Cathay Pacific in its financial review at end of Q2 said that the first six months of 2012 was a challenging period for the Cathay Pacific Group.
“High fuel prices, passenger yields coming under pressure and weak cargo demand had a significant adverse impact on operating results for the period. Despite these challenges, the Group remained focused on improving its products and services and enhancing its network where possible. We will continue to make long-term investments which demonstrate our commitment to developing Hong Kong’s role as one of the world’s leading international aviation hubs,” the statement added.
Cathay Pacific and Dragonair carried a total of 14.3 million passengers in the first half of 2012. This represents an increase of 8.6% compared to the same period in 2011. The increase in passenger numbers over the period was ahead of the increase in capacity. There was a slight increase in the load factor, which rose by 0.8 percentage points to 80.1%. Passenger yield grew by 1.2% to HK66.1 cents in the first half of 2012. Revenue from passenger services grew by 9.2% while capacity increased by 6.9%
“Increased fuel prices significantly affected the profitability of our passenger services, particular on long-haul routes operated by older, less fuel-efficient aircraft. The weakness of a number of key operating currencies relative to the Hong Kong dollar and the US dollar had a negative impact on revenues, particularly in the second quarter. Passenger growth was ahead of the increase in capacity.
“Despite careful revenue management, the pressure on economy class yields that began in the second half of 2011 continued in the first half of 2012. This was primarily a result of strong competition on key routes. Premium class demand was strong at the beginning of the year. However, as employees of major corporations started to travel less in response to economic uncertainty, there was a reduction in the number of premium class passengers.
“The India routes benefited from the continued buoyancy of the Indian economy, but yields remain a concern. Later this year we will increase the frequency of flights to Chennai and Dragonair will launch a four-times-weekly service to Kolkata.”
“The Middle Eastern routes were affected by strong competition, which put pressure on yields. We reduced the frequency of flights to Abu Dhabi and Bahrain in response to reduced demand. The economic instability in Europe had a significant effect on our business. Routes to Continental Europe were generally weak. The London route was relatively stronger, helped by stable demand from students and more robust premium class demand.
Premium class revenues on the New York route were adversely affected by the state of the financial markets. Economy class load factors were strong on most United States routes. The Chicago route was weak during the winter months, but has since improved. Business on the Canada routes was affected by strong competition and there was a fall in yields,” it added.
“The air cargo markets continue to be weak. In the first half of 2012, the tonnage carried by Cathay Pacific and Dragonair fell by 9.8% to 754,000 tonnes, with our two main markets, Hong Kong and Shanghai, both heavily affected by weak demand. Shipments to Europe were particularly weak. The high price of fuel made it hard to operate profitably on European and transpacific routes. We reduced capacity during the period, with the aim of trying to maintain load factors and yield. By comparison with the first half of 2011, capacity was down by 4.3%. The load factor fell by 4.1 percentage points to 64.3%. Yield was down by 0.4% to HK$2.41. Cargo revenues decreased by 10.2% to HK$10441 million as cargo business is generally stronger in the second half of the year than in the first though the outlook for the remainder of 2012 is uncertain,” it said.