Profits at Cathay Pacific have fallen 61% compared to a year earlier, following another challenging year for the aviation industry.
The carrier, which made 5.5bn Hong Kong dollars (£450m) in 2011, compared with HK$14bn in 2010, has attributed rising fuel prices, political instability and economic uncertainty to the results.
Cathay Pacific Chairman Christopher Pratt said: “After a record year in 2010, we faced a number of major challenges in 2011: the instability of the global economy, the weakness of the air cargo market, the reduction of yields in economy class, the impact of natural disasters in Japan and Thailand, unrest in the Middle East and continued high jet fuel prices.
“Looking ahead, economic uncertainties have continued into the first half of this year - while these uncertainties continue, we expect pressure on economy class yields and our cargo business in particular to remain weak.
“Fuel prices have risen further. As a result, 2012 is looking even more challenging than 2011 and we are therefore cautious about prospects for this year. We will continue to be vigilant in managing our costs while not compromising the quality of our products and services or our long-term strategic investment in the business.
Disregarding the effect of fuel hedging, the Group’s gross fuel costs increased by HK$12,455 million (or 44.1%) in 2011. The increase reflected both higher fuel prices and the fact that more flights were operated. Managing the risk associated with changing fuel prices remains a high priority and to this end the Group has an active fuel hedging programme in place. In 2011 it realised a profit of HK$1,813 million from fuel hedging activities, with additional unrealised mark-to-market gains of HK$436 million in the reserves at 31st December 2011.
Despite challenges, Cathay Pacific plans to launch a number of new initiatives in 2012, including delivery of new aircraft and the introduction of a new premium economy class product and new economy seats.
Pratt explains: “We faced a number of major challenges in 2011 and we are still operating in a very challenging environment, particularly for our cargo business. However, the Cathay Pacific Group has a clear strategic focus.” He added: “The Group is taking delivery of 19 new aircraft in 2012; we are introducing a new premium economy class product, new long-haul economy class seats and continuing with the rollout of our acclaimed new business class; we are improving our lounge facilities; and we are building one of the world’s most sophisticated cargo terminals in Hong Kong that is on track to open early in 2013.”
He added: “For Dragonair, we will add more aircraft, launch new products and introduce new destinations this year, all of which will improve connectivity and boost Hong Kong’s role as one of the world’s premier international aviation hubs.”