Cathay Pacific (CPCAY) has reported an 82% drop in profits in the first half of 2016, due largely to increased competition and currency fluctuations.
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Net profit fell to HK$353 million, or HK$0.09 per share, in the first six months, down from last year’s HK$1.97 billion, or HK$0.501 per share, the airline said in a statement.
The airline’s earnings deteriorated as companies cut their first- and business-class reservations for their business trips mainly on long-haul routes on the back of the economic slowdown in China and elsewhere.
Chairman John Slosar expected operating environment remains challenging for the rest of the year.
Cathay saw profit surge over 90% previous year as record low crude oil prices helped reduce fuel costs and a higher contribution from its affiliate Air China Ltd boosted income.
Its shares, in intra-day trade on Wednesday, suffered their biggest one-day percentage drop since August of past year.
Revenue for the six months to 30 June fell 9.2% to HK$45.68bn.
“It all boils down on the China economy”.
At the same time, the firm suffered huge hedging losses as the price of oil plunged.
The carrier is among the airlines that did not benefit fully from the drop in oil prices, as the level at which it has hedged is higher than the spot market price.
A slump in crude since mid-2014 should have provided a much-needed boost to their bottom line.
The company took a HK$4.49 billion loss from fuel hedging contract, which also contributed to the drop in profits. “It’s a nagging pain”, Wong added.
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The company, which also operates regional carrier Cathay Dragon, said passenger numbers rose 2.7 per cent but the money it earned from them fell 10 per cent.
