Cathay Pacific lowers profit forecast; passenger traffic shrinks
As Hong Kong protests continue, the local flag carrier, Cathay Pacific, is less positive on achieving its yearly profit targets and exhibiting a much stronger second half of the year. Throughout September 2019, the trend of lowering demand has continued, as passenger and cargo numbers dropped compared to September 2018.
Newly appointed Chief Customer and Commercial Officer, Ronald Lam, noted that “September was another challenging month”, as demand for travel into Hong Kong has weakened, especially during National Day, “traditionally a very strong period”, he added. “Intense competition and reliance on transit passengers” put pressure on Cathay’s yields.
In September 2019, the Hong Kongese airline group carried 2.4 million passengers (7.1% less compared to September 2018) and 172 tons of cargo (a drop by 4.4%). Year-to-date (YTD) results are also diminishing, even if Cathay Pacific group carried 26.8 million passengers, which is an increase of 1.3%. However, in August 2019, YTD passenger traffic results were up by 2.2%. Freight tonnage improved compared to August 2019, but YTD remained negative – down by 6.8%.
Cathay lost a significant portion of demand to Mainland China routes ‒ a key market for the airline. Revenue per Passenger Kilometers (RPK) dropped by 23.2% compared to September 2018. Corresponding to the market, the carrier withdrew capacity on routes to China and added additional Available Seat Kilometers (ASK) to other regions and continents, with biggest increase on routes to North East Asia, North America and Europe. A shining star was India, Lam highlighted, as Cathay saw strong demand between India and North America in September. In total, Cathay Pacific added 9.8% more capacity on all routes. Worryingly, load factors dropped 7.2pt – on an average flight in September 2019, the airline only had 73.6% of the total seats filled.
Nevertheless, due to “shortfall in inbound bookings for the remainder of 2019”, Lam expects that the rest of the year will “remain incredibly challenging for the airline”, as second-half financial results are forecast to be “below those of our first half”, said Cathay Pacific’s CC&CO – an unusual scenario for the airline that usually produces much stronger results in H2.
In September, management changes were also present at Cathay. On September 4, 2019, the airline announced that John Slosar will leave his chairman role on November 6, 2019, and will be replaced by Patrick Healy. Previously, in August 2019, Cathay introduced a new Chief Executive Officer and the aforementioned CC&CO, Ronald Lam.
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