https://www.flightglobal.com/news/artic ... ev-430336/

Tough times at the Cathay Pacific operation. Profits down by almost 72% and also considerable softness in the cargo business.

Overcapacity in the business and in the region is blamed for this need to conduct a critical review of the CX operation. Might this mean the 777-9 order is in question if CX need to reduce capacity? The 773ER is now their biggest passenger aircraft and if both seats and cargo space need to be trimmed, then adding a bigger plane could be something John Slosar and his team no longer want to do.

Whatever your views, times in the Asia-Pacific region are hard at the moment for all the legacies.

Its a confusing situation, seats need to be trimmed but yet now we're going ahead to 10 abreast. I don't think the 777-9 order would be in jeopardy but I'm not privy to the full information on the direction of the company.

Why would the 777-9 be the scapegoat for capacity sacrifice, why not the A350-1000 ? The 777-9 is replacing the 77W , some will be on the way out of the Cathay fleet as the 777-9 arrives. The 777-9 also will fly the London and JFK routes where capacity is needed leaving the smaller routes to the A350 fleet. The A330 fleet should be trimmed, not every flight needs a 300 sea airplane.

Might they consider a deal with Boeing to replace the 777-9 order with some variants of the 787? They do have the A350-1000 on order but that's not too much of a capacity step-down. If they do need to take a severe look at all their operations then maybe replacing some 777 flying with 787-9 or 787-10 aircraft might be a more efficient option than flying empty cargo capacity and seats on a bigger 777-9.

Channex757 wrote:

Overcapacity in the business and in the region is blamed for this need to conduct a critical review of the CX operation. Might this mean the 777-9 order is in question if CX need to reduce capacity? The 773ER is now their biggest passenger aircraft and if both seats and cargo space need to be trimmed, then adding a bigger plane could be something John Slosar and his team no longer want to do.

That would make sense if they were due in next year... but that model is nearly a decade out.

So much could change from now, and it's likely the market will dip and recover (to respective extents) several times over, before they arise.

Let's hope so, but the fact remains that Asia-Pacific is seeing capacity increasing hugely and that isn't going away whatever happens.

CX used to have a nice position at HKG with their own planes and Dragonair. Now there's all the new Chinese carriers, ME3 and lowcosts snapping at their heels. Making tough decisions now is preferable to having to make more expensive ones five years down the road. Reducing capacity and driving up yields is the order of the day.

jfk777 wrote:

Why would the 777-9 be the scapegoat for capacity sacrifice, why not the A350-1000 ? The 777-9 is replacing the 77W , some will be on the way out of the Cathay fleet as the 777-9 arrives. The 777-9 also will fly the London and JFK routes where capacity is needed leaving the smaller routes to the A350 fleet. The A330 fleet should be trimmed, not every flight needs a 300 sea airplane.

You need to look at the combination of Cathay Pacific and Cathay Dragon. Cathay Dragon has A330/A321/A320.

I think Cathay is at the moment confused. On one hand they seem to want to trim cost, but they don't seem to have a strategy. This 10-abreast 777 is one of them. The whole explanation of "we need more capacity and don't have more slot so that why we go 10-abreast" is just complete BS. If you have the problem, raise prices first and increase yield.
Another weird example is CX moving to Terminal 4 in Singapore. This terminal is designed as "self service". The big disadvantage of terminal 4 is connectivity: getting to the subway or to other terminals will be a pain. It will reduce cost but just does not seem to align with the CX brand. Other users of the terminal are KE, VN and the whole AirAsia group (probably by far the largest airline presence at this terminal).

The comments from readers in South China Morining Post on an interview with the CX CEO (published about 2 weeks) as well as the 10 abreast seating and they where brutal. Best comment:"The HK travelling public now hate Cathay Pacific as much as they hate the HK government!".

http://www.scmp.com/news/hong-kong/econ ... t#comments
http://www.scmp.com/news/hong-kong/econ ... e#comments

As other people have said, they need to look at SQ and QF. Both seems to be doing ok growing at the LCC end while keeping the premium brand more or less intact (although for both it was a painful journey).

Only going to get worse for CX as more and more travellers and flights go direct to and from China. Hong Kong is losing its relevance.

AngMoh wrote:

The whole explanation of "we need more capacity and don't have more slot so that why we go 10-abreast" is just complete BS. If you have the problem, raise prices first and increase yield.

....and then watch your competitors eat you alive in the process.

There's a reason that almost EVERY other airline who flies that aircraft came to the same conclusion that CX finally is. Why would they be an exception?

Significant weaknesses, yet they think massively devaluing the Marco Polo program, putting 10-seat abreast in 77Ws, and cutting back on food and amenities will bring back their profits?

keitherson wrote:

Significant weaknesses, yet they think massively devaluing the Marco Polo program, putting 10-seat abreast in 77Ws, and cutting back on food and amenities will bring back their profits?

I do agree that there have been some highly questionably and controversial decisions under the Ivan Chu management, but the modifications to the MP program were a good thing. The program now values and prioritizes the true frequent flyers who are actually flying to gain status. The previous program was too skewed as many higher ranking members weren't flying often at all and had accumulated status based off other means which devalued the program to many real frequent flyers.

I am not an expert on this subject but from gathering what I knew, I think the key issue is image of CX is tarnished.
CX believes it has a customer base that will never changed, stick to CX forever and that is not true at all.
1. CX totally revamp their MarcoPolo program. I have been a Gold member with them for almost 5 years and I am based in Taiwan. I choose to fly backward with CX and then off to USA or Canada. I no longer do this. Number 1, EVA is adding frequency to most destination to daily basis. Number 2, given the way Marco Polo counts its status, I gave up to achieve Gold status.
2. If you look at CX business class, nothing has changed. Catering has always been on the weak side and in the mean time, you see other competitor, Mainland China aside, BR and CI both have equal or better business class seat of the same style. So, hardware advantage is no longer on the CX side.
3. Just because you are not making enough money because of wrong bet on fuel price, how can you justify put that as a surcharge to your customers? This is insane! Arrogant to say the least! I don't know how Ivan Chung could have agreed to this move.

To sum up, market dynamic has changed, customer revenue base has moved, more choice, better competitor, and most importantly, current management team has an arrogant attitude that put them more adrift from their loyal customers. All it takes now, is another industrial action to put CX into more chaos…. On the side note, I still don't understand or feel justified that Dragonair need to be changed to Cathay Dragon?

Tough times indeed. The carrier has lost its niche. It used to be the hometown airline for the UK's Asian outpost. It no longer has those historic ties and more and more it is a fly over location as the Chinese carriers grow. Look at China Southern today with its order for 20 787-9s.

AngMoh wrote:

As other people have said, they need to look at SQ and QF. Both seems to be doing ok growing at the LCC end while keeping the premium brand more or less intact (although for both it was a painful journey).

Don't think SQ and QF are great examples. SQ has been killed by overcapacity from the ME3 which has seen significant reduction in their market share, and SQ cargo is skeleton of what it used to be. QF and VA has been complaining for years to their investors of the overcapacity in the domestic market.

Most of the comments above don't understand what the word overcapacity means.

An observation from a HK-based J-class flier... i was Diamond on CX for 12 straight years. Alas no more effective this year. It has nothing to do with the revamp of Marco Polo Club (which to be honest, we shouldn't complain about - especially those of us who can't find a seat in the first class lounge at rush hours because its swamped with economy class fliers holding Diamond cards). It also has nothing to do with the soft/hard product. Cathay's J hard product is best in class as far as i am concerned. The soft product (food, entertainment) is not best in class by any stretch (i agree food in J has gotten exponentially worse over the past 10 years - how hard is it to cook the food in one plate and then serve it in a different one? Other airlines do it...)

For me, it has 100% to do with price. This year i've flown the equivalent of a Diamond membership in J regionally and long-haul. Less than 10% of it with CX. To North America, I flew AA to the East Coast for HK$25,000 (CX is HK$55,000+). AA offers exactly the same hard product as CX in J, exactly the same seat on exactly the same plane. To Europe, I flew Etihad for HK$17,000. To Indonesia, Garuda (with flat beds on their A330s) is 60% less than CX (with their regional business class seat). Those are just a few examples. Now why are CX prices that much higher? Is it because of the fuel hedge? Is it because its costs are too high? I don't know and i won't speculate, its outside my area of expertise. But that to me is why CX is hurting.

You simply can't ignore the huge price differences out there these days. Oddly enough i started flying CX 13 years ago because their prices in J to YVR for 50% cheaper than the competition. Times have changed and CX needs to adjust/respond. Simply relying on "loyalty" or a "better flying experience" just doesn't cut it anymore. Especially since the soft product in J long-haul from HK offers lie-flat beds for basically any and all carriers.

If CX were price competitive, i would switch back overnight. Its my home airline which comes with certain advantages but no money-consious business person should justify paying a 50% premium for that. At least not in my eyes.

Just my five cents worth.

A

As a regional Asian flyer with CX with a silver Marco Polo card, the CX offer is no longer good value. Even maintaining silver only flying regional flights is nearly impossible.

I came back from KUL on Wednesday and have to say that the food option was simply disgusting - on a par with domestic Chinese food in terms of taste and nutritional goodness. Their biggest issue is punctuality - their 17:40 ex KUL rarely leaves anywhere near on time. In comparison, the MH 08:45 on Tuesday morning from HKG pushed back nicely early.


I'm no longer loyal to CX - MH to KUL is better (although empty), GA to Jakarta is far better, and both considerably cheaper.

I was booking 4 seats to Europe two weeks ago for a short holiday end October. I would prefer to fly CX rather than BA, but their economy fares were exactly Double the BA price.

I heard MAD is doing very well, despite China Eastern and Iberia to PVG starting the same season. Maybe they can move some capacity there?

CX management only needs to look to KUL to see where they will be in five years time.

AngMoh wrote:

jfk777 wrote:

I think Cathay is at the moment confused. On one hand they seem to want to trim cost, but they don't seem to have a strategy. This 10-abreast 777 is one of them. The whole explanation of "we need more capacity and don't have more slot so that why we go 10-abreast" is just complete BS. If you have the problem, raise prices first and increase yield.

Because CX can't- that's the whole point!!! As the saying goes, "if you can't beat them, join them".
Let's remember even Swissair succumbed to 10 abreast on their 747 fleet in the mid 80's as SR pax were no longer willing to pay a premium to fly with them.

"As a regional Asian flyer with CX with a silver Marco Polo card, the CX offer is no longer good value. Even maintaining silver only flying regional flights is nearly impossible.
I came back from KUL on Wednesday and have to say that the food option was simply disgusting - on a par with domestic Chinese food in terms of taste and nutritional goodness. Their biggest issue is punctuality - their 17:40 ex KUL rarely leaves anywhere near on time. In comparison, the MH 08:45 on Tuesday morning from HKG pushed back nicely early."


I am a Diamond MP on CX and I travel the same HKG-KUL route 2-3 times per month. I agree that the 17:40 flight is always late but that's because it is coming in from CX's hub. The MH early morning flights (as well as the CX ones) are always on time or early because they RON. Many a times I have been on MH 073 (when it was a 777, A380, A330 and now B737) and it is generally not on time either coming in from KL.

Please do not generalize here, you have to compare apples to apples.

CX needs to re-examine what they want to be and where they want to be. I am flying next week to the US on QR in biz for a quarter of what CX was charging. They need to get in-line with the market.

CX is stuck with a high cost base and nimble competition and cannot compete on cost. Their reduction of onboard service standards whilst maintaining high fares will not work. They need to reduce unit costs faster than fares.

CX and their relationship with KA looks to be changing too. Reading the runes, I'd suggest that KA's rebranding as Cathay Dragon (which I like BTW as it looks classy) could indicate more routes being transferred from the parent. Does anyone know of any routes that might qualify? Regional obviously, and could some Australasia routes be up for a change?

zeke wrote:

QF and VA has been complaining for years to their investors of the overcapacity in the domestic market.

I don't for one second disagree with you - but it is worth noting that the overcapacity was largely (entirely) as a result of the war of egos between Borgetti and Joyce and QF Group's line in the sand with respect to market share . That little battle cost shareholders dearly - although was an absolute boon for the travelling public. I was a major beneficiary of this - I was for a number of years able to work in Darwin and have a personal life in Sydney - taking advantage of the $430 return fares on Qantas 40+ weekends of the year.

I believe that CX will hand over Jakarta and Surabaya next. Bangkok and Singapore will remain with CX due to the higher level of premium US transit.

With Hong Kong airlines sniffing around YVR and further cities in Australasia it could be a difficult 12 months for CX.

CX needs to find a way to compete on the beach routes in a way that BA have over the last decade. Their value proposition is broken in my opinion. Take my trip this week to KUL MH ticket (returning on CX with MH code) 3k+ Hkd return CX ticket 8k hkd return.

CX is in big big trouble, there never been one CEO that has been that talked about and hated by general public, they are like a headless chicken fighting a snake in the same cage, that snake is HX and soon it would be a King Cobra or Python. They now see the core Japan/Korea market being attacked by low cost carriers or local carriers that offered better food and services, for overnight flight to Seoul for example, KE uses a 777-300ER or 747-8I with proper longhaul products and serve a full meal, whilst CX might be a 330 or 777-300 at best and a hot bun, that is difference, not to mention the onslaught of LCC on ICN-HKG, lead by our very own UO. Just travelled on a flight from Taipei to HKG, the last 744 departure from Taipei,it was a morning flight and the rear end Door 4 to 5 was TOTALLY empty, CX sells the most expensive tickets yet provides the least, BR, CI are now streets better than CX.
For Europe, they start to feel the impact of ME3, business travelers used to book automatically to CX, not anymore, typical price for CX C Class, with open scissors options, runs at around HK$40000, ME3 could do it for 2/3, all with flexible departure times from places apart from London, why stayed one more night just get up early to catch CX flight when I could have an evening departure the night before and sleep in the hotel room or my own bed, places like FRA, MXP need more than daily frequencies, then where you find your pilots, your industrial relationship left a lot to be desired, customers worried about industrial actions all the time, once that is added, you can add another departure bank from Hong Kong. What about dealing with situation when there would be no new slots from HKIA after 2018, what are you going to do for the 8 years when expansion has to stop, how many BJS,PVG,TPE, BKK flights CX willing to surrender for other destinations? Your frequency strategy could only work if that is DFW with many runways, Cathay need his head checked.

Chu needed his head checked, apart from mucking about with fuel futures, who in the right mind would invest 60% of their cash to fuel options? What is plan for 2 years? 5 years? Many questions, we needed answers

Which is more profitable; Cathay Pacific, or Cathay Dragon?

If Cathay Pacific is indeed signaling that they (CX) are dealing with 'over-capacity' - could the cuts come from reductions at Cathay Dragon (KA)?

Their recent actions seem counter to that reality - with the surrender of KUL to KA, it seems that CX is taking advantage of KA's brand and lower costs to tackle some of the challenging markets. If indeed, KA's costs are lower, CX may actually be signaling that it intends to increase KA flying, and decrease CX flying - and/or accompany a few cuts in between at CX to provide a net decrease in seats.

Overall, CX does have to find, and refine their strategy; but as other have rightly pointed out, CX's significance has waned of late due to increased and vastly improved competition. Perhaps CX now need to accept a smaller market - one more focused directly on serving its core business better (in the new reality of it being more focused on the HK market, and not so much so on eating other's lunch via connections). That, though, would require catering more closely to the needs of HK locals. There is a market there, though not as large as CX had been previously used to.

CX has been too reliant on China, and too complacent over the past few years. They didn't foresee the following things:
-Chinese mainland carriers improving to a relatively acceptable standard
-Taiwanese upping their game in terms of service standards and price
-Chinese airlines increasing their international services (and therefore overall capacity)
-China's slowing growth making it less attractive for Chinese nationals to travel abroad with full service carriers.
-HNA group airlines (HX and UO) starting to clean up their image and realigning themselves to the market needs, both in terms of price and overall service standards.

And where they decided to act, it was to cut costs, and the sacrificial lamb was their hard product (including food), not exactly the best way of retaining customers.
They have to be thankful to the HK authorities for not granting JQ HK a licence, else there would had been a bloodbath which CX would not like to be in right now.

jeffrey0032j wrote:

They have to be thankful to the HK authorities for not granting JQ HK a licence, else there would had been a bloodbath which CX would not like to be in right now.

Competition is already high in HKG with well over 100 carriers competing. That is the problem, so many carriers has resulted in overcapacity, i.e. More supply than demand.

Jetstar HKG would have been welcomed to startup if they followed the same rules as everyone else based there. They saw themselves above that, so their application was unsuccessful.

There is very few slots left in HKG, fast turn arounds are impossible, and it's a high cost place to operate from. Add that to the forced capacity reduction by the CAD next month for the ATC system changeover.

Could CX be an airline negotiating with EK for a QF-style joint venture on some routes?

{Quote: CX is stuck with a high cost base and nimble competition and cannot compete on cost. Their reduction of onboard service standards whilst maintaining high fares will not work.

Quote:If CX were price competitive, i would switch back overnight. Its my home airline which comes with certain advantages but no money-consious business person should justify paying a 50% premium for that. At least not in my eyes.

Quote:Significant weaknesses, yet they think massively devaluing the Marco Polo program, putting 10-seat abreast in 77Ws, and cutting back on food and amenities will bring back their profits?}

There is a wide range of opinions being expressed...some wants service level to be maintained whilst others wants price to come down. I suspect what CX ultimately will do is to go down the route of cost cutting whilst trying to keep customers happy with lowering prices. This is what Euro and US legacy have done in the past years and I believe CX will say they are not going to keep upmarket like SQ because SQ mainline is operating at very low margin, and will only try to compete in areas like frequencies. BA and EK have been doing pretty well with 7-8 abreast in C class, and many legacy carriers around the world are BOB on Y class. Ultimately, it is profit margin that airline work towards sadly.

In response to the growing threat of new startup Chinese airlines, I believe they already knew that and said they are working with CA to grow their joint businesses, but what they plan to do that is new will need to be seen.

Continued from my last post:　CX are only just start to see impact from mainland carriers now, in the past, Hong Kong is the port for travelling on intercontinental all over Pearl River Delta, Guangzhou only has flights to Sydney, Los Angeles and Amsterdam (2004), today China Southern offers similar destinations than CX, they even have CHC, they truly target ME3 for the Kangaroo routes, once they start to educate Hong Kong based customers how easy it is to travel from Hong Kong to Guangzhou Airport (2 change in trains, 1:30 mins door to door from LoWu on MTR) to the terminal, CX would be under even more pressure. CA, CX's buddy, now have longhauls from FRA,LAX and I believe MEL, whilst the cake grow, more hands are chasing those cakes CX are once exclusive of. CX are slow to use Dragon to penetrate smaller Chinese cities, its position its ideal for North (China, Japan,Taiwan) to South (Malaysia, Vietnam, Singapore, Australia) transit traffic. For US, whilst they are doing OK in terms of load and yield, but they are not ideal to capture traffic from Japan and northern half of China, the best positioned carriers for that is KE or OZ, the EK of Pacific, whom have very deep reach to smaller cities in Japan and China, KE benefited from years of HND/NRT separation for Japan on domestic/international flights, Japanese customers simply move to ICN. For 10 rows on 777, by all means, do it on the regional 777, but leave the 777-300ER alone, you are not going to win customers, KA's older 333 are started to reach over 20 years, is it justifiable to do overhaul on the ladies or what is their replacement, CX has a lot of problem and fuel isn't the only one of them, will continue tonight

In short, CX's high cost base only works with high fares.

CX's punctuality and diminishing product quality don't match the high fares they charge and people are noticing. To Europe in Y, I'd pay a 25-30% premium to fly CX over a European carrier.

If they go high density in Y on the 777, I won't pay a premium at all.

They need to reduce fares and the only way to do that is to dramatically reduce costs. The days of (certain) pilots living in the four seasons residences are ending.

CX certainly has a difficult road ahead. With all of the nonstop flights coming on line between China and Europe and North America by Chinese airlines, there is certainly less reason to choose CX than ever before. Although CX has long been an innovative and world leading operation, CX has been quite a terrible business for the past 25 years or so, and their shareholders have enjoyed negative capital appreciation during that time. I think we will see CX absorbed by CA within the next decade, as Swire finally throws in the towel to pursue more remunerative businesses with their shareholders' capital.

It seems to me being in HK will always make CX's base higher. CX has. Great brand. Why cheapen it?

So why not down gauge their wide bodies and fly more direct routes. This is what business travelers will pay for.

AngMoh wrote:

jfk777 wrote:

Why would the 777-9 be the scapegoat for capacity sacrifice, why not the A350-1000 ? The 777-9 is replacing the 77W , some will be on the way out of the Cathay fleet as the 777-9 arrives. The 777-9 also will fly the London and JFK routes where capacity is needed leaving the smaller routes to the A350 fleet. The A330 fleet should be trimmed, not every flight needs a 300 sea airplane.

You need to look at the combination of Cathay Pacific and Cathay Dragon. Cathay Dragon has A330/A321/A320.

I think Cathay is at the moment confused. On one hand they seem to want to trim cost, but they don't seem to have a strategy. This 10-abreast 777 is one of them. The whole explanation of "we need more capacity and don't have more slot so that why we go 10-abreast" is just complete BS. If you have the problem, raise prices first and increase yield.
Another weird example is CX moving to Terminal 4 in Singapore. This terminal is designed as "self service". The big disadvantage of terminal 4 is connectivity: getting to the subway or to other terminals will be a pain. It will reduce cost but just does not seem to align with the CX brand. Other users of the terminal are KE, VN and the whole AirAsia group (probably by far the largest airline presence at this terminal).

The comments from readers in South China Morining Post on an interview with the CX CEO (published about 2 weeks) as well as the 10 abreast seating and they where brutal. Best comment:"The HK travelling public now hate Cathay Pacific as much as they hate the HK government!".

http://www.scmp.com/news/hong-kong/econ ... t#comments
http://www.scmp.com/news/hong-kong/econ ... e#comments

As other people have said, they need to look at SQ and QF. Both seems to be doing ok growing at the LCC end while keeping the premium brand more or less intact (although for both it was a painful journey).

As a (nolonger that frequent) flyer from Hong Kong, I have to agree that Cathay is not the carrier of choice for quite a lot of Hong Kongers anymore. Over the past years, the airline has been trying to maximise profit through cutting costs on amenities and services. However, I am unable to be convinced that their cost base could be simplified to the extent that it would become comparable to Hong Kong Airlines (for legacy-like services) or Hong Kong Express (for LCC services).

Take HKG - Taiwan as an example. HX, CI and BR are often selling Y tickets at $900-1000 HKD tax incl, whereas CX is asking for $1100-1200, and all you get is a bunch of mainlanders and a disgusting bun, compared to a proper Y meal offered by BR and CI. Granted CX has the most flight and enjoys direct access through a jet bridgr, but for price-sensitive travellers, would they really care if they are bussed to a remote stand? Would they enjoy the luxury of frequency? No.

Even worse is HKG - Japan, Korea and Southeast Asia, where LCCs have a greater say in the market, with Vanilla, Peach, Air Asia, Tiger, etc. CX's Y fare to KIX is north of $2400HKD during firesale when HX is only demanding $1600 and UO asking for under $500.

The price disparity between CX and regional competitors is so great that price sensitive travellers simply wont choose CX, not to mention the sub-par service offered. The uproar got even worse when people learnt that transit travellers actually pay a lower price than HKG-origin travellers (eg travellers to europe ex-CAN may be paying abit more than $3000 when travellers ex-HKG is paying uowards of $5000). That is why SCMP quoted that nost HK people hated it as much as the government.

The saving grace for CX is that their LH operations are still uncontested by competitors local (HX/UO) and abroad (BR/CI/CZ/etc), but that day is also numbered, with the recent influx of overseas carriers (Austrian, SAS, AA, etc) and expansion of HX in Oceania.

With the run for bottom out of question, what kind of customers should CX seek after.

Their aircraft purchasing strategy has skewed towards frequency (which is why they opted out A380), which means a higher cost per flight, but more appealling to premium travellers. I dont know why CX has decided to downgrade their J and F services, which should be their core customers, and their aircraft purchasing strategy reflected it. IMO CX should really focus back on its target passenger group and stop the degredation of services before it is too late. Give the low-yielding pax to HX, UO and the likes. Focus on premium passengers, and market yourself as such.

B-HOP wrote:

Continued from my last post:　CX are only just start to see impact from mainland carriers now, in the past, Hong Kong is the port for travelling on intercontinental all over Pearl River Delta, Guangzhou only has flights to Sydney, Los Angeles and Amsterdam (2004), today China Southern offers similar destinations than CX, they even have CHC, they truly target ME3 for the Kangaroo routes, once they start to educate Hong Kong based customers how easy it is to travel from Hong Kong to Guangzhou Airport (2 change in trains, 1:30 mins door to door from LoWu on MTR) to the terminal, CX would be under even more pressure. CA, CX's buddy, now have longhauls from FRA,LAX and I believe MEL, whilst the cake grow, more hands are chasing those cakes CX are once exclusive of. CX are slow to use Dragon to penetrate smaller Chinese cities, its position its ideal for North (China, Japan,Taiwan) to South (Malaysia, Vietnam, Singapore, Australia) transit traffic. For US, whilst they are doing OK in terms of load and yield, but they are not ideal to capture traffic from Japan and northern half of China, the best positioned carriers for that is KE or OZ, the EK of Pacific, whom have very deep reach to smaller cities in Japan and China, KE benefited from years of HND/NRT separation for Japan on domestic/international flights, Japanese customers simply move to ICN. For 10 rows on 777, by all means, do it on the regional 777, but leave the 777-300ER alone, you are not going to win customers, KA's older 333 are started to reach over 20 years, is it justifiable to do overhaul on the ladies or what is their replacement, CX has a lot of problem and fuel isn't the only one of them, will continue tonight

I dont think most HK people will prefer to fly from CAN or indeed any mainland airport for the simple issue that we have no trust on them. However, ex-mainland travellers do not have this issue and I think we have seen a formiddable lost of connecting traffic from PRC over the years.

Speaking of fuel hedging issues, yes, this has also been calls for Chu to resign after him hedging way too much, but i think it should have limited signifiance on CX's pricing strategy. To charge your customer for your bad investments is one of the worst ideas a CEO can do to retain profit. Chu should turn to its investors for that, not the customers.

Two more things to add.

As already mentioned, CX is charging significantly lower fares for long haul passengers ex-CAN as opposed to ex-HKG. At the same time, CX markets itself as a proud Hong Kong carrier, the carrier of choice for Hong Kong people. Given HK's greater social and political climate of general distrust in China, when CX sells itself as a HK carrier and rip HK passengers off and apparently favouring transit passengers from neighbouring Guangzhou, this looks pretty bad to the average Hong Konger.

Also as a result of over-reliance on transit passengers from China, the cabin environment is markedly worse off. China's different culture means that a great number of Chinese travellers are less accustomed to practising what we perceive as the general practice of good manners e.g.being considerate of other passengers in a long haul flight by wearing earphones and keeping voices down. To further add insult to injury the crew is not too concerned with maintaining a premium, pleasant cabin environment if it means confronting unruly passengers. I flew HKG-LAX in June and the Chinese woman in front of me was playing music from her tablet at full volume during taxi. Crew walked past and did not intervene until I asked them to. In August I flew HKG-MXP and a bunch of Chinese passengers were talking by literally yelling across the cabin for a good portion of the flight, again, crew did not intervene. The point I'm trying to make here is, when you market yourself as a premium airline and the crew does very little to maintain that ambiance in the cabin, it's just an overpriced flight with a terrible hard product.

For example if you flew BA from HKG-LHR, the majority of the passengers are quite considerate, even the Chinese ones. This is in part because the cabin crew would intervene. In May I flew LHR-HKG on BA and a Chinese woman behind me was banging my seat for no reason, a member of the crew walked past and asked her to stop and told me to talk to him if there's any more trouble. This kind of service is missing on CX flights. Given the high fares and the crew's reluctance to maintain a level of discipline and order on board that's appropriate to the kind of premium airline that CX is marketing itself as, it's not hard to imagine why Hong Kong people are increasingly shying away from CX when they fly. Hence it's wise for CX to conduct a capacity review.

DouglasDC9 wrote:

I dont think most HK people will prefer to fly from CAN or indeed any mainland airport for the simple issue that we have no trust on them. However, ex-mainland travellers do not have this issue and I think we have seen a formiddable lost of connecting traffic from PRC over the years.

Speaking of fuel hedging issues, yes, this has also been calls for Chu to resign after him hedging way too much, but i think it should have limited signifiance on CX's pricing strategy. To charge your customer for your bad investments is one of the worst ideas a CEO can do to retain profit. Chu should turn to its investors for that, not the customers.

For Hong Kongers, flying from Shenzhen to domestic destinations or transit in Beijing for CA or Shanghai for MU's Europe/N.A network is quite common, consumer would make the choice if the price were right, no trust distruct issue as long as you are not treading on thin ice. I don't see longhaul from Shenzhen or even Guangzhou would be an exception, one cousin have recently flown direct from Guangzhou to Christchurch, the flight leaves at 1am, which means he need 1 fewer days of leave, took him 2 hours from Sha Tin from Guangzhou airport, I do not see what is the problem here, please set resentment and politics aside and see the big picture, mainland passengers are there to stay in Cathay aircraft, it is this indifference attitude that make that slow to react to changes, their PRD competitors are not going to be grounded for Cathay to be ready, CZ just ordered another 20 787-9 and more 77W is coming soon, more point to point flights from Shenzhen and Guangzhou. I think CX crew could do more to sort out misbehavior for all groups, Hongkongers weren't exactly angels either, but serious cases were dealt with by police. For Chu, publicly criticizing governments for two of its biggest markets are suicidal at best (Accuse Chinese Big 3 of receive subsidy, HK government by not allowing it introduce fuel surcharge), they weren't exactly Western governments you been used to.

zeke wrote:

Competition is already high in HKG with well over 100 carriers competing. That is the problem, so many carriers has resulted in overcapacity, i.e. More supply than demand.
Jetstar HKG would have been welcomed to startup if they followed the same rules as everyone else based there. They saw themselves above that, so their application was unsuccessful.
There is very few slots left in HKG, fast turn arounds are impossible, and it's a high cost place to operate from. Add that to the forced capacity reduction by the CAD next month for the ATC system changeover.

Welcome to 2016, in 1985 when Sir John Henry Bremridge, ex CX man introduce "one route one airline" policy that protects CX from much competition, with opening up of Pearl River Delta and opening up visit from Taiwan to China for the vets, not to mention CI's difficultly of obtaining traffic rights themselves, CX is booming, just like city of Hong Kong, at the right place at the right time.For lthe last 5 years, the makrket changed completely, with or without Jetstar HK, CI and BR are providing a good product, CI also passed the time when it is accident prone, mainland competitors are growing at a rapid pace and low cost are starting to make an impact, they choose to sit down and not doing much. The current government are on much less friendlier terms with CX, they would not stop HX grow, not like the 15 aircrafts limit introduce in 2011. You lose on fuel options and you cried like a moaning child, the public are quite fed up.

More tomorrow.

B-HOP wrote:

Welcome to 2016, in 1985 when Sir John Henry Bremridge, ex CX man introduce "one route one airline" policy that protects CX from much competition, with opening up of Pearl River Delta and opening up visit from Taiwan to China for the vets, not to mention CI's difficultly of obtaining traffic rights themselves, CX is booming, just like city of Hong Kong, at the right place at the right time.For lthe last 5 years, the makrket changed completely, with or without Jetstar HK, CI and BR are providing a good product, CI also passed the time when it is accident prone, mainland competitors are growing at a rapid pace and low cost are starting to make an impact, they choose to sit down and not doing much. The current government are on much less friendlier terms with CX, they would not stop HX grow, not like the 15 aircrafts limit introduce in 2011. You lose on fuel options and you cried like a moaning child, the public are quite fed up.

More tomorrow.

The problems the Taiwanese carries had with the mainland had nothing to do with either Macau or Hong Kong, it was a political issue between the mainland and Taiwan. The change in the past 5 years between the mainland and Taiwan is they now are allowed to have direct flights. That change had little long term impact on the HKG-Taiwan market, it did change MFM.

I welcome competition, and despite what people think CX or HX dont get "home team" advantage in HKG, nor do any of the local biz jet operators. Go to the mainland, Taiwan, Vietnam, Thailand, Philippines, Singapore etc the home team always get preference over foreign carriers. The issues HX had had nothing to do with CX, they had a number of incidents which resulted in a number of crew to lodge complaints to the CAD, that along with high turnover of key personnel required under the AOC resulted in CAD placing them on notice until they could get stability into their operation.

Im not going to comment on various management decisions, needless to say there is lots of discussion about a lot of them on the corporate social media platform (yammer).

One of the challenges which CX did not (and probably could not) foresee was the popping up of tons of hub-skipping long-haul flights deep into the smaller ports of China thanks to the 787. These were the bread and butter of CX's longhaul strategy, being the premium carrier of China when every option was at least one-stop. With the non-stop option opening up in many city pairs, CX is forced to start chasing for low-yielding connecting traffic. The ME3/ME4 card is not that significant in the Greater China market as ME3/ME4's penetration in China is very limited (and brand recognition in China is very weak). The mindless subsidies offered by Chinese local governments to direct longhaul flights from secondary/tertiary Chinese cities did hurt CX's bottom line seriously and CX's longhaul network has too many holes to fill.

Running A320/A321 to Shanghai/Taipei makes absolutely zero sense at all when slots in HKG are so scarce and these markets can easily fill a A330 with no significant loss in frequency (the flights are usually so delayed that it makes no difference to have a departure at 9am or 11 am anyway)

The whole network and fleet structure of CX requires a rethink.

If you think you are a premium carrier, please act like one. There had been too many horror stories of 777-300 flights to Japan sitting 300 in Y having only 35 blankets onboard , forcing the cabin crew turned the air-con up to 28-30 degrees causing passengers to passed out. IF you want your yields to be at LCC levels, this is definitely the way to go. But if you want to charge a $1000 premium over the other carriers, is it that costly to load a blanket for every passenger? (not to mention that your competition all have lie-flat business seats while your regional business class looks like premium economy). And that is before we start talking about food and cup noodles......

I'll try and reserve any more negative feedback on this subject until their review has been completed, I do think they can and will turn the ship around but it shouldn't have taken this long to realize something substantial needed to be done.

I don't think Ivan can turn it around. It's only become more sh*tty. The FAs and Pilots are the best parts about CX. The IFE mostly has my favorite shows, so that ain't bad. The new regional seats (the former long haul seats) suck in coach. And I'm expected to sleep on this crap on the 1am flights to SIN and NRT??? Not possible. The catering quality has dipped significantly too. Then the prices. Sure they launched affordable fares a few years ago, but you earn such little mileage credit there is no point to try to accumulate anymore for leisure travel.

This Christmas we are flying to LA, and chose AA. Can't justify the price of CX. For the price of two economy standard seats on CX, me, my wife, and the triplets, are able to fly on AA.

More tomorrow.[/quote]

The problems the Taiwanese carries had with the mainland had nothing to do with either Macau or Hong Kong, it was a political issue between the mainland and Taiwan. The change in the past 5 years between the mainland and Taiwan is they now are allowed to have direct flights. That change had little long term impact on the HKG-Taiwan market, it did change MFM.

[/quote]

I mainly talked about days upto mid 90's when CI has only very few flights to Europe, 6XAMS, 2XFRA,2XFCO all making a big detour plus no Australia/N.Z rights, the tide change as BR and got CDG, LHR, VIE etc, but we shall see. CI and BR now operates many point to point flights to China, cities not even served from Hong Kong, few days a week. For now, I will see how the review will turn out, but I worry about once it is implemented and with the contracts finish then recession, so we would want to hear their plan.

Kev

More tomorrow.[/quote]

The problems the Taiwanese carries had with the mainland had nothing to do with either Macau or Hong Kong, it was a political issue between the mainland and Taiwan. The change in the past 5 years between the mainland and Taiwan is they now are allowed to have direct flights. That change had little long term impact on the HKG-Taiwan market, it did change MFM.

[/quote]

I mainly talked about days upto mid 90's when CI has only very few flights to Europe, 6XAMS, 2XFRA,2XFCO all making a big detour plus no Australia/N.Z rights, the tide change as BR and got CDG, LHR, VIE etc, but we shall see. CI and BR now operates many point to point flights to China, cities not even served from Hong Kong, few days a week. For now, I will see how the review will turn out, but I worry about once it is implemented and with the contracts finish then recession, so we would want to hear their plan.

Kev

CX needs to deal with
(1) growing threats from growing Chinese carriers which are flying more intercontinental routes,
(2) its own high cost base in comparison to Chinese airlines, HX/UO and even the re-energized American airlines,
(3) slowing economy of China which cuts demand,
(4) improved business class product offering from American and European airlines which eat into its primary competitive advantage in the premium sector.

And honestly I think the strategy is not difficult to derive to handle this. First, it needs a real regional airline (just like American Eagle vs. American Airlines) which has substantially lower cost. That carrier can handle the low yield Asian routes and low density regional routes. And that carrier is called Cathay Dragon. KA may not have a sufficiently lower cost now, so that needs to be looked into. KA should order A320/321NEO to replace its aging A320/321s. Most A333 should be transferred from CX to KA. Lower yield CX destinations such as Riyadh, Bahrain, Dubai, Cebu, Surabaya, Jakarta, Sapporo, Ho Chi Minh, Maldives, Nagoya and even Bangkok, Taipei and Manila should be transferred to the lower cost KA. Bangalore as a business route should be transferred back to CX. KA should get some A359 to open long haul tourist routes too such as Christchurch. KA's service would be simple, just Economy and Regional Business Class. I think the current fleet mix have too many A333 and not enough A320 in KA's fleet. This reduce flexibility. With competition flying A320 even on HKG-PEK and HKG-PVG, KA should start getting rid of the older A333 and bring more A321 into the fleet for routes like PEK, PVG and TPE.

Meanwhile, it is understandable for CX to make 777 10-abreast in Economy so it can lower its per-seat cost. But at the same time it needs to improve its offering in Premium Econ and Business Class. PE service and product is pathetic and half-hearted. Business Class service has deteriorated. I have flown HKG-YYZ on business class every year since 2008 and what I experience now cannot compare to what I saw back then. If CX wants to maintain its high fare on PE and Business Class, they need to focus on getting those back up to standard (and spend some $ there). They need to eliminate regional business class. That's confusing for passengers. Sometimes you get on a NRT flight and get long haul business, and sometimes you get regional business. Regional Business Class is strictly for KA and long haul business seats should be fitted onto all CX planes, even if they are used on Asian routes. But since all low yield and tourist routes are transferred to KA, CX will probably just have NRT/HND, ICN, KIX and SIN left in its own network in East Asia. I don't think any other Asian routes have sufficient demand for real (i.e. long haul flat bed type) business class service. For Econ, it can then join the race to the bottom for price once it gets 10-abreast into their 777s, just to fill the cabin and make sure the flights break even. If they offer the same price as their competitors on Econ, I don't doubt they can fill the planes pretty easily. The fleet should be standardized to 77W, 333 (newer ones), 359 and 35J. The four key Aust destinations should be served flexibly with 359 and 77W to occupy all slots allowed in the bi-lateral agreement. 77W is to be used on key North American and European routes (LAX, SFO, JFK, BOS, ORD, YVR, YYZ, LHR, FRA, CDG), and then 359 (DUS, MAD, MAN, LGW, AKL, ADE, CNS, FCO) and 35J on routes that need less capacity (ZRH, MXP, AMS, EWR), at the same time opening new routes with 359/35J (such as Seattle or even the post-BREXIT Dublin, etc.).

I don't think this is difficult to do. Fleet-wise, it involves replacing A320/321 with A320/321NEO, dropping some of the older A333 and replace with A321NEO, and dropping 772 and 773. It can even expand at the same time.

At the same time, it should really consider opening a LCC, focus on opening thin tourist destinations such as secondary Japanese cities (e.g. Hiroshima, Sendai) and third line Chinese cities (e.g. Guiyang, Nanchang) where it can't serve competitively now even with KA. CS300 would be a good plane for consideration for this.

raylee67 wrote:

CX needs to deal with
(1) growing threats from growing Chinese carriers which are flying more intercontinental routes,
(2) its own high cost base in comparison to Chinese airlines, HX/UO and even the re-energized American airlines,
(3) slowing economy of China which cuts demand,
(4) improved business class product offering from American and European airlines which eat into its primary competitive advantage in the premium sector.

And honestly I think the strategy is not difficult to derive to handle this. First, it needs a real regional airline (just like American Eagle vs. American Airlines) which has substantially lower cost. That carrier can handle the low yield Asian routes and low density regional routes. And that carrier is called Cathay Dragon. KA may not have a sufficiently lower cost now, so that needs to be looked into. KA should order A320/321NEO to replace its aging A320/321s. Most A333 should be transferred from CX to KA. Lower yield CX destinations such as Riyadh, Bahrain, Dubai, Cebu, Surabaya, Jakarta, Sapporo, Ho Chi Minh, Maldives, Nagoya and even Bangkok, Taipei and Manila should be transferred to the lower cost KA. Bangalore as a business route should be transferred back to CX. KA should get some A359 to open long haul tourist routes too such as Christchurch. KA's service would be simple, just Economy and Regional Business Class. I think the current fleet mix have too many A333 and not enough A320 in KA's fleet. This reduce flexibility. With competition flying A320 even on HKG-PEK and HKG-PVG, KA should start getting rid of the older A333 and bring more A321 into the fleet for routes like PEK, PVG and TPE.

Meanwhile, it is understandable for CX to make 777 10-abreast in Economy so it can lower its per-seat cost. But at the same time it needs to improve its offering in Premium Econ and Business Class. PE service and product is pathetic and half-hearted. Business Class service has deteriorated. I have flown HKG-YYZ on business class every year since 2008 and what I experience now cannot compare to what I saw back then. If CX wants to maintain its high fare on PE and Business Class, they need to focus on getting those back up to standard (and spend some $ there). They need to eliminate regional business class. That's confusing for passengers. Sometimes you get on a NRT flight and get long haul business, and sometimes you get regional business. Regional Business Class is strictly for KA and long haul business seats should be fitted onto all CX planes, even if they are used on Asian routes. But since all low yield and tourist routes are transferred to KA, CX will probably just have NRT/HND, ICN, KIX and SIN left in its own network in East Asia. I don't think any other Asian routes have sufficient demand for real (i.e. long haul flat bed type) business class service. For Econ, it can then join the race to the bottom for price once it gets 10-abreast into their 777s, just to fill the cabin and make sure the flights break even. If they offer the same price as their competitors on Econ, I don't doubt they can fill the planes pretty easily. The fleet should be standardized to 77W, 333 (newer ones), 359 and 35J. The four key Aust destinations should be served flexibly with 359 and 77W to occupy all slots allowed in the bi-lateral agreement. 77W is to be used on key North American and European routes (LAX, SFO, JFK, BOS, ORD, YVR, YYZ, LHR, FRA, CDG), and then 359 (DUS, MAD, MAN, LGW, AKL, ADE, CNS, FCO) and 35J on routes that need less capacity (ZRH, MXP, AMS, EWR), at the same time opening new routes with 359/35J (such as Seattle or even the post-BREXIT Dublin, etc.).

I don't think this is difficult to do. Fleet-wise, it involves replacing A320/321 with A320/321NEO, dropping some of the older A333 and replace with A321NEO, and dropping 772 and 773. It can even expand at the same time.

At the same time, it should really consider opening a LCC, focus on opening thin tourist destinations such as secondary Japanese cities (e.g. Hiroshima, Sendai) and third line Chinese cities (e.g. Guiyang, Nanchang) where it can't serve competitively now even with KA. CS300 would be a good plane for consideration for this.

I don't know why you said cities such as Jakarta are lower yields. SQ has multiple daily to CGK with F on certain flights. CX better not transfer CGK route to KA as they're quite popular with Indonesian travellers. They have SQ, GA and others to compete with which probably has better onboard product than CX.

Flyinggeek33 wrote:

raylee67 wrote:

CX needs to deal with
(1) growing threats from growing Chinese carriers which are flying more intercontinental routes,
(2) its own high cost base in comparison to Chinese airlines, HX/UO and even the re-energized American airlines,
(3) slowing economy of China which cuts demand,
(4) improved business class product offering from American and European airlines which eat into its primary competitive advantage in the premium sector.

And honestly I think the strategy is not difficult to derive to handle this. First, it needs a real regional airline (just like American Eagle vs. American Airlines) which has substantially lower cost. That carrier can handle the low yield Asian routes and low density regional routes. And that carrier is called Cathay Dragon. KA may not have a sufficiently lower cost now, so that needs to be looked into. KA should order A320/321NEO to replace its aging A320/321s. Most A333 should be transferred from CX to KA. Lower yield CX destinations such as Riyadh, Bahrain, Dubai, Cebu, Surabaya, Jakarta, Sapporo, Ho Chi Minh, Maldives, Nagoya and even Bangkok, Taipei and Manila should be transferred to the lower cost KA. Bangalore as a business route should be transferred back to CX. KA should get some A359 to open long haul tourist routes too such as Christchurch. KA's service would be simple, just Economy and Regional Business Class. I think the current fleet mix have too many A333 and not enough A320 in KA's fleet. This reduce flexibility. With competition flying A320 even on HKG-PEK and HKG-PVG, KA should start getting rid of the older A333 and bring more A321 into the fleet for routes like PEK, PVG and TPE.

Meanwhile, it is understandable for CX to make 777 10-abreast in Economy so it can lower its per-seat cost. But at the same time it needs to improve its offering in Premium Econ and Business Class. PE service and product is pathetic and half-hearted. Business Class service has deteriorated. I have flown HKG-YYZ on business class every year since 2008 and what I experience now cannot compare to what I saw back then. If CX wants to maintain its high fare on PE and Business Class, they need to focus on getting those back up to standard (and spend some $ there). They need to eliminate regional business class. That's confusing for passengers. Sometimes you get on a NRT flight and get long haul business, and sometimes you get regional business. Regional Business Class is strictly for KA and long haul business seats should be fitted onto all CX planes, even if they are used on Asian routes. But since all low yield and tourist routes are transferred to KA, CX will probably just have NRT/HND, ICN, KIX and SIN left in its own network in East Asia. I don't think any other Asian routes have sufficient demand for real (i.e. long haul flat bed type) business class service. For Econ, it can then join the race to the bottom for price once it gets 10-abreast into their 777s, just to fill the cabin and make sure the flights break even. If they offer the same price as their competitors on Econ, I don't doubt they can fill the planes pretty easily. The fleet should be standardized to 77W, 333 (newer ones), 359 and 35J. The four key Aust destinations should be served flexibly with 359 and 77W to occupy all slots allowed in the bi-lateral agreement. 77W is to be used on key North American and European routes (LAX, SFO, JFK, BOS, ORD, YVR, YYZ, LHR, FRA, CDG), and then 359 (DUS, MAD, MAN, LGW, AKL, ADE, CNS, FCO) and 35J on routes that need less capacity (ZRH, MXP, AMS, EWR), at the same time opening new routes with 359/35J (such as Seattle or even the post-BREXIT Dublin, etc.).

I don't think this is difficult to do. Fleet-wise, it involves replacing A320/321 with A320/321NEO, dropping some of the older A333 and replace with A321NEO, and dropping 772 and 773. It can even expand at the same time.

At the same time, it should really consider opening a LCC, focus on opening thin tourist destinations such as secondary Japanese cities (e.g. Hiroshima, Sendai) and third line Chinese cities (e.g. Guiyang, Nanchang) where it can't serve competitively now even with KA. CS300 would be a good plane for consideration for this.

I don't know why you said cities such as Jakarta are lower yields. SQ has multiple daily to CGK with F on certain flights. CX better not transfer CGK route to KA as they're quite popular with Indonesian travellers. They have SQ, GA and others to compete with which probably has better onboard product than CX.

SQ is held with the highest prestige amongst rich Indonesians, it is something CX cannot achieve with the same group of people due to geographical and cultural reasons, and not to mention the service standards that SQ provides vs CX. Furthermore, Singapore typically acts as a second/weekend home for this group of people.

For all of the competitive problems, the fuel hedge losses are by far the biggest issue keeping CX from being a profitable, or even sustainable, business. Management has essentially turned Cathay Pacific into a commodities hedge fund, placing billion dollar bets on the future price of jet fuel. Running an airline has almost become a sideline for CX, as financial losses from the hedge fund side of the business have essentially negated any operational profit, and almost certainly will for some time to come. If memory serves, CX shares were trading in HK at the time of the turnover for around HK$10. 25 years later, they are more or less the same, which almost every other major company on the HSE (including Swires) has gone up many hundreds of percents (if memory serves Swire was trading around HK$15 in 1990, and now trades at about HK$85, plus the Swire property spinoff which is worth another $HK20 or so). CX has been an absolute disaster for shareholders.

Had two great flights on CX in September to Japan and back.

Fly CI / BR to save a few hundred and get a hot meal... no way. Just look at BR and their ridiculous attitude towards typhoons. Safety for me thanks.

Fly SQ ... haha, no way. I value my life thanks.

Fly a US carrier to the states... no thanks.

I do hope the CEO at CX is removed ... but sadly even if he is the replacement will be from the same place with similar thinking. This is where they need to change, get someone from outside.. not someone that's been with swire/CX for years.

itisi wrote:

Fly SQ ... haha, no way. I value my life thanks.

What does this even mean? You think you'd die on a SQ flight?