Cathay Pacific posts its first back to back loss in 71 years



Cathay Pacific is not having a good time right now. It’s management is structured and educated in a way that is ideal for almost any business but one – running an airline.

It’s made a loss of $160 million USD, a significant amount of money, and it shows that the airline just isn’t coping with a changed market place. It’s even worse than that because the airline business unit lost even more money – its 9th year in a row, and the groups losses were only mitigated by cargo performing exceptionally well in late 2017, and it’s service subsidiaries also made a profit.

A quick look at the latest OAG data tells you that its core Hong Kong market is driven heavily by price now, with airlines in the low-cost segment doing especially well. Cathay Pacific’s high-end business model is valid – but not on the capacity levels it has available.

In simple terms, it needs to shrink and cut back its fleet if it stands any chance of making money on the demand levels for its product.

However that isn’t something Cathay seem prepared to do. They still think that by improving their product and offering more services, and reinventing their brand, it will bring customers back. In business it might, to a point, but when it comes to economy passengers they are clearly voting with their wallets – and it’s not for Cathay Pacific.


The problem with Cathay is that it doesn’t just face this competition in its back yard – a back yard it has used every trick in the book to prevent competition from getting into.

All of SE Asia, India and China is fully awake to low-cost travel. Australia and New Zealand show a little more desire for premium product than others, as do most European and US markets. Yet in its core Hong Kong  regional market the airline is under assault, and it just doesn’t seem to know how to respond.

It has made itself even more of a target through its complex ownership structure, which has tempted financial gamblers in the form of Hedge Funds, to target it by playing with its share price. That is something that banks and lenders keep a constant eye on in evaluating a companies overall solidity.

There is much argument that despite its short-term policies, and likely return to profit in the next four years, a sharp economic shock could send it into a tailspin from which it might not recover. It just doesn’t have the flexibility of management or understanding, to react quickly to a rapid deterioration in its situation.