"Cathay management appears oblivious to reality..." - SCMP

[NoAndThen]

Cathay Pacific is a flawed business model in a changing world | South China Morning Post (http://www.scmp.com/business/companies/article/2082259/cathay-pacific-flawed-business-model-changing-world)

Cathay Pacific is a flawed business model in a changing world

Peter Guy


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$575 million loss last year and a reversal of a HK$6 billion profit in the previous year suggests there is no turnaround on the horizon. Aviation fuel accounted for nearly 30 per cent 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$1.8 billion 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.

According to Bloomberg, China plans to build more than 50 airports by 2020 to accommodate more passengers, raising the number of civil transport facilities from 210 to 260. The government also plans to build six airport clusters nationwide and elevate airports in Beijing, Shanghai and Guangzhou to international hubs.

Through the 70s and 90s Cathay Pacific benefited from its colonial monopoly concession from the Hong Kong government. That co-dependency hasn’t changed. Cathay and its owners, Swire, have such a unique and lucrative deal with the government that taxpayers will be paying for a third runway. They collude to prevent Hong Kong travellers from benefitting from the entry of local, low cost, discount airlines.

Sustaining the cost, and passing on the pricing structure of a premium airline to passengers is unsustainable when confronting the onslaught of competition from mainland airlines.

Cathay is mired in a stuck-in-the-middle strategy – unable to compete as a discount airline and unable to sustain a premium brand. They respond in the typical, smug, self-immolating Hong Kong (and I mean Hong Kong British and Chinese) fashion that characterises many of the local businesses when confronted with real competition – they cut quality.

That’s evident in the numerous complaints online about Cathay’s service quality, and a mileage awards program which looks about as difficult to achieve as a manned expedition to Mars. Even the business class lounge has been subcontracted to an outside manager.
Controlling your brand is paramount when your business is in turmoil. Instead of reinventing the business or innovating, management chooses to die by a thousand cost cuts over time.

Cathay management complains like an aged prostitute whose uterus is about to drop out. They shouldn’t be encouraged with sympathetic SCMP op-eds that describe Cathay as a Hong Kong “icon”. They are owned and controlled by a wealthy family who run it for profit, not public trust.

The only sensible option for Swire is to sell Cathay Pacific while it still holds valuable assets like landing slots, a decent cargo business and maintenance facilities. No doubt, a mainland company will devour them. Current management is utterly confused and cannot stop the insurmountable competition and deterioration of value.
Peter Guy is a financial writer and former international banker



Finally a journalist who is not afraid to call it as he sees it. Enough said...

[Oasis]

Reading this article makes me alternate between embarrassment and feeling anger.
Embarrassment because it is our airline that is suffering.
Anger because some people working on the third floor seem hellbent on flushing it down the toilet.

[iflylow]

Hey AOA, when is the vote for "no confidence in management" taking place?

[iflylow]

Frank,

I agree 100%. I guess I meant: "When is the vote for 'no confidence in CX and/or AOA management (aka. D.S)' taking place?"

[Glass Half Empty]

I don't think he should hold back when he writes the next article.

[Shep69]

Wish I could write like that.....

There are very few who are useless at everything, but many who wind up in something they're not good at.

The answer is help them find something they're good at and don't be shy about it. It's OK to run track and field if you really suck at cricket. It's not OK to force the cricket team to keep you onboard and take them down with you.

It's OK (and sometimes even good) to fail at something so long as you use it to learn and don't keep failing at it. And it's OK to ask for help and listen to ideas that are not your own--especially in times of need--and even try them.

And it's a good thing to get humbled from time to time.

Perhaps things would have worked out better if--rather than forcing operational decisions-- Mr. Ismay was given a set of binoculars, taught how to use them, and sent up to the crow's nest to look for ice.

[Kontract Killer]

The AoA?. F****ng joke.

You get the president you elected, a complete political animal, concerned about his own ego and nothing more, friend to everyone...Enjoy!

Diluted CC/TB by adding HKPA and now their spending resources on some screaming left wing feminist, who things incompetent women in our ranks are being discriminated against because they are women. News flash, their just ****e at the job, get over it princess.

The AoA is as incompetent as our management.

There was a reason the DFO didn't want to deal with RF, cause he was effective:ugh:

[McNugget]

Hey AOA, when is the vote for "no confidence in management" taking place?

I believe Trafalgar the trainer mooted this point recently.

Perhaps we should wait to see his official response - Any day now!

When you have chest-beating apes like him, who aren't actually willing to do anything, you can expect more of the same.

I can reel off countless occasions when idiots of his like claimed "this is the final indignation", over the last few years. Nothing but bluster. Zero credibility, and zero cajones.

Utter hypocrite, and nothing more.

[Average Fool]

I reread the article, can't see any reference to the AOA as this thread would lead me to believe.

Glad someone has said it. Im sure Im not alone in my feeling of doubtfulness for the future of this airline.

[Xwindldg]

Kontractkiller

What's the story with the chick and discrimination? Haven't heard that one, what's happening?

[Bob Hawke]

DS - waste of space. Want credibility, want to do your job as Chair? Resign from training AND put up the motion. Soon you'll be Chair of a sinking ship. Dont miss the lifeboat, or you'll go down with the rats.

[Oasis]

Kontractkiller

What's the story with the chick and discrimination? Haven't heard that one, what's happening?

Can you please not call her a chick?
Lady or woman is more respectful.
Little CRM advice...

[mngmt mole]

Babe.... ?

[Xwindldg]

Oasis,

It's not disrespectful, just like saying "dude".

[Xwindldg]

But what is the story anyway?

[boxjockey]

Xwind,

I assume you aren't a member then?

box

[Xwindldg]

I am, nothing on the forums though.

[bellcrank88]

Back to the subject of this thread, the article in the SCMP.

The first recent analysis I have read that I actually agree with.

[kiwicx]

I am, nothing on the forums though.

Check out AOA Europe: Manchester base thread if you are indeed a member.

[Xwindldg]

Is she taking court action about something? Just sounded like her having a whine about someone using the word "gents"

[Hugo Peroni the IV]

I guess she confused Time to win with Time to Whine (again)

[mngmt mole]

Nice to see that she has disproved the common prejudices against women pilots. Oh, wait.... :ooh:

[anotherbusdriver]

So many haters here, I think you just proved her point IMHO.

Meanwhile, the real story, the article is just about as good an honest analysis of the situation you will ever find. Well written and an honest appraisal.

Wonder when management are going to start the soul searching then?

Never. Bring on more cuts and more blaming. Never own a mistake and never apologise for a stuff up. That's not the way old chaps now is it? More whiskey please and a cigar while we are at it. Let somebody else clean up the mess - that's what the plebs are for, isn't it?

[Table For 1]

Actually the real story here is that 36 of your colleagues are about to be made redundant or forced to HKG with CX once again ignoring clear Offer of Emplyment Terms and Conditions. But hey most of them are ex-KA so who cares......and yeah thanks for the solidarity and support some of you HKAOA guys and girls gave them by proactively advocating the closure of Manchester on Yammer. Anything to allow you to commute better whilst pocketing the ARAPA........yep all potential newcomers pay attention: CX Management and your fellow pilots are all posionous....stay well away.

[mngmt mole]

Table. I believe that the commentary on Yammer is predominately in support of ANY crewing issue being resolved based on strict seniority. Have you a problem with that?

[Arfur Dent]

There is a strange phenomenon at large here. The article is a pretty damning indictment of our management (small "m") and it pretty much describes Cathay's woes.
The thread, however, almost immediately descended into DS and AOA bashing and childish insults between so called professional aviators (one can assume anyway).
Part of me thinks you get what you bloody well deserve - at least those "contributors" so far.
Grow up for heaven's sake - or inhabit "Jet Blast".

[McNugget]

Nice to see that she has disproved the common prejudices against women pilots. Oh, wait.... :ooh:

Classic..!

[Average Fool]

This thread must be full of management.

Completely ignoring the reality of the article and shifting the subject.

[Natca]

Unfortuately what those management types are now trying to hide and play off is yes they are going to strink management first ie combining Dragon and CX flight ops folks but the next move will be seniority list integration and they shall try to reap the staffing benifits there. This is coming, get ready while you have time. SLI is real.

[mngmt mole]

It's almost surreal working for what is arguably the most dysfunctional airline in the industry. A clueless management, a feckless pilot group, sad. I predict a very unhappy ending for CX when the history books are written.

[Gnadenburg]

Integrating KA with CX would be stupid. KA is small and if properly managed is possibly well placed to compete with the competition in many areas. One matter of great import is commands ! We may be one summer away from the great white hope that is expansion coming off the rails unless things done with a new mindset.

Would a CX operationally managed KA have the ability to rapidly reverse from the old ways of doing things, for a competitive advantage against our regional counterparts? Or would the first management consequence be contract compliance from the DPA due a legacy of confrontation? A possible disaster awaits. Or can't we just be sold off?

[Natca]

Integrating KA with CX would be stupid. KA is small and if properly managed is possibly well placed to compete with the competition in many areas. One matter of great import is commands ! We may be one summer away from the great white hope that is expansion coming off the rails unless things done with a new mindset.

Would a CX operationally managed KA have the ability to rapidly reverse from the old ways of doing things, for a competitive advantage against our regional counterparts? Or would the first management consequence be contract compliance from the DPA due a legacy of confrontation? A possible disaster awaits. Or can't we just be sold off?

A sell off is much easier if your selling one airline and operation, this has been said before in previous sales and mergers.

[spleener]

KA is a wholly owned subsidiary of CX.
Buy the house, get the value added contents.

[Foxdeux]

I was always under the impression that Dragonair (Cathay Dragon) was Cathay Pacific's budget airline, or atleast should've been. I mean when Dragonair first started with Tristars people used to make fun of them that when one plane was in the air there were no planes on the ground.

[Mr Angry from Purley]

Wonder when management are going to start the soul searching then?

If the Management are failing to understand the reality of Cathy's position one suspects the Pilots are not that far behind either..........

[Average Fool]

They aren't. Which is why they are in the position they are today.

[Fool Sufferer]

Sadly, it appears this once great airline and business, which is now nothing other than a faint shadow of its former glory, is headed inexorably for oblivion.

Unfortunately, the inevitable demise is only a matter of time.

It would seem most prudent at this point, for expatriate employees in particular, to have a solid exit strategy formulated.

[shortly2]

Doom, gloom, misery, despair oh my goodness the sky is falling. Ok I among many think that the massive fuel hedging fiasco smells really suspect and probably warrants further investigation from regulators/IRD folk etc, However could I suggest that we, every time we speak to the Swire Princes/Princesses that have us by the short and curlies, suggest solutions? Surely eventually they will listen. (Chuckle, chuckle). When are we going to buy an aircraft that adequately provides a premium product? Cripey might even have to have 4 engines. Until we decide what type of airline we are we are going round in circles.

[JulieAndrews]

"mainland management" as a saviour - how do you spell oxymoron?

[Captain Dart]

Some mainland airlines offer good dosh, and basings. A mainland management may actually be more pragmatic, and without the current lot's baggage.

[Max Reheat]

Dart,

Are you pissed!

[Captain Dart]

Nope, just issues with iPad keyboard. I have made a similar post elsewhere, the point I am trying to make is that to me, a fresh management, even mainland, could be no worse than the current incumbents.

As I've also said, I have heard 'CX is going to be sold to the Chinese' throughout my near 3 decades in the airline. I guess it has to eventuate if you predict it long enough.

[ron burgandy]

I agree Dart. Talk to expats at Chinese airlines. Pilots are still treated with respect and not seen as the enemy.
I can't understand the fear of being sold, it's not like it could be any worse wrt to how management view and treat us.

[boocs]

https://blogs.crikey.com.au/planetalking/2017/03/27/is-cathay-pacific-dying-as-a-quality-brand-and-why-should-we-care/

b.

[RRAAMJET]

It really, really saddens me to read this. Friend says things are chaotic.
I just have happy memories of flying for what was then absolutely the world's #1 carrier, and by far the most difficult to get hired into.
Their flying and training standards at Kai Tak will never be equaled.
Very sad....the rot was obvious after HKG handover, when I left.

Geez, even Rod Eddington said I was making a sound decision when I asked him at cocktail party on the Island....and he left...

[Captain Dart]

Red Oddington started the rot.

[LongTimeInCX]

When Rod called us 'Million Dollar Morons', he showed the true envy that management have for the aircrew body, that they can not do without.
He and the subsequent incumbents dislike the reality that:
1) we are needed, because like it or not, planes do not currently fly themselves.
2) few, if any of the senior management could do our job, whereas many of the crew in CX could do their job very well, and it wouldn't take a 3 month conversion course.

[mngmt mole]

Dan. That comment sums it up perfectly. They should be ashamed of themselves, but of course, then know no shame.

[Starbear]

From the Friday Pravda

Industrial Escalation
In an attempt to further harm the operations of the company at this critical time, the HKAOA has escalated
their industrial action on the Training Captain Ban, by asking global pilot unions to also ban the training of
Cathay pilots. This action by the HKAOA is at odds with the efforts of teams across the airline as they work
together to ensure the future financial success of Cathay.

Or perhaps another way to look at this Anna, might be to consider your own disastrous handling of the issues thus far. If these had been dealt with,with even a modicum of integrity and simple honesty, the current situation would probably not even prevail.

[Hugo Peroni the IV]

I'm perplexed. How is just doing my job, to the highest of standards and not volunteering for training (which I am not obliged to do) seen as industrial action?

But then again, we are dealing with a woman! Hard done to, apparently, every one of them.



From the Friday Pravda



Or perhaps another way to look at this Anna, might be to consider your own disastrous handling of the issues thus far. If these had been dealt with,with even a modicum of integrity and simple honesty, the current situation would probably not even prevail.

[BusyB]

But Anna, Rupert says all the staff are on side!!!!

[Shep69]

From the Friday Pravda



Or perhaps another way to look at this Anna, might be to consider your own disastrous handling of the issues thus far. If these had been dealt with,with even a modicum of integrity and simple honesty, the current situation would probably not even prevail.

Perhaps whoever wrote the section in the update might do well to spend less time lamenting and more time considering the wisdom of Oliver Wendell Holmes.

' If it be true that workingmen may combine with a view, among other things, to getting as much as they can for their labor, just as capital may combine with a view to getting the greatest possible return, it must be true that, when combined, they have the same liberty that combined capital has, to support their interests by argument, persuasion, and the bestowal or refusal of those advantages which they otherwise lawfully control.'