Cathay Pacific needs to win over mainland leisure tourists to cut losses
EARLY this year, Hong Kong-based airline Cathay Pacific recorded its first loss since 2008, signifying the onset of an uphill battle for the premium carrier.
A report by Bloomberg said the airline may report a loss of HK$1.2 billion (US$153 million) for the first six months of the year, based on a Bloomberg survey of three analysts.
If the losses are announced, this would mean consecutive annual losses since 2016, the airline’s first in 70 years of operation.
The report said the airline needed to take advantage of the rise of mainland leisure tourists who had contributed to revenues of Chinese-owned airlines such as Air China and China Southern.
At the moment, Cathay Pacific is known as the region’s best premium airline, but Bloomberg suggested a rebrand to target the mass Chinese market was necessary for the airline. For instance, Singapore Airlines – also struggling with dwindling revenues – played up its budget brands on the side with considerable success.
— Cathay Pacific (@cathaypacific) August 10, 2017
The report quoted: “Cathay is caught between budget carriers luring regional tourists and deep-pocketed, state-owned competitors on the mainland that offer cheaper, long-haul flights from cities like Shanghai, Guangzhou and Shenzhen, without the need to fly via Hong Kong.”
John Hu, an analyst at Morningstar Investment Services LLC in Shenzhen, told the publication Cathay needed to milk its partnership with Air China.
“Cathay is begging with a golden bowl,” Hu said. “It has Air China on its back in the mainland, but has yet to fully exploit that tie-up.”
In May, the carrier said it would axe 600 jobs as part of a major restructuring program following its first loss in eight years recorded in 2016.
This year “is going to be a difficult year and current trends won’t stop”, chief operating officer Rupert Hogg told South China Morning Post in March.