Cathay expects to weather tough times after profit turnaround

708
March 13, 2019
Cathay expects to weather tough times
Cathay Pacific A350 on finlas to Perth through thick fog. Credit Richard Kreider

Cathay Pacific expects tough times to continue but remains confident in its long-term sustainability after reversing two years of losses to post a 2018 annual profit of $HK2.35 billion ($US300m).

The previously flagged profit turnaround saw Cathay transform a 2017 group loss of $HK1.26 billion in an environment where it faced intense competition from low-cost and Chinese carriers.

The Hong Kong carrier benefited in 2018 from robust freight demand, rising yields and a transformation program aimed at cutting costs and boosting revenue.

READ: Mahathir warns shutting down Malaysia Airlines is an option

Chairman John Slosar said competition remained intense during the year as fuel prices increased and the US dollar strengthened.

“However, our transformation programme remains on track and had a positive impact,’’ he said.

“We focused on finding new sources of revenue, building our network and strengthening the Hong Kong hub, delivering more value to our customers and improving productivity and efficiency.”

Cathay Pacific and Cathay Dragon reported an attributable profit of $HK1.15 billion in the second half of 2018, compared to a loss of $HK904 million in the first half and a loss of $HK1.54 billion in the second half of 2017.

Passenger revenue for 2018 rose just over 10 percent to $HK73.12 billion and yield increased 6.7 percent. The airline said this reflected increased premium class passenger demand, fuel surcharges and revenue management.

It also expanded its footprint during the year, introducing passenger services to 10 destinations while dropping two.

READ: US, Europe at odds over 737 MAX groundings.

A big boost came from the cargo business, which produced an 18.5 percent increase in group revenue to $HK28.32 billion on the back of robust demand.

Looking ahead,  Slosar said the business was expected to remain challenging in 2019 with a strong US dollar and uncertainty due to geopolitical discord and global trade tensions dampening passenger and cargo demand.

“Competition will remain intense, especially in economy class on long haul routes,’’ he said

“Operational constraints will impose additional costs. These factors will affect both the passenger and the cargo business.’’

However, the Cathay chairman remained confident in the ability of the airline’s transformation programme to deliver sustainable long-term performance.

“In 2019, we will continue to reorganize our nine core business processes, to benefit from associated underlying structural initiatives and to build a culture of continuous improvement,’’ he said.

“We will compete hard by extending our route network to destinations not currently served from Hong Kong, by increasing frequencies on our most popular routes and by operating more fuel-efficient aircraft.

“We will focus upon, and continue to invest in, customer service and productivity.”