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Cathay Pacific returns to profit in 2009

Cathay Pacific Group returned to profitability in 2009, recording a $52.7 million operating profit, up from a $369 million loss in 2008.But although business improved in late 2009, the company is cautious in its outlook for the year, as it said business w

Andrea Deuchrass
Thu, 11 Mar 2010

Cathay Pacific Group returned to profitability in 2009, recording a $52.7 million operating profit, up from a $369 million loss in 2008.

But although business improved in late 2009, the company is cautious in its outlook for the year, as it said business was not back to pre-recession levels and premium passengers have not fully returned.

The company’s attributable profit was $868.25 million compared to a $1.5 million loss in 2008, influenced by fuel hedging gains ($510.74m), a one-off $232 million boost from the sale of HAECO (Hong Kong Aircraft Engineering Company Limited) shares and contribution from subsidiaries and associates.

The company said the year was extremely challenging and although passenger and cargo businesses picked up towards the end of 2009, there was a deep downturn in key markets, resulting in sharply reduced revenues.

In the first half of the year, fuel prices were significantly lower than the record highs experienced in mid-2008 but they rose again in mid 2009.

Fuel hedging gains (from fuel contracts for the 2010/2011 period) reversed a large part of the hedging contract losses in 2008.

Passenger numbers fell 1.6% on 2008, to 24.6 million (including Dragonair) and capacity fell by 3.7%, which helped to push the load factor up 80.5%. The load factor rose by 1.7 percentage points compared to 2008.

Revenue from the company’s cargo operations fell by 29.9% to $3.2 million and freight dropped by 7.1% to 1,527,948 tonnes. The company said the cargo business was “exceptionally weak” in the first half, with yield increasing in October and rising consistently.

Downturn creates change
Cathay Pacific Group said 2009 was a very difficult year but it worked hard to keep fundamentals intact – trying to ensure quality, service and the passenger experience was not compromised.

However, the airline also adopted some significant changes.

Capacity was reduced for both Cathay Pacific and Dragonair, along with operating costs and capital expenditure. It introduced an unpaid leave scheme for staff, parked new aircraft and requested deferrals of new aircraft deliveries.

In the second half, Air China and Swire Pacific agreed to buy more of a share into the company and in February this year, Air China and Cathay signed joint venture agreements for a cargo airline.

Expected to start operating in summer 2010, the joint venture is still conditional on regulatory approval and on independent shareholder agreements from the two companies. Cathay Pacific will operate in the Pearl River Delta and Air China Cargo in the Yangtze River Delta.

Cautious outlook
Cathay Pacific chairman Christopher Pratt said the company welcomed the upturn in business in late 2009 but remained cautious about 2010, as revenues and yields were not yet back up to levels seen before the downturn.

Premium passenger demand (accounting for a significant chunk of the company’s revenue) had not recorded a sustained improvement.

“That said, we have many things working in our favour which will help to put us in a stronger position if the current recovery in the world economy is sustained.”

He said the company’s network into Mainland China through Dragonair was unrivalled and its relationship with Air China would bring benefits in years to come.

“We are deeply committed to our home city and remain highly confident about the future of Cathay Pacific.”

Andrea Deuchrass
Thu, 11 Mar 2010
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Cathay Pacific returns to profit in 2009
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