Hong Kong: Hong Kong flag carrier Cathay Pacific said yesterday first-half profit rose almost sixfold from a year earlier, helped by lower fuel prices, but shares fell to a nine-month low as the result missed expectations.
Net profit in the six months through June rose to HK$1.97bn ($254m) from HK$347m in the same period last year, helped by a slump in world oil prices that cut fuel costs by over a third.
But around half of the HK$7.08bn gain was offset by losses from oil hedging, and profits missed the HK$2.22bn median estimate of six analysts polled by Bloomberg News. Revenue for the period fell 0.9 percent to HK$50.39bn while passenger yield, a key measure of profitability, also dropped.
“The group’s performance in the first six months of 2015 was considerably better than in the same period in 2014,” Cathay Pacific chairman John Slosar said in a statement filed to the Hong Kong stock exchange. “We expect our business to do well in the remainder of 2015.” Passenger yield, which is the average fare paid by a passenger per mile, fell 9.3 percent for the period. “Strong competition, a significant reduction in fuel surcharges, foreign currency movements and the fact that a higher proportion of passengers were connecting through Hong Kong put downward pressure on yield,” Slosar said.
Cathay shares fell more than eight percent in the southern Chinese city’s bourse after the result, their lowest intraday point since November. They closed down 7.68 percent at HK$15.38 per share, while the benchmark Hang Seng Index finished the day 1.31 percent lower. “I found the results to be pretty disappointing. The passenger yield decline has been much bigger than expected,” airlines analyst Daniel Tsang said.
“I think the yield will continue to come under intense pressure in the second half given the yuan devaluation, which will affect the average return Cathay manages to get from the Chinese market,” Tsang said.
Beijing’s central bank shocked financial markets by devaluing its currency last week, sending the yuan plunging by the most in over two decades and raising concerns fewer Chinese will travel abroad.
“We have always believed in the China outbound (travel) story, we think the story is going to continue. The short-term (currency) fluctuation is not going to upset the fundamentals,” Cathay’s CEO Ivan Chu said. Still, Cathay said passenger numbers grew by 8.8 percent to 16.8 million in the first half compared to the same period last year.
The airline’s capacity — the total number of passengers it could theoretically carry — was also up 6.4 percent compared to the same period last year, helped by new routes, while air cargo capacity increased by 8.9 percent.
A fall in fuel prices and a rise in the number of flights that are filled to capacity means airlines are expected to make collective profits of $29.3bn in 2015, the International Air Transport Association said in June.
AFP
