StockTalk(6.20): Singapore Airlines outperforms Cathay Pacific in post-pandemic recovery: What makes them different?
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During the pandemic, Singapore Airlines (SIA) $SIA (C6L.SG)$ and Cathay Pacific Airways $CATHAY PAC AIR (00293.HK)$ have seen divergent fortunes, even post-pandemic. SIA rebounded much faster, with a market value almost three times Cathay's. SIA's shares rose 40% this year, while Cathay's fell 9.3%. SIA has been one of the world's best-performing airline stocks in the last three months, carrying 2.8 million passengers in May, 88% of its pre-pandemic capacity. In contrast, Cathay's passenger traffic was nearly 1.4 million in April, and it expects to return to just 70% of pre-pandemic operation levels by the end of this year. SIA's revenue for the year ended March was SGD 17.8 billion, exceeding pre-Covid levels, while Cathay's revenue last year was less than half of what it was in 2019.
The Hong Kong government's reluctance to drop virus-related restrictions severely hampered Cathay Pacific's rebuild. At the same time, Singapore Airlines benefited from a relentless wave of travel demand. Additionally, SIA has cemented partnerships with several airlines around the region, while Cathay and HK Express are only back to 70% of their pre-pandemic operation levels. These factors likely contributed to the significant difference in market value between the two airlines.
What could Cathay do to catch up with Singapore Airlines' recovery pace? Do you believe the Hong Kong government should drop more restrictions to help Cathay Pacific regain its feet?
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redevilgiggs : The Hong Kong government should lift restrictions related to the virus
kind Dolphin_7635 redevilgiggs : HK already done that, but slow and behind..
ZnWC : Cathay didn't perform as good as SIA has little to do with HK government lifting pandemic restrictions late. SIA recovery also coincided with China lifting it's travel restriction due to the pandemic. Hence the 2 airlines should have the same advantage.
SIA revenue increase was party due to increase in passenger and cost saving from fuel. I think quality service, safety and productivity play important role to attract passenger.
There are 2 long term initiatives taken by SIA. First is the collaboration with other airlines (e.g. Garuda and Air India). Second is Digitalisation to increase productivity. I believe morale in the company is equally if not more important.
Mr Pistachio ZnWC : if I recall CX didn't get any help from HK gov.
ZnWC Mr Pistachio : No it didn't but HK government lifting of travel restriction affect the passenger of the airline and therefore revenue.
Kopikarp : To catch up with Singapore Airlines' recovery pace, Cathay Pacific can focus on a few key strategies. First, they should increase capacity deployment in the Asian market, especially in mainland China, which is an important source of passengers for the airline. By expanding their capacity, Cathay Pacific can improve efficiency and gain a larger market share. Second, they should seize market opportunities and carefully analyze trends to identify profitable routes and markets. This will help them capitalize on the release of pent-up demand and accelerate their recovery. Lastly, optimizing their cost structure is crucial. Cathay Pacific should aim to reduce unit costs by maximizing asset utilization. Currently, their fleet is underutilized, so increasing utilizationn through increased hiring can lead to cost savings and better financial performance.
As for the Hong Kong government dropping more restrictions to aid Cathay Pacific, it could potentially support the airline's recovery. Gradual relaxation of COVID-19 measures and reopening international travel would stimulate demand and provide Cathay Pacific with more opportunities to attract passengers. However, any decision to drop restrictions would have to carefully consider public health concerns to prevent potential spikes in infections. Ultimately, the Hong Kong government needs to continually assess the risks and benefits and make trickling informed decisions based on the prevailing circumstances. Consequently, Cathay's recovery would also likely be more gradual in response.
TLim77 : Is there a missing article link? The business times article perhaps?
Leefh : SIA can perform better than CX due to strategic location which have good connecting flight within the region as well as world, plus local government supports.
toomanyscammers : well, perhaps, we gotta think of why SIA's price was dropping pre-covid levels then to understand why it's rising now and if it'll drop again. honestly, I didn't do research on why its share price dropped pre -covid. but to me, my guess is cos of strong competing budget airliners. premium airlines I believe might have been losing business (eh this one also not fact -checked, just personal opinion), to cheaper alternatives to flying like Tiger, Scoot, Jetstar,Air Asia, pre-covid. but why are premium airlines like SIA rocketing now while we don't hear the same for budget airlines? I think cos the budget airlines might have been harder hit during COVID. for eg, what happened to tiger? they seem to have disappeared. ( or was it precovid?) if sia retrenched so many during COVID,what more about the budget airlines who might have lesser resources than Sia? so I feel that cos these airlines are still recovering from COVID and setting up their biz in order, they haven't posed a big threat to Sia yet. but that's why I feel that Sia's price would eventually be affected when these competitors get back into the game. (all my opinions only yea, distinguish this from facts!)
also, consumers may not mind spending on Sia now having saved more during the pandemic but when their wallets start getting thinner ,especially with the recession, they'd cut back on expensive purchases like Sia and that's when the earnings for the co will drop.
lastly, I do feel that china needs to lessen restrictions for country based airlines like Cathay Pacific to enjoy the same growth as Sia. I do think that it is being in the right moment at the right time that has brought Sia this far post COVID, rather than its brand name being the reason for its recovery. hence, Cathay would enjoy the same success too if only the china govt would allow ease of movement etc. doubt the HK govt can do much as they get their instructions from china.
102765799 : SIA has always been the world's leading airline and will maintain its stead with strong experience and legacy
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