Hong Kong: Comparison: Cathay Pacific and Singapore Airlines

Asia's aviation axis has shifted from Singapore Airlines (SIA) to Cathay Pacific as the region undergoes both cyclical and structural change. SIA is additional exposed than Cathay to the weak economies of Europe while Cathay can additional entirely serve North America, currently a strong market. Cathay's Hong Kong hub is far better suited to capturing Chinese increase than is Changi, and Hong Kong's additional northerly location than Singapore means diversions through the Middle East on Gulf carriers are less of a threat than at SIA.

Cathay's decision to offer premium economy– which SIA is still hesitant to do – is bearing fruit. SIA however has made additional significant and bolder change than Cathay, embarking on new partnerships and launching long-haul LCC Scoot. These will take time to mature – Scoot particularly.

These factors are unlikely to change in the short term, but the long term contains much better uncertainty. The possibilities of deep partnerships, acquisition, consolidation, changes in bilaterals or a surge in increase out of India and Indonesia, to name but a few, could potentially re-balance not only SIA and Cathay, but all of Asian – and probably world – aviation. This statement looks at where Cathay and SIA compare today and what the next may hold as they pursue different strategies.

Profits and operating margins higher in last four years at Cathay than SIA
Since 2009 Cathay has posted larger operating profits than SIA. Prior to 2009 SIA was consistently the better performer, inclunding during the world financial crisis which impacted both carriers significantly. 2012 gives a worrying trend for Cathay, but its performance in 1H2013 is significantly better (relative to itself – not globally) than a year ago due to capacity cuts and re-fleeting.

Reported operating profits are for each airline's group. For Cathay this includes Cathay Pacific, Dragonair, cargo, catering and other services. For SIA this primarily includes Singapore Airlines, SilkAir, cargo, engineering and in some years its SATS division. While the flying components are the major source of revenue, they are typically lower yielding; the balance is further skewed as SIA has an engineering division with a large third-party business whereas Cathay does not. Cathay does not statement profits for each major division but SIA does.