Cathay Pacific struggles to put its troubles behind it

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For an airline with the marketing slogan “Move Beyond”, Cathay Pacific is struggling to put its many troubles behind it. The Hong Kong flag carrier hoped 2024 would mark its return to full capacity and an upward trajectory in its fortunes after years of pandemic-related disruptions.

In terms of profitability benchmarks, the airline is on track — Cathay expects its full-year results due to be announced in March will show it breaking a three-year streak of annual losses.

But more broadly, the carrier is beset with a long list of problems — an acute shortage of pilots, low cabin crew morale, a lacklustre share price and passenger complaints over flight cancellations.

It has cancelled more than 80 flights since Christmas Eve, raising a public expression of concern from the territory’s leader. “It is the basic service requirement for airlines to provide satisfactory service to passengers,” John Lee said this week. The Hong Kong Aircrew Officers Association, its pilots’ union, have called for an inquiry into the pilot shortages and cancellations.

Gary Chan, a local pro-Beijing lawmaker, was among those who saw his flight to mainland China cut this week. It would be “difficult not to foster distrust towards” the airline, he lamented.

Such problems have shaken the confidence of staff of an airline ranked the world’s best four times by the Skytrax consultancy, most recently in 2014. As a pilot who has flown for more than 25 years with the airline put it, “you used to be at the top of the Premier League. Now you are near the bottom.”

Cathay’s pilot workforce was about 40 per cent lower than 2019 levels as of last month, according to the HKAOA despite an active recruitment of new joiners. Cabin crew numbers were also roughly 50 per cent lower than pre-Covid figures, according to its flight attendants union.

“Manpower is undoubtedly the most significant challenge for Cathay in increasing capacity,” says Jason Sum, an equity research analyst at DBS Bank. “Replenishing their pilot ranks poses a formidable task in the face of the high global demand for pilots.”

It is still rebuilding its workforce after it cut 8,500 jobs in 2020 and closed its Cathay Dragon brand amid the pandemic. It also suffered a pilot exodus after a pay cut of up to about 40 per cent. Hong Kong’s tough zero-Covid hotel quarantine policies and political crackdown also deterred some expat pilots.

One Cathay pilot says the airline is currently “flying on borrowed time”. Many pilots have maxed out a 900-hour rolling flying legal limit over the past year. When pilots are supposed to fly about 85 hours on average per month minus leaves, many are now flying about 100 hours each month, several pilots say.

Rival Singapore Airlines, which said it was expected to reach 92 per cent of pre-pandemic capacity last month, previously said it had brought back most of the 3,000-plus pilots with only a small number who left. Singapore Airlines’ share price has risen almost 17 per cent over the past year. In contrast, Cathay’s stock has fallen 2.6 per cent though that was against the backdrop of a near 25 per cent drop in the Hang Seng index.

Unless Cathay offers a more competitive pay package for pilots, DBS’s Sum says the carrier is likely to “struggle to achieve” its goal of reaching 100 per cent pre-pandemic capacity by the end of 2024 — although he maintains a “positive outlook on its earnings trajectory over the medium term”.

Cathay has apologised over the flight cancellations. Alex McGowan, its chief operations and service delivery officer, said this week he would be leading a task force to “identify and resolve the underlying issues”. “The disruption of this scale is . . . far below the standard to which we hold ourselves,” he said in a statement.

The carrier is also edging closer to Beijing as it forges a new identity with a home base in the so-called Greater Bay Area, an 11-city metropolis circle in southern China. The moves come after the airline faced backlash in 2019 from Beijing over the participation of some employees in Hong Kong’s pro-democracy movement. One senior Cathay executive told me last month the airline aimed to become the Greater Bay Area’s flag carrier and opened a Shenzhen office in 2022 as an “extended headquarters” in the region.

Some employees, though, remain pessimistic about the company’s outlook. “Cathay now has such a poor reputation among the international pilot community,” said a senior captain with Cathay who is planning to quit over the next few months and move to the US. “The majority of us are working on a Plan B.”

thomas.chan@ft.com