Barely a month has gone by since Cathay Pacific announced plans to make 600 head office workers redundant and now more bad news for the Hong Kong-based airline. The latest passenger figures show demand in May dropped year on year as capacity continued to grow.
Managers, however, may actually be cheering the size of the decline. The number of passengers carried fell by just 0.5% to 2,849,475 passengers, compared to May 2016 – a month that the airline says is traditionally quieter. Patricia Hwang, Cathay Pacific’s General Manager for revenue management commented:
“May is traditionally one of the slower months of the year, and we saw a weakening in passenger demand for regional leisure travel after the Easter holiday period,”
But not all was bad. Hwang continued: “On a brighter note, there has been an uptick in demand for premium class travel. Traffic on long-haul routes remained robust in May. Our Tel Aviv flights, which were launched in March, continued to perform well.”
Management Slashed by 25%
Cathay Pacific also plans to start a new seasonal service to Barcelona this summer which Hwang hopes will prove popular. It comes at a time when the airline is going through a major reorganisation to better compete with the rise of low-cost carriers and intense Middle East competition.
The decision to slash 25% of the airline’s management is intended to make Cathay Pacific more nimble and faster to react. “As we look to the future we will have a new structure that will make us leaner, faster and more responsive to our customers’ needs,” commented Cathay Pacific’s Chief Executive, Rupert Hogg.
Hogg blamed “evolving competition and a challenging business outlook” for the airline’s woes, saying there was a “need for significant change.” The airline has promised an investment in their onboard product but also plans changes that may hurt the passenger experience.
Boeing 777 Fleet to be Densified with 10 Abreast Economy Cabin
That includes plans to densify the Economy Class cabin on some of the airline’s Boeing 777 fleet from 9 to 10 abreast in a 3-4-3 configuration. Up to 48 aircraft will have the extra seats installed, increasing capacity from 19-28 passengers per aircraft. It will see seat width shrink by 1.3 inches to 17.2 inches.
Cathy has said the changes are necessary due to capacity constraints at its home airport, Hong Kong International Airport. The two runway airport is reaching its operational capacity and although a third runway has been approved it won’t be in operation until 2024.
The densified 777’s will put Cathay Pacific on a par with Gulf rivals including Emirates, Etihad and Qatar Airways who have flown 10 abreast economy cabins for years. Unlike, Emirates, however, Cathay reported a healthy passenger load factor of 84.2% in May – nearly 10 points higher than Emirates’ 2016 average load factor.
Passenger Yield Under Intense Pressure
It’s also too early to tell whether the current diplomatic crisis affecting Qatar and its national carrier will have a positive effect on Cathay Pacific. So far this year, Cathay has seen its biggest rise in passenger numbers coming from Euope, with a 13.9% increase year on year. Conversely, its India, Middle East, Pakistan & Sri Lanka market has witnessed a 7.3% fall in passenger numbers.
One further word of warning from Hwang who cautions that yield continues to come under “intense pressure” with competition driving down air fares in the region.
