Cathay Pacific Airways has warned that its financial results for the first half of 2012 are “expected to be disappointing”. In response to the changing market conditions and challenging business environment, the group is readjusting the capacity of both Cathay Pacific and Dragonair by reducing capacity on some long-haul routes while increasing capacity and introducing six new destinations in its regional network.
Since the airline announced its annual results in March, fuel prices have remained high, the cargo business, despite a temporary improvement in March, has shown no sign of a sustained recovery
and pressure on Economy Class yields has continued. There has also been some softening in yield in the premium cabins.
Cathay Pacific chief executive John Slosar said: “We previously warned that 2012 is looking even more challenging than 2011 and we were therefore cautious about prospects for this year. In response to the challenging environment we face, we are reducing costs where possible, including through a reduction of capacity.
The airline’s financial position remains strong which will enable us, despite the current difficult trading conditions, to maintain the quality of our products and services and to continue with our longterm strategic investment in the business.” Slosar added: “This is not just a Cathay Pacific problem; it is clearly an industrywide
issue, and continued high fuel prices in particular are hitting airlines hard across the globe. We have no option but to take concerted action to adapt to this volatile operating environment. We need to do this to protect our business in the short-run and to protect the Cathay Pacific team.”
The carrier has announced a raft of measures to reduce costs that will include adjusting both passenger and cargo capacity, deploying more fuel-efficient aircraft on long-haul flights, speeding up the retirement of its older Boeing 747-400 aircraft, and putting a hiring freeze on new or replacement ground staff. At the same
time it is offering voluntary unpaid leave for cabin crew from June and introducing cost-saving measures such as cancelling non-essential business travel for staff and reducing its marketing and IT spend.
For cargo, Cathay Pacific will now target four per cent growth in total (freighters plus passenger aircraft bellies), down from the original target of seven per cent, while there will be zero growth in
freighter capacity compared to the three per cent originally targeted for 2012. Ad hoc cancellations will continue to be made
to match market demand, the carrier said.
In the cargo fleet, Cathay Pacific currently operates 25 wide-body
freighters, including five new B747-8Fs. As it takes delivery of three more B747- 8Fs this year and two next year, the airline will take three B747-400BCFs out of service this year as a near-term capacitymanagement measure.
On the passenger side, the Cathay Pacific Group as a whole will see its capacity growth reduced to 3.2 per cent from the targeted seven per cent this year. The capacity growth for Cathay Pacific will be reduced to two per cent from the targeted seven per cent. The airline’s network will remain intact but frequencies on some long-haul routes to North America and Europe will be reduced in response to high fuel costs and depressed yields.
The Group will retain its focus on expanding capacity within the region, with Dragonair’s capacity set to grow by 9.2 per cent against a target of 7.3 per cent as a result of the launch of new destinations and increased frequencies on regional and Mainland routes.
