MIAMI — For the first time in Cathay Pacific’s history, an interim loss was posted for the second time in a row for HK$2.05 billion (US $262.07 million) in the first half of 2017. The airline claims that these results are mainly because not enough revenue was collected from ticket sales and the increased competition on long-haul markets.
Cathay Pacific was due to announce these results to the Hong Kong Stock Exchange at noon time today, but the press conference was postponed, according to the South China Morning Post.
The airline’s chairman, John Slosar, said in a statement that “fundamental structural changes within the airline industry continue to affect the operating environment for our airlines and created difficult operating conditions in the first half of 2017.”
Even though Cathay Pacific is in the midst of a strong reorganization plan, it posted its first annual loss since 1946 in 2016.
Slosar also blamed higher aircraft maintenance costs and the weakness of the Hong Kong dollar on revenues coming from other currencies. The maintenance costs, however, should decrease as the airline completely retires from service its aging Airbus A340-300s and welcomes new A350-900s.
As of today, Cathay has taken delivery of 17 Airbus A350s and expects to receive five more in 2017.
Even though both Cathay Pacific and its sister carrier Cathay Dragon registered a strong 85% load factor on all its network flights, this loss was much worse than what analysts had anticipated. According to reports, the airline suffered a 3.9% decrease on passenger revenue and a 5.2% decrease in yields.
Slosar revealed that he doesn’t expect the operating environment to improve. “Passenger business will continue to be affected by strong competition from other airlines and our results are expected to be adversely affected by higher fuel prices and our fuel hedging positions,” he said.
Conversely, the positive note on this otherwise terrible outcome is that the airline’s cargo division boomed. According to Cathay Pacific, mainland exports yielded an additional 4.4% in the first six months of 2017.
Slosar explained that “the outlook for the cargo business is good and we expect robust demand and growth in cargo capacity, yield and load factor in the second half of this year. We expect to see the benefits of our transformation in the second half of 2017, and the effects will accelerate in 2018.”
As the airline continues to struggle, rumors refer to a potential takeover by Air China, which is one of Cathay’s biggest shareholders. To this, Cathay’s response was that they will continue to work closely with them, leaving the questions unanswered.
Cathay Pacific did say in the statement: “In March 2017, Air China announced the completion of the issue of 1.44 billion shares. Air China’s shareholding in Cathay Pacific was diluted from 20.13% to 18.13%.”
As far as routes and destinations are concerned, Cathay recently launched services to Tel Aviv, seasonal services to Barcelona, and Christchurch coming up in December. The airline axed Riyadh and transferred their Kuala Lumpur route to Cathay Dragon.
As the airline continues to welcome new aircraft with new technologies, better fuel saving capabilities, and enhanced entertainment for its passengers, results may turn for the positive while headquarters continues to be restructured. What remains to be seen is how Cathay will cope the increased competition in the Asia-Pacific region.