Cathay Pacific profit drops 28% in 2019 as revenue slides

Hit by trade tensions and unrest in Hong Kong, the airline is now cutting capacity due to coronavirus

Hong Kong’s Cathay Pacific reported a 28 per cent drop in profit for 2019. Reuters.

Hong Kong's Cathay Pacific reported a 28 per cent drop in profit for 2019 as revenue declined and finance charges rose.

Net profit attributable to the owners of the company for the year ending December 31 plunged to 1.69 billion Hong Kong dollars (Dh800.6m), the company said in a statement on Wednesday. Revenue slid 3.7 per cent to 107bn dollars, while net finance charges rose 39 per cent to 2.93bn dollars as net borrowing rose 41 per cent to 82.4 billion dollars.

“With our three-year transformation programme starting to bear fruit we delivered a positive performance in the first half of 2019 notwithstanding a difficult environment brought about by geopolitical and trade tensions,” said Patrick Healy, chairman of Cathay Pacific.

“However, with social unrest in Hong Kong intensifying over the second half of the year and mounting US-China trade tensions, we experienced a sharp drop in both inbound and outbound passenger traffic.”

Passenger load factor during the period fell 1.8 per cent to 82.3 per cent and passenger yield dropped 3.9 per cent to 53.6 Hong Kong cents. Cargo yield fell 7.9 per cent to 1.87 dollars. Passenger revenue in 2019 decreased 1.3 per cent year-on-year to 72.2bn dollars and cargo revenue 14.2 per cent to 21.1bn dollars.

“Following the impact of social unrest in Hong Kong in the latter half of 2019, the first half of 2020 was expected to be extremely challenging financially, with an already reduced winter season capacity. This has been exacerbated by the significant negative impact of Covid-19,” Mr Healy said.

“It is difficult to predict when these conditions will improve. Travel demand has dropped substantially and we have taken a series of short-term measures in response. These have included a sharp reduction of capacity in our passenger network. Despite these measures we expect to incur a substantial loss for the first half of 2020.”

The airline said the outbreak of Covid-19 since January 2020 has resulted in a challenging operational environment, and will adversely impact the group's financial performance and liquidity position.

Travel demand has dropped substantially and the group has taken a number of short-term measures in response, including aggressive reduction of passenger capacity measured in Available Seat Kilometres (ASK) by approximately 30 per cent for February and 65 per cent for March and April, with frequencies cut by approximately 65 per cent and 75 per cent over the same periods.

Substantial passenger capacity and frequency reduction is also likely for May. As at the end of February, passenger load factor had declined to approximately 50 per cent and year-on-year yield had also fallen significantly, it said.