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  • ​Cathay swings to H1 operating profit as yields improve

​Cathay swings to H1 operating profit as yields improve

The Cathay Pacific Group posted an operating profit of HK$697 million ($88.8 million) for the first six months of 2018, compared with an operating loss of HK$1.7 billion a year earlier.

Group revenue jumped 15.7% to HK$53 billion, says the carrier in its interim results disclosure. Passenger revenue rose 10.4% to HK$35 billion, with passenger yields improving 7.6% to HK$0.55. Group cargo revenue rose 23% to HK$13 billion, with cargo yields jumping 16.4% to HK$1.93.

ASKs rose 3.2%, RPKs 2.5%, and RASK was up 7.1% to HK$0.47. The overall load factor declined one half of a percentage point to 84.2%.

Operating expenses were also higher during the first six months of the year, rising 8.2% to HK$52 billion.

The group narrowed its attribute net loss to HK$263 million, compared to its 2017 interim net loss of HK$2.1 billion.

“The operating environment for our airlines remains challenging,” says Cathay chairman John Slosar. “We are half way through our three year transformation programme, which is designed to make our businesses leaner, more agile and more effective competitors. The programme is on track. Despite higher fuel prices, we performed much better in the first half of 2018 than in the first half of 2017.”

Pre-hedging fuel costs were sharply higher in the first half of 2018, rising 32% to HK$3.6 billion. This reflected 28% higher fuel costs, and 2.1% higher consumption as the carrier added capacity. Fuel comprised 30.1% of total operating costs, compared with 30.7% a year ago. Still, after fuel hedging group fuel costs rose only 7.1%.

The group had 206 aircraft in its fleet at the end of the first half. These comprised 148 aircraft with Cathay Pacific, 47 with Cathay Dragon, and 11 with cargo operator Air Hong Kong.

In his outlook for the second half of 2018, Slosar expects performance to improve based on the precedent set in previous years.

He adds that challenges remain, namely a strong US dollar and the uncertainty around global trade. Nonetheless, the carrier expects both passenger and cargo yields to keep improving.

“Fuel prices are expected to be higher,” he says. “Hedging losses will reduce but net fuel costs will increase. Our new aircraft will improve fuel efficiency and we expect to generate more ancillary revenue.”

Corrected: an earlier version of this version stated the group's operating profit as an operating loss.

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