Mar 20, 2017 (LBO) – Hong Kong’s flagship carrier Cathay Pacific has reported its first annual loss since 2008 with the airline management blaming weak demand and fierce competition for the loss.
The airline posted a net loss of 74 million US dollars for 2016, reversing a 773 million US dollars profit from the previous year.
Bloomberg analysts expected an average profit of 57.9 million US dollars for the carrier.
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Cathay Pacific said passenger revenue has dropped 8.4 percent to 8.6 billion US dollars due to overcapacity in the market and weak foreign currencies.
The airline is now planning to cut jobs in a major restructuring programme.
Chairman of Cathay Pacific John Slosar in a statement to the Hong Kong exchange said they are aiming to reduce unit costs excluding fuel over the next three years.
Some analysts said fuel hedges are the primary culprit for Cathay Pacific’s annual loss.
They blamed the fuel hedging program, a decision taken in 2015 to protect against high oil prices; and said without that Cathay Pacific would have reported a healthy profit.
Fuel is still the airline’s most significant cost, accounting for 29.6 percent of total operating costs in 2016 compared to 34.0 percent in 2015.
Total fuel costs have decreased by 20.4 percent in 2016 but after taking hedging losses into account, fuel costs have only decreased by 15.2 percent compared to 2015.