The Australian operation of Cathay Pacific is already bracing for staff cuts and tougher measures may be on the way after the carrier yesterday declared a net loss of HKD 263 million (AUD 45.17 million) for the six months to the end of June.
The result compares with a loss of HKD 2.05 billion (AUD 352.1 million) a year earlier, so the airline’s current restructuring plan appears to be working and turning the loss around – but observers had expected a profit for the latest six-month period so the result came as a surprise.
Analysts interpreted it a sign that Cathay Pacific chief executive, Rupert Hogg, would need to go further with his austerity plan. One of them, Shukor Yusof, founder of aviation consulting firm Endau Analytics, commented ominously to Bloomberg news service: “They [Cathay] need to endure more pain.”
Cathay’s charman, John Slosar, commented: “We are halfway through our three-year transformation program, which is designed to make our businesses leaner, more agile and more effective competitors. The program is on track. Despite higher fuel prices, we performed much better in the first half of 2018 than in the first half of 2017.”
However, Slosar noted, “the operating environment for our airlines remains challenging”.
Slosar said Cathay Pacific and sister airline Cathay Dragon “usually perform better in the second half of the year than in the first half of the year. We expect this to be the case in 2018.”
He said the strength of the US dollar “and economic uncertainty arising from global trade concerns” remained challenging. The “global trade concerns” reference is probably an allusion to the escalating trade war between the US and China, as US President Donald Trump moves to force China into trade concessions. Cargo is an important part of the Cathay business mix, though it did well in the latest six months. Cargo revenue improved, reflecting strong demand.
“We still expect passenger yields to continue to improve and the cargo business to remain strong,” Slosar said.
“Fuel prices are expected to be higher. Hedging losses will reduce but net fuel costs will increase. Our new aircraft will improve fuel efficiency and we expect to generate more ancillary revenue.”
Cathay Pacific and Cathay Dragon paid 32% more for fuel in the six months. The carrier plans to hire more than 1800 staff this year, Slosar told reporters on Wednesday in Hong Kong, so any staff cuts are being balanced.
Cathay Pacific has said it plans to increase passenger capacity by 4% to 5% a year.
Written by Peter Needham
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