Cathay posts record loss
Cathay Pacific Airlines posted a $1.1 billion loss in 2008 as cargo and passenger services were deeply affected by the global economic crisis.
Cathay and sister airline Dragonair saw revenue rise 14.9 percent to $11.1 billion, but that wasn't enough to avoid profits dropping from 2007, when the airline made $905 million. It was a record annual loss for the airline.
The airline's cargo division suffered from high fuel prices in the first half of the year and slumping demand in the second half, even as it upgraded its fleet.
'High fuel prices made it difficult to operate profitable long-haul freighter flights in the first half,' Cathay said in comments accompanying the results. 'We removed our older Boeing 747-200 'Classic' freighters from European services and combined more flights to ensure profitability. We began phasing out the more fuel-inefficient 'Classics' in March 2008. Under an accelerated retirement program, all will be retired by August 2009.'
Cathay is counting on the new versions of 747 freighters to help defray fuel costs in the future.
'The move to a more fuel-efficient freighter fleet began in May with the arrival of our first Boeing 747-400ERF freighter,' the airline said. 'Our second Boeing 747-400ERF freighter arrived in August but the delivery of the third was put back from November to January 2009 as a result of the strike at Boeing. Three more of the type will arrive in 2009. We also have 10 new-generation Boeing 747-8F freighters on firm order with delivery commencing in March 2010 — later than originally scheduled.
'We now have 10 Boeing 747-400BCF freighters after switching three over from the Dragonair fleet. The scheduled delivery of the last Boeing 747-400BCF freighter is in July 2009 bringing the fleet size to 11. However, we have now taken two of these aircraft out of service from January 2009 for a one-year period as a result of the recent deterioration in cargo loads.'
As far as specific regions, Cathay added freighter flights to Southeast Asia but pulled back on new services to the United States.
'We strengthened our freighter network with the addition of a new service to Dhaka and Hanoi,' Cathay said. 'The route has performed well since its launch. We postponed our plan to launch a new service to Houston and Miami in 2008 due to the delayed arrival of our third Boeing 747-400ERF freighter. The service was launched in the first quarter of 2009. We also launched a new twice-weekly freighter service to Jakarta/Ho Chi Minh City in January 2009 and increased our Malpensa frequency from three to six per week in February 2009 to maximize revenue earning opportunities.'
China, of course, is a huge market for the airline, and falling demand for Chinese-made goods from the end of the Beijing Olympics soured revenue levels for Cathay.
'Regionally, demand out of Mainland China was robust for most of the year, particularly from the Yangtze River Delta,' Cathay said. 'However, there was a marked dip in demand around the Olympics period. We will maintain our freighter frequencies to Beijing and Xiamen in 2009. In the coming summer schedule, our Shanghai frequency will increase and at the same time all Dragonair's Mainland China freighter operations will be transferred to Cathay Pacific.'
Cathay Chairman Christopher Pratt said the effects of fuel price hedging — and a nearly $60 million penalty payment to the U.S. Justice Department for price fixing — hurt the airline's bottom line, the demand drop has hurt worst.
'Our cargo business in the first half was stronger than anticipated, but there was a rapid decline in the last quarter of the year as demand fell in all key markets,' Pratt said. Cargo revenue for Cathay Pacific and Dragonair combined rose by $296 million while total tonnage carried fell by 1.6 percent to 1.6 million tons. Capacity grew 0.7 percent as services were trimmed in the second half of the year due to the weakening demand. ' Eric Johnson