Cathay says premium travel slumping, prompting discounts

Cathay Pacific says it’s getting tougher to find premium fliers from Hong Kong. The lack of first and business-class travellers from the Asian financial center -- the worst since the global financial crisis days of 2009 -- is such a dent on Cathay’s financials that analysts are asking whether CEO Ivan Chu needs to find a Plan B. After more than two years at the helm of the marquee Hong Kong airline -- his two predecessors stayed for about three years at the top -- Chu is under pressure to revive earnings that have slumped amid an expansion by his Chinese and Middle Eastern rivals. Cathay shares have lost about 25% of their value since Chu took over while passenger yields slumped to their worst in seven years. With Chinese airlines offering more direct services to the US and Europe from the mainland, Cathay’s Hong Kong hub is no longer critical. The carrier also reported Wednesday that it lost HK$4.49b (US$579m) from fuel hedges in H1 of the year. “Everything is quite negative for them and their business model is ripe for change,” said Shukor Yusof, founder of aviation consulting firm Endau Analytics in Malaysia. “They need to review their hedging and focus on things that have contributed to growth. They should focus more on regional services." The carrier reported Wednesday an 82% drop in H1 net income. Passenger yields fell 10% to 54.3 Hong Kong cents as an economic slowdown in China hurt premium class demand and depressed corporate travel from Hong Kong to London and New York, Cathay said. Security concerns related to terrorism has also dented travel demand, Chu said.<br/>