TAIWAN: EVA Air To Feed North America Network

Regional Asia growth does not receive the attention that intercontinental long haul growth does, but regional expansion provides the foundation connections for an expanded range of long haul flights.

In Jul-2018 Eva Air inaugurated service to Chiang Mai, its 12th Southeast Asia destination. EVA Air disclosed that it is planning for its 13th and 14th destinations – Penang and Yangon. EVA Air may also fly to India.

Taiwan's Go South policy encourages the economy, transportation and tourism included to do more business in Southeast Asia in order to differentiate away from Northeast Asia and reduce reliance on mainland China.

The new destinations will also help fuel EVA's North America network, which accounts for approximately half of the airline's system-wide flying. Half of EVA's North American passengers connect beyond Taipei, mostly to Southeast Asia.

New destinations, especially those that few other competitors serve, add uniqueness. Rapid trans Pacific growth in recent years has necessitated a greater number of unique city pair combinations.

Cathay Pacific's regional arm Cathay Dragon is adding service to two Southeast Asian destinations not yet served by another Northeast Asian airline.

EVA Air is considering service to Penang and Yangon.

EVA Air studying India, dependent on aeropolitical instruments.

Taiwan is encouraging tourism and visitor growth in Southeast Asia in order to differentiate away from Northeast Asia, especially from mainland China.

Southeast Asian destination growth important for EVA Air to feed its North American network.

Taiwan is pursuing Southeast Asia tourism growth.

The new destinations, if launched, would further Taiwan's aim to grow tourism from Southeast Asia and reduce dependence on Northeast Asia.

Approximately two thirds of Taiwan's visitor arrivals are from Northeast Asia. This includes mainland China, with a 25% share of all arrivals, and Japan at 18%.

Taiwan's quest for Southeast Asia growth is partially out of opportunity, but also as a hedge should the uncertain mainland China market dip – which has occurred over the years, with significant impact on Taiwan tourism.

Taiwan visitor arrivals by market: 2017

Taiwan receives a larger share of visitors from the US before any Southeast Asia market. Taiwan's largest Southeast Asian source markets are Malaysia (5%), Singapore (4%), Philippines (3%) and Indonesia (2%).

Singapore has only a 1ppt difference from Malaysia, despite Singapore's much smaller size.

This is partially the result of LCC competition between Singapore and Taiwan with Scoot and Jetstar as well as ample full service airline capacity, as EVA Air and China Airlines use widebodies to feed their North American networks.

EVA Air has not served Penang. Penang would be a new passenger destination for EVA Air. The airline has freighter services to Penang, while China Airlines has freighter services as well as a daily 737-800 passenger service.

China Southern has twice daily Airbus narrowbody flights to Guangzhou, which connect with its North American network (albeit limited).

Penang International Airport international seat capacity by airline: week commencing 02-Jul-2018

The main competition is from Cathay Dragon, which has twice daily flights on narrowbody and widebody aircraft. Cathay Dragon's sister airline Cathay Pacific has a larger North America network but also links Penang to the rest of Northeast Asia.

No other Northeast Asian airline serves Penang with passenger service (Korean Air has freighter service). Cathay Dragon is the fourth largest international operator at Penang. 17% of Penang's international capacity is to Northeast Asia.

Penang International Airport international seat capacity by region: week commencing 02-Jul-2018

EVA Air briefly served Yangon. Yangon represents a service resumption for EVA Air, if launched. EVA Air was one of a number of airlines to launch service to Yangon after political change and an impending opening-up for business.

EVA Air entered Yangon with other Northeast Asian airlines, including ANA and what is today Cathay Dragon, both of which are able to link Yangon with their large North American networks.

EVA Air served Yangon for eight months from Oct-2012 to May-2013. Taiwan was initially a smaller business partner for Myanmar and EVA Air operated at lower frequency than Cathay Dragon. ANA also had low frequency, but operated a premium aircraft while Japan had larger business ties.

Yangon has far more Northeast Asian competition than Penang. Also, Gulf airlines are more present in Yangon. One-stop flights from Yangon to North America can be longer than transiting through a Northeast Asian hub, but fares can be low.

Gulf airlines tend to be more present in the Southeast Asia-East Coast North America market, which represents a smaller detour compared to Northeast Asia-West Coast North America.

Unlike service on Penang, the North American heavyweights ANA and Korean Air serve Yangon. Two mainland Chinese airlines – Air China and China Southern – link Yangon with their main hubs. China Eastern serves Yangon from Kunming and not Shanghai, the hub for its North American network.

Northeast Asia represents 19% of Yangon's international seats, which is a share not much higher than the 17% that Northeast Asia represents at Penang.

Yangon Mingaladon International Airport international seat capacity by region: week commencing 02-Jul-2018

India's high volumes but low yields are challenging. EVA Air has also said that it is considering service to India but would have to assess aeropolitical instruments.

Taiwan and India amended their air service agreement in 2016, with reports stating that each side was permitted 14 weekly passenger flights. The only passenger services are two weekly flights from China Airlines on the Taipei-Delhi route. This low frequency does not suggest a large unserved market.

Northeast Asian airlines have a number of challenges growing in India. Local demand is typically very small due to limited business, tourism and VFR markets – unlike in Southeast Asia.

Flights from Northeast Asian hubs to India can between five and nine hours – a long time to sustain a flight on mostly connecting traffic with little O&D traffic.

Gulf airlines do this across their network, but their market is connecting traffic, whereas Northeast Asian airlines are structured more towards a balance between O&D and connecting traffic.

The high cost of Northeast Asia-India flights is especially limiting to ANA and JAL, which are historically Northeast Asia-North America connecting airlines but have the highest cost bases in Asia.

The distance between India and Northeast Asian hubs requires a widebody aircraft to be used in most instances. Next generation narrowbodies (A321LR, 737 MAX) will only open so many markets in Northeast Asia-India.

This limits the opportunity to link thinner markets and offer high frequency, or trade three weekly widebody flights with a daily narrowbody traffic rights permitting; some are based on frequency and others on seats/units of capacity.

Southeast Asia growth fuels North America expansion. New Asian destinations will help EVA's North America network. North America accounts for 48% of EVA's ASKs, and more when the regional Asia capacity that exists largely to feed North American flying is taken into account.

An expanded Asia network can help EVA Air grow in North America while also improving the existing network.

As one-stop trans Pacific competition increases, EVA Air needs more differentiation.

EVA Air ASKs by region: Week commencing 02-Jul-2018

Should EVA Air add Penang and Yangon, it will have 14 destinations in Southeast Asia from its main hub.

In 2017, with 11 markets, EVA served the same number of Southeast Asian destinations as China Eastern did from its hub. This considers only destinations served, and not frequency, capacity or connectivity.

EVA will have much more differentiation than ANA, and come up to Korean Air. Penang and Yangon, besides being new destinations, bring more uniqueness to EVA's network.

In comparison, all of ANA's Southeast Asian destinations are served by three or more airlines in this benchmark study of leading trans Pacific operators with Southeast Asian connections.

EVA Air's additions of Penang and Yangon also reduce the dominance of competitors. Exceptions are Cathay Pacific and Cathay Dragon, which have added service to two destinations – Davao and Medan – not served by any other Northeast Asian airline.

Potential for the connectivity upside is still largely unrecognised. Yet for all the changes, there is still far more growth to be unlocked with improvements in narrowbody aircraft technology, slots, traffic rights and government transparency.

The inevitable focus on China market growth tends to disguise the great potential for growth of southeast and south Asian transfer markets over north Asia.

The large distances across the Pacific make direct services operationally difficult and often uneconomical, but as economies grow and trade links with north America expand, traffic flowing along the linkages made possible by connecting services will only increase.


Tourism Observer

AIRLINES: Disparity Over Few Women In Leadership Positions

There have long been fewer female leaders than male in Hong Kong’s aviation sector, but come this summer the disparity will be made starker when Cathay Pacific Airways’ sole female leader, flight operations director Anna Thompson, leaves the city’s flagship carrier.

Thompson’s departure to the property unit of Cathay Pacific’s biggest shareholder, Swire Pacific, will leave no women in leadership roles at any of the city’s four passenger airlines.

Asked about the discrepancy, Cathay Pacific CEO Rupert Hogg acknowledged: We are an all-male line-up and we hope that doesn’t continue forever.

He pledged to address the gender imbalance, saying inclusion is really important, particularly from minority groups to feel they have a place in Cathay Pacific.

Thompson could not be reached for comment. The other three airlines are Cathay Pacific’s subsidiary, Cathay Dragon, as well as Hong Kong Airlines and Hong Kong Express. The latter two declined to comment.

More than 60 per cent of employees at Cathay Pacific and Cathay Dragon are women.

The sector’s gender imbalance and how businesses can make progress on it featured in a discussion on Monday at the International Air Transport Association (IATA) summit, an annual global gathering of airlines and industry executives, held this year in Sydney.

Aviation consultant Mylene Scholnick said the scales tip heavily towards male candidates across the board when middle-to-senior management roles in the industry are being filled.

Scholnick cited statistics to illustrate the scale of the challenge, noting women make up less than 5 per cent of airline pilots and airline CEOs.

And while half of the intake into the aviation industry last year was female, they were mainly hired for support functions or roles such as flight attendants.

I believe mentorship, training on unconscious biases, and business resource groups, are all key to seeing more women leaders, the consultant said.

At the summit, an all-male panel of airline executives, including Hogg and bosses from Air Canada, Air New Zealand, Emirates and KLM, agreed more action was needed to even out the gender disparity.

Cathay Pacific’s senior management comprises 11 directors.

KLM’s Pieter Elbers said the sector needed to look more deeply into what was driving the imbalance and what should be done in various parts of women’s careers to spark change.

That is not necessarily a discussion with the five of us at the summit that is a discussion with the women involved, he said. What’s needed and how can we help to make the progress?

But at the event’s closing press conference on Tuesday, the incoming IATA chairman, Qatar Airways CEO Akbar Al Baker, voiced a different view, saying nothing needed to be done to promote women to his airline’s senior ranks.

Asked about the top job, Al Baker said, Of course it has to be led by a man because it is a very challenging position. This statement later caused furry from ladies.

His statement elicited groans and boos.

On IATA’s 31-member governing board, represented by airlines, only one woman holds a seat.

And in the past year, two female CEOs have left the airline industry for top jobs elsewhere. Former EasyJet CEO Carolyn McCall switched to the media sector, while ex-Jetstar boss Jayne Hrdlicka left for the agriculture sector.

Thai Airways announced its female acting president, Usanee Sangsingkeo, would be replaced permanently by an outsider, a man with no aviation experience.

On Monday the SkyTeam airline alliance announced Kristin Colville as its new CEO, a month after the board of United Continental airlines agreed to have its first female chair, with JetBlue promoting a woman to its president in charge of day-to-day operations.

In the region, China’s Dr Fang Liu chairs the International Civil Aviation Organisation, a UN agency managing the global rules in aviation.

Flourishing budget carrier Vietjet, whose model is as much to sell seats as well as the appeal of its female cabin crew, is led by CEO Nguyen Thi Phuong Thao, and commercial chief Nguyen Thi Thuy Binh.

At AirAsia, Aireen Omar has risen to the rank of deputy group CEO.

Scholnick, who co-founded Hong Kong business jet operator Metrojet, was optimistic about the imbalance being corrected eventually.

Gender disparity in aviation will persist over the next several years, she said. However, I believe that there’s opportunity now for young women in aviation to gain experience and reach senior levels of leading organisations.

Women's Foundation CEO Fiona Nott says women are generally under-represented in Hong Kong across leadership positions in business.

In Cathay Pacific’s case, the female general managers who are just one level below the airline’s 11 directors appear poised to move up to serve as its next batch of leaders.

Fiona Nott, CEO of the non-profit Women’s Foundation in Hong Kong, said women were generally under-represented in the city across leadership positions in business, with just 29 per cent of management positions held by women.

Surprisingly for a global hub, women’s position in Hong Kong lags behind other developed markets, Nott said.

She called for targets and objectives to be rolled out for gender diversity over and above those set for business outcomes.

Numerous studies show that greater gender diversity leads to better business outcomes. Having more women in leadership is good for business and good for Hong Kong.

We all benefit when our businesses reflect the society in which they operate.


Tourism Observer

SINGAPORE: Cathay Pacific And Cathay Dragon Flew 2,980,654 Passengers April 2018

Cathay Pacific's and Cathay Dragon's traffic figures for April 2018 show a slight drop in the number of passengers carried and an increase in cargo and mail uplifted compared to the same month in 2017.

Cathay Pacific and Cathay Dragon carried a total of 2,980,654 passengers in April 2018 – a drop of 0.8% compared to April 2017.

The passenger load factor decreased 1.9 percentage points to 84.5%, while capacity, measured in available seat kilometres (ASKs), increased by 0.9%.

In the first four months of 2018, the number of passenger carried grew by 2.0% while capacity increased by 3.1%.

The two airlines carried 174,489 tonnes of cargo and mail last month, an increase of 6.7% compared to the same month last year.

The cargo and mail load factor rose by 2.3 percentage points to 68.0%.

Capacity, measured in available cargo/mail tonne kilometres, was up by 4.2% while cargo and mail revenue tonne kilometres (RTKs) increased by 7.9%.

In the first four months of 2018, the tonnage rose by 7.8% against a 4.7% increase in capacity and a 7.7% increase in RTKs.

Cathay Pacific Director Commercial and Cargo Ronald Lam said, The earlier start to the Easter holidays this year resulted in a reduction in backend demand during April when compared to last year.

However, we enjoyed a high front end load factor during the month and yield improvements helped offset the loss in traffic volume.

Our routes to Europe, the United Kingdom and the United States performed well, as did those to mainland China and Taiwan.

Meanwhile, the positive momentum in our cargo business continued into April. Tonnage grew ahead of capacity while yield strengthened.

After a slight slow-down in our Hong Kong and mainland China markets early in the month, volumes started to pick up again during the month and network flow from the Americas, Europe, India, Japan and Southeast Asia continued to show strength.


Tourism Observer

SINGAPORE: Silkair To Merge With Singapore Airlines After $100 Million Major Cabin Upgrade

Singapore Airlines’ (SIA) regional wing, SilkAir, is to undergo a significant investment programme to upgrade its
The programme will comprise investment of more than $100 million to upgrade the wholly owned subsidiary’s cabins with new lie-flat seats in Business Class, and the installation of seat-back in-flight entertainment systems in both Business Class and Economy Class.

This will ensure closer product and service consistency across the SIA Group’s full-service network.

Aircraft cabin upgrades are expected to start in 2020 due to lead times required by seat suppliers, including to complete certification processes.

The merger will take place only after a sufficient number of aircraft have been fitted with the new cabin products.

Specific details will be announced progressively as the programme develops and timelines are finalised.

Consistent with ongoing efforts to optimise the SIA Group’s network, there will also be transfers of routes and aircraft between the different airlines in the portfolio.

Singapore Airlines is one year into our three-year Transformation Programme and today’s announcement is a significant development to provide more growth opportunities and prepare the Group for an even stronger future, said SIA CEO, Mr Goh Choon Phong.

Importantly, it will be positive for our customers. It is another example of the major investment we are making to ensure that our products and services continue to lead the industry across short-, medium- and long-haul routes.

SilkAir is the regional wing of Singapore Airlines, operating a fleet of 11 Airbus A320-family aircraft and 22 Boeing 737-800 and 737 MAX 8 aircraft.

It is currently transitioning to an all-737 fleet, and serves 49 destinations in 16 countries.

Aircraft cabin upgrades are expected to start in 2020 due to lead times required by seat suppliers, including to complete certification processes, according to Singapore Airlines.

The merger will take place only after a sufficient number of aircraft have been fitted with the new cabin products, and specific details will be announced progressively as the programme develops and timelines are finalised, it added.

There will also be transfers of routes and aircraft between the different airlines in the portfolio, which Singapore Airlines said was consistent with ongoing efforts to optimize the SIA Group’s network".

Singapore Airlines CEO Goh Choon Phong called the announcement a significant development to provide more growth opportunities and prepare the Group for an even stronger future.

The changes will be positive for customers, Mr Goh, adding that it was a major investment to ensure that Singapore Airlines' products and services continue to lead the industry across short, medium and long-haul routes.

Speaking at the carrier’s results briefing, Mr Goh also said the merger between Singapore Airlines and SilkAir is not a consolidation exercise.

He said the SilkAir brand is not as well known in areas like Europe compared to here in Asia and as such, the merger will allow SIA to better position the brand in those regions.

SilkAir has always played a critical role for SIA as a regional feeder. Even with the merger, it won’t detract from that role.

However, we believe that with the merger and one single brand, it will make it much easier for customers to understand that both narrow body and wide body planes belong to the same organisation and brand.

That is not to say there is no place for SilkAir, Mr Goh told media and analysts at the briefing.

In fact there is still a lot of demand for SilkAir type of service specifically on the bigger destinations, bigger cities in Southeast Asia.

He also said that no employee will be made redundant.

Our view is that with the integration and the growth opportunity, there should be more opportunities for our staff to go into different roles, he said.

However, where there are overlaps, we will look at how to redeploy staff and also how to provide re-training. This is not something new for us, we have gone through mergers between Tiger and Scoot.

Mr Goh also clarified that when the merger is successfully completed, SilkAir will no longer exist as an airline or brand.

SilkAir operates a fleet of 11 Airbus A320-family aircraft, 22 Boeing 737-800 and 737 MAX 8 aircraft.

It is currently transitioning to an all-737 fleet, and serves 49 destinations in 16 countries, according to Singapore Airlines.

The move comes as Singapore Airlines undertakes a three-year transformation programme designed to cut costs and boost revenue amid competition from Chinese and Middle Eastern rivals and low-cost carriers.

Singapore Airlines on Thursday topped market expectations by reporting a 150 per cent rise in full-year net profit to the highest level since 2011.

This is as passenger and cargo revenue rose and the transformation programme produced early results.

But SilkAir was a weak spot, reporting a full-year operating profit of S$43 million for the 12 months ended March 31, down 57 per cent from a year earlier.

The cabin upgrade will close a gap with rival Cathay Pacific Airways, whose regional arm, Cathay Dragon, operates jets with cabins more similar to its parent than the wider gulf between Singapore Airlines and SilkAir products.

Upgrading the narrowbody product and folding SilkAir into Singapore Airlines is sensible and was inevitable, CAPA Centre for Aviation Chief Analyst Brendan Sobie said.

The product gap between SilkAir and Singapore Airlines has become too wide.

As part of its transformation programme, Singapore Airlines had already handed some of SilkAir's routes to budget carrier Scoot and merged part of SilkAir's finance team with its parent.


Tourism Observer

HONG KONG: Fuel Surcharges Cause Increase In Flight Tickets Out Of Hong Kong

Travellers on long-haul flights out of Hong Kong will have to pay up to HK$600 (US$76) more if oil prices keep rising and the government allows airlines to recoup fuel costs.

At least four industry sources said they were confident the Civil Aviation Department would deregulate the setting of fuel surcharges in the next few months, giving airlines some wiggle room when oil prices rise.

The department launched a year-long review of its policy on fuel surcharges last March but when approached last week, would only say its new policy was being finalised.

Long-haul flights out of Hong Kong will be the most affected if regulation on fuel surcharges is lifted.

Upon completion of the study, the Civil Aviation Department will consult stakeholders on the proposed way forward with a view to formulating the relevant policy.

Airlines could previously charge fuel fees on passenger and cargo flights from Hong Kong but in January 2016, the aviation regulator scrapped this as oil prices fell to US$35 a barrel from a peak of US$110.

The price of oil as of last week was US$74 a barrel and the last time oil prices were at that level in November 2014.

Airlines with flights originating from Hong Kong were allowed to charge an extra HK$623 for a long-haul flight and HK$143 for regional ones.

All four airlines based in Hong Kong, including Cathay Pacific Airways, had been lobbying over the past year for the surcharge to be reinstated.

A spokeswoman for Cathay Pacific and subsidiary Cathay Dragon would not comment other than stating the airline was keenly awaiting the outcome of the review.

Budget carrier Hong Kong Express only said it advocates pricing transparency.

Competition would influence airlines, particularly Cathay Pacific, to pass on half of the fuel price increase to passengers flying out of Hong Kong.

We expect all the carriers to successfully implement the fuel surcharges, Png said, adding that airlines might grant more discounts on underlying airfares to retain their market share.

About 87 airlines fly in and out of Hong Kong.

Cathay currently adds a fuel surcharge for flights arriving in the city as this is not regulated.

Passengers pay HK$116 for regional flights and HK$516 for long-haul flights.

The reintroduction of a fuel surcharge for outbound flights would harm the city’s competitiveness as a travel hub.

The fuel surcharge mechanism just has to be more transparent so passengers know exactly what they’re paying for.

It is important for airlines to have the power to make their own decisions.

However the fuel surcharge mechanism has to be more transparent so passengers won’t be out of pocket.

Surcharge should be directly linked to the cost of oil rather than the current formula used by authorities.

The department had on multiple occasions refused to disclose its calculations on price regulations.

In launching its review last March, the department had signalled that deregulation would occur, citing the example of other countries.

It said it was searching for the best way to follow similar trends.

Cathay Pacific was caught off guard more than two years ago when the fuel surcharge was suspended.

At the time, the airline’s chief financial officer Martin Murray said the company would be lobbying hard for the reinstatement of the surcharge.

The city’s biggest airline pays for its jet fuel up to four years in advance to secure a significant portion at a slightly discounted rate from the market price of oil.

However, the dramatic collapse in oil prices saw rivals who did not hedge as much profit from lower fuel costs and pass on savings to consumers through cheaper airfares.

Four years straight of fuel hedging losses totalled a cost of HK$24.2 billion (US$3.08 billion) for Cathay Pacific, which led to the struggles of the airline in recent years.

Fuel Surcharge Policies Worldwide

Hong Kong, Japan and Brazil are among the very few jurisdictions in the world that regulate fuel surcharges.

Hong Kong

When oil prices reach a certain level, typically around US$50 a barrel, the city’s civil aviation regulator authorises a surcharge to be added by airlines to a price of a ticket.

Airlines submit a figure they think reflects the oil price and the authorities set the final price based on all airline applications. The method of calculation has never been disclosed.

Japan

A transparent system informs airlines and travellers how much extra they would pay for international flights.

The fuel surcharge cost for passengers is based on the destination and a fixed price band for oil.

Brazil

Fuel surcharges are prohibited in one of Latin America’s largest countries and economies.

This is based on the belief that fuel costs and other carrier-imposed surcharges should be covered in the final airfare price.

Fuel surcharges originating from Brazil do not exist.

Regulators maintain that the stance is fair and gives more transparency to consumers.

European Union

Any airline operating from inside the European Union is free to add surcharges but should indicate the final ticket price at the start of the booking process, including taxes, airport charges and fees.

Lufthansa and British Airways are testing a new class of airfare in Hong Kong, which may cut prices of regular economy-class tickets for flights from the city by nearly 50 per cent.

Passengers will get no allowance for check-in luggage, board last, and forfeit selection of their seats, flight times or even carriers.

We are asking the traveller to give us this flexibility and in return we give them a very attractive price.

That’s how the deal works, said Malte Haut, general manager for the Lufthansa Group’s three airline brands in Hong Kong, southern China and Macau, which include Swiss International Air Lines and Austrian Airlines.

Lufthansa is using Hong Kong as the first international market to test its concept.

Lufthansa, Europe’s largest airline in terms of passengers and British Airways are among the first traditional carriers to alter their offerings with special discounts as passengers increasingly opt for low-cost fares and no-frills service.

Working alongside its Swiss and Austrian partners, Lufthansa wants its passengers to sacrifice flexibility, such as not knowing the exact airline or flight times until a few days before departure, to enjoy cheaper fares.

The German airline giant is using Hong Kong as the first international market to test its concept.

We are asking the traveller to give us this flexibility and in return we give them a very attractive price
Malte Haut, Lufthansa

In its trial programme, Lufthansa is offering a discounted one-way flat fare of HK$2,488 (US$317) to 13 destinations, including Barcelona, Milan and Venice.

Flights from Hong Kong to Lisbon under the scheme cost HK$4,976, but using the regular Lufthansa search function, the lowest price on the same selected date was HK$9,441.

British Airways is exploring additional enticements: lower fares for no checked-in luggage, boarding last, and seating choices left to the airline.

We know that when our customers travel with us their needs vary from trip to trip, the carrier’s chief commercial officer Adam Daniels said.

We need to ensure that the fares we provide reflect those differing needs so customers can select the best option for them on that occasion.

Low-cost Norwegian Air Shuttle has emerged as one of the main challengers to traditional airlines, initially on transatlantic routes and now in Asia.

Yet despite its popularity, Norwegian is under significant financial pressure amid heavy losses from its low fares and expansion.

US carriers have rolled out similar basic-economy fares, with a focus first on domestic flights while rolling out deals for flights to Europe.

Why cheap long-haul flights could be the best deal for savvy travellers

Keen Hong Kong travellers stand to benefit from the higher number of cheaper long-distance flights.

Cathay Pacific Airways last month ruled out any immediate plans to introduce similar basic- economy fare deals that restrict typical booking options.

But CEO Rupert Hogg noted customer behaviour had been changing a lot and forcing full-service airlines to reconsider conventional pricing models.

Cathay Pacific Airways has for now ruled out introducing similar deals.

People are travelling much more frequently and for lots of different reasons, he said.

As people’s needs change and get more varied, clearly we will start looking at how best we can meet those needs.

Airlines need to be very open-minded in the current market.

With budget airlines flying long-distance routes more frequently and reaping greater success, traditional carriers were starting to follow competitors’ offerings and travel conditions with reactive pricing.


Tourism Observer

HONG KONG: Cathy Pacific To Cut 600 Jobs To Save HK$4 Billion To Return To Profitability

Hong Kong flag carrier is cutting 600 staff as airline seeks to save HK$4 billion over coming three years and return to profitability.

Cathay Pacific Airways has denied a report in the South China Morning Post that there will be an additional 200 staff cuts later this year.

A Cathay Pacific spokeswoman said on Tuesday afternoon: The number of redundancies resulting from the transformation programme is around 600, as we announced to our people and the public yesterday. Rumours of other figures are incorrect.

Sources said that the 200 extra jobs to be culled would be from junior ranks and they would go before the conclusion of the restructuring exercise at the end of this year.

Anger rippled through the airline on Monday as the company said 600 of 3,000 head office jobs would be axed with no department spared except for frontline staff such as pilots and cabin crew.

Changing customer habits and a “challenging business environment” were cited as reasons for the largest job losses in 20 years.

Cathay Pacific’s new chief executive, Rupert Hogg, paid tribute to colleagues by praising their commitment and professionalism in an internal note to staff as he described the day’s events as an “unquestionably difficult day”, warning the “unsettling” changes would “continue to be so for a little while longer”.

Hogg said the transformation plan was the right thing to do for the long-term future of our business and our customers.

In a public statement, Hogg described the changes as tough but necessary.

Changes in people’s travel habits and what they expect from us, evolving competition and a challenging business outlook have created the need for significant change, Hogg said.

Staff let go on Monday will receive 12 months’ salary in the form of severance pay and extended medical and travel benefits. They will also be offered counselling.

Despite the words of gratitude from Hogg, the announcement rankled with the head office union, which represents 800 staff.

Local Staff Union representative Hearty Baleros said: People are not happy about this action by the company.

We will continue to have an open dialogue with the company to try and get better terms for those affected.

The major problems facing new Cathay Pacific boss Rupert Hogg after management reshuffle

The Labour Department said it was highly concerned about the job cuts and urged the airline to maintain effective communications over the terminations.

Asian rival Singapore Airlines is also facing significant challenges.

Both airlines have been hurt by competition from Middle East and mainland Chinese airlines as well as budget carriers. They are bleeding cash from slumping ticket prices.

Singapore Airlines last week announced a comprehensive review of its business after reporting an unexpected loss of US$99 million in the first quarter of this year.

Cathay Pacific and Cathay Dragon lost HK$3 billion last year but the company as a whole lost HK$575 million because of better performances in other areas of the business, including catering and its shareholding in Air China.

Cathay also struggled after two years of substantial fuel hedging losses amounting to HK$8.4 billion each year in 2015 and 2016.

The losses were absorbed into the overall fuel cost.

The successful turnaround of Australia’s Qantas Airways could offer a blueprint. It saved HK$12.5 billion over three years by axing 5,000 out of 33,000 jobs, retiring old planes and trimming its flights and destinations.

Frontline staff also agreed to wage cuts.

Key to Qantas’ recovery was a partnership with Emirates and expansion of its pan-Asian budget airline Jetstar.

Staff cuts could deliver annual savings of HK$600 million for Cathay Pacific, according to FlightGlobal Asia finance editor Ellis Taylor.

The airline is seeking HK$4 billion of cuts over three years, including HK$2 billion this year.

Taylor believed the staff cuts were just the start of wider workforce measures.I expect that we will see more integration of Cathay Pacific and Cathay Dragon, possibly with the latter taking over more services into Southeast Asia, he said.

For Cathay to be really serious, it needs to consider reversing some of the capacity growth that it has made over the past few years to cope with lower demand and higher competition from mainland and Middle Eastern carriers, Taylor added.

Cathay Pacific must push ahead with its restructuring

In Monday’s announcement, 190 management jobs will go immediately, representing 25 per cent of such posts. A further 400 non-management staff – or 18 per cent of the total – will be cut by mid-June.

Before the staff cuts, Cathay employed 19,000 people in Hong Kong, most being frontline staff, including pilots and cabin crew.

Among other announced changes, the airline’s cargo unit will be restructured. Job losses in the cargo, finance and human resources departments will be unveiled later.

The airline said it would look for greater efficiencies and productivity improvements in the rest of the workforce.