Cathay Pacific's 2011 Profit Tumbled

Cathay Pacific's 2011 Profit Tumbled

This year will be even tougher for airlines than 2011 because of economic instability, high jet fuel prices and weak cargo markets, said Christopher Pratt, chairman of Cathay Pacific Airways.

Announcing that the world’s largest international cargo carrier had filed a 61 percent decline in profit last year as net income dropped to HK$5.5 billion ($710 million) from HK$14 billion, he said last year’s economic uncertainties had continued into the first half of 2012 with “our cargo business in particular to remain weak.”

“Fuel prices have risen further,” Pratt said. “As a result, 2012 is looking even more challenging than 2011 and we are therefore cautious about prospects for this year.”

After a record 2010, he said 2011 was affected by the instability of the global economy, the weakness of the air cargo market, the impact of natural disasters in Japan and Thailand, unrest in the Middle East and high jet fuel prices.

Last year also failed to yield a significant peak in cargo shipments, and the Hong Kong-based carrier was forced to cut capacity on key routes in line with demand and to help reduce the fuel burden.

“Fuel prices were high throughout the year. This affected the profitability of our cargo operations. Fuel surcharges were insufficient to recover increased fuel costs,” the carrier said in a stock market exchange statement.

Demand for cargo shipments from the carrier’s main markets of Hong Kong and Mainland China declined from the second quarter of 2011 and remained weak for the rest of the year, with export demand to Europe “particularly weak.”

“Our business was also affected by increased competition from carriers operating from Shanghai,” Cathay said.

“In Mainland China less manufacturing is being done in the Pearl River Delta and the Yangtze River Delta and more manufacturing - particularly of high technology products - is being done in western and central areas. In order to position ourselves to carry cargo from these areas, we started scheduled freighter services to Chongqing and Chengdu in October 2011.”

Cathay said that imports to China and intra-Asia cargo traffic had performed well in 2011, allowing some capacity to be switched onto Asian routes from long hauls, although this was offset by the earthquake and tsunami in Japan in March 2011, which disrupted the supply chain for high-technology products and reduced cargo shipments through Hong Kong.

Last year saw the delivery of Cathay’s first three 747-8F freighters. Four more are scheduled for delivery this year and further two in 2013 with deployment on North American routes most likely.

Eight 777-200F freighters due for delivery between 2014 and 2016 will be deployed on European and Asian routes.

Contact Mike King at michael@borderline.eu.com.