OPINION
Hemlock
Airline serves as metaphor for city
T
he glory days of Cathay Pacific are ancient history, an analyst said. Others are forecasting that Hong Kong’s major airline faces more financial losses and further cost-cutting. The “glory days” would most likely have been the mid-80s to mid-90s. During that time, Asian air travel boomed. Japanese tourists started flooding into the region and beyond, and Taiwanese businesses poured into just-opening China. Airlines couldn’t expand fast enough, and nonstop Taiwan-Mainland flights were forbidden. Cathay managed to grab market share by buying a load of second-hand L1011 TriStars from the US, and offering crazy packages to lure cockpit crews from the UK and Australian militaries. With a preferential government policy and only one runway at Kai Tak, the airline didn’t have to worry much about competition. Profits rolled in. But it couldn’t last. Hong Kong’s high inflation pushed up Cathay’s costs much faster than its regional rivals, and started to undermine its competitiveness. To complicate things, the coming handover of Hong Kong created uncertainty and led the British owners— the Swires — to sell stakes to Chinese state aviation interests. Still, the airline went on to expand massively, notably on the back of the China growth/Chinese tourist phenomenon, growing a major cargo business, and developing Dragonair as a classy rival to nasty, cheap, and even scary Chinese carriers on Mainland routes. It went through labour problems, fuel-price surprises, and outsourcing, but nothing unusual by industry standards — though it has long suffered exceptionally whiny employees and customers. Fast-forward to today. Mainland carriers have matured into big, serious regional and global operators, as have Middle-Eastern ones; Hong Kong has inevitably declined in relative prominence as a hub linking Asia to North America and Europe. And budget airlines like AirAsia and Peach have become a low-cost choice for regional travellers who don’t mind arriving at the destination late and hungry. Meanwhile, Hong Kong’s costs still drag on the city’s comparative advantage as an old-style airline’s home base.Cathay is not alone in the industry in struggling to adjust. It has to charge a premium to survive, yet it can’t differentiate its product — modern air travel is basically a longish bus-ride, and only pretentious bores and ad agencies think “service” and “quality” and slinky, doeeyed cabin attendants are deal-breakers. But CX has additional burdens. The Swire system of appointing eager British “chaps” as core managers is 48
HONG KONG BUSINESS | NOVEMBER 2017
a curious colonial hangover. It is also a reminder that the company hails from one of Hong Kong’s familyrun cartel/landlord-conglomerates. And as Hong Kong undergoes Mainlandisation, it can only be time before Beijing wants the airline in more dependable party-state-linked hands. But, like Hong Kong, it was amazing for a while. Beijing is not only trying to tighten its grip on Hong Kong through long-term demographic engineering. It wants the continued support of co-opted octogenarian property tycoons whose cartels squeeze the domestic economy. That’s why you can forget all this disruptive innovative/creative tech industry stuff – we have vested interests to protect. By allowing in more Mainlanders while artificially restricting the supply of affordable housing, the Hong Kong government forces more people into privatesector accommodation. At the lower end, this pushes up rents in nasty sub-divided apartments and similar accommodation. But the pressure on per-square-foot housing prices obviously trickles up into other market segments, hence the HK$8,500-a-month nano-flats at Shouson Hill, and ever-rising rents generally. So Mainland immigrants make our population more loyal and patriotic – and help to push up Beijing-shoeshining landlords’ profits. Talk about a win-win!
by hemlock www.biglychee.com Email: hemlock@hellokitty.com
The glory days of Hong Kong’s flag carrier is over according to analysts.