Cathay first-half profit up nearly sixfold, misses estimates

GMT 08:41 2015 Wednesday ,19 August

Arab Today, arab today Cathay first-half profit up nearly sixfold, misses estimates

Cathay Pacific
Hong Kong - AFP

Hong Kong flag carrier Cathay Pacific said Wednesday first-half profit rose sixfold from a year earlier, helped by lower fuel prices, but shares fell to a nine-month low as the result missed expectations.

Net profits in the six months through June rose to HK$1.97 billion ($254 million) from HK$347 million in the same period last year, helped by a slump in oil prices that cut fuel costs over a third.

But around half of the HK$7.08 billion gain was offset by losses from oil hedging, and profits missed the HK$2.22 billion median estimate of six analysts polled by Bloomberg News.

Revenue for the period fell 0.9 percent to HK$50.39 billion while passenger yield, a key measure of profitability, also dropped.

"The group's performance in the first six months of 2015 was considerably better than in the same period in 2014," Cathay Pacific chairman John Slosar said in a statement filed to the Hong Kong stock exchange.
"We expect our business to do well in the remainder of 2015."

But Cathay warned it still faces "strong competition" from other airlines and airports in the region.

Passenger yield, which the average fare paid by a passenger per mile, fell 9.3 percent for the period.

"Strong competition, a significant reduction in fuel surcharges, foreign currency movements and the fact that a higher proportion of passengers were connecting through Hong Kong put downward pressure on yield," Slosar said.

- 'Pretty disappointing' -

The plunge of oil prices by some 50 percent in the second half of last year incurred losses to airlines which had placed hedges against rising oil prices in previous years.

Cathay shares fell more than eight percent after the result, their lowest intraday point since November.
In mid-afternoon trading they were down 7.32 percent at HK$15.56 per share.

"I found the results to be pretty disappointing. The passenger yield decline has been much bigger than expected," airlines analyst Daniel Tsang, told AFP.

"I think the yield will continue to come under intense pressure in the second half given the yuan devaluation which will affect the average return Cathay manages to get from the Chinese market," Tsang said.

Beijing's central bank shocked financial markets by devaluing its currency last week, sending the yuan plunging by the most in over two decades and raising concerns fewer Chinese will travel abroad.

Still, Cathay said passenger capacity for the period was up 6.4 percent compared to the same period last year, helped by new routes.

Air cargo capacity also saw an increase by 8.9 percent for the period, although demand "slackened" in the second quarter and the business is now facing "overcapacity".

A fall in fuel prices and a rise in the number of flights that are filled to capacity means airlines are expected to make collective profits $29.3 billion in 2015, the International Air Transport Association said in June.

However, the global aviation body warned the Asian market was mixed, with some carriers seeing their cargo business "in the doldrums".


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