The first consecutive loss in two years in its 71-year old history was noted by Cathay Pacific Airways after the airways posted losses of HK$1.25 billion (US$160 million) in 2017 which is double that of the previous year.
Cathey Pacific is the largest international airline of Asia.
Analysts however said that the results were better than what the market had expected and signaled that the airline is on its path of revival profitability.
There were huge losses on account of one-off fines, redundancy costs and bad fuel hedging bets but they were partly offset by significantly higher contribution to the profits from subsidiaries and associate businesses and enhanced revenues and earnings from Cathay’s cargo unit.
A net loss of about HK$2.8 billion was estimated by some analysts. In 2016, a HK$575 million loss was reported by the airline. During the first half of 2017, the airlines had reported a loss of HK$2.05 billion while in the second half of the fiscal, it recorded profits of HK$792 million excluding one-off gains and losses. Traditionally, the second part of a year has always been strong.
There is an ongoing restructuring process at the largest airline of Hong Kong that is estimated to provide it a savings of HK$4 billion. The restructuring exercise comprises a potential job cut of about 600 to combat the aggressive expansion efforts of mainland Chinese and Middle Eastern airlines in addition to low-cost carriers taking away a part of its market share which has placed the airlines in the face of stiff competition
Enhanced premium passenger demand, weaker currency, a good cargo business and early results of restructuring had benefitted the airlines in 2017, Cathey Pacific said.
“We took decisive action through our transformation programme to make our businesses leaner and more agile,” Cathay Pacific chairman John Slosar said.
“Our focus in 2017 was on building the right foundations, structure and strategy to improve revenue and to better contain costs. Evidence of progress became apparent in the second half of the year.”
For the first half of 2018, confidence on the profitability and outcome of the restructuring was expressed by Slosar.
“The trends of the second half were better than the first half,” Slosar said. “It is always hard to say whether trends will continue but they continued through the first couple of months of this year.”
“We intend to grow. We’re ambitious,” said chief executive officer Rupert Hogg while referring to the bullishness about the strategy of the company to combat competition.
In 2018, the airline plans to fly to seven new destination routes.
There was however no consideration of merger or acquisition on the agenda of the management. to boost competitiveness. Suggestion of the airline acquiring all or part of the assets of the distressed rival local carriers Hong Kong Airlines and Hong Kong Express were shrugged off by Hogg. Both the airlines are controlled by Chinese conglomerate HNA Group which has put up for sale assets worth billions of US dollars.
(Adapted from SCMP.com)