Dear Anna
Joined: Jul 2013
Posts: 504
Likes: 1
From: one country, one system
Curtain,
I never thought I would ever say this, but you are of course absolutely right.
I still am a bit puzzled why you and your friends were after me for 2 years saying precisely over and over what you just said, but ok, water under the bridge.
I never thought I would ever say this, but you are of course absolutely right.
I still am a bit puzzled why you and your friends were after me for 2 years saying precisely over and over what you just said, but ok, water under the bridge.
Joined: Aug 2008
Posts: 0
Likes: 1
From: Polar Route
Joined: Sep 2013
Posts: 42
Likes: 0
From: Arctic Circle
Excellent summation Curtain rod. Combine your salient points with the structural, competitive and systemic issues, and unfortunately it is self-evident that the once mighty Cathay Pacific now faces an unavoidable and inevitably fatal trajectory.
Do not postpone the exit strategy until it becomes too late.
Do not postpone the exit strategy until it becomes too late.
Joined: Mar 2008
Posts: 1,542
Likes: 5
From: London
Curtain and Frank. Thank you both for such illuminating and sadly accurate summations of the death of an airline. Curtain, you have described our management and their moral bankruptcy so well that I won't even try to add to the list. Nothing left to say. What a disgrace this airline has become. As far as their 'threats' go.....bring it on AT. I firmly believe there are more than enough of us ready to ensure that any action you take will bring this airline to a grinding and sudden halt.
Joined: Mar 2015
Posts: 85
Likes: 0
From: Hong Kong
Every airline is a reflection of the place it originates from.
For many, Donkey Kong has turned into an unsustainable, unaffordable and toxic city.
A place, which is run by a small, corrupt, cleptocratic and incompetent 'elite'.
Now, you do your maths about its future, (and your own) in this dying city (airline).
For many, Donkey Kong has turned into an unsustainable, unaffordable and toxic city.
A place, which is run by a small, corrupt, cleptocratic and incompetent 'elite'.
Now, you do your maths about its future, (and your own) in this dying city (airline).
The airline could be a reflection of senior pillaging until the perceived inevitable, the ultimate rebranding to Air China HK.
It won't be the end of the world, but the airline and city will never be what they once were.
Joined: Jul 2003
Posts: 78
Likes: 3
From: Big Island
THE REAL REASON CATHAY PACIFIC IS LOSING MONEY
MATTHEW MARCH 16, 2017
Yesterday I wrote about Cathay Pacific’s 2016 reported annual loss. The Hong Kong-based airline blamed weak demand for its premium cabin product and fierce competition from Mainland China as the reason. Although I mentioned that Cathay lost money hedging fuel, one reader took me to task for not focusing on that. So today I will.
Reader Mak wrote (bolding mine)–
I think you’ve got this story exactly backwards thanks to poor press reports about CX earnings, and it is a source of continuing fascination to me that reporters in the financial press don’t know how to read an earnings report. Cathay’s loss has little to do with competition — that is the spin that Cathay’s management is trying to sugarcoat this with. In fact, CX had another huge operational profit this year.
Cathay’s earnings results includes a loss of HK$8.46bn on “hedging” the price of jet fuel — that is, wrong bets that the price of jet fuel would rise. Add this self-inflicted wound back into the report, and you can see that CX’s airline is quite a profitable enterprise, and continues to be so despite competition, etc. The even more shocking thing is that this is the second year in a row that CX has had a loss of this order of magnitude (over US$1 Billion!!) in a row.
You seem to think that CX management would prefer if the loss were caused by operations instead of hedging, but you also have this precisely backwards. Of course, CX management would love to blame competition, and things out of its control for the loss, instead of the reality that management is actually directly responsible for the very foolish choices behind this massive loss.
The real story is that management has been running a commodities hedge fund, instead of running an airline, and have lost vast amounts of their shareholders money in doing so. The scandal is even more acute given that CX shareholders own a minority interest in the airlines, and that management has little or no accountability to them.
You should correct the story so as not to promulgate CX management propaganda, as the rest of the media seem to be doing for them.
Is the Fuel Hedging Really the Primary Culprit?
I want to see raw numbers, but the 2016 annual report has not yet been released. We only have this press release from Cathay, which notes but downplays the fuel hedging program.
The interim 2016 report does state–
Lower fuel prices were partially offset by fuel hedging losses.
The Financial Times reports–
Cathay lost HK$8.46bn on fuel hedges in 2016, roughly on par with the HK$8.47bn hedging loss in 2015, as it continued to pay the price for a decision taken in 2015 to protect itself against what it then feared would be high oil prices.
The airline expects to benefit from lower fuel prices this year but is still forecasting a hedging loss for 2017.
So, the answer is YES. Blame the fuel hedging program. Without that, Cathay Pacific would have reported a healthy profit.
What is Worse?
But what is worse — loss due to fuel hedging or loss to do fierce competition?
Mak asserted, “Of course, CX management would love to blame competition, and things out of its control for the loss, instead of the reality that management is actually directly responsible for the very foolish choices behind this massive loss.”
I still take a different view.
The lack of profits are not due to Cathay’s uncompetitive route network or its service or its seats. Nor is it because of the Mainland carriers squeezing it to the point of unprofitably. No, the problem is just one bad decision on fuel. In 2015, Cathay Pacific executives thought fuel would go up in price — I did too. I’m not a fuel expert (Kyle from Travel Codex is welcome to chime in), but I never thought fuel prices would stay so low for so long.
So they locked in a price that turned out to be too high. That is a strategic blunder. A big blunder that should not be missed. But had it paid off, we would all be hailing them now as geniuses. They missed it. Fine. Hopefully they have learned and will guess correctly next time. The good news is the “fundamentals are sound”. Cathay is still running a lean operation with a great product that is otherwise profitable.
CONCLUSION
Let’s be clear — fuel hedges are the primary culprit for Cathay Pacific’s 2016 annual loss. At the same time, I still view management’s blunder on fuel to be less of a concern that asserting that no one wishes to connect in Hong Kong anymore.
MATTHEW MARCH 16, 2017
Yesterday I wrote about Cathay Pacific’s 2016 reported annual loss. The Hong Kong-based airline blamed weak demand for its premium cabin product and fierce competition from Mainland China as the reason. Although I mentioned that Cathay lost money hedging fuel, one reader took me to task for not focusing on that. So today I will.
Reader Mak wrote (bolding mine)–
I think you’ve got this story exactly backwards thanks to poor press reports about CX earnings, and it is a source of continuing fascination to me that reporters in the financial press don’t know how to read an earnings report. Cathay’s loss has little to do with competition — that is the spin that Cathay’s management is trying to sugarcoat this with. In fact, CX had another huge operational profit this year.
Cathay’s earnings results includes a loss of HK$8.46bn on “hedging” the price of jet fuel — that is, wrong bets that the price of jet fuel would rise. Add this self-inflicted wound back into the report, and you can see that CX’s airline is quite a profitable enterprise, and continues to be so despite competition, etc. The even more shocking thing is that this is the second year in a row that CX has had a loss of this order of magnitude (over US$1 Billion!!) in a row.
You seem to think that CX management would prefer if the loss were caused by operations instead of hedging, but you also have this precisely backwards. Of course, CX management would love to blame competition, and things out of its control for the loss, instead of the reality that management is actually directly responsible for the very foolish choices behind this massive loss.
The real story is that management has been running a commodities hedge fund, instead of running an airline, and have lost vast amounts of their shareholders money in doing so. The scandal is even more acute given that CX shareholders own a minority interest in the airlines, and that management has little or no accountability to them.
You should correct the story so as not to promulgate CX management propaganda, as the rest of the media seem to be doing for them.
Is the Fuel Hedging Really the Primary Culprit?
I want to see raw numbers, but the 2016 annual report has not yet been released. We only have this press release from Cathay, which notes but downplays the fuel hedging program.
The interim 2016 report does state–
Lower fuel prices were partially offset by fuel hedging losses.
The Financial Times reports–
Cathay lost HK$8.46bn on fuel hedges in 2016, roughly on par with the HK$8.47bn hedging loss in 2015, as it continued to pay the price for a decision taken in 2015 to protect itself against what it then feared would be high oil prices.
The airline expects to benefit from lower fuel prices this year but is still forecasting a hedging loss for 2017.
So, the answer is YES. Blame the fuel hedging program. Without that, Cathay Pacific would have reported a healthy profit.
What is Worse?
But what is worse — loss due to fuel hedging or loss to do fierce competition?
Mak asserted, “Of course, CX management would love to blame competition, and things out of its control for the loss, instead of the reality that management is actually directly responsible for the very foolish choices behind this massive loss.”
I still take a different view.
The lack of profits are not due to Cathay’s uncompetitive route network or its service or its seats. Nor is it because of the Mainland carriers squeezing it to the point of unprofitably. No, the problem is just one bad decision on fuel. In 2015, Cathay Pacific executives thought fuel would go up in price — I did too. I’m not a fuel expert (Kyle from Travel Codex is welcome to chime in), but I never thought fuel prices would stay so low for so long.
So they locked in a price that turned out to be too high. That is a strategic blunder. A big blunder that should not be missed. But had it paid off, we would all be hailing them now as geniuses. They missed it. Fine. Hopefully they have learned and will guess correctly next time. The good news is the “fundamentals are sound”. Cathay is still running a lean operation with a great product that is otherwise profitable.
CONCLUSION
Let’s be clear — fuel hedges are the primary culprit for Cathay Pacific’s 2016 annual loss. At the same time, I still view management’s blunder on fuel to be less of a concern that asserting that no one wishes to connect in Hong Kong anymore.
Joined: Aug 2008
Posts: 0
Likes: 1
From: Polar Route
There you have it. That's it, that's all. The rest is mere smoke and mirrors. Don't be fooled into conceding your own pay, benefits, and work rules just because they bet the farm on black and the ball landed on red. CX is short of pilots, especially the types that actually know how to fly airplanes. Don't sell yourselves short!
Last edited by cxorcist; 28th September 2017 at 12:49.
Joined: Sep 2017
Posts: 29
Likes: 0
From: Koh Samui Thailand
Just had lunch with a lawyer mate discussing how he would spend his 24% housing allowance increase ( all cash of course ). His firm desperate to retain quality personnel to keep them number one in the market.
As a commercial lawyer in Hong Kong he assured me that although actual Labour Law in HKG was neolithic, Contract Law was entirely up to date and current compared to world standards. An employee cannot be coerced into signing a new contract if the new terms are deemed ( by the employee ) to be detrimental to his employment or career prospects. The employee can have his current contract terminated ( as per the terms of the contract ) in our case 3 months written notice and on a seniority basis ( ie last in first out ) or by mutual agreement ( ie redundancy buyout ).
Any attempt to force an employee to sign a new contract other than by agreed measures is an offence under Hong Kong Law.
As a commercial lawyer in Hong Kong he assured me that although actual Labour Law in HKG was neolithic, Contract Law was entirely up to date and current compared to world standards. An employee cannot be coerced into signing a new contract if the new terms are deemed ( by the employee ) to be detrimental to his employment or career prospects. The employee can have his current contract terminated ( as per the terms of the contract ) in our case 3 months written notice and on a seniority basis ( ie last in first out ) or by mutual agreement ( ie redundancy buyout ).
Any attempt to force an employee to sign a new contract other than by agreed measures is an offence under Hong Kong Law.
Joined: Jun 2005
Posts: 298
Likes: 2
From: in denial
Only in accordance with Para 34.4 of your CoS, or the Employment Ordiance. Neither of which mention termination due 'declining to sign an inferior contract'.
Last edited by Veruka Salt; 28th September 2017 at 13:14.
Joined: Oct 2007
Posts: 552
Likes: 22
From: Hong Kong
As a commercial lawyer in Hong Kong he assured me that although actual Labour Law in HKG was neolithic, Contract Law was entirely up to date and current compared to world standards. An employee cannot be coerced into signing a new contract if the new terms are deemed ( by the employee ) to be detrimental to his employment or career prospects. The employee can have his current contract terminated ( as per the terms of the contract ) in our case 3 months written notice and on a seniority basis ( ie last in first out ) or by mutual agreement ( ie redundancy buyout ).
Any attempt to force an employee to sign a new contract other than by agreed measures is an offence under Hong Kong Law.
If the Company is committed to paying for its fuel hedging mistake by cutting employee costs, then they can do it in accordance with my contract (lay off from the bottom up) and in accordance with Hong Kong and international laws.