Former United Airlines chief executive Jeff Smisek is being credited for a business decision that had nothing to do with his legacy carrier. At a university lecture, the leader of Hong Kong’s Cathay Pacific admitted that Smisek talked him out of launching a low-cost subsidiary on the grounds that they would only be competing with themselves for customers.
Former United Airlines executive Jeff Smisek is back in the headlines again, but this time it has nothing to do with his alleged political activities. The South China Morning Post reports that the former aviation leader once talked Cathay Pacific out of launching their own low-cost carrier.
During a lecture at The Hong Kong Polytechnic University, Cathay Pacific chairman John Slosar cited a dinner with Smisek “a few years ago” for his decision to stay out of the low-cost carrier realm. In their time together, the conversation went towards American legacy carrier experiences with low-cost subsidiaries, including United’s “Ted” and Delta Air Lines’ “Song” sub-brands. As a result, Smisek advised his fellow executive to stay away, noting that a secondary brand would only compete against their main brand for flyers.
“[Smisek] was saying don’t go down the path of setting up all these different airlines, figure out how to make your main brand compete in the main markets, that is what you ultimately have to do,” Slosar told the audience, according to the SCMP. “Given the point about segmentation, its really hard to segment out, I think there is a lot of sense in that. Jeff sort of convinced us that was the right way to look at it.”
Although other carriers out of Hong Kong want to challenge Cathay Pacific for passengers, including international upstart Hong Kong Airlines, analysts believe that the flag carrier won’t start a low-cost subsidiary anytime soon. The strategy seems counterintuitive to other international carriers like Lufthansa group, which recently expanded their low-cost offerings by purchasing assets of the failed Air Berlin.
Smisek was shuffled out of United after the airline was probed for corruption over alleged flight benefits akin to bribery at Newark Liberty International Airport (EWR). For his time with the Chicago-based carrier, he received a generous compensation package which includes lifetime flight benefits.