HK flag carrier Cathay suffers first loss in 8 years

SHANGHAI: Cathay Pacific Airways yesterday reported its first full-year loss since the 2008 global financial crisis, dragged down by overcapacity, a strong Hong Kong dollar and mounting competition from mainland Chinese carriers.

Hong Kong’s flag carrier had warned its results for the second half of 2016 would be weak as it battles falling demand for premium class seats on long-haul routes. It now expects the outlook to remain challenging in 2017 as the headwinds continue.

Acknowledging the competitive landscape, Cathay recently undertook what was the biggest review of its business in two decades and said it would cut jobs and consider shifting some flights to its shorthaul arm as part of a three year programme.

For 2016, the Hong Kong carrier posted a net loss of HK$575 million (US$74.01 million), versus a profit of HK$6 billion a year ago. This is only the third time the company has posted a full-year loss since it was founded in 1946.

The results fell significantly short of an average estimate for a net income of HK$384.86 million from 13 analysts polled by Thomson Reuters.

“The operating environment for our airlines was difficult in 2016, with a number of factors adversely affecting their performance. Intense and increasing competition with other airlines was the most important,” chairman John Slosar said. “We expect the operating environment in 2017 to remain challenging.”

Group revenue dipped more than 9% to HK$92.75 billion, while passenger yields — which refers to the average fare paid per mile per customer — tumbled 9.2% to $0.54. Yield on cargo services fell 16.3%.

The airline said it would not pay a second interim dividend, slashing its dividend per share for the full year by 90.6% to HK$0.05.

Cathay has typically held up its premium service as its calling card, but business has faltered with state-backed mainland Chinese and Gulf carriers as well as budget airlines luring away passengers with cheaper fares.

The airline has also failed to reap the full benefit of low fuel costs brought on by weak crude oil prices due to hedges put in place when prices were much higher.

Cathay said it planned to cut costs in the long term by buying new and more fuelefficient aircraft, while continuing to grow passenger capacity by 4-5% annually to meet strong growth in demand from the Asia Pacific region.