Cathay Pacific net profit falls below expectations
HONG KONG: Hong Kong flag carrier Cathay Pacific’s net profit for 2014 rose more than 20 percent but failed to meet analysts’ expectations, results showed yesterday, with the airline hit by losses on fuel hedging. Cathay, whose shares dipped on the news, insisted that overall demand was strong and its outlook was positive, after reporting a slow start to 2014, affected by high fuel prices and weakness in the air cargo market. Net profit for last year stood at HK$3.15 billion ($406 million), 20.2 percent higher than the previous year’s figure of $2.62 billion, it said in a filing to the Hong Kong stock exchange.
But the figure fell short of expectations, with a survey of 16 analysts by Bloomberg News forecasting a profit of $3.49 billion. Cathay shares closed down 0.59 percent at HK$16.94. “For the full year, passenger demand was reasonably firm, with high demand during the peak summer and Christmas periods,” Cathay chairman John Slosar said in the filing. “Our business benefited from lower fuel prices in the fourth quarter, but this was partially offset by fuel hedging losses,” Slosar said, adding that cargo demand started to improve in the summer of 2014. Slosar said the results were nevertheless “encouraging”.
“While we face growing competition in our passenger business... overall demand remains strong and the outlook is positive,” he said. Fuel in particular accounted for 39.2 percent of total operating costs, compared to 39.0 percent in 2013, the statement said. “Although oil prices have come down, they will not have been able to benefit in full because they are obliged to pay the oil contracts at higher prices,” Geoffrey Cheng, Bocom International’s head of transportation and industrial research, told Bloomberg before the results were released. The firm’s shares fell 0.6 percent when the Hong Kong bourse closed, at HK$16.94. The benchmark Hang Seng Index was up 0.91 percent.
New routes
Passenger numbers for Cathay Pacific and its short-haul subsidiary Dragonair increased 5.5 percent to 31.6 million in 2014, with capacity boosted by new routes to Doha, Manchester and Newark. Cathay is set to launch further new routes to Zurich, Boston and Dusseldorf this year. The airline also said it was investing heavily in its fleet, with 16 new aircraft delivered in 2014, nine more set to arrive this year and a total of 79 on order for delivery up to 2024. “How to drive yield improvement (the amount of revenue per passenger) alongside significant capacity addition is a tall order,” aviation analyst Daniel Tsang at Aspire Aviation said. He said the results had missed analysts’ targets “partially because of the fuel hedging program” but did not see them as a slowdown. “The 2013 results were off a very low base in 2012, so that really distorted the year-over-year changes,” he added.
In 2013 the carrier’s net profit more than tripled on a rise in Chinese travelers and fuel cost savings. The latest results come a day after the Hong Kong government announced a plan to build a third runway at the city’s international airport, which will cost HK$141.5 billion and is expected to be completed by 2023. Cathay Pacific said in a statement it welcomed the decision and believes it is necessary to maintain Hong Kong’s competitiveness as a premier aviation hub. A record 3.3 billion passengers boarded planes last year worldwide, a jump of 170 million from 2013, the International Air Transport Association said in February. — AFP