The Cathay Pacific Group has reported an
attributable loss of HK$935 million for the first six months of
The loss compares to the profit of
HK$2,808 million in H1 2011. The loss per share was HK23.8 cents
as compared to the earnings per share of HK71.4 cents in 2011,
while turnover for the period rose by 4.4% to HK$48,861 million.
In the first half of 2012, Cathay Pacific’s core
business was significantly affected by the persistently high price
of jet fuel, passenger yields coming under pressure and weak air
cargo demand - factors common to the aviation industry as a whole. Profits from associated companies, including Air China, also
showed a marked decline.
In response to these challenges, the
Cathay Pacific Group introduced measures designed to protect its
business, including schedule changes and capacity reductions, the
withdrawal from service of older, less fuel-efficient aircraft, a
recruitment freeze and the introduction of voluntary unpaid leave
for cabin crew.
At the same time the group kept its
network intact and continued with major investments – new
aircraft, new products and its own HK$5.9 billion cargo terminal
at Hong Kong International Airport – that will benefit the
business in the long term.
Fuel remains the airline’s most
significant cost. Fuel prices were at historical high during the
first half of 2012 (although they decreased significantly at the
end of the period) and this had a major impact on Cathay Pacific’s
In the first six months of 2012, the group’s
fuel costs (disregarding the effect of fuel hedging) increased by
6.5% compared to the same period in 2011. Fuel accounted for 41.6%
of total operating costs.
Managing the risk associated with high
and volatile fuel prices remains a key challenge, and while the airline’s
fuel hedging programme helps to mitigate the impact of fuel price fluctuations, with the fuel price remaining high for the
past two years, realised profit from hedging activities in the
first half of 2012 fell by 59.4% compared to the same period in
In the first six months of 2012, the passenger
business of the Cathay Pacific Group was affected by pressure on
yields against the background of increased fuel prices and higher
Revenue for the period was HK$34,713 million, representing an increase of 9.2% compared to the same period in
Capacity increased by 6.9%, and a total of 14.3 million passengers were carried by Cathay Pacific and Dragonair in the
first six months, which is a rise of 8.6% compared to the same
period in 2011.
The load factor rose by 0.8 percentage points.
Yield increased by 1.2% to HK66.1 cents.
Again, the high cost of fuel made it more
difficult to operate profitably, particularly on long-haul routes
operated by older, less fuel-efficient Boeing
747-400 and Airbus A340-300 aircraft.
The group’s cargo
business was affected by continued weak demand in major markets.
Cargo revenue for the first half of 2012 was down by 7.6% to
HK$11,897 million compared to the same period in 2011. Yield was
down by 0.4% to HK$2.41. Capacity was down by 4.3%, while the load
factor was down by 4.1 percentage points to 64.3%.
shipments from the group’s two key markets, Hong Kong and Mainland
China, was well below expectations, though the introduction of new
hi-tech consumer electronics products in March resulted in a
The airline has continued to develop new markets where demand
warranted doing so, introducing freighter services to Zhengzhou in
March and to Hyderabad in May.
Six Airbus A350-900 aircraft
were ordered in January. In August, the airline agreed to acquire
10 Airbus A350-1000 aircraft and to convert 16 previously ordered
Airbus A350-900 aircraft into Airbus A350-1000 aircraft which has
a bigger capacity and longer range.
The Cathay Pacific Group will
take delivery of 19 aircraft in 2012 which will help to improve
the operational efficiency of the fleet.
In view of their high
operating costs when fuel prices are high, the retirement of the airline’s Boeing 747-400 passenger aircraft has
also been accelerated.
Three Boeing 747-400BCF freighters have also been withdrawn from
service in order to reduce costs.
In May, Cathay Pacific
announced its intention to reduce some passenger services on
transpacific routes. This will enable fuel-efficient
777-300ER aircraft to operate on routes currently served by older
less fuel efficient Boeing 747-400 aircraft.
The group has
increased some services in Asia, where demand is relatively
robust. Dragonair introduced or resumed flights to six
destinations – Xi’an, Guilin, Clark, Jeju, Taichung and Chiang Mai
– and will introduce flights to Kolkata and Haikou later in the
Cathay Pacific also continues to improve products and services in
the air and on the ground. A new Premium Economy Class was
launched alongside new long-haul Economy Class seats. The airline
also continued to install its popular new Business Class on
Cathay Pacific Chairman Christopher Pratt said,
“Aviation will always be a volatile and challenging industry and
our business will always be subject to factors, including economic
fluctuations and fuel prices, which are beyond our control. The
cost of fuel is the biggest challenge, although the recent
reduction in the fuel price will, if sustained, provide welcome relief. We will continue to take whatever measures are necessary
to protect the business, managing short-term difficulties while
remaining committed to our long-term strategy. Our financial
position remains strong and we are in a good position to deal with
our current challenges. We will continue to invest in the future,
using our core strengths – a superb team, a strong international
network, exceptional standards of customer service, a strong
relationship with Air China and our position in Hong Kong – to
ensure the continued success of the Cathay Pacific Group.”
See other recent news regarding: