FOXTROTS

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.

Foxtrots – leading the industry in a dance.

 

Cathay Pacific. On endangered list.

An excerpt from our monthly Travel Business Analyst newsletter.

 

We’re not sure if the Hong Kong-based Cathay Pacific group, CPG, realises business trends are threateningly bad, or is in denial.

 

Based on traffic trends so far, we reckon the two airlines’ total (the group’s Dragonair has been renamed Cathay Dragon, CD) will end this year with a fractional fall in seats sold. And possibly also in traffic – RPKs.

 

CPG has not changed its strategy to match today’s traffic realities. Over-simplifying, economy passengers today want cheaper fares, and are ready to accept fewer frills – even if they say they still want them.

 

CPG does not need CD as it is currently formed. CD’s flights could simply be operated as Cathay Pacific, CP. However, CPG does need CD to operate lower-cost flights – whether to current destinations, CP destinations, or new destinations. But at lower costs; CD should be an LCA*, not part-LCA/part-FSA*.

 

(As an aside, that makes CD’s new name irrelevant, and Dragonair better. Because of the name’s association with Asia’s economic dragons and tigers. But that is not an important fault.)

 

CPG’s main shortcoming is having no NFA*. Having successfully lobbied to stop Australia’s Jetstar NFA from starting up in Hong Kong, CPG should take up with one of Jetstar’s would-be partners (Hong Kong-based/Macau-operating gambling group Shun Tak) to start an NFA, primarily for mainland China routes.

 

(Jetstar’s other partner was to be China Eastern, but CPG is already partly owned by Air China.)

 

If CPG continues to resist this move, its mainline CP will continue to fade. Its part-FSA/part-LCA CD will do reasonably well – but not enough to grow the whole CPG. And without an NFA, not only will the future be growth-light, but others will fill that LFA space.

 

 

*Notes:

-FSA = full-service-airline. Offering first/business/economy, travel agency bookings, meals/bookings/baggage/cancellations included, etc. As its name indicates – full service.

 

-LCA = low-cost-airline. (Not a no-frills-airline; see next.) An FSA but with lower operating costs – cheaper longer-hours flight-deck crew, younger/new longer-hours cabin crew, tighter cost control (twinned 3-star hotel rooms, for instance), fewer fare types, which may have first and business cabins, and which allows bookings through travel agencies etc. If relevant, usually similar to the parent airline, but a different name, and competition against parent airline allowed.

 

-NFA = no-frills-airline. We believe that among the many essential elements that make a successful NFA are: market freedom in terms of routes and aircraft choice; single aircraft type; where relevant, competition against parent airline allowed; fares that are extremely low when booked at least three months in advance, say US$25; one fare at one time (no wholesale rates, travel agency commissions, etc); no refunds; no service frills; single economy-class cabin; no seat selection; two toilets for 150-seat aircraft; 25-minute turnaround time; cabin crew do daytime cabin cleaning; name and flight change charged at least US$25 each; no trade shows; plenty of consumer advertising and promotion; and much more.

 

 

 

 

The Fox

Remember, I’ll be famous after I’m dead.