HONG KONG/SINGAPORE (Reuters) – Cathay Pacific Ltd (0293.HK) needs to focus on safety and security, its customers and the completion of a three-year financial turnaround plan, the airline’s new chief executive told staff on Monday.
Augustus Tang took the top job at the airline following the sudden exit of Rupert Hogg on Friday amid mounting Chinese scrutiny over the involvement of some of the Hong Kong carrier’s staff in anti-government protests in Hong Kong.
Hogg’s departure highlights growing pressure on the corporate sector in the Chinese-controlled former British colony, where Beijing is trying to quell protests that have gone on for 11 straight weeks.
Tang, a former Cathay executive who had been running an aircraft engineering business for parent Swire Pacific Ltd (0019.HK), was appointed as the airline attempts to salvage relations with Beijing.
The Chinese regulator had demanded it suspend staff supporting anti-government protests.
Tang told staff the airline’s safety management system required 100% compliance with all rules issued by regulators.
“Right now, we are one of the most watched companies in the world,” he said in an email to staff which was seen by Reuters.
“As such, more than ever, each one of us carries a personal responsibility to make sure that our reputation for safety and security is untarnished.”
Tang also said a three-year financial turnaround plan begun by Hogg would continue at full speed.
“We cannot ease off the throttle, especially at a time when international trade tensions are high and international travel is under pressure,” he said.
Cathay shares had a choppy day on Monday, rising more than 2% early on but later falling by nearly as much. They closed 1% higher.
Earlier this month, Cathay swung to its first profit for the January-June period since 2016 on the back of the transformation plan and forecast it would have higher earnings in the seasonally better second half.
Analysts said Tang’s priority should be on rebuilding the brand and restoring customer confidence in all markets, including Hong Kong, the mainland and overseas after the Chinese regulatory action and recent disruptions at Hong Kong airport.
Dongchen Zhao, an analyst at ICBC International, who last week put a “strong sell” rating on Cathay, said on Monday that the departure of Hogg and deputy, Paul Loo, was only a first step on the airline’s “long journey” to improve management and its brand in China. He has kept his “strong sell” rating after the management changes.
Morningstar analyst Ivan Su said he believed Cathay had done enough to prevent it from being cut off from Chinese airspace, but possibly not enough to placate all Chinese travellers.
“The carrier will likely see weaker demand if travellers boycott Cathay over the short term,” he said.
Shukor Yusof, the head of consultancy Endau Analytics, said in the longer term, 30% shareholder Air China Ltd (601111.SS) could buy the remainder of Cathay, but there was no urgency because the Hong Kong carrier was in a state of flux.
“That will only occur when the political climate is right.”
Reporting By Anne Marie Roantree and Donny Kwok in Hong Kong, Jamie Freed in Singapore and Stella Qiu in Beijing; Editing by Himani Sarkar and Jane Merriman