Cathay posts 1st loss since 2008 amid Chinese competition

Reuters file photo

A Cathay Pacific Airways staffer walks past self check-in machines at Hong Kong Airport on March 7, 2016.

BloombergSINGAPORE (Bloomberg) — Cathay Pacific Airways Ltd. reported its first loss in eight years and scrapped plans for a second-half dividend after competition from Chinese airlines and losses from fuel hedging dented earnings.

The net loss totaled 575 million Hong Kong dollars (U.S. $74 million) in 2016, Hong Kong-based Cathay said in a statement Wednesday.

That compares with the median profit estimate of H.K.$450 million in a Bloomberg News survey of nine analysts.

Sales at Asia’s largest international airline dropped 9.4 percent to H.K.$92.8 billion.

Cathay predicted the operating environment in 2017 would remain challenging, and also said premium travel from Hong Kong was below expectations, prompting the airline to sell such tickets at promotional prices to leisure travelers.

The carrier is executing a revamp to stem the earnings slide as shrinking business travel, pressure from budget operators and more direct routes offered by mainland carriers weigh on its yields — the money earned from flying a passenger for one kilometer and a key measure of profitability.

“When you look into Cathay, things aren’t rosy,” Mohshin Aziz, an analyst at Maybank Investment Bank Bhd., said before the results were released. “They’re getting revenue hit in terms of lower yields and struggling to get passengers to their flight.”

Cathay has been facing competition from operators such Hainan Airlines Co. and Spring Airlines Co., China’s biggest budget carrier.

Analyst projections

In the Bloomberg News survey, analysts had predicted results ranging from a profit of H.K.$1.5 billion to a net loss of H.K.$1.5 billion. The disparity in the figures reflected varying estimates of charges due to fuel-hedging losses.

Chief Executive Officer Ivan Chu has seen Cathay’s shares plunge more than 20 percent since his appointment in March 2014, compared with a gain for Hong Kong’s Hang Seng Index.

The company was expected to pay a second interim dividend of 27 Hong Kong cents, according to estimates by Bloomberg.

Cathay said passenger yield in 2016 fell 9.2 percent to 54.1 Hong Kong cents, while losses from fuel hedging totaled H.K.$8.46 billion in the year, versus H.K.$8.47 billion in 2015.Speech

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