Cathay Pacific Shares Rise After Loss

April 13, 2017 – Shares in Hong Kong carrier Cathay Pacific were up today, a day after the airline announced a management shakeup on the heels of its first loss in eight years.

Last month the troubled airline posted its first annual net loss since 2008, citing intense competition as lower cost carriers, particularly from mainland China, eat into its market share.

It reported a US$74 million net loss for 2016 and warned that 2017 would be similarly “challenging”, later saying it would slash staff costs by 30 per cent.

Cathay announced a major restructuring programme in January, but it has not said how many jobs it intends to axe.

Its shares were up as high as 3.5 per cent in Hong Kong at HK$11.30 (US$1.45), but closed only slightly higher by 0.18 per cent Thursday following the appointment of its new chief executive officer.

Current CEO Ivan Chu, who has been in the job for three years, will be replaced by the airline’s chief operating officer Rupert Hogg starting May 1.

“Rupert will lead the airline through its three-year corporate transformation programme with the aim of becoming more agile and competitive in the challenging market place,” Cathay chairman John Slosar said in a statement last night.

Financial analyst Jackson Wong said the airline had made the right move, but investors remain cautious, awaiting further details on its restructuring plans.

“They cut the CEO, that sends a signal to the investors that they are committed to reshaping the whole company,” Wong of Huarong International Securities said.

Shares in Cathay have fallen 29 per cent since Chu was appointed CEO in 2014 despite an 11 per cent gain in the benchmark Hang Seng Index in the same period.

Companies like China Eastern and China Southern Airlines are offering direct services to Europe and the United States from the mainland, while budget carriers like Spring Airlines have targeted regional travellers, undermining Cathay’s position.

The airline is also losing premium travellers as it comes under pressure from Middle East rivals which are expanding into Asia and offering more luxury touches.

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