Cathay Pacific posts worst first-half loss in at least 2 decades

A Cathay Pacific Airways jetliner preparing to land at Hong Kong's airport on Tuesday. The airline is on track for its first ever back-to-back annual loss since it was founded in 1946.
A Cathay Pacific Airways jetliner preparing to land at Hong Kong's airport on Tuesday. The airline is on track for its first ever back-to-back annual loss since it was founded in 1946.PHOTO: EUROPEAN PRESSPHOTO AGENCY

SHANGHAI • Cathay Pacific Airways yesterday posted its worst first-half loss in at least 20 years and said it did not expect conditions to improve for the rest of the year, as it continues to lose customers to mainland competitors.

The loss of HK$2.05 billion (S$358 million) for the six months ended June puts the Hong Kong airline on track for its first ever back-to-back annual loss since it was founded in 1946.

Group revenue edged up 0.4 per cent to HK$45.9 billion, while passenger yields - the average fare paid per mile per customer - fell 5.2 per cent, Cathay said in a filing to the Hong Kong bourse. Yield on cargo services rose 4.4 per cent.

"We do not expect the operating environment in the second half of 2017 to improve materially," Cathay chairman John Slosar said in a statement.

"In particular, the passenger business will continue to be affected by strong competition from other airlines, and our results are expected to be adversely affected by higher fuel prices and our fuel-hedging positions," he said.

Shares in Cathay closed up 0.86 per cent before results were announced, in line with the Hang Seng Index which rose 0.9 per cent.

The airline posted an annual loss last year for the first time since the global financial crisis as state-supported Chinese airlines chipped away at its market share, particularly on international routes to and from China.

Cathay has had to resort to seasonal discounts for its premier seats after saying last year that premium travel was slumping, causing passenger yields to decline.

Revenue passenger kilometres (RPK), a measure of traffic, grew by 1.4 per cent over the first half, its lowest growth rate since the turn of the decade, save for the first half of 2013, according to Bocom International analyst Geoffrey Cheng.

Cathay has reported losses only in three years since it was founded in 1946 - once in 1998 in the aftermath of the Asian financial crisis, in 2008 as the global credit crisis unfolded, and last year as a result of fuel-hedging bets gone wrong and intensifying competition.

Mr Rupert Hogg, who took over as Cathay's chief executive on May 1, announced the elimination of 600 jobs in the same month as part of a three-year transformation programme, Asia's biggest international airline revealed earlier in the year. In comparison, China Southern Airlines' RPK rose 12.49 per cent year on year over the same period, according to company data.

Air China, which has a cross-shareholding deal with Cathay, reported RPK growth of 6.5 per cent. Last month, third-largest shareholder Kingboard Chemical Holdings called on the airline's founding Swire family to intervene to lead it out of "hard times".

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on August 17, 2017, with the headline 'Cathay Pacific posts worst first-half loss in at least 2 decades'. Print Edition | Subscribe