Cathay Pacific Is Embarking on a New Business Strategy
Kyunghee Park, Bloomberg - Jan 16, 2017 9:20 am
Pressure from Gulf airlines, as well as newer carriers in China, has put Cathay Pacific in a difficult spot. To get out of it, it looks like the company is going to have to implement some form of restructure in order to make it more competitive.
— Patrick Whyte
Cathay Pacific Airways Ltd., Asia’s biggest international airline, plans to shorten its fuel-hedging program and revamp its workforce as part of a new business strategy to halt a slide in earnings. The shares jumped the most in nine months.
The carrier “won’t hedge as far forward as we have in the past” and will “rethink its workforce,” Chief Operating Officer Rupert Hogg told the South China Morning Post in comments confirmed by Cathay Pacific Monday. The Hong Kong-based airline plans to reassign employees from some outdated roles to new jobs that are better aligned with a “digital focus” while “never saying never” to redundancies, Hogg said.
Cathay Pacific is set to unveil a new strategy Wednesday following a “critical review” of its business as mounting competition from Chinese and Middle Eastern carriers caused the airline in October to scrap its second-half outlook. Chief Executive Officer Ivan Chu, who took the helm in March 2014, had said the carrier planned to continue with its fuel hedges.
Cathay Pacific lost HK$8.4 billion ($1.1 billion) in the three years to December 2015 on account of fuel hedging. In the first half of last year, the loss was HK$4.49 billion.
The stock climbed 3 percent to close at HK$10.86 in Hong Kong, the largest gain since April 2016. Shares of Cathay Pacific fell 24 percent last year, their second straight annual decline.
The carrier will share the new strategy with about 350 senior managers at an annual leadership conference and also with all employees, Cathay Pacific said in an e-mailed response to a query. The focus will be on laying out the context for the new strategy, addressing the carrier’s challenges and showing how the new strategic direction will transform the way things are done, it said.
Chu has been at the helm of the carrier for about three years now. His predecessors John Slosar and Tony Tyler both held the top job at the marquee airline for about three years. In both instances, the then chief operating officer was promoted to the chief executive’s role.
A company spokeswoman said Cathay won’t comment on speculation.
The airline had 33,700 employees as of June 30, according to data compiled by Bloomberg. In comparison, Singapore Airlines Ltd. had 13,983 employees at the end of March and Air China Ltd. had 27,442 as of June.
Cathay Pacific will hedge jet fuel for two years, shortening the period from a past practice of four years, according to Hogg. It also plans to cut costs and boost efficiency.
“If our cost base is too high, we’ll have to find ways to be more productive and more efficient,” Hogg said. Cathay Pacific needs to “become more agile and efficient in dealing with challenges ahead.”
Source:https://skift.com/2017/01/16/cathay-pac ... -strategy/
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