question. Clickbait.

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