Exclusive | Cathay Pacific to reassign jobs, review business to reverse earnings slide

Cathay Pacific Airways will re-evaluate and reassign jobs to match a new digital focus during this week’s business review, part of the strategy to reverse a three-year earnings slide and revive one of Asia’s worst-performing airline stocks of 2016.

Hong Kong’s biggest airline will make “the right long-term decisions” to prepare it and its Cathay Dragon unit for a “challenging and competitive environment ” in 2017, chief operating officer Rupert Hogg said.

Cathay’s business had deteriorated for three consecutive years even amid falling jet fuel cost, missing earnings estimates and posting HK$13 billion in hedging losses over 18 months. This has prompted the airline to halve its fuel hedging period during in response to the losses.

The carrier does not expect 2017 to be easier, as disruptions to the geopolitical order in Europe and US may hamper global commerce, causing passenger and cargo traffic to dwindle. That will force Cathay to slash costs while finding new revenue sources.

The need for efficiency is only becoming more urgent, as global airlines are likely to suffer an earnings slump in 2017, their first industry decline in six years as higher oil prices erode their margins, according to a December forecast by the International Air Transport Association (IATA) forecast. Net income for the world’s carriers is expected to fall 16 per cent to US$29.8 billion, IATA said.

“If our cost base is too high, we’ll have to find ways to be more productive and more efficient,” Hogg said in an interview with the South China Morning Post, aheadof the much-anticipated review. The airline needs to “become more agile and efficient in dealing with challenges ahead.”