Cathay Pacific Airways said it would cut operating costs to combat a “challenging” business environment as the carrier issued a profit warning for its first half 2012 results.
The Hong Kong-based carrier, which incorporates Dragonair and Cathay Pacific, the latter the world’s largest international freight airline last year measured in freight tonne kilometres, said high fuel prices and poor cargo returns had compounded price pressure on its passenger business.
“We previously warned that 2012 is looking even more challenging than 2011 and we were therefore cautious about prospects for this year,” said Cathay Pacific Chief Executive John Slosar. “In response to the challenging environment we face, we are reducing costs where possible, including through a reduction of capacity.”
The cuts will see Cathay target 4 percent growth in total freight capacity — freighter and bellyhold — compared to the original target of 7%. A total freeze will also be implemented on growth of freighter-only capacity which was originally slated to grow by 3 percent this year. “Ad hoc cancellations will continue to be made to match market demand,” said the airline in a statement.
Cathay, which currently operates 25 wide-body freighters including five new Boeing 747-8Fs, said it would also phase three Boeing 747-400BCFs out of service this year “as a near-term capacity-management measure”, but would still take delivery of three more 747-8Fs this year and two in 2013.
The company also insisted funding for its new HK$5.7 billion cargo terminal at Hong Kong International Airport which is due to open in early 2013 would be unaffected by cutbacks.
“This is not just a Cathay Pacific problem; it is clearly an industry-wide issue, and continued high fuel prices in particular are hitting airlines hard across the globe,” added Slosar.
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