Cathay Pacific promotes cheap 'Fanfares' as quasi answer to LCCs, but structural change is needed

As Jetstar Hong Kong prepares to launch, Hong Kong Airlines weighs transforming Hong Kong Express into an LCC, Spring Airlines moots a Hong Kong base and other LCCs evaluate Hong Kong as a hub, the market has been left wondering about Cathay Pacific's response. Cathay and its Dragonair subsidiary account for about half of Hong Kong's capacity.

Cathay effectively has no public response. While deep down it is watching the market and undoubtedly weighing possible reactions, from a business perspective it says LCCs will not impact its business while to the general public its push has been to offer a limited number of discounted web-only tickets, "Fanfares", as a reminder that it can offer fares on par with LCCs.

Any airline can cut fares, but few can do so profitably. Fanfares account for less than 1% of seats, relatively isolating Cathay from any pricing detriments, but reminding the carrier this is no response to LCCs either taking existing traffic or creating new demand Cathay will be unable to tap. Structural change is needed.