Cathay Pacific Swings To First Loss Since 2008

Hong Kong’s Cathay Pacific posted its first full-year loss since the global financial crisis as intense competition and increased capacity hit revenue.

The SAR flag carrier made a net loss for 2016 of HKD$575 million (USD$74 million), from a HKD$6 billion profit the previous year.

Annual revenue was down 9.4 percent to HKD$92.75 billion (USD$11.94 billion) as regional competitors ramped up capacity.

Cathay blamed “intense and increasing competition” as the biggest drag on performance, with mainland Chinese carriers launching more direct flights to international destinations.

Competition from low cost carriers increased, with overcapacity a particular problem, Cathay said.

Passenger revenue saw an 8.4 percent drop to HKD$66.93 billion as the airline introduced new routes and increased frequencies, with capacity up overall by 2.4 percent. Load factor dropped 1.2 percentage points to 84.5 percent.

Yield was down 9.2 percent, reflecting the overcapacity.

Revenue at Cathay’s cargo business was HKD$20.06 billion, 13.2 percent down from 2015 as strong competition and overcapacity again plagued the airline. Cargo carried rose by 3.1 percent on a 0.6 percent capacity increase. Load factor came in 0.2 percentage points higher at 64.4 percent.

Cathay added new routes during the year and said it would add more in 2017. Tel Aviv, Barcelona and Christchurch will be added and some destinations will have increased frequencies.

During the year Cathay retired the last of its fuel-hungry Airbus A340s and Boeing 747s, and added Airbus A350s to its fleet.

Looking forward, Cathay chairman John Slosar said: “We expect the operating environment in 2017 to remain challenging. Strong competition from other airlines and the adverse effect of the strength of the Hong Kong dollar are expected to continue to put pressure on yield. The cargo market got off to a good start, but overcapacity is expected to persist.”