News
Cathay posts first back-to-back loss in 71-year history
March 16th 2018
Hong Kong’s Cathay Pacific Group has reported a net loss of HK$1,26 billion (US$161 million) for 2017, a 119% slump from a loss of HK$575 million posted the previous year. Read More » Nevertheless, the airline group made a net profit of HK$792 million in the second half of 2017, narrowing a massive HK$2.1 billion first-half loss, which indicates the turnaround plan is progressing better than expected.
Presenting its first back-to-back annual net loss in its 71-year history, the Cathay Group said fundamental structural changes within the industry continued to create a challenging operating environment in 2017.
To address this, Cathay said it took “decisive action” through its transformation programme to make its businesses “leaner, more agile and more effective competitors”.
Cathay again pointed to overcapacity in passenger markets and intense competition with other carriers for the worsened performance.
Conversely, the group’s cargo business performed well in 2017, its hedging losses were lower and premium class passenger demand improved through to December 31.
The biggest headache for Cathay continues to be declining yields across all markets. In 2017, yields to North America slumped a further 5%, Southwest Pacific and South Africa lost 3.2%, Southeast Asia 2.9%, North Asia 2.8% and Europe 2.7%. India and the Middle East performed best from that list, but even that market lost 1.4% in yield over the year.
The yield slippages, particularly to North America and Australasia, can be attributed to intensifying competition from Hong Kong Airlines and Mainland Chinese carriers.
Hong Kong Airlines launched its maiden flights to North America in 2017, to Los Angeles and Vancouver. From March 26, it will add a service to San Francisco. Those three destinations have been cash cows for Cathay for decades but those days are now certainly over.
Cathay is trying desperately to carve out new revenue streams. The airline has announced new routes to Brussels, Copenhagen, Dublin, Cape Town and Washington. It will hold monopolies on all five routes.
Cathay took delivery of twelve A350-900s in 2017 and it retired its final four A340-300s and two B747-400BCFs.
Looking ahead, Cathay Pacific Airways chairman, John Slosar, said: “Our priorities for 2018 are our transformation programme, changing the way that we work so as to better contain costs which will strengthen our passenger business further. We are confident of a successful outcome from these efforts. We also look to benefit from a slowing of the decline in passenger yields as global economic conditions improve. The outlook for our cargo business is positive and we will take best advantage of opportunities in the growing global cargo market.”
“We are improving our competitive position by expanding our route network, increasing frequencies on our most popular routes and buying more fuel-efficient aircraft. We have improved productivity and efficiency and at the same time we are improving our already high customer service standards. We are acting decisively to make Cathay Pacific and Cathay Dragon better airlines and stronger businesses. We believe we are on track to achieve strong and sustainable long-term performance,” Slosar concluded.
Hong Kong Aircraft Engineering Company (HAECO), another Swire Group subsidiary, recorded a net loss of HK$541 million in 2017, reversing a net profit of HK$975 million the previous year. HAECO said the loss was largely due to a HK$625 million impairment charge related its HAECO USA Holdings subsidiary.
