Cathay Pacific 2017 first half results - HK$2.05b loss
Aug 17, 2017, 12:26 am
#46
Join Date: Jan 2011
Posts: 2,344
Someone still was in charge of researching, analyzing, and making the decision - not the Board! It's like if a hedge fund analyst pitched a stock to long in his sector, yet when the stock tanks he says the PM signed off on it!
Aug 17, 2017, 12:29 am
#47
Join Date: Oct 2016
Posts: 291
If those large amount of contracts can be signed without the approval of the board, I will be highly doubted of their corporate governance.
Aug 17, 2017, 12:46 am
#48
Join Date: Jul 2016
Location: HK
Programs: CX DM, IHG G, Hyatt Explorist, Marriott Silver
Posts: 39
Clearly finance and the board bear some responsibility , but in all of this, i haven't seen one bit of recognition that the fatal error was a human error, and that certain people should take responsibility. they talk about the fuel hedge loss as if its an act of god, like they had nothing to do with it. They haven't once come out to say say, we made a bad decision, here's how we're rectifying it, and here's the head we've rolled as a result.
they blame the passenger situation, mainland airlines, other airlines, market conditions, etc. Everything but their own collective stupidity. It's infuriating. It make the public believe that CX is a bad incompetent airline, when really their core operations are good, but just their finance and governance are flawed.
they blame the passenger situation, mainland airlines, other airlines, market conditions, etc. Everything but their own collective stupidity. It's infuriating. It make the public believe that CX is a bad incompetent airline, when really their core operations are good, but just their finance and governance are flawed.
Aug 17, 2017, 1:11 am
#49
Join Date: Aug 2016
Programs: CX Life Time,TG,
Posts: 265
A few numbers from recent results:
Shareholder Funds at June 30 $55,365M
Fuel Gambling Losses 2017 YTD $3,237M
2016 $8,656M
2015 $8,474M
2014 $ 911M
TOTAL $21,078M About USD2.7B, B not M
So the total gambling losses represent 38% of current shareholder funds. WOW!
2017 YTD Inflight Services and Expenses $2,417M
And this year they are only willing to spend 75% of their gambling losses taking care of all of us during our flights. No wonder EVERYTHING is being pared back.
And it will continue. They have committed to buy over 50% of their current fuel purchase volumes for the balance of 2017 for Brent at $90/Bbl, and over 45% of estimated 2018 volumes at $80/Bbl.
If this was not approved by the Directors, they were derelict in their duties. Either way HEADS SHOULD ROLL. And that should start at the very top. Instead they want to recover the losses from passengers and staff. Swire must be ruled by senility.
Shareholder Funds at June 30 $55,365M
Fuel Gambling Losses 2017 YTD $3,237M
2016 $8,656M
2015 $8,474M
2014 $ 911M
TOTAL $21,078M About USD2.7B, B not M
So the total gambling losses represent 38% of current shareholder funds. WOW!
2017 YTD Inflight Services and Expenses $2,417M
And this year they are only willing to spend 75% of their gambling losses taking care of all of us during our flights. No wonder EVERYTHING is being pared back.
And it will continue. They have committed to buy over 50% of their current fuel purchase volumes for the balance of 2017 for Brent at $90/Bbl, and over 45% of estimated 2018 volumes at $80/Bbl.
If this was not approved by the Directors, they were derelict in their duties. Either way HEADS SHOULD ROLL. And that should start at the very top. Instead they want to recover the losses from passengers and staff. Swire must be ruled by senility.
Aug 17, 2017, 1:16 am
#50
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Posts: 1,206
A few numbers from recent results:
Shareholder Funds at June 30 $55,365M
Fuel Gambling Losses 2017 YTD $3,237M
2016 $8,656M
2015 $8,474M
2014 $ 911M
TOTAL $21,078M About USD2.7B, B not M
So the total gambling losses represent 38% of current shareholder funds. WOW!
2017 YTD Inflight Services and Expenses $2,417M
And this year they are only willing to spend 75% of their gambling losses taking care of all of us during our flights. No wonder EVERYTHING is being pared back.
And it will continue. They have committed to buy over 50% of their current fuel purchase volumes for the balance of 2017 for Brent at $90/Bbl, and over 45% of estimated 2018 volumes at $80/Bbl.
If this was not approved by the Directors, they were derelict in their duties. Either way HEADS SHOULD ROLL. And that should start at the very top. Instead they want to recover the losses from passengers and staff. Swire must be ruled by senility.
Shareholder Funds at June 30 $55,365M
Fuel Gambling Losses 2017 YTD $3,237M
2016 $8,656M
2015 $8,474M
2014 $ 911M
TOTAL $21,078M About USD2.7B, B not M
So the total gambling losses represent 38% of current shareholder funds. WOW!
2017 YTD Inflight Services and Expenses $2,417M
And this year they are only willing to spend 75% of their gambling losses taking care of all of us during our flights. No wonder EVERYTHING is being pared back.
And it will continue. They have committed to buy over 50% of their current fuel purchase volumes for the balance of 2017 for Brent at $90/Bbl, and over 45% of estimated 2018 volumes at $80/Bbl.
If this was not approved by the Directors, they were derelict in their duties. Either way HEADS SHOULD ROLL. And that should start at the very top. Instead they want to recover the losses from passengers and staff. Swire must be ruled by senility.
That was my point..
Passengers, Staff and the Public are going to bear the cost of this 'paper" loss.
If you buy a book for $10 and then I go buy it for $5.. have you 'lost' $5.
That is the fuel hedge 'loss".
They thought they could make money fixing fuel @ X.
They pay when they could pay X - actual price..
so they have to pay X.
They were happy with X when they took the bet.
CX shareholders are Swire and Air China for the vast majority, the new bloke who bought in last week.. and finally the public.
Public shareholders have no sway.
"If this was not approved by the Directors, they were derelict in their duties. Either way HEADS SHOULD ROLL. And that should start at the very top. Instead they want to recover the losses from passengers and staff. Swire must be ruled by senility."
Exactly. Yet they remain.
Cargo fines, Collusion, it doesn't matter. It's HK.
Aug 17, 2017, 4:13 am
#51
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Join Date: Aug 2010
Location: Vancouver
Programs: CX DM, SQ TPP, QF GO LIFE, OZ*G LIFE, Marriott TIT LIFE, WOH GLOBALIST LIFE, HH DM, BA GO LIFE
Posts: 598
A few numbers from recent results:
Shareholder Funds at June 30 $55,365M
Fuel Gambling Losses 2017 YTD $3,237M
2016 $8,656M
2015 $8,474M
2014 $ 911M
TOTAL $21,078M About USD2.7B, B not M
So the total gambling losses represent 38% of current shareholder funds. WOW!
2017 YTD Inflight Services and Expenses $2,417M
And this year they are only willing to spend 75% of their gambling losses taking care of all of us during our flights. No wonder EVERYTHING is being pared back.
And it will continue. They have committed to buy over 50% of their current fuel purchase volumes for the balance of 2017 for Brent at $90/Bbl, and over 45% of estimated 2018 volumes at $80/Bbl.
If this was not approved by the Directors, they were derelict in their duties. Either way HEADS SHOULD ROLL. And that should start at the very top. Instead they want to recover the losses from passengers and staff. Swire must be ruled by senility.
Shareholder Funds at June 30 $55,365M
Fuel Gambling Losses 2017 YTD $3,237M
2016 $8,656M
2015 $8,474M
2014 $ 911M
TOTAL $21,078M About USD2.7B, B not M
So the total gambling losses represent 38% of current shareholder funds. WOW!
2017 YTD Inflight Services and Expenses $2,417M
And this year they are only willing to spend 75% of their gambling losses taking care of all of us during our flights. No wonder EVERYTHING is being pared back.
And it will continue. They have committed to buy over 50% of their current fuel purchase volumes for the balance of 2017 for Brent at $90/Bbl, and over 45% of estimated 2018 volumes at $80/Bbl.
If this was not approved by the Directors, they were derelict in their duties. Either way HEADS SHOULD ROLL. And that should start at the very top. Instead they want to recover the losses from passengers and staff. Swire must be ruled by senility.
It's the net fuel cost that is important here. It was an insurance against any spikes that may have represented in forward contracts. If one didn't hedge and oil went up, the management would be criticized. The same would go the other way round.
Aug 17, 2017, 6:37 am
#52
Join Date: Aug 2016
Programs: CX Life Time,TG,
Posts: 265
380flyer, please look at the chart of fuel prices on page 21 of CX's latest Analyst Briefing and explain how you interpret that to mean prices were going up in 2014
Anyway hedging is justified for up to 12 months ahead as commitments are being made to provide service at a fixed price during that period. There can even be an argument to go a bit longer than that, but going 4 years out is clearly gambling. They hoped to win as they had done in the past. Prices can go up or down, nobody knows, but there is always a cost to pay when you put on the bet. This time they went down and they have lost a fortune.
Anyway hedging is justified for up to 12 months ahead as commitments are being made to provide service at a fixed price during that period. There can even be an argument to go a bit longer than that, but going 4 years out is clearly gambling. They hoped to win as they had done in the past. Prices can go up or down, nobody knows, but there is always a cost to pay when you put on the bet. This time they went down and they have lost a fortune.
Aug 17, 2017, 4:39 pm
#53
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Join Date: Jul 2006
Location: Hong Kong, France
Programs: FB , BA Gold
Posts: 15,552
Many threads have been discussing the hedge losses at nausea.
There have been many arguments cons and pro hedging. Some call it speculation other business hedging.
There is no doubt that CX thought that they should protect their future costs of fuel by long term hedges and probably some speculation, that they benefited from it for a few years, and lost a lot since oil prices unexpectedly dropped.
But that is an exceptional item. A bit like the HKD500 million EU fine is exceptional or the realized 586 capital gain on their Travelsky Technology shares or their 244 gain in Air China.
What is crucial is their business performance. Their profit from operation.
What is catastrophic in the announcement is the 5.3% drop in yield. And the drop is even larger on longhaul to America and Europe (over 7%). To maintain a reasonable load faxtor on their planes, CX had to drop ticket prices dramatically. It could also mean that they are bleeding pax in premium cabins (high fares).
I had never seen such low business class fared exHKG offered by competitors to Europe. So the cartel pricing impose by CX out of HKG is breaking up.
This is much much more worrisome for the long term than the residual exceptional losses due to hedging.
There have been many arguments cons and pro hedging. Some call it speculation other business hedging.
There is no doubt that CX thought that they should protect their future costs of fuel by long term hedges and probably some speculation, that they benefited from it for a few years, and lost a lot since oil prices unexpectedly dropped.
But that is an exceptional item. A bit like the HKD500 million EU fine is exceptional or the realized 586 capital gain on their Travelsky Technology shares or their 244 gain in Air China.
What is crucial is their business performance. Their profit from operation.
What is catastrophic in the announcement is the 5.3% drop in yield. And the drop is even larger on longhaul to America and Europe (over 7%). To maintain a reasonable load faxtor on their planes, CX had to drop ticket prices dramatically. It could also mean that they are bleeding pax in premium cabins (high fares).
I had never seen such low business class fared exHKG offered by competitors to Europe. So the cartel pricing impose by CX out of HKG is breaking up.
This is much much more worrisome for the long term than the residual exceptional losses due to hedging.
Aug 17, 2017, 5:01 pm
#54
FlyerTalk Evangelist
Join Date: Dec 2004
Programs: CX Green, QF Platinum, BAEC Silver, Hyatt Glob
Posts: 10,780
Many threads have been discussing the hedge losses at nausea.
There have been many arguments cons and pro hedging. Some call it speculation other business hedging.
There is no doubt that CX thought that they should protect their future costs of fuel by long term hedges and probably some speculation, that they benefited from it for a few years, and lost a lot since oil prices unexpectedly dropped.
But that is an exceptional item. A bit like the HKD500 million EU fine is exceptional or the realized 586 capital gain on their Travelsky Technology shares or their 244 gain in Air China.
What is crucial is their business performance. Their profit from operation.
What is catastrophic in the announcement is the 5.3% drop in yield. And the drop is even larger on longhaul to America and Europe (over 7%). To maintain a reasonable load faxtor on their planes, CX had to drop ticket prices dramatically. It could also mean that they are bleeding pax in premium cabins (high fares).
I had never seen such low business class fared exHKG offered by competitors to Europe. So the cartel pricing impose by CX out of HKG is breaking up.
This is much much more worrisome for the long term than the residual exceptional losses due to hedging.
There have been many arguments cons and pro hedging. Some call it speculation other business hedging.
There is no doubt that CX thought that they should protect their future costs of fuel by long term hedges and probably some speculation, that they benefited from it for a few years, and lost a lot since oil prices unexpectedly dropped.
But that is an exceptional item. A bit like the HKD500 million EU fine is exceptional or the realized 586 capital gain on their Travelsky Technology shares or their 244 gain in Air China.
What is crucial is their business performance. Their profit from operation.
What is catastrophic in the announcement is the 5.3% drop in yield. And the drop is even larger on longhaul to America and Europe (over 7%). To maintain a reasonable load faxtor on their planes, CX had to drop ticket prices dramatically. It could also mean that they are bleeding pax in premium cabins (high fares).
I had never seen such low business class fared exHKG offered by competitors to Europe. So the cartel pricing impose by CX out of HKG is breaking up.
This is much much more worrisome for the long term than the residual exceptional losses due to hedging.
Aug 17, 2017, 5:34 pm
#55
Join Date: Feb 2013
Location: PHX
Programs: AA EXP, IHG Diamond, IC Amb
Posts: 5,508
I've noticed that Cathay is always around $1800-$2200 for PE from LAX-SE Asia. There are ALWAYS options to get to DPS/SIN/CGK/HKT/BKK on other airlines with great PE products for $1200-$1500.
I've never even considered paying that much more for CX.
I've never even considered paying that much more for CX.
Aug 17, 2017, 9:20 pm
#56
Join Date: Jan 2017
Programs: Cathay Pacific, Air Astana
Posts: 102
Seems to be looking worse: http://www.scmp.com/news/hong-kong/e...athay-pacifics
This suggests they recognise F/J FF's and low cost customers, but are ignoring those of us who travel frequently but don't get to go in J much of the time!
This suggests they recognise F/J FF's and low cost customers, but are ignoring those of us who travel frequently but don't get to go in J much of the time!
Aug 17, 2017, 9:56 pm
#57
Join Date: Feb 2011
Posts: 5,797
Does anyone know for sure who was on the other side of these hedges? The size/duration of the hedge was way above both industry standard and anything CX themselves had done before, and there are increasing rumours Swire might not be as dumb as first thought.
Aug 18, 2017, 3:34 am
#58
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Read this!
Analysts, including Ms Corrine Png, chief executive officer of Singapore-based Crucial Perspective, and Mr Shukor Yusof, founder of Endau Analytics in Malaysia, have said that Cathay needs to take a leaf out of rival Singapore Airlines' book and start a budget carrier, or turn its affiliate Cathay Dragon into one to keep a grip on Hong Kong passengers.
"They still believe they have this unique market position," Mr Shukor said about Cathay. "They don't realise that the way things were done doesn't work anymore. Their reluctance to change is very disturbing."
This is when I really wonder if these analysts have any idea what they are talking about and how much they really understand the airline industry let alone the organisation that they are commenting on.
HKIA is slots constraint and why on earth would Cathay Pacific start a low cost carrier when they can manage low fare pricing within their existing offering. If these analysts attending the management briefing, they will understand that CX/KA are looking at different options to further tap into offering low fares through an expanded fanfares offering.
Conclusion: Corrine Png from Crucial Perspective and Shukor Yusof from Endau Analytics are just BAD ANALYSTS who don't understand the business.
Analysts, including Ms Corrine Png, chief executive officer of Singapore-based Crucial Perspective, and Mr Shukor Yusof, founder of Endau Analytics in Malaysia, have said that Cathay needs to take a leaf out of rival Singapore Airlines' book and start a budget carrier, or turn its affiliate Cathay Dragon into one to keep a grip on Hong Kong passengers.
"They still believe they have this unique market position," Mr Shukor said about Cathay. "They don't realise that the way things were done doesn't work anymore. Their reluctance to change is very disturbing."
This is when I really wonder if these analysts have any idea what they are talking about and how much they really understand the airline industry let alone the organisation that they are commenting on.
HKIA is slots constraint and why on earth would Cathay Pacific start a low cost carrier when they can manage low fare pricing within their existing offering. If these analysts attending the management briefing, they will understand that CX/KA are looking at different options to further tap into offering low fares through an expanded fanfares offering.
Conclusion: Corrine Png from Crucial Perspective and Shukor Yusof from Endau Analytics are just BAD ANALYSTS who don't understand the business.
Aug 18, 2017, 3:38 am
#59
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Location: Hong Kong
Programs: None any more
Posts: 11,017
Indeed - if a Swire-owned entity were on the other side of the hedge then this would be an excellent way for them to retain the bulk of CX's profits rather than have them going to Air China and the other shareholders.
Aug 18, 2017, 1:01 pm
#60
Join Date: Jun 2016
Programs: Marriott Titanium, Hilton Diamond, Hyatt Explorist, Marco Polo Gold
Posts: 1,084
HKIA is slots constraint and why on earth would Cathay Pacific start a low cost carrier when they can manage low fare pricing within their existing offering. If these analysts attending the management briefing, they will understand that CX/KA are looking at different options to further tap into offering low fares through an expanded fanfares offering.
Conclusion: Corrine Png from Crucial Perspective and Shukor Yusof from Endau Analytics are just BAD ANALYSTS who don't understand the business.
Because at low fares Cathay and Dragon are losing money big time with their overhead expenses. For low fares to work, the flight needs to be completely LCC - no food, restrictive baggage rules, etc. etc. One cannot run a luxury airline with high overhead, and sell low fares, and think that will work, it won't. That's the point of the analysis.
I heard for a luxury airline like Cathay, to maintain the quality they are offering, they have to sell an average of V-fare(!!!) to break even. Anything less than that is pure loss. Now I see Cathay is throwing around Q-fare and even if they fill up the plane with Q-fare they are losing tons of money.
So to amend the situation? Cathay is degenerating towards a LCC airline (a metaphor, but you get the point). Lower service standards, lower quality of food and products, etc. etc.
Dragon had a chance to be the "Best LCC in Asia" when Cathay bought them. Instead Cathay thinks they can run Dragon like Cathay and as a result they left the flood gate open for other LCC airlines to thrive and Dragon is bleeding money the same way Cathay is.