The Cathay Pacific Group swung to an operating loss of HK$1.7 billion ($217.3 million) for the first half of 2017, reversing from the HK$664 million profit posted the same period a year ago, reflecting intense competition and downward pressure on yields.
Revenue for the six months rose a marginal 0.4% to HK$45.9 billion. This is as passenger revenue fell 3.9% as yield slid 5.2%, while cargo revenue climbed 11.7% together with a 4.4% yield increase.
Expenses, however, shot up 7.5% to HK$48.4 billion as fuel costs and maintenance expenses rose. It fuel hedging losses were however reduced.
Congestion at Hong Kong International airport, and air traffic control constraints in the Greater China region also continue to impose costs on the group.
The poor performance led Cathay to an attributable net loss of HK$2.05 billion, a drastic downturn from its HK$353 million profit a year ago.
Cathay says its results were also impacted by an HK$498 million fine by the European Commission for collusion on cargo surcharges prior to 2007, as well as HK$224 million in redundancy costs as part of its transformation programme. Air China's issue of new shares during the period, however, gave it a HK$244 million gain, while its sale of Travelsky Technology brought a profit of HK$586 million.
During the six months, the Hong Kong carrier increased ASKs by 1.1%, but revenue passengers carried dropped 0.5%. Load factor climbed 0.2 percentage points to 84.7%.
In its outlook, Cathay says it does not expect the operating environment in the second half of the year to improve.
"In particular, the passenger business will continue to be affected by strong competition from other airlines and our results are expected to be adversely affected by higher fuel prices and our fuel hedging positions," says chairman John Slosar in his address.
He adds, however, that robust demand is expected for the cargo business, with capacity, yield, and load factor to grow.
"We are addressing the industry challenges through our corporate transformation and by expanding our route network, increasing frequencies on our most popular routes and buying more fuel-efficient aircraft. This will help us to increase productivity and to reduce costs while improving the quality of our services to customers," says Slosar.
"The new management team is acting decisively to make Cathay Pacific and Cathay Dragon better airlines and stronger businesses… we are confident that we are on the right track to achieve strong and sustainable long-term performance…."