Cathay Pacific Shares Plunge
Join Date: May 2008
Location: All Over
Posts: 471
Likes: 0
Received 0 Likes
on
0 Posts
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.
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.
Join Date: Apr 2007
Location: HK- A little bit of industrial China in every breath you take.
Posts: 508
Likes: 0
Received 0 Likes
on
0 Posts
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?
Join Date: Apr 2008
Location: On the road
Posts: 160
Likes: 0
Received 0 Likes
on
0 Posts
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.
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.
Join Date: Oct 2000
Posts: 45
Likes: 0
Received 0 Likes
on
0 Posts
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.
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.
Join Date: Sep 2000
Location: Planet Earth
Posts: 276
Likes: 0
Received 0 Likes
on
0 Posts
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.
Join Date: Sep 2014
Location: Hong Kong
Posts: 63
Likes: 0
Received 0 Likes
on
0 Posts
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.
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.
Join Date: Aug 2015
Location: Hong kong
Posts: 98
Likes: 0
Received 0 Likes
on
0 Posts
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
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
Last edited by Tea time; 17th Mar 2017 at 02:20.
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.
Join Date: Apr 2002
Location: hong kong
Posts: 397
Likes: 0
Received 0 Likes
on
0 Posts
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 ??
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 ??
Join Date: Mar 2016
Location: Exist
Posts: 47
Likes: 0
Received 0 Likes
on
0 Posts
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.
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.
Join Date: Mar 2015
Location: Australia
Posts: 330
Likes: 0
Received 0 Likes
on
0 Posts
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.
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.
Join Date: Oct 2008
Location: N/A
Posts: 121
Likes: 0
Received 0 Likes
on
0 Posts
Join Date: Feb 2000
Posts: 81
Likes: 0
Received 0 Likes
on
0 Posts
Turbulence ahead for Hong Kong’s flag carrier: Analysts
Turbulence ahead for Hong Kong?s flag carrier: Analysts
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."
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."
Join Date: Sep 2007
Location: Hong Kong
Posts: 61
Likes: 0
Received 0 Likes
on
0 Posts
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...
Or words to that effect...
Join Date: Apr 2007
Location: HK- A little bit of industrial China in every breath you take.
Posts: 508
Likes: 0
Received 0 Likes
on
0 Posts
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.
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.
Join Date: Jul 2014
Location: Hong Kong
Posts: 433
Likes: 0
Received 0 Likes
on
0 Posts
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.
Well, they got it.
We are now just another dirty Chinese city, and surprise, surprise, no-one likes it.
