Hong Kong airline Cathay Pacific posts HK$2.05 billion loss for first half of 2017
Carrier admits performance unlikely to improve as HK$2.05b first-half loss is blamed on stiff competition and weak revenue from ticket sales
Cathay Pacific Airways has warned of further turbulence in the months to come after suffering a loss of HK$2.05 billion in the first half of this year.
The performance unveiled on Wednesday puts Hong Kong’s flagship carrier on track to post its first back-to-back annual loss in its 70-year history.
Cathay Pacific blamed the first-half loss on punishing competition and not enough revenue from ticket sales.
Earnings were also dented by the higher jet fuel costs, including losses from fuel hedging, which hit HK$3.2 billion.
“Clearly it was a challenging first half and the performance of our core airlines was disappointing,” Cathay Pacific chairman John Slosar said. “We do not expect the operating environment in the second half of 2017 to improve materially.”
Following the results announcement, Cathay shares on Thursday soared as much as 6.15 per cent to HK$12.42 at one stage before closing the morning trading session at HK$11.94, or 0.24 per cent higher from Wednesday.
“People just expect the worst is over,” GEO Securities CEO Francis Lun Sheung-nim said.
The interim loss was greater than the HK$1.2 billion estimated by analysts. The carrier made a profit of HK$353 million in the first half of last year, but lost HK$575 million for the whole of last year.
Revenue was flat at HK$45.85 billion in the first half.
Passenger yield, which measures the average fare paid per kilometre per passenger, was down 5.2 per cent to 51.5 cents.
One of the few bright spots was the cargo business, which was boosted by mainland exports with yield up 4.4 per cent in the first half, and likely to get even better over the rest of the year.
Despite Cathay Pacific and sister airline Cathay Dragon planes being 85 per cent full, luring passengers with cheaper airfares was hurting business, Slosar said.
The airline would seek to earn more from ticket sales, he said, implying fewer seats would be sold cheaply.
“What are we going to do? We are going to manage our revenue better,” Slosar said.
In addition to an ongoing restructuring drive to stem losses, the airline said it would continue to invest in more new aircraft, add in-flight Wi-fi in long-haul planes and upgrade dining in business class, among other measures.
Cathay Pacific has increasingly struggled against carriers based on the mainland and in the Middle East flying to the same long-haul destinations, as well as against budget airlines muscling in on regional flights.
Fellow premium carriers such as Singapore Airlines and Etihad Airways are also under pressure.
Corrine Png, CEO of transport research firm Crucial Perspective, said Hong Kong’s flagship carrier needed to do whatever it took to cut costs. “Cathay needs to work at bringing non-fuel costs lower in order to increase its competitiveness,” she said.
As for cutting more jobs by targeting employees in foreign offices and airports, the airline said its review had only just started and it was too early to tell if more people would be made redundant.
Airline analyst Will Horton was more optimistic, saying the core results were “not all that bad”, and second-half earnings could be better.