Friday, August 12, 2011

CATHAY PACIFIC profit FALLS 59pc to US$348.7 million, cites high fuel, uncertainty


HONG KONG's Cathay Pacific Airways posted a 59 per cent first-half plunge in net profit to HK$2.81 billion (US$348.7 million) year on year, attributing the decline to lower cargo demand, higher fuel costs and global economic uncertainty.

"After an exceptionally strong 2010, in which we made record profits, 2011 is proving to be more challenging," said Cathay chairman Christopher Pratt.

However disappointing the result, it still beat an average profit forecast of HK$1.5 billion from four analysts polled by Reuters.

Cargo business performed well at the start of the year, but slackened by the second quarter, while the passenger businesses of both Cathay Pacific and Dragonair did well throughout with a strong demand for premium travel, said a company statement.

Cathay reported that the delivery of its new Boeing 747-8F freighters has been delayed again. Now two deliveries are scheduled for September, with three more expected by the end of the year. But delivery dates are still subject to change.

The company also launched a cargo joint venture with Air China in May, in which it holds an equity and an economic interest. The joint venture operates from Shanghai under the Air China Cargo logo and will capture airfreight opportunities from the Yangtze River Delta region.

Fuel was the big cost, rising 49.5 per cent year on year, an increase of HK$6,461 million. Fuel hedging brought some relief, resulting in a realised profit of HK$962 million.

Cathay and Dragonair cargo started well, but demand from Hong Kong and the mainland weakened from April and first half revenue fell 7.7 per cent to HK$11.6 billion year on year. Yield was up by 7.1 per cent to HK$2.42 billion while capacity increased 14.6 per cent. The load factor fell by 9.6 percentage points to 68.4 per cent, said the company.

First half passenger revenue was HK$31.7 billion - an increase of 15.9 per cent year on year. Capacity increased 9.8 per cent and the two airlines carried a total of 13.2 million passengers, a rise of 1.7 per cent on 2010.

The group took delivery of six new aircraft in the first half with a further eight deliveries scheduled in the second half. In March, Cathay announced its intention to acquire another 27 new aircraft - two Airbus A350-900s, 15 Airbus A330-300s and 10 Boeing 777-300ERs. In August, Cathay Pacific announced a further acquisition of four Boeing 777-300ERs and eight Boeing 777-200F freighters.

Cathay Pacific started flying to Abu Dhabi in June and will start flying to Chicago in September, with frequencies increased to Milan, Paris, New York, Toronto and a number of southeast Asian routes. Dragonair increased frequencies to a number of cities on the mainland.