Airline serves as partial metaphor for city

The glory days of Cathay Pacific are ancient history, an analyst says.  Others are forecasting that Hong Kong’s major airline faces more financial losses and further cost-cutting.

The ‘glory days’ would most likely have been the mid-80s to mid-90s.

During that time, Asian air travel boomed. Japanese tourists started flooding into the region and beyond, and Taiwanese businesses poured into just-opening China. Airlines couldn’t expand fast enough, and non-stop Taiwan-Mainland flights were forbidden.

Cathay managed to grab market share by buying a load of second-hand L1011 TriStars from the US, and offering crazy packages to lure cockpit crews from the UK and Australian militaries. With a preferential government policy and only one runway at Kai Tak, the airline didn’t have to worry much about competition. Profits rolled in.

But it couldn’t last. Hong Kong’s high inflation pushed up Cathay’s costs much faster than its regional rivals’, and started to undermine its competitiveness. To complicate things, the coming handover of Hong Kong created uncertainty and led the British owners – the Swires – to sell stakes to Chinese state aviation interests.

Still, the airline went on to expand massively, notably on the back of the China growth/Chinese tourist phenomenon, growing a major cargo business, and developing Dragonair as a classy rival to nasty, cheap and even scary Chinese carriers on Mainland routes. It went through labour problems, fuel-price surprises and outsourcing, but nothing unusual by industry standards – though it has long suffered exceptionally whiny employees and customers.

Fast-forward to today. Mainland carriers have matured into big, serious regional and global operators, as have Middle-Eastern ones; Hong Kong has inevitably declined in relative prominence as a hub linking Asia to North America and Europe. And budget airlines like Air Asia and Peach have become a low-cost choice for regional travellers who don’t mind arriving at the destination late and hungry. Meanwhile, Hong Kong’s costs still drag on the city’s comparative advantage as an old-style airline’s home base.

Cathay is not alone in the industry in struggling to adjust. It has to charge a premium to survive, yet it can’t differentiate its product – modern air travel is basically a longish bus-ride, and only pretentious bores and ad agencies think ‘service’ and ‘quality’ and slinky, doe-eyed cabin attendants are deal-breakers.

But CX has additional burdens. The Swire system of appointing eager British ‘chaps’ as core managers is a curious colonial hangover. It is also a reminder that the company hails from one of Hong Kong’s family-run cartel/landlord-conglomerates. And as Hong Kong undergoes Mainlandization, it can only be time before Beijing wants the airline in more dependable party-state-linked hands.

But, like Hong Kong, it was amazing for a while.


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13 Responses to Airline serves as partial metaphor for city

  1. FeiLo says:

    There was a time, back in the Nineties in which Swire temporarily moved the airline main base and business registration to Australia, on the footsteps of what HSBC did by buying midland in UK. Then they decided that,all thing considered, it would be still a good idea to remain based and registered in HK.
    Mainland based airlines have the advantage that CPC can throw virtually infinite amounts of money in subsidies, hidden or not. For the rest, while they had improved in strides they are still on the lower side of the quality spectrum, but given the fact that nowadays the average passenger can and will tolerate a fair amount of discomfort in exchange for lower fares, i am sure many would not care at all.
    Currently there is a renewed push by many airlines to extend the low cost concept to the longhaul routes, and in my opinion is a matter of time before the vast majority of travellers will adapt to that. Expect then the end of the old flag carriers of yesterday such as Cathay, Singapore, Air France, and the definitive emergence of the big state sponsored ones such as mainlanders or the gulf states.

  2. Come on. You used to work for them. That’s where you really learnt to despise the locals. But they gave you a good payoff for your first sunless bunker!

    They wouldn’t take you now. They have had it with wannabe White taipans lording it over them.

    Pip, pip!

  3. Bemused says:

    Remember CX’s tag ? Cabin attendants from 10 Asian lands. Damn it was good back then ! Your line “But, like Hong Kong, it was amazing for a while” – having been here for 30 years, I think that sums up the whole experience. How the hell did we get to where we are now, and how did a place so ‘can do’ end up so totally @@@@ed ? The streets are cleaner and the buildings are taller but the place is uglier. Yeah, we’ve all been here too long…keep on Hemmers, rage against the dying of the light – for all of us.

  4. Stephen says:

    Knowing how much our administration loves vested interests I don’t think Cathay’s long overdue demise is inevitable yet. Arrogant firm with toxic labour relations managed by Swire boys who obviously never mastered the art of fuel hedging. My employer insists I fly with them but when it’s my money it’s ABC – Anyone But Cathay.

  5. Chris Maden says:

    A minor factoid: Hong Kong International Airport is amongst the top three most busy international airports in the world, the other two being Dubai and Bangkok. (Heathrow fell off the list ages ago).

    I don’t fly Thai a lot, but I fly lots of Cathay and Emirates. Emirates is young and forward looking with crew who smile; Cathay feels tired in all respects. Perhaps employing airline professionals instead of spoilt public schoolboy types would help, but I suspect the malaise runs deeper than that.

  6. Joe Blow says:

    Does the CX pilots union still run a closed shop ? They are all Tories, free enterprise and all that, except when it comes to protecting their own privileges.

  7. Lebowski says:

    A “factoid” is not a minor fact. It’s unreliable info that’s regurgitated til ppl believe it.

  8. HK1980 says:

    On the other hand, you cant use a mainland carrier to connect in the same way you would use a middle eastern airline.
    The delays make a layover a certain failure…

    For the moment at least, it’s not a problem that Hong Kong has.

    But oh how I loved those Tri-Stars.

  9. Real Fax Paper says:

    I think HKIA is even more emblematic of the mismanagement and fate of HK. On the face of it, the airport remains a glittering example of efficient modernity. Or at least, that’s what the folk who know little more than the superficialities of the place will tell you.

    In reality, it was glittering and efficient in 1998, and it hasn’t changed all that much since, save for expanding luxury retail space at the expense of all else (pillar of the HK economy). Behind the scenes, exploitation of labour (another pillar of the HK economy) means that the place has become chronically understaffed: despite an economy with full employment, HKIA and its contractors cannot bring themselves to offer more competitive wages. Planes arrive late at their gates for a want of tugs to bring them from remote stands, baggage takes longer and longer to arrive at the reclaim carousel because there are simply not enough ramp staff. But HKIA continues to pat itself on the back and pretend everything’s just fine, covering up their mismanagement by manipulating statistics (the latest ones on time to reclaim baggage are a hoot) and being opaque and sneaky and mainly just lying about everything.

    Take for example the large midfield concourse (with 30+ gates) that blossomed from the tarmac in total silence in recent years, and opened with nary a fanfare. Why? Well, the Airport Authority was busy telling everyone we desperately need to pay for a third runway (in reality, a third runway and a whole new terminal the size of the existing one) and the sudden arrival of extra capacity, there for any passenger to see, was simply and inconvenient truth, and therefore became untruth. Concrete must be poured, a nothing may stand in its way (the third pillar of the HK economy).

    It’s all so transparent, and pathetic, and there’s no way they should get away with any of it. But they do, and they will continue to get away with it and slowly run the place into the ground at the expense of everyone, for the benefit of a very few, and answerable to none.

  10. Donnie Almond says:

    Weren’t those Tri-Stars bought in the 1970s ? And wasn’t there an issue with a senior captain who accepted bribes to make the deal happen ?

  11. FOARP says:

    Late to this discussion: my first long-haul flight (in fact, my first flight anywhere except for a brief hop in a single-engine plane from Shoreham Airport) was CX250 to Hong Kong. The plane was half-empty – something I was later to realise was very unusual, and may well have been only sustainable as a result of subsidies. Never understood the buzz around CX – they’re OK and a bit more friendly than other airlines, but then I’ve never rode CX business-class.

    EVA is still my favourite though, not least for the upgrades I always got.

  12. FOARP says:

    @Chris Maden – Current rankings for busiest airport are as follows:

    1. Hartsfield–Jackson Atlanta International Airport
    2. Beijing Capital International Airport
    3. Dubai International Airport
    4. O’Hare International Airport
    5. Tokyo Haneda Airport
    6. London Heathrow Airport
    7. Los Angeles International Airport
    8. Hong Kong International Airport
    9. Paris-Charles de Gaulle Airport
    10. Dallas/Fort Worth International Airport

    So, basically LHR is still busier than HKG. Taking cities as a whole (i.e., summing their air traffic) London still ranks way ahead of every city in the world.

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