Home » Aviation, Breaking News » Cathay Pacific swings to black after two years of loss

Hong Kong flag carrier Cathay Pacific Airways said it returned to profitability last year, both in its core airlines business and as a group, as it entered the third year of its three-year restructuring program.

In a statement on March 13, the Cathay Pacific Group reported an attributable profit of HKD2.345 billion (US$298.738 million) for 2018 compared to a loss of HKD1.259 billion for 2017.

The group reported an attributable profit of HKD2.608 billion in the second half of 2018, compared to an attributable loss of HKD263 million in the first half of 2018 and an attributable profit of HKD792 million in the second half of 2017.

Sister airlines Cathay Pacific and Cathay Dragon reported an attributable profit of HKD1.145 billion in the second half of 2018, compared to an attributable loss of HKD904 million in the first half of 2018 and an attributable loss of HKD1.538 billion in the second half of 2017.

“Despite broadly benign economic conditions, the environment in which our airlines operated was as ever difficult in 2018. Competition was intense, fuel prices increased and the US dollar strengthened,” said John Slosar, group chairman.

But he said the company’s transformation program has had a positive impact. “We focused on finding new sources of revenue, building our network and strengthening the Hong Kong hub, delivering more value to our customers and improving productivity and efficiency.”

“We effectively competed with more than 110 airlines operating in and out of HKIA as evidenced by our solid revenue growth and continued expansion of the airlines,” he added.

In 2017, Cathay, Asia’s biggest international carrier, built the foundations for its transformation program. In 2018, it restructured its operations outside Hong Kong, benefited from a series of productivity improvements, increased its digital capabilities and concentrated on global business services.

At the end of 2018, Cathay Pacific acquired from DHL International the 40% shareholding in Air Hong Kong that it did not already own, with the result that Air Hong Kong became a wholly owned subsidiary. At the same time, a new 15-year block space agreement between Air Hong Kong and DHL International commenced.

Passenger revenue in 2018 was HKD73.119 billion, an increase of 10.1% compared to 2017. Capacity increased by 3.5%, reflecting the introduction of new routes and increased frequencies on existing routes. The load factor decreased by 0.3 percentage points, to 84.1%. Yield increased by 6.7% to HKD55.8 cents, reflecting improved premium class passenger demand, fuel surcharges and revenue management initiatives.

The cargo business benefited from robust demand in 2018. Group revenue increased by 18.5% to HKD28.316 billion. Capacity of Cathay Pacific and Cathay Dragon increased by 2.6%. The load factor increased by 1.0 percentage point to 68.8%. Tonnage carried increased by 4.7%. Yield rose by 14.7% to HKD2.03, reflecting an increase in high-value specialist cargo shipments and higher fuel surcharges.

Despite fuel costs for the two airlines increasing by 31.1% compared with 2017, the group’s fuel unit consumption rates fell by 1.3% “reflecting our continued investment in more fuel-efficient aircraft,” said the company.

In 2018, the airline took delivery of its first eight Airbus A350-1000 aircraft, and will have a total of 20 aircraft of this type in service by the end of 2021.

On prospects ahead, Slosar said the business environment is expected to remain challenging in 2019, with the forecast strength of the U.S. dollar and uncertainty due to geopolitical discord and global trade tensions dampening passenger and cargo demand. Competition will remain intense, especially in economy class on long-haul routes. Operational constraints will impose additional costs.

“These factors will affect both the passenger and the cargo business,” said Slosar.

But the company remains confident in the ability of its transformation program to enable it to deliver sustainable long-term performance. In 2019, Cathay will continue to reorganize its nine core business processes to benefit from associated underlying structural initiatives and to build a culture of continuous improvement.

“We will compete hard by extending our route network to destinations not currently served from Hong Kong, by increasing frequencies on our most popular routes and by operating more fuel-efficient aircraft. We will focus upon, and continue to invest in, customer service and productivity,” Slosar said.

Photo: Mehdi Nazarinia

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