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Cathay Pacific further lowers profit forecast over Hong Kong’s protest crisis as Asian aviation summit cancelled

South China Morning Post

發布於 2019年11月13日16:11 • Danny Lee danny.lee@scmp.com
  • Hong Kong’s flagship airline group said second half of 2019 to be ‘significantly lower’ than the first, making an annual loss more likely
  • Separately, next week’s Cathay Pacific-hosted aviation summit for Asian carriers week was cancelled
A Cathay Pacific plane lands at Hong Kong airport on August 14 after it reopened after clashes between police and protesters. Photo: Reuters
A Cathay Pacific plane lands at Hong Kong airport on August 14 after it reopened after clashes between police and protesters. Photo: Reuters

The Cathay Pacific Group on Wednesday further lowered its full-year profit forecast, warning that the second half of 2019 would be "significantly below" the first six months of the year and the short-term outlook remained "challenging and uncertain".

Hong Kong's flagship airline group said last month its second half performance would only be below the first six months of the year, making it more likely to take an annual loss for the third time in four years.

Cathay Pacific, one of Asia's premium airlines, has been battered by the protest crisis in Hong Kong while suffering the lasting effects of punishment imposed by China's civil aviation authority.

"We expect our second-half financial results will be significantly below those of our first-half," said Ronald Lam Siu-por, the airline's chief customer and commercial officer, said on Wednesday in an update on the company's performance in October. "The short-term outlook remains challenging and uncertain."

This was a very difficult decision … but reflects the unpredictability of the situation in Hong KongAndrew Herdman, the AAPA director general, and Augustus Tang Kin-wing, and the CEO of Cathay Pacific Group

The airline said its advanced bookings "continue to show weakness in both inbound and outbound travel", and said that trend was only partly offset by an increase in passengers transiting through Hong Kong.

Cathay Pacific said it faced reduced passenger volume, less busy flights and lower airfares " a triple threat that had contributed to the drop in business.

The company clarified its response to the slump in travel, saying it would cut passenger flight capacity against its original schedule by 2 to 4 per cent between August and October, and 6 to 7 per cent for November and December.

Demand for flights to and from Mainland China continued to fall at a steep rate, tumbling 21.9 per cent in October. China flights typically make up one-fifth of Cathay Pacific's daily flights. October was the third month in a row in which Cathay has seen demand in its China market fall more than 20 per cent.

Europe remained an overall bright spot with demand for flights growing 5.4 per cent.

Overall, the airline group carried 2.74 million passengers in October, a drop of 7.1 per cent year on year. The rate at which flights were full fell to 77.6 per cent, a drop of 4 per cent.

Demand for business-class travel, one of the group's most profitable segments, was also sluggish, posting a "double-digit" drop in October, which is generally a peak month for corporate travel.

Cathay Pacific carried fewer passengers year on year in September

Travel into Hong Kong was also weak, falling 35 per cent after dropping 38 per cent in August and September. Outbound travel fell 13 per cent, after dropping 9 per cent in September and 12 per cent in August.

Cargo performance picked up as it entered the peak season, despite the US-China trade war. Over the first 10 months of the year, the airline carried 6.6 per cent less cargo.

Cargo performance picked up headed into the peak season, despite the US-China trade war. Photo: AFP
Cargo performance picked up headed into the peak season, despite the US-China trade war. Photo: AFP

"October operating data shows no notable improvements in passenger demand from the past several months," said Luya You, a transport analyst at Bocom International.

"We expect similar performance until at least the end of 2019. However, while Cathay can attract increasing transit volumes with lower airfares, the resulting impact on 2H19 earnings will be minimal."

You continued: "Nonetheless, as the carrier will likely attempt to control capacity cuts within planned limits for the fourth quarter, lower yields will have to be the necessary sacrifice to maintain break-even loads on major routes."

Cathay Pacific plans to give away free economy-class tickets to its staff across Asia

Cathay made a profit of HK$2.34 billion (US$298 million) in 2018 after two consecutive years of losses. This year it made a first-half profit of HK$1.35 billion.

Separately, a Cathay Pacific-hosted aviation summit for Asian carriers week was cancelled, the Association of Asia-Pacific Airlines (AAPA) said in a statement on Wednesday evening. The AAPA 63rd Assembly of Presidents was expected to start next week.

"This was a very difficult decision given our commitment to organise this important industry event, but reflects the unpredictability of the situation in Hong Kong," said Andrew Herdman, the AAPA director general, and Augustus Tang Kin-wing, and the CEO of Cathay Pacific Group, in a joint statement.

"At the same time, the well-being of our delegates and guests has always been of paramount importance."

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.

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