Cathay reduces H1 loss despite fuel rises

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August 08, 2018
Cathay narrows loss
Cathay Pacific A350 on finlas to Perth through thick fog. Credit Richard Kreider

The Cathay Pacific Group expects to benefit from an improved performance in the second half after reducing  its interim net loss to $HK263 million, despite the drag on industry profitability from higher fuel prices,

The result for the six months ending June 30 is better than some analysts predicted and compares to a net loss in the first half of 2017 of more than $HK2 billion.

Cathay is half way through a transformation program aimed at reducing costs and improving efficiency in the face of increased competition from mainland Chinese and regional low-cost carriers.

Read Cathay passengers see new menus, seats in restructure.

Airlines Cathay Pacific and Cathay Dragon reported an interim loss of $HK904m compared to $HK2.76 billion the same half a year ago.

Chairman John Slosar said the operating environment remained challenging but the three -year transformation was on track.

“There is still much to do, but I am confident in our future,’’ he said.

Passenger revenues grew by 10.4  percent to $HK35.4 billion as capacity increased 3.2 percent.  An increase in traffic limited the fall in load factor to 0.5 percentage points to bring it to 84.2 percent.

Yields, a measure of average fares, were up 7.6 percent and passenger numbers rose 1.9 percent to 17.5m.

A 29.7 percent increase in average jet fuel prices was blunted by hedging and the introduction of more efficient aircraft. This saw overall fuel costs rise by 7.1 percent compared to the first half of 2017.

The group also benefited from strong freight demand which saw its cargo business benefit from growth in both volume and yield. Cargo revenue rose 23.4 percent to $HK12.97 billion.

“Our airlines usually perform better in the second half of the year than in the first half of the year. We expect this to be the case in 2018,’’ Slosar said.  “The strength of the US dollar and economic uncertainty arising from global trade concerns remain challenges.

“ But we still expect passenger yields to continue to improve and the cargo business to remain strong. Fuel prices are expected to be higher.

“Hedging losses will reduce but net fuel costs will increase. Our new aircraft will improve fuel efficiency and we expect to generate more ancillary revenue.”