Cathay Pacific reported an attributable loss of HK$2,051 million for the first six months of 2017.
Fundamental structural changes within the airline industry continue to affect the operating environment for airlines and created difficult operating conditions in the first half of 2017.
The factors which affected the 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 hedging), the adverse effect of the strength of the Hong Kong dollar on revenues denominated in other currencies, and higher aircraft maintenance costs.
Passenger business
Passenger revenue in the first six months of 2017 was HK$32,105 million, a decrease of 3.9% compared to the same period in 2016. Capacity increased by 1.1%, reflecting the introduction of a route to Tel Aviv and increased frequencies on other routes. The load factor increased by 0.2 percentage points, to 84.7%. Yield fell by 5.2% to HK51.5 cents, reflecting intense competition in all classes and the adverse effect of the strength of the Hong Kong dollar on revenues denominated in other currencies.
Cost
Total fuel costs for Cathay Pacific and Cathay Dragon (before the effect of fuel hedging) increased by HK$2,871 million (or 33.4%) compared with the first half of 2016, reflecting a 31.5% increase in average fuel prices and a 1.6% increase in consumption. Fuel is the Group’s most significant cost, accounting for 30.4% of total operating costs in the first half of 2017 (compared to 29.1% in the same period in 2016). Fuel hedging losses were reduced. After taking them into account, fuel costs increased by HK$1,678 million (or 12.7%) compared with the first half of 2016.
Prospects
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. We expect to see the benefits of our transformation in the second half of 2017, and the effects will accelerate in 2018.
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