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Cathay Pacific Airways

Cathay Pacific parking planes after sales take a dive

Aug 05, 2009

Cathay Pacific Airways Ltd., Hong Kong’s biggest carrier, intends to park six passenger planes by the end of the year after first-half sales slumped 27 percent.

“We still cannot see any signs of any pickup in business,” Chairman Christopher Pratt told reporters in Hong Kong today. One of the planes has already been parked along with five freighters, Chief Executive Officer Tony Tyler said.

Cathay has cut capacity, offered staff unpaid leave and begun talks about delaying new aircraft as business and leisure travelers pare flying because of the global recession. The airline ended a run of two straight losses in the first half on a HK$2.1 billion ($271 million) hedging gain and a 52 percent drop in fuel prices.

“Only a recovery in demand will help them make a profit in the second half,” said Allen Wong, an analyst at Quam Ltd. “It’s unlikely the carrier can save that much in fuel costs again as oil prices have already gone up a lot.”

Cathay has already parked the first of four Airbus SAS A340-300s that will be taken out of service, Tyler said. Two Boeing Co. 747-400s will also be idled, he added.

Travel Drop

Passenger numbers at Cathay and its Hong Kong Dragon Airlines Ltd. unit fell 4.2 percent in the first half to 11.9 million. Passenger yield, a measure of average sales, plunged 20 percent, “slightly more” than Wong expected. Cargo volumes tumbled 15 percent.

“Full-year earnings will depend on a pick-up in premium traffic,” said Winson Fong, who helps manage about $2 billion at SG Asset Management H.K. Ltd. “Fuel-hedging gains really aren’t something to evaluate the company’s performance on.”

Across the Asia-Pacific region, international passenger traffic fell 15 percent in June because of the economy and concerns about H1N1, according to the International Air Transport Association.

Singapore Airlines said last week it may post its first annual loss in 24 years because of plunging traffic. British Airways Plc also reported a quarterly loss last week and said that yields will continue to decline.

Cathay was expected to make a HK$475 million net income, based on the median of six analysts’ forecasts. It won’t pay an interim dividend.

Fuel Costs

The Hong Kong carrier’s gross fuel spending fell 56 percent in the first half from a year earlier to HK$8.65 billion. It bought fuel at an average price of $63.70 per barrel.

“The recent strengthening of fuel prices is a cause for concern,” Pratt said in the company’s results announcement.

The airline is in talks about delaying new planes including Boeing 747-8 freighters and Airbus A330s, Chief Operating Officer John Slosar said today. The carrier had a fleet of 162 planes as of June 30, with another 39 on order. That includes aircraft operated by Air Hong Kong, a cargo venture with DHL.

Cathay Pacific parking planes after sales take a dive
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