Cathay Pacific flies into HK$2 billion loss in first half of 2017

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Cathay Pacific has made a loss of two billion Hong Kong dollars ($255 million) in the first half of 2017, with intense competition and higher costs creating “difficult operating conditions”.

The loss compares to a HK$353 million profit in the same period of 2016, with costs for Cathay Pacific and Cathay Dragon increasing considerably.

Fuel costs before the effect of fuel hedging increased by 33.4 per cent to HK$2.8 billion, with the adverse effect of the strength of the Hong Kong dollar denominated in other currencies, and higher aircraft maintenance costs also affecting results.

There were other exception costs including a decision issued by the European Commission in March that a number of carriers including Cathay Pacific had agreed cargo surcharge levels prior to 2007, infringing European competition law, with a fine of HK$498 million being imposed.

Though Cathay Pacific has made an application to the General Court of the European Union to annul the decision leading to the fine.

Cathay Pacific also started a three-year corporate transformation programme, which includes a reorganisation of the head office, with costs associated with redundancies totalling HK$224 million.

Cathay Pacific chairman, John Slosar says he does not expect the second half to improve materially, but the cargo business is looking good.

He says: “The outlook for the cargo business is good and we expect robust demand and growth in cargo capacity, yield and load factor in the second half of this year. We expect to see the benefits of our transformation in the second half of 2017, and the effects will accelerate in 2018.”

Cargo revenue has improved, with tonnage growing faster than capacity, and yield benefitting from resuming fuel surcharges and improved demand for Mainland China exports, while demand for shipments within Asia was stronger and European routes grew.

Cargo revenue increased 11.7 per cent to HK$10.5 billion, with capacity up 2.3 per cent and tonnage by 11.5 per cent, while load factors improved four percentage points to 66.2 per cent.

The group’s fleet was upgraded with the delivery of six Airbus A350-900s during the first six months and another in July, while the final Airbus A340-300 was retired.

One Boeing 747-400 Boeing Converted Freighter was retired and Cathay Pacific wet-leased two Boeing 747-8 Freighters from Atlas Air in June.