Cathay’s first annual loss more than US$1 billion

As the Hong Kong carrier, Cathay Pacific struggled with fuel prices and also decreasing cargo business, the airline has recorded its first annual loss in a decade of over US$1 billion last year, as reported by the airline yesterday.
The global turndown has left Cathay stuck with the same situation with other airlines that is money losing fuel contracts.
The airline has signed the contract when the prices of fuel were still high and that was before the slowdown.
Chairman Christopher Pratt warned gloomy times ahead for 2009 for the firm.
Despite a dramatic turnaround from 2007 that has recorded a profit of US$7 billion; the airline suffered a net loss of HK$8.6 billion in 2008.
In a statement for the Hong Kong stock exchange, Pratt said, “Having made a painful adjustment to high fuel prices, the aviation industry now has to adjust to a severe economic downturn.
“Cathay expects an extremely challenging year in 2009. Passenger and cargo demand are expected to remain weak and, if fuel prices remain at their present levels, further loss on fuel hedging contracts will be incurred.”
Like any other airline in the aviation industry, Cathay too suffered from an extremely volatile 2008.
According to Pratt, the first half saw an encouraging market from passenger travel and cargo, however, the airline was hit by record oil prices of more than US$140 a barrel.
Number of passengers on Cathay and its sister airline Dragonair rose to 25 million in 2008, that is an increased of 7.3 per cent. The figures dropped drastically in the second half of the year.
Due to global economic slowdown, Cathay’s cargo business dropped in the last quarter as demands for goods from southern China dropped.
The statement reported the number of cargo carried fell from 1.6 per cent to 1.6 million tonnes in 2008.
Earlier this year, the airline plan to build a new cargo terminal at Hong Kong International Airport for two years has been postponed due to the falling demand.
With the oil price of below US$40 for the second half of 2008, hedges were extremely pricey and therefore, forced Cathay to write off HK$7.6 billion in potential losses.
Pratt added due to the low global oil price, the airline was facing possible losses of US$1.9 billion to the end of February.
While Cathay’s chief executive, Tony Tyler said the firm is now assessing possible routes that can cut down their costs.
Tyler said, “There are no sacred cows. This is being driven by the market; ultimately we have to cut our coat according to our cloth.”
Cathay plans to set out five Boeing passenger aircraft while the sister airline Dragonair would not renew the expired leases of three Airbus planes.
Three Boeing freighter planes have also been disposed as a result from falling demand of cargo.