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Cathay Pacific Announces 2009 Annual Results

10 Mar 2010


Results   2009 2008
Turnover HK$ million 66,978



Profit/(loss) attributable to owners of Cathay Pacific HK$ million




(Earnings/(loss) per share HK cents




Dividend per share HK cents





The Cathay Pacific Group today announced an attributable profit of HK$4,694 million in 2009. This compares to a loss of HK$8,696 million the previous year. Turnover in 2009 fell by 22.6% to HK$66,978 million while earnings per share rose by HK340.3 cents to HK119.3 cents.

However, excluding fuel hedging gains of HK$2,758 million, a one-off item of HK$1,254 million resulting from the sale of HAECO shares, and the contribution from subsidiaries and associates, Cathay Pacific made an operating profit of HK$285 million from its core airline business compared with a loss of HK$1,440 million in 2008.

The global economic slump last year resulted in extremely challenging business conditions for the Cathay Pacific Group and commercial aviation in general. While there was some pick-up in the airline’s passenger and cargo businesses towards the end of 2009, overall there was a deep downturn in key markets which in turn led to sharply reduced revenues.

Fuel prices in the first half of the year were significantly lower than the record highs of mid-2008. However, they started to rise again in the middle of 2009, reaching uncomfortably high levels. This rise was reflected in mark-to-market gains of HK$2,018 million recorded in 2009 in respect of fuel hedging contracts for the period 2010-2011. These gains reversed a large part of the substantial losses recorded in 2008 in respect of fuel hedging contracts.

Cathay Pacific and Dragonair between them carried 24.6 million passengers in 2009 – a fall of 1.6% on the previous year. Capacity fell by 3.7% compared to 2008. This in turn helped to push up the load factor, which at 80.5% rose by 1.7 percentage points compared to 2008. Passenger revenue fell by 20.8% to HK$45,920 million, reflecting substantial reductions in premium traffic and in economy class yield, though economy class passenger numbers held up well. The strong US dollar in the first half of the year also contributed to the 19.5% fall in passenger yield for the year.

Cargo revenue for the Cathay Pacific Group fell by 29.9% to HK$17,255 million in 2009, while the amount of freight carried for Cathay Pacific and Dragonair dropped by 7.1% to 1,527,948 tonnes. Cargo capacity was reduced by 13.1% and this was reflected in a load factor of 70.8% (compared with 65.9% in 2008). The Group’s cargo business was exceptionally weak in the first half of the year, though the latter half was stronger with yield increasing in October, albeit from a very low base, and rising consistently for the remainder of the year. Cargo yield for the year fell by 26.8% to HK$1.86.

The airline took a number of measures last year to help address the steep downturn in business, including reducing capacity for both Cathay Pacific and Dragonair, reducing operating costs and capital expenditure, introducing an unpaid leave scheme for staff, parking a number of aircraft, working to get concessions from suppliers, and requesting a deferral of new deliveries from aircraft manufacturers. Despite 2009 being a very difficult year, the Cathay Pacific Group worked hard to keep the fundamentals of the business intact, maintaining the integrity of the network substantially intact and going to great efforts to ensure that the quality of product and service was not diminished, and that the passenger experience was not compromised.

A significant change in Cathay Pacific’s shareholding structure took place in the second half of the year, with Air China and Swire Pacific both agreeing to increase their shareholdings by acquiring shares from CITIC Pacific. In February 2010, Cathay Pacific announced it had entered into a framework and other agreements with Air China and others under which they have agreed to establish a jointly owned cargo airline. The formation of the cargo joint venture, which is expected to begin operations in summer 2010, is conditional upon obtaining all necessary approvals from regulatory bodies and the independent shareholders of Cathay Pacific and Air China. The joint venture will provide the two most important cargo-generating regions in the Mainland with two highly competitive and efficient home-based carriers - Cathay Pacific in the Pearl River Delta and Air China Cargo in the Yangtze River Delta.

The Cathay Pacific Group’s balance sheet was put under considerable pressure in 2009 by the reduction in revenue last year. This was offset by cost reductions, while the balance sheet also benefited from the sale of part of a shareholding in the Hong Kong Aircraft Engineering Company Limited.

Cathay Pacific Chairman Christopher Pratt said: “While we welcomed the improvement in business in the latter part of 2009, we remain cautious about the prospects for 2010. Revenues and yields remain below levels experienced prior to the recent downturn and there has not yet been a sustained improvement in the premium passenger demand, which accounts for a significant part of our revenue.

“That said, we have many things working in our favour which will help to put us in a stronger position if the current recovery in the world economy is sustained. We launched a number of projects and initiatives at the beginning of 2009 designed to improve further the way we do things, particularly for our customers. We have a united team that is the hallmark of Cathay Pacific. We have a superb international network and an unrivalled network into Mainland China through Dragonair. Our relationship with Air China will bring many benefits in the years to come and we operate out of one of the world’s premier aviation hubs, Hong Kong. We are deeply committed to our home city and remain highly confident about the future of Cathay Pacific.”

Cathay Pacific 2009 Annual Results