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Cathay Pacific says HK political unrest has affected forward bookings

written by WOFA | August 9, 2019

A file image of a Cathay Pacific Airbus A350-900 at Hong Kong airport. (Rob Finlayson)
Hong Kong is one of the busiest hubs in the Asia Pacific. (Rob Finlayson)

Cathay Pacific says the recent political unrest in Hong Kong has affected passenger bookings as it reported a return to profitability for the first half of calendar 2019.

The Hong Kong-based carrier has reported net profit of HK$1.35 billion for the six months to June 30 2019, an improvement from a loss of HK$263 million in the prior corresponding period.

Revenue rose 0.9 per cent to HK$53.5 billion, Cathay Pacific said in a regulatory filing to the Hong Kong stock exchange on Wednesday.

Cathay Pacific chief financial officer Martin Murray said the outlook for Hong Kong was “very fluid” amid the ongoing protests in Hong Kong, as well as escalating trade tensions between China and the United States.

“The geopolitical and trade tensions have escalated and they will be expected to continue to impact our business negatively in the second half,” Murray said during Cathay Pacific’s first half results presentation on Wednesday.

“Protests in Hong Kong has reduced our inbound passenger traffic in July and are adversely impacting forward bookings going forward.”

Hong Kong has been rocked by protests in recent months, which began with local citizens taking to the streets in huge numbers in opposition to a proposed extradition bill that may have allowed those suspected of crimes facing trial in China.

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While Hong Kong chief executive Carrie Lam said the bill had now been withdrawn, the street marches have continued and turned violent as protesters clashed with police and other groups. The demonstrations have also included strikes by workers across a number of industries.

And in recent days, the demonstrations have taken their campaign to Hong Kong airport, resulting in scores of cancelled flights and tightened security measures.

On August 6, Australia’s Department of Foreign Affairs and Trade raised its travel advise for Hong Kong, calling on travellers to the Special Administrative Region (SAR) to exercise a high degree of caution in the country.

“Protests have become more unpredictable and are expected to continue,” the travel advice on the Department’s Smart Traveller website said.

“Tourist areas have been affected. There is a risk of violent confrontation between protestors and police, or criminally-linked individuals, particularly at unauthorised protests.”

The travel advice also recommended travellers avoid large public gatherings, kept an eye on local media and followed the advice on local authorities.

The United States State Department has also raised its travel advisory, warning its citizens to express increased caution in Hong Kong.

Cathay Pacific flies the A350-900 to a number of Australian ports. (Rob Finlayson)
Cathay Pacific flies the A350-900 to a number of Australian ports. (Rob Finlayson)

Passenger numbers up. However, yields under pressure

Cathay Pacific said it carried 18.3 million passengers in the first half of calendar 2019, up 4.4 per cent from the prior corresponding period.

Average load factors – an industry term for how full flights are – was steady at 84.2 per cent. Capacity, measured by available seat kilometres (ASK) rose 6.7 per cent.

For the South West Pacific region, which covers Australia and New Zealand, load factors rose 3.8 percentage points to 85.4 per cent, while ASKs were 0.9 per cent higher. Yields – an industry measure of average airfares per passenger – fell 2.3 per cent.

Cathay Pacific said its Australian and New Zealand routes “did well, helped by capacity reductions by other airlines”.

And while competition put pressure on yields, “this was mostly offset by an increase in passenger numbers”, Cathay Pacific said.

Currently, Cathay Pacific serves Adelaide, Auckland, Brisbane, Cairns, Christchurch, Melbourne, Perth and Sydney in this part of the world with a combination of Airbus A330-300, A350-900 and Boeing 777-300ER equipment.

It is ending flights to Cairns in October.

Cathay Pacific is also upgauging flights from Hong Kong to Melbourne and Perth to the A350-1000 from October.

Cathay Pacific Airbus A350-1000 B-LXA at Toulouse. (Cathay Pacific)
Cathay Pacific Airbus A350-1000 B-LXA at Toulouse. (Cathay Pacific)

The cargo operations suffered an 11.4 per cent decline in revenue during the first half, reflecting the weak freight market globally. Cargo load factors slumped 4.9 percentage points to 63.4 per cent, while total freight tonnage was down 5.7 per cent.

In terms of the outlook, Cathay Pacific chairman John Slosar said the airline group was expected to have a better first half amid a worsening operating environment.

“Our airlines normally achieve better results in the second half of the year than in the first half and, despite headwinds and other uncertainty, we expect this to be the case in 2019,” Slosar said in a statement.

“Geopolitical and trade tensions are expected to continue to affect the global economy and, in turn, demand for air travel and air freight.

“Cathay Pacific has been Hong Kong’s home airline for over seven decades and we remain resolutely committed to this wonderful city.”

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