Cathay Pacific is a flawed business model in a changing world
Cathay Pacific Airways has lost its glamorous and exclusive image because it is no longer a glamorous and exclusive business. “Arrive in better shape” was their old slogan. Today, it means “Lost in transit.” Their business model is irrevocably flawed in a changing world. An unexpected announcement of a HK$575m loss last year and a reversal of a HK$6b profit in the previous year suggests there is no turnaround on the horizon. Aviation fuel accounted for nearly 30% of total operating costs last year. Yet, near catastrophic bets on future fuel costs raise serious questions about management competence. We will probably never know how Cathay’s management erred to cause a huge US$1.8b loss in oil derivatives, even though they try to explain it with phlegmatic dignity. Derivatives salespeople are laughing all the way to the bank and surprised the senior management team still survives. The airline blames a slump in business travel, global conditions and the increasing competitiveness of mainland airlines. But all airlines operate in difficult conditions. Cathay management appears oblivious to reality, living in the fantasy profit world of Hong Kong’s protected cartels now beset by the cruel world.<br/>
https://portal.staralliance.com/cms/news/hot-topics/2017-03-27/oneworld/cathay-pacific-is-a-flawed-business-model-in-a-changing-world
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Cathay Pacific is a flawed business model in a changing world
Cathay Pacific Airways has lost its glamorous and exclusive image because it is no longer a glamorous and exclusive business. “Arrive in better shape” was their old slogan. Today, it means “Lost in transit.” Their business model is irrevocably flawed in a changing world. An unexpected announcement of a HK$575m loss last year and a reversal of a HK$6b profit in the previous year suggests there is no turnaround on the horizon. Aviation fuel accounted for nearly 30% of total operating costs last year. Yet, near catastrophic bets on future fuel costs raise serious questions about management competence. We will probably never know how Cathay’s management erred to cause a huge US$1.8b loss in oil derivatives, even though they try to explain it with phlegmatic dignity. Derivatives salespeople are laughing all the way to the bank and surprised the senior management team still survives. The airline blames a slump in business travel, global conditions and the increasing competitiveness of mainland airlines. But all airlines operate in difficult conditions. Cathay management appears oblivious to reality, living in the fantasy profit world of Hong Kong’s protected cartels now beset by the cruel world.<br/>
