Swire Group

Reduced demand cuts fares on Cathay

PUBLISHED : Tuesday, 15 May, 2012, 12:00am
UPDATED : Tuesday, 15 May, 2012, 12:00am

Cathay Pacific Airways said yesterday that it had cut economy class fares by up to 10 per cent this year after a slowdown in demand.

Chief executive John Slosar said fares dropped 8 to 10 per cent to match its rivals. In the process, the carrier managed to fill up more seats but at the expense of passenger yield, a measure of average fare paid per passenger per mile.

Cathay and subsidiary Dragonair flew 7.02 million passengers in the first three months of this year, up 9 per cent year on year. Seats sold stood at 78.8 per cent, up 0.2 of a percentage point from a year earlier.

Singapore Airlines, which announced a surprise loss for the first quarter, said the pressure on passenger yield will continue, especially in the routes to Europe and the US.

However, its outlook for the year ahead is less pessimistic than Cathay. Advance bookings in the second quarter have been higher off a low base a year before because of the Japan earthquake. It also forecast a gradual recovery of air freight demand in the second half.

'Cathay's outlook is more negative than its peers,' said Kelvin Lau, transport analyst for Daiwa Capital Markets. 'The management perhaps sees something we don't, such as continuing weakness in advance bookings.'

Price of jet fuel Singapore Kerosene has slid from the peak of above US$137 per barrel in March, ending at US$123.95 yesterday.

May is the traditional low season as it falls between the Easter holiday in April and the school vacations that start in mid-July. Carriers, including Cathay, Singapore Airlines and Qantas, offer discounts to attract travellers during this season.

But a travel agent said Cathay's current promotional fares are similar to its offers in the past and that fares have not seen any drastic cuts so far.

The falling yield in economy and business classes along with high oil prices last week caused Cathay to flag a profit warning for the first half.

It also announced cost-saving plans by freezing the headcount of ground staff, cutting capacity and offering unpaid leave to cabin crew.

Cathay shares fell 2.05 per cent to HK$12.4 yesterday. The stock has been down 5 per cent so far this year.

Air China, which has a nearly 30 per cent stake in Cathay, dropped 2.5 per cent to HK$5.46.

The Beijing-based carrier saw its passenger numbers slip 4.6 per cent year on year in April to four million.

4%

Cathay Pacific has cut its forecast for passenger growth this year to this figure from 7 per cent. It predicts zero growth for cargo trade