David Fickling of Bloomberg Gadfly describes the “new Great Power struggle” in his recent article on the fall of Cathay and Singapore Airlines. The two airlines cornered long-haul traffic beginning with the introduction of the B747 in the ’70s and continued dominating until the early 2000’s. However, today they are falling victim to excess capacity at Chinese and Gulf carriers. China Southern, China Eastern, Air China, Emirates and Qatar all exceed them in capacity and Etihad is getting close. The damage is clear – Cathay is cutting jobs and Singapore shares have not gone past $7 in over two months, the longest such stretch according to the article since 2009.
Crushed between the tectonic plates of the Chinese and Gulf carriers, the cities’ airlines are also geographically disadvantaged. Two-thirds of humanity lives within an eight-hour flight of Emirates’ base in Dubai, making it particularly well-placed to link global travelers.
With ultra-long-haul jets such as the Boeing 787 and Airbus SE’s A350 opening up unheard-of routes such as direct Perth-London flights, and Chinese airlines hitting their stride, the old roles connecting Asia to Europe and North America are disappearing. Where they still have an advantage — using the hub-and-spoke model to fill more seats on planes, thus improving profitability — the Gulf carriers’ geographic advantage means Emirates and Qatar can do it better.
Check out the full article here to see what Cathay and Singapore are doing to fight back and turn the page. Though profitability may be restored over the long-term, their business models will be forever changed.