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Cathay Pacific: how should the airline navigate the political turbulence in Hong Kong?

Cathay Pacific, Hong Kong’s most iconic brand has faced quite a few crises over the past decade.

The 1997 handover to the 1998 Asian Economic Crisis leading up to 2003 SARS epidemic, was perhaps its most tumultuous period not just for the airline but also for Hong Kong.

But nothing could have prepared it for the anti-Extradition Law Amendment Bill (ELAB) protests that have rocked the city the past weeks.

The protests at the airport led to several of its flights being cancelled; Cathay stood most to lose as passengers chose other airlines and even other airports to transit.

Indeed, Cathay’s own success is intimately connected with that of Hong Kong’s.

The city for the longest time was known as the “Window into China” and Cathay operated as Hong Kong’s de-facto national carrier connecting the world to the “Far East”. With the opening up of China, it has placed increased financial pressures on the airline that is facing competition from mainland carriers.

Add to this, the partial ownership of shareholding by Chinese conglomerate, CITIC, as well as by Air China, means that it now has multiple parties in its stakeholder group.

Stakeholder management and the shareholder conundrum

Cathay’s Hong Kong staff are its other stakeholder group who have in the past years, had more than a few disputes with the airline management on changes to their conditions of service.

Indeed, forming labour unions is lawful in Hong Kong as is participating in protests – a position that was made clear by the former Cathay CEO, Rupert Hogg in response to the flight attendants participating in anti-ELAB protests at the airport. The airline changed its position a week later, warning staff that those involved will be fired.

Cathay also came under the new regulations announced by Beijing's aviation regulator, Civil Aviation Administration of China (CAAC) which asked to submit the names of the staff flying on mainland routes and banning those who were involved in the protests from working on those flights.

A privately held airline, Cathay is accountable to its shareholders by remaining profitable. Unlike a national carrier, Cathay can’t be bailed out by the government in case the airline has monetary problems.  

As a Hong Kong Stock Exchange-listed company, any repercussions – be it threats of industrial action, regional or global economic crisis, competition from mainland as well as from the regional carriers, fuel costs or other factors have a direct impact on the airline’s performance and confidence.

This makes Cathay’s stakeholder management a tightrope walk.

Adding to this, Hong Kong’s own ability to attract visitors to the city has made it particularly challenging for the airline. August was a difficult time, both for Cathay Pacific and for Hong Kong with the overall tourist arrivals into the city nearly half of what they usually are in a strong summer holiday month. This had a significant effect on the performance of the airline.

According to a press release on Cathay Pacific site, the inbound Hong Kong traffic was down 38% while outbound was down 12% year-on-year, and the airline didn’t anticipate September being any less difficult. 

Reputation management

Hong Kong relies quite significantly on foreign investment, in particular from countries like the US, Canada, the UK and the wider APAC region. The recent PR brief by Chief Executive Carrie Lam shows how important it is for the city to rebuild its reputation and investor confidence.

For Cathay, the damage runs deep. 

We all know that mixing business with politics is fraught with tension. But that is exactly what its commercially-savvy management (some of the finest in the world), are having to manage.

The past lessons of reputation control can’t be applied. Because only one thing matters now – the airline, which is also one of the largest employers in Hong Kong, must ensure it is protecting the jobs of its 27,000 staff who it employs. 

The larger question

With many other airline brands that have come and gone – from PanAm to TWA to Swiss Air, Ansett, Jet Airways and Philippine Airlines (some of whom succumbed to the 98 Asian Economic Crisis), the bigger question is: how can the 72-year-old brand ensure it remains operational?

The future of Hong Kong is the future of Cathay. And this means Cathay must comply with the expectations of the regulators. That is the only way forward.

Its very operational ability depends on it.

The writer, a former employee of the brand, requested to remain anonymous. 

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