“As a premium airline, we have to live up to that ambition, right? So we have to continue to invest. We cannot just stand still.”

Singapore Airlines was voted 2023’s best airline in the Skytrax World Airline Awards, known as the aviation Oscars. Cathay ranked number eight. The city’s flag carrier took fourth place in 2019.

Lau, 53, said investments in first and business class were especially important, as they were “big revenue drivers” for the airline.

The airline is banking on a resurgence in corporate travel, which Lau said was coming back “quite strong,” especially demand for flights to and from mainland China.

Cathay’s corporate travel has almost recovered to pre-pandemic levels as a proportion of overall traffic.

The airline is launching a new business class cabin, called Aria, which will arrive in the second quarter of next year as part of a redesign of its long-haul Boeing 777-300ER aircraft. A new first class cabin will be featured in Cathay’s Boeing 777-9 aircraft from 2025.

A surge in demand after Hong Kong lifted coronavirus travel restrictions earlier this year helped Cathay report a net profit of HK$4.26 billion (US$546 million) for the first half of 2023, compared with HK$4.99 billion in losses in the same period last year.

Aviation analytics firm Cirium said business class fares were between 12 and 24 per cent higher in August compared with the same month in 2019 for travel between Hong Kong and London, New York, San Francisco and Tokyo.

Cathay’s strategy is in line with an industry-wide trend that has seen airlines such as Germany’s Lufthansa, Australian airline Qantas and Air France invest in their high-end services.

The moves came even though corporate travel has been slow to recover in the United States and Europe as economic uncertainty, higher inflation and environmental concerns about airline travel affect demand. Lau said Cathay took a longer term view of the market.

“We have a lot of confidence in Hong Kong and in the whole Chinese mainland market,” Lau maintained. “So that is why I think when we make these investments, they will be there for the next five to 10 years.”

Gary Ng Cheuk-yan, senior economist at corporate and investment bank Natixis, said it was an “unavoidable choice” for Cathay because it had to make investments in its business and first class amid competition from other airlines, including Middle East operators such as Emirates and Qatar Airways.

Despite indirect journeys to destinations in the West taking longer on Gulf carriers, the savings could be as much as half of a direct flight in Cathay’s business class, which would sway some customers, he added.

Ng said demand among mainland leisure travellers was still there and they were willing to spend more, because they were not using their cash to buy new cars or houses.

But he remained cautious about business from China to the rest of the world recovering to pre-pandemic levels.

He warned geopolitical tensions would be a major factor for business travel between China and the rest of the world.

Earnings at Hong Kong’s Cathay soar to HK$4.3 billion in first half of 2023

Ng said potential customers would also be on the lookout for more than just business class cabins.

“It depends on what kind of services that they offer, what is the quality, the fast connectivity? Ng added. “These factors also matter beyond the pure upgrade to the business class.”

Lily Agonoy, the managing director of Jebsen Travel, said Cathay had some catching up to do, in particular with Singapore Airlines, which was well-known for its premium services as well as connectivity, an important consideration for executives who prized flexibility and convenience.

She predicted there would be demand for business travel, but it would not reach pre-pandemic levels.

Agonoy said another potential money-spinner airlines should examine was premium economy class.

“Some companies are reducing their travel expenses, because the business class fares are really expensive nowadays,” Agonoy explained. “So companies now are considering premium economy.”

Cathay and its budget carrier HK Express aim to reach 70 per cent of pre-pandemic flight capacity by the end of the year. It is also planned to return to service in line with pre-coronavirus levels by the end of 2024.