Cathay in cost-saving drive over fuel prices
Cathay Pacific Airways announced cost-saving measures - unpaid leave, a cut in capacity and a freeze on headcount - to cope with high oil prices, which it predicted would take a heavy toll on its business.
The high fuel prices and weakening demand in the passenger and cargo segments have been weighing on the airline's performance.
'Those pressures have left us no choice but to report that Cathay's financial results for the first half will be disappointing,' chief executive John Slosar said at a news conference yesterday.
The last time Cathay used the word 'disappointing' to describe its performance was in 2008, when reporting a net loss of HK$8.56 billion after betting on the wrong side of futures contracts on oil prices.
Slosar did not say whether this year's results would be worse or better than those for 2008.
From June to December, all cabin crew in Cathay will be offered the chance to take unpaid leave.
The carrier will cut capacity on long-haul flights, as they are more vulnerable to high fuel costs. Instead, it will deploy long-haul aircraft such as the Boeing 777 on routes to the mainland, Southeast Asia and Northeast Asia, as the demand for flights to regional destinations remains strong.
The recruitment target for cabin crew, originally 1,000, has been slashed to the 700 already recruited, and no pilots will be hired beyond the 300 already hired - in effect, imposing a hiring freeze across the board.
Cathay has revised down its forecast for passenger growth this year to 4 per cent from 7 per cent, and for cargo to zero from 3 per cent.
'The volatility we've seen over the past four, five years and the shortness of the cycle have made it more difficult to manage our business,' Slosar said. 'When the world economy goes up and down like a yo-yo, it makes it hard to invest for the future.'
Cathay's warning came after many of its peers announced losses or steep profit declines for the first quarter. Korean Airlines swung to a US$59 million loss in the first quarter, while the net loss at Taiwan's China Airlines widened to NT$940.3 million (HK$248.6 million).
Net profit at the big three mainland carriers dived as much as 86 per cent in the quarter year on year.
Slosar likened present conditions to those during the summer of 2008, when jet fuel prices also soared. One difference is that demand then was stronger than now, he said.
The only advantage the airline enjoys today is its more modern fleet: it has 27 Boeing 777s, while it had just a handful in 2008. It will speed up the retirement of its Boeing 747s.