Cathay flags fare increases, capacity cuts
HONG KONG – Cathay Pacific has attributed “the relentless rise in the cost of jet fuel in recent months†for a loss of HK$663 million (US$85m) in its 2008 Interim Results.
This compares to a profit of HK$2,581 million (US$330.5m) in the first half of 2007.
Cathay says it has no option other than to raise fares and redeploy some capacity.
Cathay Pacific chairman Christopher Pratt said: “Global aviation is making a painful adjustment to the new reality of US$100-plus oil.
“Cathay Pacific is reducing other costs where it can but there is a limit to how much cost can be saved before quality and brand are compromised.
“It is thus inevitable that fares for passengers and shippers will have to rise to reflect the new cost of operation.
“It is difficult to forecast with any degree of accuracy the extent to which these higher fares will reduce demand but thus far it has remained robust.
“The company’s priority at this time is to protect the integrity of this network. There will be some redeployment of capacity within the network but it is not envisaged that the company will withdraw from any destination it now serves.”
Group turnover rose by 22.6% over the same period in 2007 to HK$42,448 million, with a significant increase in both passenger and cargo revenue.
However, ever-increasing fuel prices completely undermined the airline’s business, with the average into-plane fuel price increasing by 60% to US$132 per barrel. As a result the fuel bill rose from HK$10.55 billion to HK$19.31 billion, a climb of 83%.
Fuel as a percentage of total operating cost rose to 45.3% for the first half of 2008, compared to 33.6% this time last year.
Cathay noted the fuel surcharges approved by the Hong Kong Civil Aviation Department in the first half were less than half of the increased fuel bill and were significantly behind those charged by major international competitors.
Ian Jarrett
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