TheDell

"Aiming for Higher Returns

Managers urged to build a better business at leadership conference

The message at the 2014 Leadership Conference, held in December, was clear: that while Cathay Pacific may have built a reputation as a great airline, it now needs to secure its position as a great business. Chief Executive Ivan Chu gave the opening address, and while he acknowledged the impressive work that had been achieved in many areas, from developing the fleet and network to providing an award-winning customer experience, he made it clear that Cathay needs to ensure it can give good returns
to its investors.

'Of course we want to continue to be a great carrier – one that creates value for customers and other stakeholders,' he said. 'But we also want to be a great business – a more profitable airline that can keep more of the value we create. If we don’t run the airline well we could be forced into painful decisions,' he said."

(Extracted from http://downloads.cathaypacific.com/c...pdf/CXW225.pdf)

wolf72

"Award winning customer experince?"

I think they have a lot of work to do as far as that crap they call in-flight catering and meals is concerned.

I would not rate CP an elite airline anymore at this moment in time.

BENLEE

I am a regular SQ flyer. Decided to try out CX for my round trip JKT <> Taipei in J end of last year. Big mistake. 3 out of 4 sectors I experienced significant delays requiring last minute change of flights. The last sector I had to downgrade myself because of the coffin seats in J ( again due to change of aircraft ). I complained and got no response. Will be a long time before I fly CX again.

380Flyer

And Singapore Airlines suffers from similar issues - their profits have been down significantly - they are only saved on the basis that they didn't have high fuel hedging. Otherwise, they are also in the same boat as CX.

I think the whole write up on the CX results is overdone! Seriously. CX has one of the strongest balance sheets in the business and they can weather this downturn well. They have a plan in place and they are working towards a recovery.

Look at Qantas years back - they would in worst shape and they pulled through only because they had zero hedging. They have structural issues to worry about the profits are coming down from last year so all is not good for them either.

boybi

Are there any airline that are not reporting losses or declines in its profit? It seems all top airlines are not doing well?

KrazyTrain18

^ Couldn't have said it better myself

lingua101

but there is no LCC based in HKG right?

triplefives

"When oil prices plunge, carriers that don’t hedge benefit the most. Airlines in mainland China don’t hedge fuel, gaining every time the commodity declines.

“It’s a battle between those who hedge and those who don’t hedge,” said K. Ajith, an analyst at UOB Kay Hian Pte. in Singapore, who rates the Hong Kong carrier’s shares as hold. “Cathay’s cost base is unfortunately higher, and their competition knows that."

From: https://www.bloomberg.com/news/artic...s-as-oil-drops

Bolded emphasis is probably the biggest difference between CX and their competition. Another article from Bloomberg cited sources that believed CX was hedged at $85 a barrel for crude when market conditions were approx $50 in Q3 2016. Bottom line here is no one should feel bad for CX due to "market conditions" when they made a bet against the tide.

triplefives

HK Express

kawaii

Hong Kong Airlines count as a LCC?

TomYoung

CX lost HK$18 Billion over the last 3 years on gambling over fuel prices. And still they are 54% committed at US$90/Bbl for 2017, 46% at US$81/Bbl for 2018, and 8% at $75/Bbl for 2019. How many of their ancient (built pre 2000) A320s, A321s and A330s could have been replaced with that?

And of course they would have made a profit of HK$8 Billion in 2016 if they had not pissed it away in the casino. Why do they not highlight this self inflicted disaster instead of hiding it away in page 20 of the Stock Exchange announcement? Clearly the top pair, Chairman and CEO, need to go.

kawaii

Depends on your definition of top airlines.

In 2016, American reported full year net income of $2.7b, UA reported $2.3b, Delta reported $4.3b. Lufthansa (full year not available) reported a 79% rise in net profit for Q3 YoY to $1.55b.

kawaii

Absent the fuel hedge, they would have been +$1.2b, which would have been in line with the profits of the major US airlines. So, maybe their fundamentals aren't bad, if they can ride out the horrible fuel hedge.

Enhancements

It's ex-HKG itself. I've seen the US3 *and* Chinese airlines dump ridiculous TPAC fares there while CX is still attempting to charge premiums for the direct. HKG isn't ATL, so to speak...

hkflyer2014

Indeed, the losses will continue. Clearly they made huge mistakes on their hedging decisions. Lemme guess..some banker sold them on a scheme whereby they could "make" money hedging...of course that assumed oil prices would hold at high levels or continue to increase (which another bank department was telling them would happen)...when oil collapsed, well, we know what happened.

Another issue is that they learned to rely on revenue from fuel surcharges. It's all BS anyway...everyone faces the same fuel costs...it should be in the fare you pay as opposed to a "surcharge"...

The last issue is that CX isn't the only game in town anymore and as noted in the results, there are fewer mainland travelers transiting HK. North American and European flyers are going direct from PVG and PEK while others choose mainland carriers from Guangzhou and other cities. This combined with all the cuts in service we all know about means they will continue to face defections.

The next issue is that to entice those lost customers to return CX will need to spend more on perks which will again impact profits.

I still prefer the airline but I too will start moving business if they don't show me some improvements in J soft product...