Cathay swings back into the black: Not quite happy days yet

Courtesy Cathay Pacific

Courtesy Cathay Pacific

Singapore Airlines (SIA) reported a profitable first quarter recently; now Cathay Pacific Airways has turned round last year’s first six-month’s loss, posting a profit of HK$24 million (US$3.1 million) this year. This was achieved on the back of lower fuel costs, retiring older aircraft and replacing them with more fuel-efficient airplanes, and cutting back on long haul flights in the weak travel market. As in the case of SIA, Cathay carrier continues to be plagued by its bleeding cargo arm.

Are the good times finally rolling back?

Cathay chairman Christopher Pratt warned against the volatility of the fuel price, as did SIA. Fuel costs account for almost 40 per cent of total operating costs.

The fear of the fuel price rebouncing back up aside, travel particularly that of premium class is far yet from previous achievements; in fact, a month-by-month track from January to May shows a general downward trend for many of the big names, including SIA, Cathay, Qantas and Emirates. In some cases, the numbers are even lower than last year’s numbers.

Hopeful, Cathay said all long-haul flights that were cancelled as part of the cost-cutting exercise would be fully restored by September. Reducing capacity has helped the carrier swing back into the black, so restoring it will have to be matched with increased demand to uphold the trend. It is not a certainty, but one that constantly tests the limit of the age-old axiom that capacity will create demand. Or, lose that growing demand to the competitors.

The picture becomes clearer when an airline like Garuda Indonesia reported a 12-per-cent growth in revenue for the first quarter, from US$717.45 million to US$807.2 million. The Indonesian carrier which has maintained a pretty low profile looks set to mark its presence in the region, with plans to operate a direct service from Jakarta to London Heathrow by early next year (originally scheduled for November this year).

A veteran like Cathay understands only too well the hazards of giving up the driver seat in a potentially shifting market.


About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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