Cathay Pacific reports HK$2,051 million loss for first six months of financial 2017

Cathay Pacific reports HK$2,051 million loss for first six months of financial 2017

Cathay Pacific Group has reported a loss of HK$2,051 million for the first six months of 2017.

This compares to a profit of HK$353 million for the same period in 2016 and a loss of HK$928 million in the second six months of 2016.

The loss per share for the first six months of 2017 was HK52.1 cents compared to earnings per share of HK9 cents for the first six months of the previous year.

In a statement, the carrier said: “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.

“The factors which affected our performance were largely the same as in 2016.

“Intense competition with other airlines was the most significant.

“Other major adverse factors were higher fuel prices (including the effect of our hedging), the adverse effect of the strength of the Hong Kong dollar on revenues denominated in other currencies, and higher aircraft maintenance costs.”

Cathay Pacific Group has put in place a three-year corporate transformation programme, designed to achieve returns above the cost of capital and to reducing unit costs, excluding fuel.

Cathay Pacific chairman John Slosar said: “We do not expect the operating environment in the second half of 2017 to improve materially.

“In particular, the 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. 

“However, 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.

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“We expect to see the benefits of our transformation in the second half of 2017, and the effects will accelerate in 2018. 

“We are addressing the industry challenges through our corporate transformation and by expanding our route network, increasing frequencies on our most popular routes and buying more fuel-efficient aircraft.

“This will help us to increase productivity and to reduce costs while improving the quality of our services to customers.

“We continue to enhance our high standards of customer service and are proud of the quality, dedication and professionalism of our staff.”
Several special factors affected the results in the first half of 2017.

In March, the European Commission issued a decision finding that a number of international air cargo carriers, including Cathay Pacific, had agreed to cargo surcharge levels prior to 2007 and that such agreements infringed European competition law and imposed a fine of €57.12 million (equivalent to approximately HK$498 million) on Cathay Pacific.

Although an application has been made to the general court of the European Union to annul the decision which led to the fine, the full amount of the fine has been recognised.

In March, Air China announced the completion of the issue of 1.44 billion ‘A’ shares. 

As a result, Cathay Pacific’s shareholding in Air China was diluted from 20.13 per cent to 18.13 per cent and a gain of HK$244 million was recognised on the deemed partial disposal. 

In April, Cathay Pacific disposed of its entire interest in Travelsky Technology at a profit of HK$586 million.

“The new management team is acting decisively to make Cathay Pacific and Cathay Dragon better airlines and stronger businesses, delivering more to customers with improved productivity,” Slosar added.

“We are confident that we are on the right track to achieve strong and sustainable long-term performance, with a leaner, more competitive business, while enhancing the brand and the quality of services that our customers deserve and expect.

“These services are always delivered by our people, who remain dedicated in these volatile times. I would like to thank them for their hard work and commitment.

“Our commitment to Hong Kong and its people remains unwavering and we will continue to make strategic investments to develop and strengthen Hong Kong’s position as Asia’s largest international aviation hub.”