Cathay Pacific: go pilot fish The Hong Kong airline has been slow to respond to competition on price and standards
Shareholders in Cathay Pacific may not agree. The Hong Kong airline’s shares are at a level usually associated with financial crises. Some woes are beyond Cathay’s control. China-based rivals are piling on capacity, adding direct routes to cities that would once have required a Hong Kong stopover. The territory’s government scrapped fuel surcharges and imposed extra airport costs to finance a runway. US airlines, whose domestic routes are now reliably profitable after heavy consolidation, are taking a renewed interest in Asia. But Cathay has been slow to respond. Flyers say its service has fallen behind standards set by Middle Eastern airlines. Losses on its badly timed fuel hedges have limited its ability to compete on price. So too have costs higher than rivals like Singapore Airlines, JAL or Qantas. A long-awaited review this week was longer on jargon than financial targets. The shares, which over five years have lagged behind even legacy European airlines, fell 3 per cent. New blood at the top would inject urgency into Cathay’s restructuring. The current chief executive was promoted internally. No non-executives are independent of big investors Swire Pacific and Air China. British Airways once changed its culture by hiring former Cathay boss Rod Eddington. He cut costs and axed Concorde, leaving the airline solidly profitable. A similar hire could help Cathay conform with Stevenson’s maxim that life is often about playing a poor hand well.