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Cathay Pacific must push ahead with its restructuring
As an icon in the city, its return to health is important for our image and economy
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Aviation fuel accounted for nearly 30 per cent of Cathay Pacific Airways’ total operating costs last year. Wrong-way bets on future fuel costs can therefore weigh on its balance sheet. But it is not hedging losses that have soured investor sentiment towards Cathay. Rather it is the negative trend in its business environment behind an unexpected announcement of a HK$575 million loss last year, a reversal of a HK$6 billion profit the previous year. Moreover there is no prospect of early relief from the pressure on earnings.
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The airline blames a slump in business travel, the increasing global reach and competitiveness of rival mainland airlines, falling visitor numbers to Hong Kong, rival carriers increasing the number of seats on competing routes, more passengers paying lower fares – plus, of course, the ongoing fuel-hedging losses.
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These are mostly not one-off factors, tempered by the promise of better times on the horizon. Airline chiefs warn that the passenger yield on major routes will remain under pressure. The outlook puts the onus on Cathay management to push ahead with the turnaround plan unveiled in January .
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