What the press is starting to say about CX....

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Also in today's FT

http://news.ft.com/ft/gx.cgi/ftc?pag...id=ZZZHJ52NA0C

Talks between Cathay Pacific Airways and its pilots union, the Hong Kong Air Crew Officers Association (AOA), collapsed over the weekend with each side accusing the other of bad faith.

The stand-off sets the stage for industrial action, which is expected to take the form of a go-slow by the pilots' union from July 3 onwards.

The bitter squabble is likely to take a severe toll on Cathay's bookings and reputation.

The current dispute with the AOA comes little more than two years after a bruising showdown with the union that cost Cathay $64m and forced it to cancel hundreds of flights.

The showdown this time is especially badly timed. "This is slap-bang in the middle of the holiday period," says Timothy Ross, an analyst with UBS Warburg. Cathay is also heading into a cyclical downturn with capacity increasing in the airline industry, prices softening and lower demand for cargo.

Passenger load factors for Cathay fell six percentage points in May, driven by falling traffic and rising capacity, Mr Ross says.

Meanwhile, unflattering and unremitting coverage of the dispute in Hong Kong, Cathay's home market - where it gets about a third of its passenger and cargo business - so soon after the last battle, has hurt the airline's image. Arch-rival Singapore Airlines, which put a disagreement with its own pilots behind it in April, is poised to roll out new features such as DVD-quality films for the front of the aircraft that are expected to impress business customers.

The threat of industrial action may have garnered all the headlines, but in reality the pilots have been working to rule for a few months already, says Mr Ross. The bad blood between the two sides has meant that many pilots have been holding Cathay to the letter of their contracts - for example, refusing to answer their phones outside their on-duty periods.

The pilots complain that their work schedules have been horrendously mismanaged by Cathay and that they often, quite literally, do not know whether they are coming or going. The union cites a case where a pilot arrived at Hong Kong airport in summer uniform, thinking he was bound for Manila, only to be told he was flying to North America in the dead of winter.

Cathay's reputation for the level of service business travellers have come to expect of a premium airline has already begun to fray.

Passengers on Cathay's prestigious New York-Hong Kong flight via Vancouver on June 22 were informed by a form letter that the flight had to be cancelled because of a family emergency affecting "a member of our fight [sic] crew" - a typo that now seems remarkably prescient. Some of the passengers were then brusquely shunted off to a China Airlines flight.

The escalation from July 3 to "limited industrial action" is likely to be a go-slow or a "sick-out," during which pilots resort to calling in sick en masse.

The chances of an all-out strike are remote because, under Hong Kong's regulations, employees can only take part in a strike during work hours if they seek permission first from their employer. Otherwise they must confine themselves to striking outside working hours, says Rebecca Davern of Freshfields, Bruckhaus, Deringer, the international law firm.

Despite its troubles, however, Cathay has plenty going for it; one of the youngest fleets in the world, a reputation for superior service and safety and one of the busiest home markets in the world. Observers point out that several US airlines have muddled on after industrial action. The difficulty for Cathay is that it often competes and is compared with Singapore Airlines.

Mr Ross warns that the looming battle between pilots and management will result either in "customer flight or capital flight as shareholders abandon the company because a generous settlement suggests it is giving away part of the ranch". With a cyclical downturn in the business already under way, his recent advice to Cathay's institutional investors could not be more blunt: "Diminished fundamentals and revolting pilots - get out now". Additional reporting from Douglas Wong in Singapore