Cathay reaches record profit, cargo grows 10% in slow market

Cathay reaches record profit, cargo grows 10% in slow market Cathay Pacific said Wednesday it reached record profit in 2007 as group turnover increased 24 percent to a record $9.7 billion in 2007, and profits rose to $901.9 million from $525 million in 2006.
   The Hong Kong-based airline said its cargo revenue grew 10 percent despite steep fuel costs that weren't completely recovered by surcharges, as well as a modal shift to ocean in some trades.
   This year will mark a key point in Cathay's cargo business as it transitions some of its older 747 freighters to more efficient extended range 747s.
   'There was a further expansion to the freighter fleet in 2007 and the increased capacity helped Cathay Pacific carry a record 1.4 million tons of freight, despite a soft market throughout the year,' the airline said in a statement. 'Cargo revenue rose by 10 percent to ($1.7 billion), while the cargo load factor fell by 0.8 percent point to 67.5 percent. A combination of factors — including weak demand out of Europe and North Asia, increased competition and a modal shift to marine freight due to high fuel prices ' led to a 7.7 percent decline in cargo yield to 20 cents.'
   Fuel costs skyrocketed, Cathay said. 'High fuel prices continued to have a significant impact on the airline, particularly in the second half of the year, and the fuel bill rose by 21.8 percent to ($3.2 billion). This was only partially offset by fuel surcharges. The unit cost excluding fuel fell slightly as a result of the airline's efforts to increase productivity and reduce controllable overheads.
   'High fuel prices continued to have a big impact on our cargo business, only partially offset by fuel surcharges,' Cathay said. 'The negative effect of fuel prices was particularly felt on our older, more inefficient Boeing 747-200F freighters. We will start to withdraw these from service as new freighters arrive in 2008.'
   But the new freighters on order are expected to ease some of the burden.
   'We announced our biggest-ever order for new freighters in November, with an order for 10 Boeing 747-8Fs for delivery between 2009 and 2012. These new generation aircraft offer greatly improved efficiency and will enable us to carry more cargo over longer distances,' Cathay said. 'We will also take delivery of six new Boeing 747-400ERFs, extended range freighters, starting May 2008.
   As for Cathay's specific markets, cargo flights to China were, no surprise, the bedrock of the airline's success.
   'Demand from Mainland China continued to be strong and flights out of Hong Kong to North America were full for much of the year,' the airline said. 'The freighter service to Atlanta and Dallas was turned into a daily operation. We also increased our freighter frequency to Chennai and Toronto. Demand to and from Australia rose significantly during the second half of the year, helping to boost yield. We saw a marked decline on the Japanese route in both directions, with tonnage and yield affected by a modal shift to marine freight.'
   The 2007 results are the first to include a full year's contribution from wholly owned subsidiary Dragonair.
   'Work was ongoing throughout 2007 to fully realize the synergies resulting from Dragonair becoming part of the Cathay Pacific Group in September 2006,' the airline said. 'In the first full year since the integration, the two airlines worked to enhance connectivity by strengthening and aligning both carriers' networks. Dragonair saw a total of six new destinations — Busan, Fukuoka, Kathmandu, Phuket, Sendai and Taichung — added to its network while frequencies to a number of secondary Mainland destinations were strengthened.'