Cathay Pacific has posted heavy a HK$935 million (US$120.6m) loss for the first half of 2012 as high jet fuels costs and a weak cargo sector hit the airline.
The result marks a significant downturn for the Hong Kong-based group, following the HK$2.81bn profit it recorded in the first half of 2011. While revenues climbed 4.4% to HK$48.86bn, the airline said that “persistently high price of jet fuel, passenger yields coming under pressure and weak air cargo demand” affected its H1 2012 performance.
Cathay’s fuel costs increased 6.5% in the six month period and now account for 41.6% of total operating costs. The airline also admitted that profits from fuel hedging activities fell by 59.4% year-on-year.
Passenger revenues climbed 9.2% to HK$34.71bn as Cathay Pacific and Dragonair boarded 14.3m passengers – 8.6% more than the same period last year. But the airline said the high cost of fuel “made it more difficult to operate profitably, particularly on long-haul routes operated by older, less fuel-efficient, Boeing 747-400 and Airbus A340-300 aircraft”. Cathay has already announced measures to speed up the retirement of these older jets.
The group’s cargo operations also suffered, with revenues down 7.6% to HK$11.90bn.
“Aviation will always be a volatile and challenging industry and our business will always be subject to factors, including economic fluctuations and fuel prices, which are beyond our control. The cost of fuel is the biggest challenge, although the recent reduction in the fuel price will, if sustained, provide welcome relief. We will continue to take whatever measures are necessary to protect the business, managing short-term difficulties while remaining committed to our long-term strategy,” said Cathay’s Chairman, Christopher Pratt. But he added; “Our financial position remains strong and we are in a good position to deal with our current challenges.”
Despite the downturn, Cathay has increased some services in Asia, where demand remains relatively robust. Dragonair introduced or resumed flights to six destinations – Xi’an, Guilin, Clark, Jeju, Taichung and Chiang Mai – and will introduce flights to Kolkata and Haikou later in the year.