[260317.EN.BIZ] Cathay Prices Too Low to Meet Costs of Operation: Bloomberg Commentary

SELLING seats below cost is at the root of Cathay Pacific's staggering losses and 30 per cent layoffs of headquarter staff, according to a Bloomberg commentary by John Ollila.

"Its shares have fallen 27 per cent since CEO Ivan Chu took over in 2014, and the carrier reported a HK$575 million (US$74 million) loss, its first on an annual basis since 2008," said Mr Ollila.

"When it comes to filling up seats on its planes, it's among the best in the business. Of the world's top 15 carriers by revenue, only Air France-KLM and Delta have a better load factor-passenger traffic as a percentage of available seats," he said.

"Thanks to its high costs and plummeting ticket prices from overcapacity in greater China's aviation market, Cathay needs to fill about 124 per cent of its seats to break even.

"You don't need a math PhD to spot the fundamental obstacle to achieving anything above 100 per cent," he said.

"The absence of decisive moves to address this problem in the annual results announcement should be deeply troubling," Mr Ollila said.

Source : HKSG.