Cathay’s annual profit falls

Cathay Pacific Airways, Asia’s No.4 carrier by market value, posted a bigger-than-expected 61 per cent drop in 2011 net profit on Wednesday amid high fuel costs and a slowing global economy, and warned of a more challenging year ahead. Global economic instability has continued in the first half of this year and jet fuel prices have risen further, Cathay, Hong Kong’s largest carrier, said in a statement to the Hong Kong Stock Exchange. “As a result, 2012 is looking even more challenging than 2011 and we are therefore cautious about prospects for this year,” chairman Chirstopher Pratt said in the statement. Cathay may see a softening in premium air passenger demand in the first half of 2012 before an improvement in air cargo demand in the second half, Nomura analyst Jim Wong said in a research note before the results. He expected a recovery in Cathay’s premium air passenger demand in 2013. The notoriously cyclical global airline industry faces headwinds from high fuel prices and sluggish demand, particularly in the premium segment. Cathay rival Singapore Airlines has cut cargo capacity and asked its pilots to take non-paid leave to counter the downturn. Cathay, the world’s largest air cargo carrier, reported an annual net profit of HK$5.5 billion, down from a record high of HK$14.05 billion in 2010 which included HK$3 billion of profit from the sales of its interests in two units. The result came slightly below an average forecast of HK$5.82 billion from 17 analysts polled by Thomson Reuters. The cost of fuel, which is Cathay’s biggest single expense, rose 44 per cent to HK$12.46 billion in 2011, it said. Air China, the country’s national flag carrier and 19 per cent-owned by Cathay, contributed 31 per cent of Cathay’s consolidated profit before tax in 2011. Shares of Cathay were down 2.8 per cent at HK$15.14 after the results. They have risen about 14 per cent this year compared with a 17 per cent gain in the benchmark index. Cathay stock slid about 38 per cent in 2011, lagging a 20 per cent fall in the main index. Combined passenger traffic of Cathay and its unit Dragonair grew just 2.9 per cent last year to 27.6 million while cargo throughput dropped 8.6 per cent to 1.65 million tonnes as demand for its key markets in China and Hong Kong slowed.