Cathay Pacifc’s profit dives on high fuel prices
March 14, 2012, Hong Kong, China - Cathay Pacific Airways says profit fell 61 per cent last year, hurt by persistently high jet fuel prices and weakness in the world's major economies.
The airline posted a profit of 5.5 billion Hong Kong dollars ($709 million) for 2011, down from a record HK$14 billion the year before. Earnings per share fell to HK$1.40 from HK$3.57.
Cathay said high prices for jet fuel — its single biggest cost — had a "significant effect'' on operating results. The airline's fuel costs rose by HK$12.5 billion in 2011 from the year before, reflecting both higher jet fuel costs and that it flew more routes.
High fuel costs hurt profitability at its air cargo division, as fuel surcharges weren't enough to cover the gap.
Demand for air cargo shipments from Hong Kong and mainland China started falling in April and remained weak for the rest of 2011, buffeted by the slumping global economy that hurt consumer demand for manufactured goods. The company said European demand was particularly weak.
Air cargo shipments through Hong Kong were also hit by the devastating earthquake and tsunami that struck Japan in March 2011. The tsunami destroyed a swath of factories producing auto and high-tech components in northern Japan, disrupting manufacturers that relied on shipping those parts through the city for use in China.
The tsunami also temporarily hurt demand for air travel to Japan, although it recovered fully by October. Flooding in Thailand and unrest in the Middle East also hurt demand for travel.