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Cathay Pacific losses snowball to HK$1.25 billion, first back-to-back loss in 71-year

Cathay Pacific losses snowball to HK$1.25 billion, first back-to-back loss in 71-year

Old Mar 14, 2018, 5:45 am
  #16  
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Originally Posted by Kachjc
no the way to achieve this is to slot hog
Virgin Australia?

Originally Posted by Kachjc
anyone who thinks more competition = higher profits is retarded
especially if the slots are going to airlines that do not have to post a profit on that route
Fine. CX can bleed itself dry.
To Mainland and foreign transit passengers.
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Old Mar 14, 2018, 7:18 am
  #17  
 
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Originally Posted by Cathay Dragon 666
Cathay is the victim of their own failures and the fierce competition from mainland airlines. Own failures such as fuel hedges that make no sense, not aggressively going after the China market (could be limited by Beijing so not really their fault), offended and pushed out their most loyal fliers that were willing to pay premium prices with them to keep status, branding itself as luxury airline but cuts services, etc. However, Cathay is also in a tough spot when mainland airlines are selling all cabins are ridiculously low prices.

One would think Cathay wants to secure their home turf, Hong Kong, by offering competitive prices in and out of Hong Kong. But rather, in reality, if departure/destination is Hong Kong it is usually the most expensive. Some people claimed this is because Cathay has strong yields for Hong Kong traffic so there's no pressure to deflate prices. However, on the last 3 business trips I fly with Cathay in and out of Hong Kong, the air craft is pretty empty, a quick glare back to the Y class shows it to be virtually deserted. It could be the exception, and the 6 days I was traveling were happen to be low-yield days, but I don't ever remember seeing a situation like this in my 30 years of flying with Cathay.

Really to win people back is simple: increase product and service quality, reasonable fares, and attractive FFP. But again and again airlines decided to go price war and the industry seems to be like a race to LCC.
1. The hedge exposure comment is quite hindsight. If it had gone the other way around it would be a huge profits, and nothing was "stupid" since oil price almost follows "random walk" like FX. I think it's fair to say they bet it wrong, but nothing stupid here.
2. Depending on your route. On regional I do observe quite empty seats, but a lot of ex-EWR/HKG Y/PEY is quite packed (except for JFK - YVR). Last time HND was also packed for me but that's only 1 sample size.
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Old Mar 14, 2018, 8:29 am
  #18  
 
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Originally Posted by andersonCooper
1. The hedge exposure comment is quite hindsight. If it had gone the other way around it would be a huge profits, and nothing was "stupid" since oil price almost follows "random walk" like FX. I think it's fair to say they bet it wrong, but nothing stupid here.
2. Depending on your route. On regional I do observe quite empty seats, but a lot of ex-EWR/HKG Y/PEY is quite packed (except for JFK - YVR). Last time HND was also packed for me but that's only 1 sample size.
It was not stupid to hedge fuel prices, but what was extremely stupid was the size and duration of the hedges they placed. It was gambling, pure and simple.
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Old Mar 14, 2018, 10:35 am
  #19  
 
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Originally Posted by 1010101
It was not stupid to hedge fuel prices, but what was extremely stupid was the size and duration of the hedges they placed. It was gambling, pure and simple.
I think the statement is contradicting itself.
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Old Mar 14, 2018, 12:34 pm
  #20  
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Originally Posted by andersonCooper
I think the statement is contradicting itself.
not really i guess.
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Old Mar 14, 2018, 6:39 pm
  #21  
 
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Hedging is when you match assets/ liabilities or costs/ revenues. I.e. I sell a ticket to travel in 3 months, I don't know what the fuel price will be in 3 months, but I can lock it it by buying forward. As an airline sells tickets only a year in advance, buying fuel much further forward than that is a bit odd. You would expect a fuel purchase book to rise from about 0 a year ahead to 100% on day of departure

You could argue that by locking in fuel prices for a longer period they then have certainty over what price to sell tickets at - but the ticket price is market driven. What CX did was buy forward four years - so not hedging but a big macro view that oil prices would not stay low.

So, yes, you can say that hedging is not stupid, but what CX did was a macro gamble.
christep, sxc, dmatthew and 3 others like this.
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Old Mar 14, 2018, 9:50 pm
  #22  
 
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Originally Posted by christep
Well yes, but with a $6.377bn loss on fuel hedging, so that would be a $5.12bn profit but for that monumental cock-up.
I see it the same way. Hedging is a misnomer - they were obviously betting on fuel prices and they lost.
Outside of the fuel bets, I don't see CX doing worse than other similar carriers. But how they have been operating as a result of the losses might hurt them in the long run.
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Old Mar 14, 2018, 10:45 pm
  #23  
 
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Originally Posted by peasant
I sell a ticket to travel in 3 months, I don't know what the fuel price will be in 3 months, but I can lock it it by buying forward.
What I fail to understand is why they can't buy your fuel for your flight in 3 months on the day they actually sell you the ticket? Ie. if they sell 10,000 tickets today they know where they are going and how much fuel they require - why not hedge fuel the same day or the same week? That is what genuine hedging is not the BS they are currently doing.

Perhaps I should have become a financial advisor instead of a custom tailor! 😜
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Old Mar 14, 2018, 10:53 pm
  #24  
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Originally Posted by ajhira
What I fail to understand is why they can't buy your fuel for your flight in 3 months on the day they actually sell you the ticket? Ie. if they sell 10,000 tickets today they know where they are going and how much fuel they require - why not hedge fuel the same day or the same week? That is what genuine hedging is not the BS they are currently doing.

Perhaps I should have become a financial advisor instead of a custom tailor! 😜
I am not sure I understand your question but if you meant buying physical fuel, then you have to consider the cost of storing it which is far from free.
When you buy forward contract you do not actually received the physical product you just pay/receive the spot difference with the forward price on the settlement date. (although they are stories of traders who went for physical delivery )
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Old Mar 15, 2018, 8:55 am
  #25  
 
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I still need to look into the fuel hedging in order to give an opinion about that, but speaking of helping CX financially, I just booked a tix to TPE in UA Y->J. I did try hard, however, to look at YYZ-TPE Eva PEY or CX PEY. The problem is when EVA non-stop PEY is $1400ish USD, UA $1100ish Y->J, and CX giving me $2k USD PEY, that's really not much I can do to really help.

Fare pricing is apparently a problem for CX. If that particular trip is around $1400-$1500USD I might have gone to CX.

Another example of poor pricing to drive away customers.
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Old Mar 15, 2018, 9:39 am
  #26  
 
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Originally Posted by PaulInTheSky
I still need to look into the fuel hedging in order to give an opinion about that, but speaking of helping CX financially, I just booked a tix to TPE in UA Y->J. I did try hard, however, to look at YYZ-TPE Eva PEY or CX PEY. The problem is when EVA non-stop PEY is $1400ish USD, UA $1100ish Y->J, and CX giving me $2k USD PEY, that's really not much I can do to really help.

Fare pricing is apparently a problem for CX. If that particular trip is around $1400-$1500USD I might have gone to CX.

Another example of poor pricing to drive away customers.
The ticket price always fluctuate. I go to LAX for around HK$3000 in November and I found no reason to switch into other airlines.
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Old Mar 15, 2018, 9:50 am
  #27  
 
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Originally Posted by Aus106080
The ticket price always fluctuate. I go to LAX for around HK$3000 in November and I found no reason to switch into other airlines.
What you are talking about is Y fare. CX has to compete with with all the lowest prices to fill up their aircraft. Usually you can get a very competitive Y fare ex-HKG. However, I am talking about Premium fare. What good is it really when you can get a non-stop BR YYZ-TPE PEY for $1400USD but you need to pay $600USD more for CX PEY with a stop at HKG? Nobody would want to pay that to fly CX if their premium fare isn't as competitive.

There have been some complaints about expensive CX fares. And it's not just about that particular weekend. The PEY fare basis YYZ-TPE is the same across the board all year long. That tells me CX doesn't matter what the heck BR charges.

If CX wants to fill up their seats for better profits, then they have to stay looking at their own pricing model.

Last edited by PaulInTheSky; Mar 15, 2018 at 9:58 am
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Old Mar 15, 2018, 10:39 am
  #28  
 
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Originally Posted by PaulInTheSky
What you are talking about is Y fare. CX has to compete with with all the lowest prices to fill up their aircraft. Usually you can get a very competitive Y fare ex-HKG. However, I am talking about Premium fare. What good is it really when you can get a non-stop BR YYZ-TPE PEY for $1400USD but you need to pay $600USD more for CX PEY with a stop at HKG? Nobody would want to pay that to fly CX if their premium fare isn't as competitive.

There have been some complaints about expensive CX fares. And it's not just about that particular weekend. The PEY fare basis YYZ-TPE is the same across the board all year long. That tells me CX doesn't matter what the heck BR charges.

If CX wants to fill up their seats for better profits, then they have to stay looking at their own pricing model.
The ticket price is always link to the predicted load factor.
CX needs to offer cheap y ticket because they are trying hard to fill up all the seat.
However, if cx offesr higher fare for PEY(even higher than direct route), it maybe indicate CX has a pretty good load factor for PEY.
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Old Mar 15, 2018, 11:06 am
  #29  
 
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Originally Posted by Aus106080
The ticket price is always link to the predicted load factor.
CX needs to offer cheap y ticket because they are trying hard to fill up all the seat.
However, if cx offesr higher fare for PEY(even higher than direct route), it maybe indicate CX has a pretty good load factor for PEY.
I respectfully disagree with you. You can see PEY cabin is often not filled or half empty when no op-ups occur. Also, if your fare is the same all year long, then does it mean the load factor is the same - high all year long? Apparently no.
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Old Mar 15, 2018, 3:07 pm
  #30  
 
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Originally Posted by percysmith
Virgin Australia?



Fine. CX can bleed itself dry.
To Mainland and foreign transit passengers.
it won't
take the fuel hedges out
there ain't no bleeding
the true bleeders are the mainland subsidized airlines- subsidies and ridiculous loans can only last so long

Last edited by Kachjc; Mar 15, 2018 at 7:14 pm
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