Cathay heads for red ink from Sars
The effects of the Sars outbreak are expected to drag Cathay Pacific Airways deep into the red in its first-half results, but analysts are forecasting a rebound in the rest of the year.
The No1 carrier in Hong Kong is expected to report a net loss of $1.44 billion when its interim results are released today, according to a survey of six research houses.
It made a $1.41 billion net profit in the first half last year.
'Cathay started the year well with a record January, but we estimate that Sars and the Iraq war-induced losses of April wiped out the first-quarter profits,'' Credit Suisse First Boston analyst Peter Hilton said in a report.
It estimated an interim loss of $1.2 billion.
Passenger numbers fell more than 32 per cent to 4.01 million in the first half due to the Sars outbreak. But traffic has improved gradually, with passenger numbers in June surging more than 88 per cent from May, when the outbreak was at its peak. Cathay will reinstate its full schedule next month.
Analysts said yields would remain a concern this year, with the carrier offering discounts to get passengers on board.
JP Morgan analyst Peter Negline said in a report that overall yields might decline 14 per cent in the first half because of an adverse shift in the traffic mix and he expects an interim loss of $1.85 billion.
Anil Daswani, of Citigroup Smith Barney, said: 'Pent-up demand and discounts have helped drive up traffic demand.
'Lower passenger yield is still a concern and it will be important to monitor the traffic demand in the fourth quarter when full capacity is resumed and most promotional offers are phased out.'
Nomura Securities' Pierre Lau said the carrier would benefit from lower jet fuel prices this year. He said the expected launch of a Beijing service next year would add at least $26 million to its bottom line.
