HONG KONG -- A Cathay Pacific Airways Boeing 747 aircraft flying over the roofs of high-rises in the crowded, aging district of Kowloon City was a typical picture-postcard image of colonial Hong Kong. Last October, dozens of nostalgic fans flocked to see the last flyover of the double-decker, dubbed the "Queen of the Skies," as the Hong Kong-based airline phased out older planes for lighter, more economic models.
Some commentators sentimentally described the moment as the "end of an era" -- when the jumbo jet propelled international travel, transforming Hong Kong from a regional seaport into a global hub of finance and trade. It was also a time when the homegrown airline wowed international rivals and impressed shareholders with its growth prospects and distinguished earnings records.
"It only made losses in two out of 70 years of operations," wrote Mohshin Aziz, an aviation analyst at Malaysia's Maybank Kim Eng, in a report on Jan. 17. "No other airline has a better track record."
Cathay Pacific has indeed been reigning over the skies of Hong Kong since 1946. The airline is one of the core businesses of Hong Kong-listed parent Swire Pacific, which owns a 45% stake. Swire Pacific's regional activities include property, beverages, marine services, retail and trading. It is one of the largest Coca-Cola bottlers in the world.
Cathay's ultimate parent is John Swire & Sons, a London-based family conglomerate with over 200 years of history and more than 130,000 staff worldwide. It owns 55% of Swire Pacific and in 2014, appointed John Slosar, an American, as that company's first non-British chairman. He also chairs Cathay Pacific.
Cathay's winning streak is likely to be broken. Some analysts expect the airline to post its third full-year loss in March-- and its first full-year loss since 2008. A major reason for its problems: Cathay's business model is looking outdated, with a full rebound in demand for its premium service perhaps impossible given shifts in corporate and individual travel spending. At the same time, fuel costs are rising after several years of weakness and budget airlines and state-backed airlines from China and the Gulf are challenging Cathay on far more routes than before.
On Jan. 18, Cathay announced job cuts and hinted at a leadership reshuffle in what it said would be its largest restructuring exercise in two decades. "2017 is going to be a year of significant change" in an "increasingly competitive aviation landscape," the airline said in a statement, after a review meeting by its leadership team.
Cathay said the overhaul would create new positions but "some jobs will no longer be needed." Citing the need for a "leaner, simpler structure," it said key changes would "start at the top" and take effect by the middle of the year. The airline will also tap into data analytics and digital capabilities for consumer insight and reducing wastage.
An employer of some 27,000 workers, Cathay gave scant details on how many positions would be cut. But it appeared that front-line workers would be less affected due to the recent addition of new services to Barcelona and Tel Aviv, extra flights to Toronto and new lounges in Hong Kong and Singapore. "Most losses would be in the back office," said Dora Lai Yuk-sim, head of Cathay's flight attendants union, who attended the leadership meeting.
The market responded negatively to the strategic plan, with some investors calling the measures too late, too little. Cathay's share price lost 4% the next day, nearly erasing the gains since news of its impending restructuring surfaced on Jan. 16. The slump brought its valuation to the lowest levels in eight years -- since the global financial crisis -- making it one of the worst-performing airline stocks across the region.
Original article can be found here: http://asia.nikkei.com
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