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Cathay profits soar 468pc to US$254.3 million while revenue slips 0.9pc

HONG KONG's Cathay Pacific Airways first half profit soared 468 per cent to HK$1.97 billion (US$254.3 million) drawn on revenues of HK$50.38 billion, which decreased 0.9 per cent.

"The group's performance in the first six months of 2015 was considerably better than in the same period in 2014, said Cathay chairman John Slosar.

Revenue in the first six months of 2015 was affected by the weakness of a number of currencies relative to the Hong Kong and United States dollars, said the statement accompanying the interim results filed to the Hong Kong stock exchange.

"This adversely affected yield on routes to Australia, Canada, Europe, New Zealand, South Africa and the United Kingdom. The depreciation of the Japanese yen increased demand for travel to Japan and resulted in higher revenue on Japanese routes," the statement said.

"Demand on Korea routes weakened. The principal reason was the incidence of Middle East Respiratory Syndrome [MERS] in June and the subsequent issue of a red outbound travel alert by the Hong Kong Government," it said.

Cargo demand slacked in the second quarter, said the statement.

"Strong competition, overcapacity in the industry and a significant reduction in fuel surcharges put downward pressure on yield. Cargo yield for Cathay Pacific and Dragonair decreased by 11.1 per cent compared to the same period last year.

"Lower fuel prices were welcome, but these were partially offset by fuel hedging losses. Lower fuel prices meant more flexibility in deploying our freighter capacity. We managed capacity in line with demand.

"The amount of cargo carried in the bellies of our passenger aircraft increased as more Boeing 777-300ER passenger aircraft were brought into service and new passenger routes were introduced," said the statement.

"The strong demand for cargo shipments from Hong Kong in the last quarter of 2014 continued in the first part of 2015, but demand slackened in the second quarter.

Shipments to and from North America were strong, assisted in part by maritime backlogs caused by industrial action at major shipping ports on the west coast of the United States, it said.

"We operated more freighter services to meet this demand. It started to decline in May as the backlogs were cleared. Shipments to Europe were below expectations," the statement said.

The group's cargo revenue for the period was HK$11,376 million, a decrease of 2.5 per cent compared to the same period in 2014.

"Capacity for Cathay Pacific and Dragonair grew by 8.9 per cent and the load factor increased by 0.9 percentage points to 64.1 per cent. But strong competition, overcapacity in the industry and a significant reduction in fuel surcharges put downward pressure on yield.

"However, there was strong demand on some of our principal cargo routes, notably to and from North America, assisted in part by maritime backlogs caused by industrial action at major shipping ports on the west coast of the United States. Intra-Asia shipments grew but traffic to Europe fell short of expectations.

"Our cargo terminal in Hong Kong has been operating smoothly after its build up to full operations in October 2013. Volumes have been growing and it provides services for five airlines outside the Cathay Pacific Group.

In the first half of 2015, despite an increase in passenger and cargo capacity of 6.4 per cent and 8.9 per cent respectively, our fuel costs (before the effect of fuel hedging) decreased by HK$7,078 million (or 35.5 per cent) compared to the same period in 2014.

Despite lower prices, fuel remains the group's most significant cost. Fuel accounted for 34.2 per cent of our total operating costs, a reduction of 3.7 percentage points compared to the same period in 2014.