Cathay Pacific posts $46m loss on rising fuel costs

BEIJING • More passengers, higher ticket prices and a cargo rebound could not save Cathay Pacific Airways from slumping into yet another loss. For chief executive officer Rupert Hogg, that means his restructuring efforts need to strengthen further to turn the tide.

After back-to-back annual losses, the carrier is midway through a transformation programme under Mr Hogg, who has been cutting jobs and improving services to lure back premium travellers since taking over as CEO in May last year.

Rival Singapore Airlines, which has earned a profit in the quarter through June, has also been restructuring as Asia's two marquee airlines grapple with the threat from low-fare carriers and the expansion of Chinese and Middle Eastern companies.

"They need to take more drastic and deeper measures in their restructuring efforts," said Mr Shukor Yusof, founder of aviation consulting firm Endau Analytics.

Cathay Pacific is "on track" to achieve sustainable long-term performance, Cathay Pacific chairman John Slosar wrote yesterday in a note to shareholders after saying earnings were dragged down by oil hedging losses and rising prices of jet fuel.

Under Mr Hogg's transformation programme, Cathay Pacific has moved to improve its cabin offerings by providing a wider choice of meals in business-class cabins on long-haul flights, adding more fuel-efficient aircraft to its fleet and starting services to more destinations.

Also, at the back end of the aircraft - economy class - the carrier is trying to boost revenue by adding another row of seats on its Boeing 777 planes. The change will result in a 3-4-3 configuration, in line with the industry standard adopted by many premium carriers, although legroom will remain the same, Cathay said in March last year.

The carrier reported a net loss of HK$263 million (S$46 million) for the six months through June, according to a statement yesterday. That compares with a loss of HK$2.05 billion a year earlier and the median estimate for a profit of HK$140 million in a Bloomberg News survey of five analysts.

Cathay Pacific and Cathay Dragon paid 32 per cent more for fuel, the biggest expense for carriers in Asia, as a 19 per cent surge in Brent crude during the period weighed on costs. Although fuel-hedging losses narrowed as Mr Hogg scaled back contracts that were hurting the bottom line, they stood at HK$653 million, versus HK$3.24 billion a year earlier.

Still, some of the measures under the revamp plan are paying off. Passenger yield - a key metric of profitability measured by the money earned from carrying a customer per kilometre - rose 7.6 per cent in the first half from a year ago to 55.4 Hong Kong cents, helped by increasing demand for its premium products. Cargo and mail yield jumped 16 per cent to HK$1.93.

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A version of this article appeared in the print edition of The Straits Times on August 09, 2018, with the headline 'Cathay Pacific posts $46m loss on rising fuel costs'. Print Edition | Subscribe