Cathay braces for “disappointing” results
Cathay Pacific Airways has warned that financial results for the first half of 2012 are “expected to be disappointing”, and unveiled several measures to reduce its costs.
The airline reported a 61% slump in full-year profits in 2011, and in a statement to the Hong Kong Stock Exchange yesterday, Cathay said that “pressure on economy class yields has continued” in 2012, and that there has also been “some softening in yield in the premium cabins”.
“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. The airline’s financial position remains strong which will enable us, despite the current difficult trading conditions, to maintain the quality of our products and services and to continue with our long-term strategic investment in the business,” said Cathay Pacific’s Chief Executive, John Slosar.
“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. We need to do this to protect our business in the short-run and to protect the Cathay Pacific team,” he added.
The airline has now announced a raft of measures to reduce costs, including the deployment of more fuel-efficient aircraft on long-haul flights, speeding up the retirement of its older Boeing 747-400s, and putting a freeze on the hiring of new or replacement ground staff. It will also offer voluntary unpaid leave for cabin crew from June, and is cancelling non-essential business travel for staff.
On the passenger side, the Cathay Pacific Group as a whole will see capacity growth reduced to 3.2% from the targeted 7% this year. The capacity growth for Cathay Pacific will be reduced to 2% from the targeted 7%, with frequencies on some long-haul routes to North America and Europe being reduced. The airline has already made some cancellations in May, primarily to Taipei, Shanghai and Japan. Cathay added that these will continue in June.
Dragonair’s capacity is set to grow by 9.2% against a target of 7.3% as a result of the launch of new destinations and increased frequencies on regional routes.
In terms of fleet deployment, the airline will put its newer B777-300ERs on more routes, including flights to San Francisco, Toronto and Paris. Cathay said it had no plans to cancel or defer aircraft orders, and still expects to take delivery of 15 new planes this year, with six already in operation.
The retirement of the airline’s 21 B747-400 will be speeded up, with three of the jumbos to be retired this year, five more leaving in 2013 and one more in early 2014.