Hong Kong's Cathay Pacific narrows losses in first half

Hong Kong flag carrier Cathay Pacific said on Wednesday its losses had narrowed in the first six months of the year but warned global economic uncertainty would pose a challenge as the firm battles to revive its fortunes.

The airline posted a net loss of HK$263 million ($33.5 million), compared with a HK$2 billion loss for the same period in 2017.

That fell short of some analysts' estimates as the firm was hit hard by rising fuel costs.

Cathay shares were down 1.82 percent at HK$11.86 at the close of trading in Hong Kong Wednesday.

Cathay has come under pressure from lower-cost Chinese carriers and Middle East rivals, which are expanding into Asia and offering more luxury touches.

It booked the first back-to-back annual loss in its seven-decade history in March.

Analysts described the results as "disappointing".

"Most analysts and investors had expected the airline to report a profit since it was profitable in the second half of 2017 and we are at the halfway mark of Cathay's three-year transformation programme," Corrine Png, CEO of Crucial Perspective, said.

The firm previously pledged to cut 600 staff including a quarter of its management as part of its biggest overhaul in two decades.

Chief executive Rupert Hogg took over in May 2017, replacing Ivan Chu, who had been in the job for three years.

There was no specific reference to the possibility of further job cuts or restructuring Wednesday, but chairman John Slosar said in a statement that the company's "transformation programme" would continue.

- Fuel hedging losses -

Hong Kong's South China Morning Post reported last month there would be a "consolidation" of Cathay's overseas operations, prompting fears over further job losses.

Cathay confirmed Wednesday that it was restructuring the organisation of its "outports", referring to its offices outside Hong Kong.

"An internal memo has been shared with the employees of the Cathay Pacific Group as our regional and country teams start to communicate and, where necessary, consult with their local teams on the restructuring," it said in an email to AFP without giving further details.

Wednesday's results missed a median estimate for a profit of HK$140 million in a Bloomberg News survey of five analysts.

Cathay said although its performance had been boosted by strong cargo business and a weak US dollar, it had been dragged by increased fuel prices.

Fuel is the group's most significant outlay, accounting for 30.1 percent of total operating costs.

Fuel costs including hedging losses in the first half of 2018 stood at HK$16 billion, compared with HK$14.9 billion in the same period in 2017.

"Cathay is still incurring fuel hedging losses due to its expensive legacy contracts," said Png who expected that the company would start booking fuel hedging gains next year as those contracts expire.

Slosar predicted the airline's performance would improve in the second half of the year.

"The strength of the US dollar and economic uncertainty arising from global trade concerns remain challenges," he said in a statement.

"But we still expect passenger yields to continue to improve and the cargo business to remain strong."

ey-yz-lm/mtp

CATHAY PACIFIC AIRWAYS

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Hong Kong's Cathay Pacific narrows losses in first half
Hong Kong (AFP) Aug 8, 2018
Hong Kong flag carrier Cathay Pacific said on Wednesday its losses had narrowed in the first six months of the year but warned global economic uncertainty would pose a challenge as the firm battles to revive its fortunes. The firm posted a net loss of HK$263 million ($33.5 million), compared with a HK$2 billion loss for the same period in 2017. But it still fell short of some analysts' estimates after being hit hard by rising fuel costs. Cathay shares were down more than two percent at HK$11 ... read more