Cathay Pacific posts biggest loss in 9 years, but upbeat on outlook

Cathay reported on March 14, 2018, a net loss of HK$1.26 billion (S$210.6 million) for 2017.
Cathay reported on March 14, 2018, a net loss of HK$1.26 billion (S$210.6 million) for 2017.PHOTO: AFP

SHANGHAI (REUTERS) - Hong Kong's Cathay Pacific Airways posted its biggest annual loss in nine years, which was slimmer than expected as a rebound in the cargo market helped offset fuel hedging losses and stiff competition for passengers.

Cathay reported on Wednesday (March 14) a net loss of HK$1.26 billion (S$210.6 million) for 2017, wider than the prior year's loss of HK$575 million but smaller than an average loss estimate of HK$2.15 billion drawn from 11 analysts polled by Thomson Reuters.

It reported an attributable profit of HK$792 million in the second half, helped by an improving cargo market and profits from subsidiaries and associates such as Air China, which offset its first half loss of HK$2.05 billion.

Still, it was Cathay's second consecutive year of losses and its fourth since the airline was founded in 1946. Revenue grew 4.9 per cent to HK$97.28 billion.

Stung by fierce competition from mainland Chinese and Middle Eastern rivals that have exacerbated its problems with overcapacity, Cathay last year launched a three-year turnaround programme that aims to make HK$4 billion in savings.

It has announced job cuts and plans to boost productivity including increasing the number of economy-class seats on Boeing 777 planes.

"We are confident of a successful outcome from these efforts," Cathay's chairman John Slosar said in a statement, referring to the turnaround programme.

"We also look to benefit from a slowing of the decline in passenger yields as global economic conditions improve. The outlook for our cargo business is positive and we will take best advantage of opportunities in the growing global cargo market."

He warned, however, that fuel costs were increasing and impacting operating costs, although the firm's losses from expensive fuel hedging contracts shrank 24.6 per cent over the year.

Cathay Pacific reported a 3.3 per cent decline in yields, a proxy for ticket prices, in 2017, although it said they had improved by 3.1 per cent in the second half of the year compared with the first half. Its full-year cargo and mail yield grew 11.3 per cent, helped by the growth of e-commerce and as buoyant consumer confidence spurred companies to restock inventories.

Rivals such as Singapore Airlines and Qantas Airways have also reported a moderating pace of yield declines in recent months amid higher fuel prices that have added to airline cost bases. Cathay's mainland Chinese competitors have yet to report 2017 financial results.

Cathay's restructuring efforts have faced some resistance. In December, it extended payment of housing allowances for pilots for another year after plans to cut it angered its pilot workforce.

Hong Kong-listed Swire Pacific is Cathay's biggest shareholder with a 45 per cent stake, followed by Air China which owns 30 per cent through a cross-shareholding. Qatar Airways owns a 9.94 per cent stake in Cathay.