Home » Aviation, Breaking News » Cathay Pacific reports H1 profit but warns of worsening operating conditions

Cathay Pacific Airways said the group continued its positive performance in the first half of 2019, but added that the operating environment has worsened as geopolitical and trade tensions intensified.

In an August 7 statement on its interim 2019 results, Hong Kong’s flagship carrier said it continued to be profitable both in its core airline business and as a group, but that both passenger and cargo yields were down and remained under pressure.

Moreover, group chairman John Slosar said they expect stronger headwinds to come.

“Our operating environment is increasingly challenging due to intensifying geopolitical tensions and US-China trade discord. We are not immune to what is happening around us in Hong Kong. Passenger traffic and forward bookings have been adversely affected,” he said.

For the six months ended June 30, 2019, Cathay Pacific reported an attributable profit of HKD1.347 billion (US$171.80 million), a reversal from the attributable loss of HKD263 million in the first half of 2018. Earnings per share in the first half of 2019 were HKD34.2 cents, compared to a loss per share of HKD6.7 cents in the first half of 2018, it added.

Cathay Pacific and Cathay Dragon reported an attributable profit of HKD615 million in the first half, compared to an attributable loss of HKD904 million in the first half of 2018. Passenger revenue was satisfactory, but overall yield declined.

The group’s cargo business was weaker, due in part to U.S.-China trade tensions, with a decline in both volume and yield. The company benefited from lower fuel prices but these were adversely impacted by a stronger U.S. dollar, said Cathay Pacific.

Passenger revenue increased by 5.6% to HKD37.449 billion in the first half of 2019. Capacity increased by 6.7%. The growth in revenue reflected the full impact of new routes introduced in 2018, the introduction of two new routes in 2019, increased frequencies on existing routes and the use of larger aircraft on popular routes. Load factor remained unchanged at 84.2%.

Passengers carried increased by 4.4% to 18.3 million. Yield decreased by 0.9% to HKD54.9 cents due to intense competition in premium classes and long-haul economy class, and adverse foreign currency movements.

Cargo revenue declined, reflecting weaker global trade brought about in part by U.S.-China trade tensions. Volume and yield declined. The group’s cargo revenue in the first half of 2019 was HKD11.498 billion, a decrease of 11.4% compared to the same period in 2018. Flown cargo capacity of Cathay Pacific and Cathay Dragon increased by 1.1%, principally due to additional belly cargo space in newly acquired passenger aircraft.

“Facing weak demand, we rationalised freighter capacity and emphasised shipments of specialist cargo,” said the statement. Load factor decreased by 4.9 percentage points, to 63.4%. Tonnage carried decreased by 5.7% to 979,000 tonnes. Yield decreased by 2.6% to HKD1.88.

After taking fuel hedging into account, fuel costs decreased by HKD1.213 billion (or 7.7%) compared with the first half of 2018. Fuel consumption per available tonne kilometer fell by 1.5%, reflecting the continued introduction of more fuel-efficient aircraft.

The contribution from subsidiaries weakened, while the contribution from associated companies improved, the airline group, one of Asia’s largest, added.

In the first half of 2019, the Cathay Pacific group took delivery of four new Airbus A350-1000 aircraft. As of June 30, it had 67 new aircraft on order for delivery over the next five years.

Slosar said the company will remain strong and resilient with positive long-term prospects. “The second half of the year is usually the better half in our business. While we are cautious about the outlook for the remainder of 2019, we are confident in the future of our business and of Hong Kong. We will relentlessly focus on moving beyond and giving our customers more reasons to fly with us,” he said.

Photo: Jeremy from Sydney

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