Cathay Pacific H1 net profit down 59%

Cathay Pacific Airways, Asia’s No.4 air carrier by market value, posted a better-than-expected 59 per cent fall in first-half net profit on soaring fuel costs and placed an order for 12 Boeing aircraft with a list price of $3.28 billion. Cathay, the dominant airline in Hong Kong, said that after an exceptionally strong 2010, this year was proving to be more challenging. “High fuel prices are increasing costs and recovering them through higher tariffs may affect demand,” Chairman Christopher Pratt said in a statement. Fuel costs, a key cost driver, rose 49.5 per cent in the first six months against the same period last year and significantly affected profitability during the reported period, the airline said. Shares of Cathay have lost about a quarter of their value this year on rising oil prices and recent market volatility, triggered by Standard & Poor’s credit rating downgrade of the United States. The stock eased 0.5 per cent to HK$16.20 ahead of the results. But analysts said the better-than-expected results could give the stock support. “No matter the headline or bottom line, they performed well and beat regional rivals such as Singapore Airlines,” said Nomura analyst Jim Wong. “Net profit dropped quite a lot but 2010 was an exceptionally good year.”Regional rival Singapore Airlines Ltd in July reported an 82 per cent drop in net profit to S$44.7 million ($36.7 million) for the quarter ended June 30. Cathay also announced on Wednesday that it had placed orders for four Boeing Co 777-300ER aircraft and eight Boeing 777-200F freighters with a total list price of $3.28 billion to replenish and expand its fleet. Boeing had granted Cathay significant price concessions for the aircraft, which are expected to be delivered between 2013 and 2016, the company said. Cathay reported a net profit of HK$2.81 billion ($359.9 million) for the six months ended June, down from a record of HK$6.84 billion a year earlier when it booked profit of HK$2.17 billion from the sale of investments. But the first-half earnings beat an average forecast of HK$1.5 billion from four analysts polled by Reuters. Revenue rose 13.2 per cent to HK$46.79 billion, while profit margin fell 10.5 per centage points to 6.0 per cent.  From / Gulf Today