Cathay Pacific Shares Plunge [Archive]

Trafalgar

15th Mar 2017, 07:59

Let's spend billions of $$$ purchasing a new, 'fuel efficient' fleet, then squander every penny and advantage of that investment by effectively turning your operation into one that may as well be using fifty year old 707's.... Every one of us should refuse to have anything to do with this management: no volunteering for courses, media adverts, sim trials, dinners at the DFO's,...etc, etc. They are not only putting our airline at risk, they have the temerity to suggest that the 'employees' and their cost are the problem. No, we are not. You and your incompetent, arrogant and clueless cabal of 'Oxbridge' failures are to blame. What a travesty, what a tragedy. You have crippled the hopes and career expectations of your employees and their families. Shame on you all. (and yes, the past two years should have seen a 2 BILLION USD profit....what would that have resulted in profit sharing distribution to the employees?).

valhalla634

15th Mar 2017, 08:17

Fuel hedging loss roughly equates to HK$1 M an hour for every hour of 2016

Freehills

15th Mar 2017, 08:26

Fuel hedging loss roughly equates to HK$1 M an hour for every hour of 2016

Oops. Oh dear. So sad. What a pity. Never mind...

TurningFinalRWY36

15th Mar 2017, 08:34

so the 2016 fuel hedging loss could have paid for more than 1000 pilots housing over 6 years......

Yonosoy Marinero

15th Mar 2017, 08:36

And to think that somewhere, some guys are pocketing US$ 1 BILLION by selling CX hundreds of thousands of tonnes of fuel at twice the going rate...

Swindling this incompetent management team is easier than taking candy from a baby.
Bernie Madoff was an amateur...

Oh well, at least it's time to win. By demanding more sacrifices from their employees, I assume.

:yuk:

goathead

15th Mar 2017, 09:20

Their are only two words that come to mind.
Inbred and pompous.
Massive egg on face sums this up.
Disgusting.

kahaha

15th Mar 2017, 16:10

Its quite amusing that their is one profitable , expanding airline in HK that may just , slightly , have had an ever so important impact on the fat cat duopoly that previously existed. CX/KA have used the courts , used the basic law to fight off any attempt by other players to enter the HK market. And still they can't catch the profit chicken, that continually evades their endeavours to hold it down.

What a joke you guys are. Your pathetic rantings and grandstanding about our company, our poor bonus and our brand. Trafalgar, get a grip lad. You hate your employer but then wish they would value your input more. You feel undervalued, ok we get it. So get back to work, start pulling your weight and stop adding to your conpanies woes. That goes for the rest of you pathetic ranters and ravers.

There is a paradigm shift in the HK aviation market. And its making my day. LOL.

Trafalgar

15th Mar 2017, 16:57

"....start pulling my weight..." Ok. Over 20 years of pulling my weight my friend. I've seen 9 CEO's come and go, nearly all destructive and useless. You have just proven yourself clueless and inconsequential with your comments. When I meet a senior manager worth their salary i'll let you know. When it comes to our 'company's woes', the real damage is being done by the short term management thinking, as they all have other Swire companies and positions to aspire to. They don't care what happens to CX in the long term. I however have been here for decades, and I care very much. You are pathetic.

Waterskier

15th Mar 2017, 18:57

"Our fuel hedging losses, almost entirely incurred on hedges put in place when the fuel price was much higher than today, were similar to the year before. "

Fuel Hedging Loss from 2015 HK$8,474,000,000 (over US $1 Billion Hedging Loss)

Therefore without hedging 2016 Results would be HK$5,100,000,000 operating profit and HK$7,899,000,000 total profit (over US $1 Billion total profit).

They can try to hide the hedging all they want, but its the root of the problem. Of course revenue (ticket prices) is down since every airline's biggest cost (fuel) is also down.

mngmt mole

15th Mar 2017, 19:06

If any senior management expect any sacrifices from me or any other staff, they are beyond deluded. The staff of this airline are already underpaid and overworked. The present financial debacle is of their own making, in spite of the hard working efforts of the front line staff. The fuel hedging disaster would bury most companies. There should not be one single senior manager still in their jobs. The reality is that they are all still in place, with no accountability or shame. Disgusting doesn't even begin to describe this. "Time to Win". Are you kidding me? What a sick joke.

etops330

15th Mar 2017, 19:44

When John Slosar and Ivan Chu took over, these two muppets have ruined a great airline. I can't believe majority shareholders like Swire can sit there and watch the ship sink. Get rid of Slosar and Chu, or do the decent thing, take responsibility for your mistake!!! Go and have a early retirement, Don't ruined it for the rest of us!

ron burgandy

15th Mar 2017, 19:51

http://https://www.bloomberg.com/gadfly/articles/2017-03-15/cathay-pacific-s-cost-crisis (http://www.bloomberg.com/gadfly/articles/2017-03-15/cathay-pacific-s-cost-crisis)

OK4Wire

15th Mar 2017, 21:25

Exactly, MM and WS.

So basically they made an operating profit of 5.1 on a 9% reduction in yield and turnover?!

Must be doing something right, eh?

okm

15th Mar 2017, 22:10

Kahaha,
Your English is atrocious.

Arfur Dent

15th Mar 2017, 22:16

As soon as the Middle East Carriers came on the scene with a far superior product, CX "Managers" were in trouble. They seem to be unable to " Manage" anything. Pilots, Engineers, rosters, remuneration and COS, fuel hedging, cadet training (and promises) etc etc. Not sure why such blatant incompetence is tolerated. Maybe it won't be for long.
If somebody doesn't do something "Managerial " pretty soon, there won't be anything left to Manage.

goathead

16th Mar 2017, 00:04

Don't worry about Kahaha
He is an ex KA driver now at HKE
He also wants to be a trainer but they wont let him . A sad pathetic individual with numerous chips on shoulder.

Bigpicture12

16th Mar 2017, 00:47

Exactly, MM and WS.

So basically they made an operating profit of 5.1 on a 9% reduction in yield and turnover?!

Must be doing something right, eh?

I agree ok4wire, a "good profit" without the terrible fuel hedging. Indicates to me that the company is basically sound and "most staff " doing a great job. This result was caused by very small senior personnel ( a couple people?!) and should not be used as the basis to cut or trim staff costs in any way.

Tea time

16th Mar 2017, 01:11

I never cease to be amazed that the board , or the Swires themselves ,have not removed the entire management team from this once great company and installed a management team that actually knows what they are doing .
Our product has slipped well below that of our Mid East competitors, and the location advantage that we once held in HK, no longer has the same strategic importance. Our passengers are moving to other airlines because the food is better , the seats are better , the entertainment is better and the service is better . They will put up with the inconvenience of the extra stop to enjoy a better product . Once they are gone it's very difficult to get them back .
So what is the issue ? Basically this penny pinching management team , who pay themselves huge bonuses , have debased the product to such an extent that our once loyal passengers no longer wish to avail themselves of the product on offer and are voting with their feet .
Salaries and COS company wide have been decimated . the not unexpected result of this is that no one really gives a sh-t any more and it shows . Starting from check in ,right through to the service on board from the Cabin Crew, the enthusiasm has been effectively beaten out of the employees . So why should they go the extra mile ? The food choices in FC are often not available, simply because they don't load sufficient quantities . Try ordering a beer in FC , the choices predominantly are Carlsberg , TsingTao , or Heineken . That's it . Only One champagne label, the list goes on and on . Everything is limited because it has been cut to the bone . Take a look at Air NZ's mattress tops for J and FC passengers,they are about an inch or more thick . what do we get a super thin pad . Whoopie !!!
People who pay top dollar for FC expect a certain level of service and we are no longer providing it . The only difference between Business and FC food is the plate that it is served on, That just isn't good enough in today's competitive world .
Seriously this management need to take a trip on one of the Mid East carriers to see how passengers should be treated . They need to understand, but are seemingly incapable of grasping a rudimentary fact ,that you need to provide a top class product to attract a passenger prepared to pay a premium . This starts with spending money on the items alluded to above, and more importantly recognising the importance of the impact that frontline staff have on your business . Staff that are happy and feel valued will willingly go the extra mile

Then we get to the fuel hedge debacle . The oil company executives will be receiving huge bonuses for selling a bill of goods to a bunch of absolute amateurs . Again why haven't those responsible for this mess been terminated ? So to counteract the fuel hedging losses the managements brilliant strategy is to cut spending on everything else , which is ultimately driving our passengers away, and so the cycle continues into a slow death spiral . But because the management team are totally myopic and determined to continue with this failed policy , I do not see any decent outcome .
If this were my company , I would have fired the whole lot of them years ago and employed someone who understands the airline business and what it takes to succeed

Ipad

16th Mar 2017, 01:15

Good call, pretty boys, turning down the 6% pay rises on offer. I am sure that showed them we meant business!!! Which was dumber the fuel hedging - that cost Ivan nothing personally or turning down our pay rise? Sorry remind me again why we did that?

Progress Wanchai

16th Mar 2017, 01:54

Simple iPad.

What we had to give up in exchange for their paltry pay offer wasn't worth it.
But I guess being Gen Y it's difficult to see anything long term. You'll understand one day.

azhkman

16th Mar 2017, 03:11

CX should have just taken a charge and written off their hedging loss in one year; owned it, and then refocused on cost structures going forward. I do agree the ME3+TK have had an impact but they are clearly experiencing their own issues now too.

Instead, they have morphed CX into a product that offers little value. The affordable fares don't accumulate miles (or only 25%), so it becomes easy to fly other airlines since one of the main benefits of consistently flying CX has been removed. On my last return flight from SG, I really could not tell the difference between my dish, and the Italian cat food I give my pet. I'm not joking, it looked the same.

armchairpilot94116

16th Mar 2017, 04:44

Cathay has been a top tier airline in Asia and even the World for decades. And along with Singapore Airlines has been my top two favorites.

I do hope CX gets itself back into being the best again and doing it profitably.

With such a huge loss from fuel hedging it still managed to lose relatively little money. An annual loss even much smaller EVA has had before and survived.

Wishing CX the best in it's recovery. However, cheapening the product and raising the price of tickets is not going to work. Cattle are much smarter these days.

Re-examining what is profitable and what is not will help. Maybe getting rid of First Class (as is the trend among many of it's peers) may be needed. First Class may become something only the ME3 can work with.

The Titanic was likely well run, until it hit the Iceberg. CX has hit it's Iceberg with the fuel hedge. Is it going to sink? Or Swim ? I am hoping it swims and I think the fundamentals seem to be workable (considering the relatively small loss on such a monumental fuel hedge loss).

I'd like to fly on CX again. Hope it's around when I get around to doing that.

Trafalgar

16th Mar 2017, 05:37

Armchair. I respect and value your opinion. Sadly, our management have lost the one crucial ingredient necessary to prosper in a more competitive marketplace: the loyalty and trust of their staff. After 20+ years of outright attacks and abuse, lack of respect and dishonest dealings (how many lawsuits involving their own employees?), we are now at a juncture where only a demonstration of commitment to change will restore that. That demonstration has to involve replacing most of our senior management. JS and IC have proven woefully inept and in IC's case, embarrassingly so (check out his Bloomberg video of a few months ago). Many of us have spent decades here, doing the professional and competent job of safely operating the company aircraft. We and our families have tied our entire futures to the success of this company. A small band of self-serving, greedy and venal managers have put all of that at risk. Enough.

boocs

16th Mar 2017, 06:50

Numero Crunchero are you still out there?
If so as you are far more wiser a person than I when it comes to numbers, could you give us your take on the profit/loss figures. My 2 questions are: 1. Is it fact that Cx would be around $7 Bill HKD in profit without the fuel hedge loss and 2. the quote going around of CX having to sell 120% of seats on each flight to be in the black. If this is true, and disregarding the fuel hedge loss, how does this equate?
Thanks,
b.

Trafalgar

16th Mar 2017, 07:47

I would be cautious of the "120%" of each seat sold figure. It seems unlikely that is factual, or at best a very selective use of facts. It would not be beyond our management to have stories 'planted' in the press to justify their future plans. Having been here as long as I have, nothing surprises me anymore. Fact: Since the early 90's CX management have been claiming the sky is falling. Every Friday, every annual report, every utterance.....for going on 30 years now. Other than a couple of years, profit every single time. I suspect most of what you are hearing is utter rubbish, and the only loss is due to the grossly incompetent fuel hedging. Still haven't heard the names of those responsible, or which third tier carrier in the Congo they are now working for.. :rolleyes:

8029848s

16th Mar 2017, 08:31

Mmmm.

Cathay's problems are far deeper than the fuel hedging screw up.

Having lived the dream life for so long as a company they completely failed to appreciate the changing market, and the impact of the growing Chinese airlines / Middle East carriers.

Put simply, CX cost base is to high, Andy therefore regardless of how new the aircraft are, load factor and all the other factors they are bringing slaughtered by their neighbours, as well as the Middle East carriers.

I would brace yourselves for some drastic restructuring centred around employee costs.

jetjockey696

16th Mar 2017, 08:50

Good news for future CX wannabes and current staff.. "solution for Cathay Pacific is to increase the crew on hand to serve travellers, with the airline aiming to hire another 1,300 staff this year including pilots and attendants, Chu said without saying if any staff will be laid off"

Cathay Pacific reports second loss since 2008 as rivals? cheaper fares erode margins | South China Morning Post (http://www.scmp.com/business/companies/article/2079031/cathay-pacific-posts-worst-results-2008-costs-competition-take)

and slowwwwly catching up with technology...

Cathay Pacific rethinks in-flight meals with on-demand catering trial on long haul services | South China Morning Post (http://www.scmp.com/news/hong-kong/economy/article/2078183/cathay-pacific-trial-demand-catering-long-haul-flights)

"The airline is also considering introducing the option of pre-ordering inflight meals akin to a “book the cook” style of service seen on rival carrier Singapore Airlines"

probably end up as this in the future... https://www.facebook.com/AirAsia/videos/10152880802657387/

McNugget

16th Mar 2017, 09:43

I would be cautious of the "120%" of each seat sold figure. It seems unlikely that is factual, or at best a very selective use of facts.

Indeed.

To reverse the question;

What load factor would be required to turn an operating profit, if we were paying $50 a barrel for fuel (like everyone else)?

The fact remains that if it is indeed a "structural change" to the industry, rather than a cyclical one, all airlines (or at least the ones in the locale) are in the same boat. Strangely, the rest all seem to be doing just fine. That's because their cost base (fuel being the biggest part thereof) is at the appropriate level, where they can compete healthily with each other while achieving a satisfactory yield.

$8BN. That's the figure we would have as profit, without the hedge. That's in spite of our expensive non-fuel cost base.

A small number of people are responsible for losing 8.5 billion. Consequently, they have allowed a feeding frenzy by the competition, allowing them to slaughter us.

AtoBsafely

16th Mar 2017, 09:56

8029848,

How much is Cathay paying for fuel, and what are the Chinese and ME carriers paying? Why are the employee costs such a serious problem?

Yes, Cathay needs to reduce its costs. Employee costs should be looked at. But that large lump you see in the rug is fuel cost that somehow was swept off the front pages of the results.

Boe787

16th Mar 2017, 10:05

Sad indeed to see this happen, to what was i consider one of the best Airlines in the world!
Wonder were all that money made from the fuel hedge losses ended up!

Dan Winterland

16th Mar 2017, 12:13

which also seems to gloss over the hedging issue

Careful facts manipulation aka 'alternative facts'. No doubt that the spin is that the loss isn't due to the fact we're paying 50% more for fuel than out competitors, but because those awful pilots are being paid too much and have the audacity to ask for more!

mngmt mole

16th Mar 2017, 12:37

Staggers. I can tell you with out any fear of being wrong. CX will try to "stop the buck" right at our and our families door. They will never hold themselves accountable. It will always be 'our' fault. Time for all of us to rise up and tell them that they have squandered a legacy of professionalism and financial success. We are NOT to blame, they are. They need to hear that loudly, from all of us. This is about to get serious.

Shep69

16th Mar 2017, 14:36

This is, I believe, a direct result of some well known and very poor decisions made by individuals charged to run the place as well as a willful desire not to listen to individuals who work here and want to make things better. There hasn't been a lack of good proposals and suggestions put forth; these tend to run into a brick wall as decisions makers view incorporating them (or being wrong) as being a weakness when exactly the opposite is true. You don't want a waffler at the helm but you DO want someone who at least can use CRM rather than doggedly running into a hill. Someone who is 'never wrong' is the last person I'd want running anything of importance.

The labor costs (and making peace with the TUs) pale into comparison with the penny wise and pound foolish decisions to try to skimp to cut corners as well as devalue the brand--trying to put the airline into a regional/low cost carrier environment without first coming up with a cost structure to support it. Volume up and revenue down in a market where others are making significant profits ?!!!?? As I've said the corporate graveyard is littered with the bodies of those who devalued a once-premium brand (have you ever seen your Mac or iPhone heavily discounted ? Disney continues to charge what I consider outrageous prices for stuff yet their parks remain packed with lines to get in). People will pay for a premium product; they will not pay for something masquerading as a premium product. There needs to be substance behind the polish and paint. And if you're going to try to expand yourself out of a slump you better have the operators and support team to go with the shiny new jet orders.

The hedge debacle has been beat to death; needs to be fixed and move on. Investors will excuse a one-time aw ****e but won't excuse a train of constant aw ****es. Bad past decisions should not drive future good decisions--they are a painful lesson which needs to be learned from, not done again, and move on. Accountability is important as is assurance that things like this won't happen anymore.

First priority goes to the people who work at the place--customers love happy workers who go the extra mile and this always pays dividends. Successful companies view employees as an investment; not as fuel or coal.

But I don't think anyone has been succesful in propagating suggestions that might help. These are ignored or covered up (how much real action has been done as a result of the multitude of surveys showing some things that need REAL improvement ? -- it seems we do a survey for survey's sake and to say we've done a survey so all is well). How many good ideas have been ignored ? How many good and dedicated folks have been beat down and demoralized into apathy (and apathy is the worst emotion one can have toward anything--at least even if you're angry you still give a d@mn). Folks who matter need to start listening.

But I don't think that's gonna happen.

So what's OUR part in this ?

When things go south there are essentially two ways forward--fix the problem or fix the blame. One works; one doesn't. The 'fix the problem' group is usually the group that listens to others (especially those they don't agree with) and as a result doesn't get into many really bad scrapes in the first place. The fix the blame group usually bounces around from one crisis to the next while things trend downhill. One guess as to which direction WE might head.

The key here is not to accept unwarranted blame. Labor costs (including the small costs of doing things to make things better and keep people happy and grateful) are a fart in a hurricane compared to the costs of what has just happened. Yet it is likely to be used as an excuse to attempt to further cut and make things even worse--exacerbating the downward spiral. Don't buy into the paradigm and stand your ground.

Lowkoon

17th Mar 2017, 00:45

The "We must compete directly" fallacy. If it was correct, wouldn't TATA have put Ferrari out of business years ago? Are the Ferrari engineers running around yelling "We need a two stroke three wheeler on the market tomorrow!"? The problem is, CX is no longer even close to the status of Ferrari. We are closer to Ford and heading for TATA, by choice of slash and burn Ivan. Why are we trying to be yet another Chinese carrier, and one without Govt support or backing that the other Chinese carriers enjoy? Or is the brief to lower the value enough so that a takeover from Air China is inevitable and cheap?

mr did

17th Mar 2017, 01:18

Or was this the plan all along.

Manufacture a crisis to convince staff and suppliers to get the cost base down to ridiculous levels to make it attractive for the new Chinese owner, while being on the other side of the fuel hedge.

I still find it suspicious that a group of supposedly smart people could be so deliberately dumb.

Freehills

17th Mar 2017, 01:20

Not a great analogy, as Ferrari are owned by Fiat, and Tata own Jaguar and Land Rover... So more like SQ also owning Scoot & Tiger to cover the low cost and premium

Staggers

17th Mar 2017, 01:25

If we need to "transform" in part by cutting staff does this mean we were overmanned before? If so why wasnt anything done?
Or has the fuel hedge debacle brought things into focus that were neglected before?
Either way some people are now going to lose their job and the ability to support the family. As usual the people at the bottom are going to hurt the most. They didn't get huge bonuses last year to cushion the impact.

6000PIC

17th Mar 2017, 01:47

Excuse my ignorance , but should it not be within the realm of reason to identify the individuals that were responsible for the fuel hedging debacle ? Name them and shame them , for they put the company at risk. These people need to be named , and their swift and transparent dismissal needs to be done. ASAP. This would do great things to restore accountability , responsibility and remind all CX employees that performance , accountability and corporate responsibility are in everyone`s best interest.

shortly2

17th Mar 2017, 01:56

Two little things. One, who are we buying the fuel from? Swire may not be losing at all
and two, we don't have a premium product anymore so we will never compete. Peter Sutch used to say 'Economy is the bread and butter, Business and First the cream and jam'. No more cream and jam for us.

shortly2

17th Mar 2017, 01:58

Oops sorry one thing more, kahaha, hahaha are you old enough to fly? Your English grammar is pre-pubescent

Tea time

17th Mar 2017, 02:09

There is a very interesting article in the SCMP about the failure of I-cable in HK .
And I quote.
'' Beyond the death of i-cable lies a story of lost opportunity and lacklustre management . Wharf runs i-cable like a real estate franchise rather than an enterprise under threat from outside forces .
The monthly subscription rates for cable TV in HK rivalled that of premium cable providers in the USA for programming bundles that were far less entertaining ."

Now i-cable is going under . Wharf treated i-cable like a property development company which mostly requires little more than purchasing some land Throw a building together and sell it at an exorbitant mark up for a grossly inferior product . Because of the ever pressing need for homes they continue to get away with this profit making policy .
TV on the other hand gives the subscriber the choice of streaming better programming via the internet or simply turning it off .

Am I the only one who sees direct comparisons between this and the Cathay model .? Cathay are no longer providing what the customers want or demand and unfortunately the passengers who have choices are voting with their feet . So this misguided management team cut the fares along with everything else to attract more passengers . It worked temporarily , but our premium passengers began to see similarities to an LCC and decided to take their business elsewhere .
We need someone with vision and foresight to get this company out of the hole it currently finds itself in .
There is a saying that goes , If you find yourself in a hole maybe it's time to stop digging

Freehills

17th Mar 2017, 02:25

http://mobile.reuters.com/article/idUSKBN16N1JQ

30% head office cuts

flyhardmo

17th Mar 2017, 02:55

Since managers take home a bonus when there is a profit, when there is a loss they should get an equivalent pay cut. That might stop them making stupid irrational decisions.

goathead

17th Mar 2017, 04:25

Well according to Will Horton ( to%#%er , read his twitter account )
We are all in this together boys and girls.....
".......That means pilots then need to come to the table , too." (From Bloomberg)
Gee thanks Will you friggen t%%%er
Will , do realise we have been visiting the begging table for years and years anyway . You sound like a puppet of CX management.
WTF kind of analyst are you anyway ??

Ipad

17th Mar 2017, 07:29

I agree with everyone here with regard to the board and their hedging decision. Hedging is reasonable up to a point as insurance. What they did - and are we over $20bn in losses so far? - was simply speculation and a gamble. That is not good corporate governance in anyone's book.

ALL of those involved in making this decision (having demonstrated that they learned nothing on their MBA course) that put Cathay at serious risk should resign or be quietly fired by Swire. In 2010, the last hedging gamble, the Director Finance, disappeared rather quickly.

Dan Winterland

17th Mar 2017, 08:03

Someone in the media has realised the truth.

The Real Reason Cathay Pacific is Losing Money - Live and Let's Fly (http://liveandletsfly.boardingarea.com/2017/03/16/cathay-pacific-fuel-hedging/)

Avinthenews

17th Mar 2017, 08:18

No one's getting fired.

Cathay is a money laundering shell company along with HAECO, catering etc. for Swire.

The HK govt let's it happen because of the huge total amount of personal tax all the staff employed above pay, including based cockpit crew paying HK tax???

The terrible times just means they can cull some non essential managers and give promotions to renergize and make everyone happy again, perhaps even the "loss" means CX gets a tax break.

Poor CX and your inability to hide money.

Strewth

17th Mar 2017, 09:34

Cathay Pacific management cuts (http://app.scmp.com/scmp/mobile/index.html#/article/2079777/section/442)

Hong Kong Airlines careers (http://www.hongkongairlines.com/en_HK/career) hyper-linked first column under post.

Betsy

17th Mar 2017, 14:19

Turbulence ahead for Hong Kong?s flag carrier: Analysts (http://www.cnbc.com/2017/03/17/turbulence-ahead-for-hong-kongs-flag-carrier-analysts.html)

There will not be a big turnaround for Hong Kong's Cathay Pacific this year, despite its best efforts to cut costs, analysts told CNBC.

On Wednesday, Cathay Pacific reported its first annual loss since 2008 of HK$575 million ($74 million) in 2016, compared to a profit of HK$6 billion the previous year, marking only the third full-year loss in seven decades.

The Hong Kong flag carrier cited factors such as the strong Hong Kong dollar, overcapacity and stiffer competition from mainland Chinese carriers. The carrier was ranked 2016's safest airline in the world, according to the Germany's JACDEC Institute.

"There's no way to sugar-coat it, Cathay Pacific's latest earnings were horrible and I expect it will be more of the same in 2017 as its revenues are under pressure from low yields," Mohshin Aziz, regional aviation analyst and associate director at Maybank Kim Eng Securities.

Aziz added that a significant problem for Cathay Pacific is its fuel hedge.

"Most of (Cathay Pacific's) competitors don't have a fuel hedge, which allows them to flexibility to lower their ticket prices in the midst of oil price volatility, but Cathay doesn't have that liberty," he said.

Cathay made a decision in 2015 to protect itself against high oil prices with a four-year hedge on jet fuel, which cost them a loss of HK$8.46 billion ($1.09 billion) in 2016.

An internal memo sent by Chief Executive Ivan Chu on Thursday said the firm needed to simplify its headquarters office structure and will cut the cost of middle to senior management roles by 30 percent.

The Hong Kong carrier confirmed the memo's contents and said that the cost-cuts were necessary because it "needs a leaner, simpler structure."

The changes are set to be announced in June, but analysts are not optimistic about the carrier's transformation efforts.

Most of the cost savings – an estimated HK$1.6 billion ($206 million) – will only be realized in 2018 because the Hong Kong carrier will likely book in retrenchment costs in 2017, K. Ajith, director of Asia transport research at UOB Kay Hian told CNBC.

The airline is taking a "step in the right direction … however we still do not expect the restructure exercise to be a game-changer," Ajith said.

The headcount reduction will lower Cathay's fixed cost structure, but not their variable costs, said Maybank's Aziz.

"Cathay will have to downsize and let go of its misguided vision to serve all of North Asia," Aziz said, adding that the company wants to continue to grow its capacity by 4 percent to 5 percent in 2017 despite the poor operating environment.

"Downsizing is not an admission of defeat; it's just about being smart because mainland Chinese carriers are not going to slow down."

Some How I'm Tired

18th Mar 2017, 02:18

Looks like the DFO is reading this thread. Friday Pravda says (about fuel hedging) "we don't blame the pilots when they do something wrong, so please don't blame us about our screw up".

Or words to that effect...

Lowkoon

18th Mar 2017, 02:47

There is another elephant in the room, how far HK has fallen in the ranking of places to visit as a final destination. There really isn't any great bargains to be had, everything is cheaper on Amazon, so those visitors aren't coming. Ok, so the transit passengers. "The one or two day stopovers" on your way to somewhere good, remember those? The fresh air, and wide open spaces?

So people come here for business. Right? Manufacturing? None left. Banking? Nope. Trade? Thats all gone north. This is a genuine question, what is left, what are we good at? Known for? Capable of?

We USED to be strategically placed, for shipping into and out of a closed communist state to the north. No longer the case. it is as easy to ship into and out of China directly, and cheaper. We used to be strategically placed because you couldn't fly directly into China, only Dragonair could. No longer the case. The landscape hasn't just changed because mainland carriers aren't crashing so regularly, this has been coming a long time. Hong kong is now just another polluted Chinese city not worth visiting. The gorilla in the room everyone is trying to ignore, we are now worth paying a few extra bucks to NOT have to transit through our inefficient airport, because you quite probably will face some sort of delay that will cost you a days travel on your way to where you really want to go, with the limited time you have.

OK4Wire

18th Mar 2017, 04:34

CISTRS

18th Mar 2017, 10:21

I can get to third and fourth tier Chinese cities direct from Shenzhen Airport, without staging through Shanghai or Beijing hubs. Airport and aircraft are new. Very convenient bus service from Shun Tak Centre.

MENELAUS

18th Mar 2017, 10:58

3rd and 4 th tier. Bliss. Sheer bliss. Enjoy.

Shep69

18th Mar 2017, 11:37

Exactly right. Mainland China wanted to "Chinese-efy" HKG and get rid of that pesky western influence.

Well, they got it.

We are now just another dirty Chinese city, and surprise, surprise, no-one likes it.

This kind of begs the question 'why stop in HKG at all' for some of our flights. Why not operate direct from say LAX-HND, ORD-PVG, or LHR-BOS, BKK-YVR, etc.

MENELAUS

18th Mar 2017, 18:05

Because there is the small matter of traffic rights.

CodyBlade

19th Mar 2017, 04:43

Why not operate direct from say LAX-HND, ORD-PVG, or LHR-BOS, BKK-YVR, etc.

You got to be kidding surely...

armchairpilot94116

19th Mar 2017, 07:47

A few stray thoughts:

Could it be the Top Brass is not being fired and the elephant in the room (fuel hedge) is being glossed over because the Board is in on it? The Board are not going to fire themselves.

CX's annual loss is well manageable for SWIRE and Sons who takes in Billions annually in profit . Not too unsettling either for China's govt owned Air China.

They will expect a further loss. The ship is basically sound. The important thing is not to "over-correct". Mis-handling of an inflight upset can result in a tail spin. CX has to tread carefully. Amputating a foot will not be the solution for a patient with a brain tumor. CX doesn't have bird flu, just a case of a bad cold . They need to be careful not to demoralize the whole company with a massive reduction of their workforce.

KABOY

19th Mar 2017, 08:31

.Could it be the Top Brass is not being fired and the elephant in the room (fuel hedge) is being glossed over because the Board is in on it?

This hedge was placed back in 2014, they went long!

Guess who was CEO back then? Maybe that might answer your question.

Progress Wanchai

19th Mar 2017, 10:40

Dear Gus,

I never thought I'd have to write one of these letters but here I am, sitting in my favorite plush armchair at the Hong Kong Club, ready to fall on my sword. Quite a sobering experience. I'd better order another Grange.

My slight deviation from company procedures is that I've been crash landing planes 60 percent of the time over the last 3 years. Not just that either. Crash landing at random places all over the map. Some places you'd never even have heard of (but mainly in the Bahamas, Switzerland and other places where money moves hands freely with little oversight and zero tax).
But let's put that into perspective. As Ivan the Invisible would say, this means that I'm not crash landing, at the right airport, 40 percent of the time. Quite respectable really.

You may ask why I'm just writing to you after 3 years. Well, it seems these bent airframes scattered all over the planet is starting to get a few lips talking and I thought I'd get ahead of the drag curve with this one. So in accordance with our just reporting culture, I'm only just reporting now.
Just.

What lessons have I learned?
Bugger all really. I fear these bent airframes are going to keep appearing at all sorts of weird places for a few years yet.

What should the company do?
I'd expect no less than a bonus that at least doubles my agreed remuneration package to continue on as per standard operating procedures and normal practice. Also I should be allowed to retain my last 3 years of bonuses despite the fact I've no idea why they were paid at all.

Is this in line with industry best practice?
Not even close but here we try to operate to a different level. We have the CX standard. So that'll be a 5 thanks.

I'd better leave it at that and finish this lovely 1965 Hermitage as I'm working soon and may be AOD tested. From my plush armchair I can see some 9th floor chaps truly settling in for a session. Must be nice to be in a "non-safety" position.

Yours forever gratefully,
A Bonus Thief
(aka Fuel Hedger turned pilot getting my head around accountability (not just accounts))