Cathay Pacific Posts US$74m Net Loss

March 15, 2017

NewsStandOnline.Net (15-March-2017): Hong Kong’s troubled flagship airline Cathay Pacific today posted its first annual loss since the height of the financial crisis as it was hit by “intense competition” and a drop in demand from business travellers.

The firm is struggling despite an expansion of international air travel in the region as lower cost carriers, particularly from mainland China, eat into its market share.

Companies like China Eastern and China Southern Airlines are offering direct services to Europe and the United States from the mainland, while budget carriers like Spring Airlines offer regional routes, undermining Cathay’s once critical Hong Kong hub.

The airline is also losing premium travellers as it comes under pressure from Middle East rivals which are expanding into Asia and offering more luxury touches.  That has led to promotional prices for Cathay’s top tickets as they are sold to leisure travellers.

Cathay Pacific Posts US$74m Net Loss

Analysts said other established Asian operators were similarly suffering from increased competition, but believed Cathay’s major fuel-hedging losses put it in an even weaker position.  Its $74 million net loss in 2016 reversed a $773 million profit in the previous year and comes as the firm prepares a wholesale review of its operations, with chairman John Slosar warning 2017 would be similarly “challenging”.

The results, the worst since 2008, were also well off expectations, with an average profit of $57.9 million forecast by analysts in a survey.  The company’s shares dropped as much as five percent in early afternoon trade before finishing 1.4 percent down.  Cathay announced a major restructuring programme in January that will see jobs axed, but it has not said how many.

“Our organisation will become leaner,” Slosar said in a statement to the Hong Kong exchange today. “Our aim is to reduce our unit costs excluding fuel over the next three years.”  Slosar and Cathay chief executive Ivan Chu would give no further details on possible job losses when asked by reporters at a press conference earlier today.

Slosar said efficiency measures did not mean lower quality of service.  ”We have built a great brand and product — we’re not going to sacrifice that,” he told reporters.  Passenger revenue dropped 8.4 percent year-on-year to $8.6 billion, hit by overcapacity in the market and weak foreign currencies.