Special items, cuts return Cathay Pacific to profit

Cathay Pacific Group returned to profit in 2009, posting a HK$4.69 billion ($604.9 million) surplus that was reversed from a restated 2008 loss of HK$8.7 billion, as fuel hedges, one-time gains and capacity and cost cuts boosted the bottom line.

Revenue dropped 22.6% to HK$66.98 billion, but the company benefitted from fuel hedge gains of HK$2.76 billion and HK$1.25 billion from the sale of a 12.5% stake in Hong Kong Aircraft Engineering Co. (ATWOnline, Sept. 17, 2009).

"The global slump resulted in extremely challenging business conditions. . . While there was some pickup in both our passenger and cargo business toward the end of the year. . .overall we saw a deep downturn in our key markets which in turn led to sharply reduced revenues," Chairman Christopher Pratt said.

"We took a number of measures to help us address the steep downturn in business, including reducing capacity in both Cathay Pacific and Dragonair, reducing operating costs and capital expenditure, introducing an unpaid leave scheme for staff, parking a number of aircraft, working to get concessions from suppliers and requesting a deferral of new deliveries from aircraft manufacturers," Pratt added (ATW, December 2009).

Operating expenses were slashed 33.7% to HK$62.5 billion and operating result swung to a HK$5.73 billion profit from an HK$8.03 billion deficit in 2008. CX and Dragonair carried a combined 24.6 million passengers last year, down 1.6%, while passenger yield plunged 19.5% to HK$0.511. Load factor rose 1.7 points to 80.5% as capacity was cut 3.7% to 111.17 billion ASKs.

As of year end CX operated 32 A330-300s, 15 A340-300s, 23 747-400s, five 777-200s, 12 777-300s, 14 777-300ERs, six 747-400Fs, 13 747-400BCFs and six 747-400ERFs. One 747-400 is coming off lease this year, and the carrier expects to take delivery of one A330-300 and four 777-300ERs. Dragonair operates nine A320-200s, six A321-200s and 14 A330-300s. Two A320-200s are scheduled for delivery in 2010 and leases will expire on one of each type. The group's Air Hong Kong subsidiary flies eight A300-600Fs.

"We remain cautious about the prospects for 2010," Pratt said. "Revenues and yields remain below levels experienced prior to the recent downturn and there has not yet been a sustained improvement in premium passenger demand. . .That said, we have many things working in our favor which will help to put us in a stronger position if the current recovery in the world economy is sustained."