Cathay Pacific CEO John Slosar, in its CX World Magazine, warned (Apr-2012) the carrier may park aircraft and reduce services if weakening demand and high fuel costs continue. He stated while there have been numerous positive developments at the carrier in recent months, such as the continuing modernisation of the fleet and the installation of new in-flight products, the carrier "cannot ignore the current difficult state of our industry". The carrier said revenue growth in recent weeks has been falling "well short of target" and failing to keep pace with capacity growth. The carrier has seen signs of weakness in its first- and business-class demand and noted the yield situation is not sustainable. "Fuel prices remain at crippling highs and our cargo business still shows no sign of any sustained pick-up," Mr Slosar said, adding, "The recent turmoil in the euro zone reinforces the fact that the world is still balancing on a knife edge”. While Mr Slosar noted conditions have not reached the challenges seen during the global financial crisis in 2008-2009, the airline will need to take action to contain costs if the situation persists, noting it will have to consider more ways to further pare back spending. [more - original PR]
Cathay Pacific may park aircraft and reduce operations amid weakening demand
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But now that Hong Kong Airlines has entered Auckland, and then expanded, the Cathay-Air NZ JV faces disbanding. By finally committing to a Christchurch route Cathay appears to be bidding to keep the JV in play. But the New Zealand government will still probably withdraw approval of the Air NZ-Cathay JV.
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Hong Kong Airlines is rapidly growing in Tokyo and Osaka, and launching a new service to Seoul Incheon – its 11th new destination in 2016. These are strong O&D markets and present a change from Hong Kong Airlines' previous staple of connecting traffic from mainland China over Hong Kong, or competing mainly against Cathay Pacific in key regional Asian markets from Hong Kong.
Following Hong Kong Airlines' entry to Tokyo and Osaka it will further increase services to the point where Japan becomes a larger market for it than mainland China. This is of some concern given Hong Kong Airlines' still evolving strategy for Japan, and weakening of the market through the appreciation of the yen.