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Well Done Cathay Pacific: Painful Turnaround Programme is Starting to Show Dividends

Well Done Cathay Pacific: Painful Turnaround Programme is Starting to Show Dividends

Well Done Cathay Pacific: Painful Turnaround Plan is Showing Dividends

It’s been a difficult few years for Hong Kong-based Cathay Pacific.  In 2017, the airline announced it would make around 600 people in its Head Office redundant after the carrier made a huge loss of HK$1,259 million in 2017.  The redundancies of mainly senior and middle management were part of a huge multi-year transformation programme which would hopefully turn the struggling airline around.

Thankfully, it looks like those kind of tough decisions are starting to have a really positive impact on Cathay’s bottom line.  In an unusual move, the airline took the decision to announce its estimated year-end profits before the accounts had been fully audited.  The reason was that Cathay Pacific is looking to make a profit of around HK$2.3 billion for 2018.

To put that into the context of what has been an extraordinarily difficult year for many airlines around the world and you get a real sense that Cathay is headed in the right direction at long last.  Investors obviously feel the same way, with Cathay’s stock surging 7.7% on the Hong Kong Stock Exchange after hearing the news from the airline.

Now, these aren’t the confirmed numbers and are subject to change but for Cathay to make this announcement obviously shows they’re confident about 2018 being a real success for the airline.  Other carriers have been struggling with rising oil prices, fluctuating currency exchange rates and geopolitical spats which has taken a heavy toll on profits.

Add into the mix the fact that Cathay is battling intense competition from upstart low-cost competitors, regional rivals and Middle Eastern heavyweights and you get a sense of just how well Cathay Pacific is performing.

Obviously, it hasn’t all been plain sailing – the job losses have been difficult, to say the least, and Cathay has also had to make some tough decisions about the passenger experience.  The carrier finally decided to reconfigure its fleet of Boeing 777’s with the same Economy layout as many of its rivals – a decision that also makes sense when taken in relation to Hong Kong’s slot restricted airport.

Cathay is also facing a continuing dispute from its pilots who are looking to secure a better pay award, while the airline also had to offer enhanced pay and benefits for its cabin crew community to bring them on side.

Hopefully, we’ll learn a lot more in the next few weeks, along with more details about where the transformation programme goes from here.

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