Cathay Pacific, posting 84% drop in profits, seeks consistency but offers no brave new strategies

Cathay Pacific has lost its ability to move faster than the changing North Asian market, and this is reflected in an 84% drop in 2012 profits to HKD916 million (USD118 million). Although this is a profit, unlike global peers, it was achieved with a paltry 1.8% operating margin.

Cathay's solution is to offer consistency in what it has done, rather than focus on what it can do differently. When the market rebounds, it will do so with a new competitive landscape that gives no guarantee past traffic can be regained. Even Cathay management seems unconvinced by its own explanation for why it does not have a low-cost carrier subsidiary. But LCCs are just part of the changing environment: Cathay needs strategic partners and a wider long-haul network, neither of which show signs of eventuating in the short-term.

Cathay is a cautious and conservative airline; it has relied on delivering benchmark quality to distinguish it. While this has advantages, the quickening pace of North Asian aviation will demand that Cathay break out of its shell. At the least, this will let Cathay counter competition while a more enduring effort will let it overtake the competition.