Company - - Mar 15,2017
On Wednesday, Hong Kong’s Cathay Pacific Airways reported its first annual loss since the 2008 global financial crisis; shares dropped after the official announcement.
The annual loss announced by Cathay Pacific is a result of overcapacity and growing competition from mainland Chinese carriers. Moreover, a strong Hong Kong dollar is also seen as a prime reason for the carrier’s drag down.
For 2016, the Hong Kong carrier issued a net loss of HK$575 million ($74.01 million), compared to a profit of HK$6 billion exactly a year ago. Since the firm was established in 1946, it is only the third time Cathay Pacific has experienced a full-year loss.
After the news release, the shares of the airline firm dropped almost 5 percent.
Presently, severe rivalry from mainland Chinese as well as Middle Eastern airlines is causing significant troubles for Cathay Pacific. These airlines are rapidly expanding in the region which has led to decline in business for Hong Kong’s flag carrier.
Moreover, carriers such as China Eastern and Air China are providing more direct services from the mainland, which is pushing away passengers to travel via Hong Kong.
Chairman John Slosar said, “The operating environment for our airlines was difficult in 2016, with a number of factors adversely affecting their performance.” He further added, the firm expects the operating environment to “remain challenging” in 2017.
It was also reported that, group revenue plunged more than 9 percent to HK$92.75 billion, whereas passenger yields dipped 9.2 percent to $0.54. Also, the yield on cargo services dropped by 16.3 percent.
Cathay Pacific stated that it has planned to reduce costs by buying fresh & latest fuel-efficient aircrafts. The carrier also aims to grow passenger capacity by 4-5 percent on an annual basis in order to fulfill solid growth in demand from the Asia-Pacific region.