Cathay records best week but rues low fares
Airlines are booking more passengers as the global economy recovers, but Cathay Pacific Airways chief executive Tony Tyler says profitability is still hampered by low air fares.
'We are able to fill flights now but at a very much reduced yield,' Tyler said yesterday on the sidelines of an exhibition.
Fares on international routes fell 20 per cent on average in the second quarter from a year earlier, according to the International Air Transport Association, an industry body with more than 230 members.
In view of the lower fares - and sluggish advance bookings for business and first-class seats - Tyler said he was reluctant to predict a sustainable recovery, even though Cathay had just seen its best week of the year.
The Hong Kong flag carrier said seasonal strength in its passenger and cargo divisions continued into the final week of last month, when it recorded its highest sales and passenger yields - revenue per seat per kilometre - for the year.
The figures were boosted by a higher number of premium-class passengers last week, an intranet message to the staff said on Friday. Cathay flew 5,000 business- and first-class passengers on a single day last week, its best day this year.
Cathay's passenger division had an average load factor of 83 per cent, largely attributed to public-holiday travellers returning from Japan and Indonesia.
But the week was this year's best largely because of the seasonal pick-up and the low base of comparison from last year, Tyler said.
Advance bookings for this month from Cathay's biggest market, Hong Kong, rose 8 per cent year on year last week. But bookings for the front end were still a concern, it said.
Normally, better load factors - the percentage of seats sold - mean higher profit. But the reduction in the frequencies of flights because of weak demand has lowered the utilisation rate of aircraft, which increases the unit operating cost of airlines.
The average number of hours flown fell 2 to 3 per cent for Boeing 747 and 777 aircraft worldwide, according to Iata.
Profit from cargo divisions is also still suffering from low freight rates.
Asian carriers such as Cathay, Singapore Airlines and Korean Airlines have been hit harder than their global peers, as they rely more on the cargo business.
Cathay said its overall cargo revenue was still well behind budget, with a big drop compared with the same week last year.
However, it operated three charters to the United States last week after two additional flights operated in response to ad hoc demand in the week before.
Shares in Cathay dropped 2 per cent to HK$11.56 yesterday.
Carrier's passenger yields and sales hit peak for this year last month
Iata says fares on international routes in the second quarter fell on average by: 20%