Cathay H1 loss worst since 2003
Earnings hit by high costs, slowdown in cargo
Cathay Pacific Airways posted its worst first-half loss since 2003, hurt by high fuel costs, weak cargo demand and fewer premium passengers, pushing its shares down as much as 7.7%.
HONG KONG: Cathay Pacific Airways, the world’s largest airfreight carrier, posted its worst first-half loss since 2003, hurt by high fuel costs, weak cargo demand and fewer premium passengers, pushing its shares down as much as 7.7%.
Cathay, among the worst-hit airlines during the 2003 outbreak of Severe Acute Respiratory Syndrome (SARS), is now grappling with economic uncertainty in Europe and the United States that has weighed on passenger and cargo traffic, and hurt some of the big players such as regional rival Singapore Airlines.
“Its stock is likely to come under pressure in the short term as analysts are expected to downgrade full-year earnings estimates for the company,” said Steven Leung, sales director at brokerage UOB Kay Hian.
Cathay, which also competes with Australia’s Qantas Airways, reported a net loss of Hk$935mil (Us$120.6mil) for the six months ended in June, under lining how sagging demand and high oil prices are taking their toll on the industry.
The earnings lagged an average forecast for a Hk$122.5mil profit from six analysts polled by Reuters and compared with a profit of Hk$2.81bil a year earlier.
The loss was Cathay’s worst for a first-half period since the outbreak of SARS hit the city in 2003, when it posted a first-half loss of Hk$1.24bil.
Cathay said demand for cargo shipments in the first half remained weak, with routes to Europe particularly sluggish due to the region’s deepening debt crisis, resulting in a 7.6% drop in freight revenue to HK$11.9bil.
Cathay’s cargo unit, which accounted for 24% of revenue, shipped 10% less freight in the first six months of the year due to weak demand in its key markets, including Hong Kong and China, as a global economic slowdown cut consumer demand for electronics and other manufactured goods from Asia.
The cargo slump also hurt Cathay’s cargo joint venture with Air China Ltd, contributing to a HK$167mil loss from associates to Cathay during the first half.
The airline said it expected the cargo market to improve, but did not provide a timeframe.
Cathay posted its worst-ever sixmonth loss in the second half of 2008, with a HK$7.9bil loss due to hefty fuel hedging charges. — Reuters