CATHAY POSTS 1ST LOSS IN 8 YEARS
Competition from Chinese carriers dent earnings
CATHAY Pacific Airways Ltd reported its first loss in eight years and scrapped plans for a secondhalf dividend after competition from Chinese airlines and losses from fuel hedging dented earnings.
The stock fell the most in seven months. The net loss totalled HK$575 million (RM329.63 million) last year, while sales dropped 9.4 per cent to HK$92.8 billion, said Cathay, Asia’s largest international airline, in a statement yesterday.
Jefferies Group LLC said the losses could continue in the current year as well.
Cathay said the operating environment this year would remain challenging, and that premium travel from Hong Kong was below expectations, prompting the airline to sell such tickets at promotional prices to leisure travellers.
The carrier, whose passenger yields have been damped by competition from full-service carriers for business seats and budget airlines for the mass market, said it was starting a three-year “corporate transformation” programme to improve returns and operational efficiency.
Chief executive officer Ivan Chu has seen Cathay’s shares plunge about 25 per cent since his appointment in March 2014, compared with a gain for Hong Kong’s Hang Seng Index.
Cathay, whose parent is the Swire Group, last posted a loss in 2008, of HK$8.7 billion, according to data compiled by Bloomberg.
The carrier, in which Air China Ltd holds almost 30 per cent, has been widening its discounts to premium offerings in a bid to fill seats as it competes against rivals, such as China Eastern Airlines Corp.
Cathay’s passenger yields dropped 9.2 per cent to HK$0.541 last year. Cargo yield declined 16 per cent to HK$1.59. Bloomberg
Cathay Pacific chairman John Slosar (right) and chief executive officer Ivan Chu at a press conference to announce the carrier’s result in Hong Kong yesterday.