Published: Thu, March 15, 2018
Business | By Tara Barton

Cathay Pacific posts annual loss of $161 mln, biggest in 9 years

Cathay Pacific posts annual loss of $161 mln, biggest in 9 years

It logged a wider net loss than last year's loss of HK$575 million but smaller than an average estimate of HK$2.15 billion.

Cathay suffered a HK$2.05 billion in the first six months of the year but that was narrowed by a healthy second-half, when it shifted into the black.

Cathay said losses from wrong-way fuel bets amounted to HK$6.4 billion for the whole of previous year, narrowing from HK$8.46 billion in 2016. The second half of the year is traditionally a stronger period for the airline.

Aside from increased competition and the influx of low-priced carriers, there are also a number of one-off fines that also affected the airline's earnings, mainly a $498 million HKD ($63.5 million USD) fine from the European Commission and a $224 million HKD ($28.5 million USD) fine for redundancy payments.

The company has been under pressure as other Asian airlines flood key routes with seats.

The airline booked gains of HK$830 million, including disposal of its interest in TravelSky Technology for a profit of HK$586 million.

There was no mention of further cuts in Wednesday's announcement but Slosar said the company's "transformation programme" was still a priority for 2018, promising to "better contain costs" to boost passenger business.

Losses associated with the airline's core business worsened to HK$4.3 billion from HK$3.3 billion the year before.

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This is the first time the Hong Kong flag carrier has seen two consecutive years of losses in its more than seven decades of operations.

"As the year progressed we began to see positive results from our transformation program and our [operations] also benefited from a strong cargo business, a weaker United States dollar, and improved premium class passenger demand", he said. "Evidence of progress became apparent in the second half of the year", Slosar said in a letter accompanying the financial results.

Cathay ferried 11 per cent more cargo for the full year, while the number of passengers carried increased 1.4 per cent.

Cargo yield jumped 11.3 per cent to HK$1.77, on the back of stronger demand.

Analyst Corrine Png, CEO of Crucial Perspective, said: "Cathay Pacific was widely expected to incur a substantial loss so investors are encouraged that the airline actually made a profit in the second half of 2017".

Fuel expenses, the largest cost component for the carrier, increased 27% as the oil price rose.

Stung by fierce competition from mainland Chinese and Middle Eastern rivals that have exacerbated its problems with overcapacity, Cathay last year launched a three-year turnaround programme that aims to make HK$4 billion in savings.

Cathay Pacific Airways is finally seeing some respite from its earnings woes.

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