Cathay returns to first-half profit on stronger yields

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Cathay Pacific Group recorded a Hong Kong dollar (HK$) 24 million ($3.1 million) net profit for the first six months of 2013, as stronger yields on long-haul services allowed it to bounce back from a HK$929 million loss during the same time last year.

The profit comes despite a marginal fall in revenue from HK$48.8 billion to HK$48.5 billion for the Oneworld carrier. The airline says that it was particularly hit by a 5.2% fall in cargo revenue, down to HK$11.3 billion which offset an increase in passenger revenue of 0.8% to HK$35 billion.

"While we continued to operate in a difficult environment in the first six months of 2013, it was pleasing to see some improvement in our business," says chairman Christopher Pratt. "This improvement mainly reflected stronger passenger business and cost reductions."

Cathay and its Dragonair subsidiary saw their combined load factor increase by 1.2 percentage points to 81.3% over the half-year, driven largely by a 4.8% decrease in capacity. Yields also improved by 4.4% to HK$0.69, driven by stronger demand on long-haul routes in all classes. However, it adds that demand on regional routes "did not match the increase in capacity" which put yields under pressure.

On the cargo side, the carriers recorded a 1.9 percentage point fall in load factor to 62.4%, despite a 1.8% fall in group cargo capacity. Cathay says that overall demand for cargo has remained weak, predominately due to surplus capacity in the Asian market and low demand for shipments from Hong Kong.

Cathay's fuel costs over the six months decreased by 8.5%, although it remains the largest operational cost item for the carrier. It adds that with a small price drop in April, it extended its fuel hedging into 2016.

Over the six months, Cathay and Dragonair took delivery of six new aircraft - comprising two Airbus A330-300s, three Boeing 777-300ERs and one 747-8F - while four 747-400s were retired. During the period, the airline also restructured existing orders with Boeing and Air China under which it agreed to purchase three more 747-8Fs for delivery in the second half of 2013 and cancelled orders for eight 777-200Fs. It also sold four 747-400BCFs to Boeing as part of that order.

Pratt says that while the outlook for the rest of the year "remains unclear", the airline is in a strong financial position and will "continue to invest to make our business stronger."

"We will remain focused on our long-term goals while managing short-term challenges," he adds.