Cathay Pacific blames fuel woes for HK$935 million loss

Despite a revenue rise, Hong Kong’s Cathay Pacific Airways registered its biggest loss in nine years during the first half of the year.

Hong Kong’s airline lost HK$935 million, chiefly as a result of higher fuel cost. Cathay identified jet fuel prices as its biggest expense, and for significantly affecting profitability. Fuel accounted for 42% of Cathay’s total costs.

The company also said Europe’s economic woes were having a big effect on both its passenger and cargo services. Revenues from many other international routes were also under pressure because of increased competition.

Cathay posted a loss of HK$935 million Hong Kong for the first six months of 2012, down HK$2.8 billion from last year and the biggest first-half loss since a HK$1.2 billion loss in January-June 2003. On the other hand, revenue rose 4.4% to HK$48.9 million.

Cathay has responded to the crisis by freezing hiring and allowing cabin crew to take unpaid leave. It also confirmed plans to modernize its fleet by replacing older, fuel-thirsty jets with newer, more efficient ones. It will increase its existing 30-jet Airbus order and speed up retirement of older, fuel hungry Boeing 747 aircraft.

“Cathay Pacific’s core business was significantly affected by the persistently high price of jet fuel, passenger yields coming under pressure and weak air cargo demand,” said Chairman Cristopher Pratt. “These factors are common to the aviation industry as a whole. Airlines around the world are being adversely affected by the current business environment.”

Profits from associated companies, including Air China, in which Cathay has a 20% stake, showed a “marked decline.” Air China, one of China’s three major state-owned airlines, warned last month that first-half profit would fall by half because of the economic slowdown in China.