Home » Aviation, Breaking News » Cathay Pacific braces for disappointing first half, eyes capacity cuts

Cathay Pacific Airways said it expects “disappointing” financial results for the first half of 2012, as fuel prices remain high and the cargo business shows no sign of a sustained recovery.

The announcement came even as the Hong Kong-based carrier said it was reducing capacity on some long-haul routes for both Cathay Pacific and Dragonair while increasing capacity and introducing new destinations in its regional network.

The move was “in response to the changing market conditions and challenging business environment,” the company said in a press statement on May 9.

“We previously warned that 2012 is looking even more challenging than 2011 and we were therefore cautious about prospects for this year. In response to the challenging environment we face, we are reducing costs where possible, including through a reduction of capacity,” said Cathay Pacific chief executive John Slosar, even as he stressed that the airline’s financial position “remains strong.”

Slosar added: “This is not just a Cathay Pacific problem; it is clearly an industry-wide issue, and continued high fuel prices in particular are hitting airlines hard across the globe. We have no option but to take concerted action to adapt to this volatile operating environment.”

The airline has announced a raft of measures to reduce costs that will include adjusting both passenger and cargo capacity, deploying more fuel-efficient aircraft on long-haul flights, speeding up the retirement of its older Boeing 747-400 aircraft, and putting a hiring freeze on new or replacement ground staff.

The company said it will retain its focus on expanding capacity within the region, with Dragonair’s capacity set to grow by 9.2 percent against a target of 7.3 percent as a result of the launch of new destinations and increased frequencies on regional and mainland routes.

For cargo, Cathay Pacific will now target a 4 percent growth in total (freighters plus passenger aircraft bellies), down from the original target of 7 percent, with zero growth in freighter capacity compared to the 3 percent originally targeted for 2012.

Cathay Pacific currently operates 25 wide-body freighters, including five new, fuel-efficient Boeing 747-8Fs. As it takes delivery of three more 747-8Fs this year and two next year, the airline will take three Boeing 747-400BCFs out of service this year as a near-term capacity-management measure, the company stated.

But the airline said it will continue with a number of long-term investments, including the purchase of 93 fuel-efficient aircraft with a value of HK$190 billion for delivery by 2019, and a new HK$5.7 billion cargo terminal at Hong Kong International Airport due to begin operations in early 2013.


Photo: Timitrius

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