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Cathay discards bright forecast to conduct critical review of challenges

HONG KONG's Cathay Pacific Airways, Asia's biggest international carrier, scrapped its profit outlook and said the airline would conduct a "critical review" of its deteriorating situation.

Cathay's second half results are no longer expected to be good it said in a stock exchange filing, having reported an 82 per cent year-on-year net decline in profit in the first half.

"We are engaged in a critical review of our business, the goal of which is to improve revenues and to reduce costs," Cathay Pacific said in the statement. "The review will consider all options for improving efficiency and productivity."

Cathay CEO Ivan Chu has struggled to revive profits at Cathay Pacific amid a slump in passenger yields - a key measure of profitability in the industry.

Rival Singapore Airlines has also warned of tougher days as competition with Middle East carriers increases. With mainland Chinese airlines offering more direct services to the US and Europe from the mainland, Cathay Pacific's Hong Kong hub is no longer so critical for travellers to use as a hub.

"Since the interim report was issued, the outlook for our airlines business has deteriorated," the carrier said in the statement.

"Overcapacity and strong competition is putting particular pressure on our passenger business, with continued shortfalls in revenue compared with forecasts and heavy pressure on yield."

Cathay chairman John Slosar said the business outlook "remains challenging."

Cathay and its unit Dragonair carried 2.7 per cent more passengers in the first six months of this year, taking the number to 17.2 million. Yet, yields slumped 10 per cent amid increased competition.