Cathay Pacific First-Half Loss Rockets

Hong Kong’s Cathay Pacific Airways reported an increased first half loss of 681 percent, blaming intense competition and higher fuel costs.

Cathay’s loss of HKD$2.05 billion (USD$262.2 million) for the six months to end June compares with a HKD$353 million loss for the same period last year.

Passenger revenue for the Cathay group was down 3.9 percent to HKD$32.1 billion, with competition pushing ticket prices down and yield falling by 5.2 percent. The strength of the Hong Kong dollar also had a negative effect on revenue.

Costs were up by HKD$2.87 billion, a 33.4 percent increase, with average fuel prices increasing by 31.5 percent, and consumption up slightly as it increased flying hours. Fuel now accounts for 30.4 percent of total operating costs, up from 29.1 percent in 1H16.

“We are addressing the industry challenges through our corporate transformation and by expanding our route network, increasing frequencies on our most popular routes and buying more fuel-efficient aircraft,” Cathay chairman John Slosar said.

The airline increased capacity by 1.1 percent in the six months, compared to the prior year period, and saw passenger load factor edge up to 84.7 percent, a 0.2 percentage point lift.

The Hong Kong flag carrier took delivery of six Airbus A350-900s during the period, bringing the fleet total of that aircraft to 17, with five more due for delivery in the second half of the year.

Cathay has always been strong in cargo, and increased demand helped freight revenue rise by 11.7 percent to HKD$10.5 billion. Cargo tonnage carried was up by 11.5 percent, on a load factor increase of 4.0 percentage points to 66.2 percent.

Looking forward, Cathay’s Slosar said “We do not expect the operating environment in the second half of 2017 to improve materially. In particular, the passenger business will continue to be affected by strong competition from other airlines and our results are expected to be adversely affected by higher fuel prices and our fuel hedging positions.”

He said the outlook for cargo “is good and we expect robust demand and growth in cargo capacity, yield and load factor in the second half of this year.”