Strike a windfall for Cathay's Asian rivals
WHILE management at Thai Airways International and Singapore Airlines have not been openly rubbing their hands in glee over Cathay Pacific's strike problems, both stand to make long-term gains from them.
Aviation analysts expect a significant number of regular Cathay passengers will be tempted to switch loyalties, either in retaliation for the inconveniences they have suffered recently or simply because they have not flown with other Asian airlines before.
Although many Cathay regulars will return after the strike, a number are likely to be lost for good. As in many other industries, it's a lot easier to lose market share than it is to gain it.
And Thai has been making something of a comeback of late under its new management. If it can pick up enough regular Cathay customers, there could be a return to the days when the big Asian trio of Cathay, SIA and Thai were on an equal footing in terms ofprofitability.
Thai has slipped behind the other two , which observers blame largely on military intervention in the day-to-day running of the national carrier.
But with the recent return to non-military management, it is better-placed to make a comeback.
Thai has declined comment, but analysts believe the firm is poised to exploit Cathay's misfortune and perhaps make up lost ground.
When it comes down to business, it is likely little sympathy will be shown. The management is under pressure to perform.
A survey of airline company performances in 1991 published in Airline Business magazine last September showed Cathay was the third most profitable carrier in the world, after British Airways and Singapore Airlines.
As the most profitable, British Airways had US$687 million in net profits for the year and an annual turnover of $9.09 billion.
Singapore headed the big Asian trio, coming in second place overall with $545 million profits and $3.18 billion turnover.
Cathay achieved net profits of $378 million and a $2.68 billion turnover and Thai came in fourth, with $199 million profits and a $2.03 billion turnover.
Apart from the day-to-day costs of the dispute and the danger of longer term market share loss, Cathay's image has been seriously tarnished by the highly publicised strike by the Flight Attendants' Union.
This is seen as further dampening investor confidence.
Enough uncertainty already exists as to Cathay's commercial freedom and status after 1997 and although the Swire group will be free to maintain its dominant role in Cathay, some analysts believe it will reduce its holding before the handover of sovereignty.
Thai has the added advantage of cheaper land and labour costs. Other international carriers are also benefitting from much lower inflation rates on their home turf.
Cathay management is only too aware of this and it has been the company's determination to increase productivity and reduce operating costs which has been one of the factors behind the current dispute with the staff.
With Hongkong's 9.4 per cent inflation rate eating away at Cathay's advantage, the airline has been scared by talk that it might fail to turn in a profit in future years without immediate corrective action.
- BARRY PORTER
