Cathay Pacific Airways Ltd. and Singapore Airlines Ltd. are spending $207 million fitting flat-bed seats and larger TV screens in business-class. Finding passengers to fly them may be a challenge.
Sales at the front of the cabin fell short of its expectations in December, Cathay Pacific said last week, as the Hong Kong-based carrier this month introduced promotional business-class fares. Qantas Airways Ltd., Australia’s biggest, offered 28 percent discounts on return premium tickets to Hong Kong during the holiday season.
|Business-class passengers check in for a Singapore Airlines Ltd. flight at Changi Airport in Singapore. (Bloomberg)|
Premium ticket prices between Asia and the U.S. averaged $5,859 in December, their lowest level since 2009, while in Australia an index of business-class ticket prices dropped 30 percent from a year earlier to a record low. Wall Street’s cost cuts and dismissals, which have helped erase more than 300,000 financial-industry jobs in the past two years, aren’t over yet as Citigroup Inc. and Morgan Stanley announced a combined 12,600 job cuts in the past month.
“When financial institutions are firing people, traffic and profits at airlines like Cathay and Singapore Airlines are affected because they are known for serving premium passengers like bankers,” said Li Lei, a Beijing-based China Minzu Securities Co. Ltd. analyst, who has covered aviation for more than a decade. “Their home bases are too reliant on financial services and trade.”
Airlines that invested in entertainment systems, seats and lounges to compete for business traffic may see growth in business-class fares slowing further this year, according to American Express Co.
New York-based AmEx said Jan. 11 it will eliminate 5,400 jobs this year, mostly in travel services, as consumers and businesses rely more on digital technology for bookings.
“When revenues are light, one of the first things to happen is a cutback in travel,” said Michael Werner, a banking analyst at Sanford C. Bernstein & Co. in Hong Kong. “You’d prefer to cut travel expenses before cutting headcount.” (Bloomberg)