CX profit.
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CX profit.
Fuel hedging seems like a good gig, I wonder who they answer too?
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Cathay Pacific Airways may post hefty fuel hedging losses
Carrier expected to report stronger profit of HK$3.4 billion for year despite taking a bad hit from locking in oil prices at higher than spot
Analysts polled by Bloomberg expect Cathay to post a net profit of HK$3.43 billion for last year, compared with HK$2.62 billion in 2013. Photo: AFP
Analysts polled by Bloomberg expect Cathay to post a net profit of HK$3.43 billion for last year, compared with HK$2.62 billion in 2013. Photo: AFP
Cathay Pacific Airways, which is due to post its annual results on Wednesday, may report hefty fuel hedging losses of up to HK$14 billion because it locked in fuel prices at higher than spot prices, which then plunged 50 per cent in the second half of last year.
That amount will not be reflected in its earnings for last year as most of it will go to reserves rather than profit or loss because of accounting rules.
Citi analyst Michael Beer said: "Cathay will report a mark-to-market loss of US$1 billion, if not more, for its hedging contracts that extend into 2018."
That loss would not affect the company's profit or loss in the period, he said.
"The only valuation-related impact of that will be a HK$7 billion dent on Cathay's book value - which is now at HK$66 billion, raising its price-book ratio," Beer said.
Two other analysts gave a similar estimate while one said the loss could be as large as HK$14 billion.
Still, analysts said the airline, like its rivals, benefited from the drop in fuel price to near six-year lows in the second half of last year as its fuel bill, which was HK$38 billion in 2013, accounted for nearly 40 per cent of total expenses.
Analysts polled by Bloomberg expect Cathay to post a net profit of HK$3.43 billion for last year, compared with HK$2.62 billion in 2013.
Bocom International analyst Geoffrey Cheng said: "Cathay's management gave guidance in November that it expected to incur hedging losses of HK$400 million to HK$500 million for the year after posting a hedging gain of HK$1.02 billion in the first half.
"Expect a bigger number [this] week because fuel price has dropped further after November," he said.
But exactly how much more would depend on the configuration of the hedge book, Cheng said, as different hedging instruments were considered effective or non-effective hedging in accounting terms, and only non-effective hedging went into the profit or loss account.
Cathay said in December it was 57 per cent hedged for its fuel consumption for this year at a Brent oil price of US$99 a barrel.
Beer said Cathay's forward hedging position meant it was likely to have less flexibility to trim fares than competitors with relatively smaller hedges.
Daiwa analyst Kelvin Lau said: "Gross yield at Cathay is expected to weaken in 2015 because of the decrease in revenue contribution from fuel surcharge, but net yield will be better because of fuel cost saving."
The International Air Transport Association expects jet fuel costs this year to average US$71.10 a barrel, reducing the airline industry's global fuel bill by US$83.6 billion.
Cathay Pacific Airways may post hefty fuel hedging losses
Carrier expected to report stronger profit of HK$3.4 billion for year despite taking a bad hit from locking in oil prices at higher than spot
Analysts polled by Bloomberg expect Cathay to post a net profit of HK$3.43 billion for last year, compared with HK$2.62 billion in 2013. Photo: AFP
Analysts polled by Bloomberg expect Cathay to post a net profit of HK$3.43 billion for last year, compared with HK$2.62 billion in 2013. Photo: AFP
Cathay Pacific Airways, which is due to post its annual results on Wednesday, may report hefty fuel hedging losses of up to HK$14 billion because it locked in fuel prices at higher than spot prices, which then plunged 50 per cent in the second half of last year.
That amount will not be reflected in its earnings for last year as most of it will go to reserves rather than profit or loss because of accounting rules.
Citi analyst Michael Beer said: "Cathay will report a mark-to-market loss of US$1 billion, if not more, for its hedging contracts that extend into 2018."
That loss would not affect the company's profit or loss in the period, he said.
"The only valuation-related impact of that will be a HK$7 billion dent on Cathay's book value - which is now at HK$66 billion, raising its price-book ratio," Beer said.
Two other analysts gave a similar estimate while one said the loss could be as large as HK$14 billion.
Still, analysts said the airline, like its rivals, benefited from the drop in fuel price to near six-year lows in the second half of last year as its fuel bill, which was HK$38 billion in 2013, accounted for nearly 40 per cent of total expenses.
Analysts polled by Bloomberg expect Cathay to post a net profit of HK$3.43 billion for last year, compared with HK$2.62 billion in 2013.
Bocom International analyst Geoffrey Cheng said: "Cathay's management gave guidance in November that it expected to incur hedging losses of HK$400 million to HK$500 million for the year after posting a hedging gain of HK$1.02 billion in the first half.
"Expect a bigger number [this] week because fuel price has dropped further after November," he said.
But exactly how much more would depend on the configuration of the hedge book, Cheng said, as different hedging instruments were considered effective or non-effective hedging in accounting terms, and only non-effective hedging went into the profit or loss account.
Cathay said in December it was 57 per cent hedged for its fuel consumption for this year at a Brent oil price of US$99 a barrel.
Beer said Cathay's forward hedging position meant it was likely to have less flexibility to trim fares than competitors with relatively smaller hedges.
Daiwa analyst Kelvin Lau said: "Gross yield at Cathay is expected to weaken in 2015 because of the decrease in revenue contribution from fuel surcharge, but net yield will be better because of fuel cost saving."
The International Air Transport Association expects jet fuel costs this year to average US$71.10 a barrel, reducing the airline industry's global fuel bill by US$83.6 billion.
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Guess they shouldn't have got rid of the expat that was in charge of hedging because they thought he was to expensive!!
Oh and don't forget to save those 100kgs each sector or will they want 200 from us now to help fix their mistakes again?
Oh and don't forget to save those 100kgs each sector or will they want 200 from us now to help fix their mistakes again?
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The only individuals in this airline, responsible and accountable for anything, sit in the front of and maintain, the hardware. Anyone else, is a complete f*****g waste of space. Once you understand that, incompetence becomes not only the norm but sadly, the expected.
Individuals promoted beyond their abilities and protected by an equally inept management.
'There are four kinds of people to avoid in the world: the assholes, the asswipes, the ass-kissers, and those that just will **** all over you'
Sound familiar?
Individuals promoted beyond their abilities and protected by an equally inept management.
'There are four kinds of people to avoid in the world: the assholes, the asswipes, the ass-kissers, and those that just will **** all over you'
Sound familiar?
Last edited by Kontract Killer; 16th Mar 2015 at 00:13. Reason: Thanks OF.
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So we got 2000 HKD last year based on a profit of 2.62 Billion if my memory is correct, which is very rare these days.
This year based on the figures presented;
(3.43 Billion / 2.62 Billion) * 2000
=2618 HKD
Well thats my prediction.
Fuxkin Awesome
Cant wait to work even harder next financial year!!!
What will the Destroyer of Flight Ops get?
Anyone Anyone Anyone......
This year based on the figures presented;
(3.43 Billion / 2.62 Billion) * 2000
=2618 HKD
Well thats my prediction.Fuxkin Awesome
Cant wait to work even harder next financial year!!!
What will the Destroyer of Flight Ops get?
Anyone Anyone Anyone......
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I fail to see how a supposedly well managed airline can't achieve record profit year, when its supposedly less well managed American peers are having a record year. At CX, the load factors are high for both passenger and cargo, the premium front end is full, and staffing cost is kept low .... it should be a record breaking profitable year.
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If you nimwits would remember from last year, the management said profit share was low due to a low operating profit (high fuel hedge gain). If in fact they keep apples to apples, then our operating profit should be huge! If it isn't, than I'm sure it will be prudent for the masses of CX staff to investigate which Swire company we buy our fuel hedges from and how they stole our profit!
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Furthermore, does anybody remember the statements that are told about "not having enough money in the pot" to give raises? Tomorrow, we will find out how big that pot has been!
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Just do it.
Check out the depreciation on all assets tomorrow. Depreciation is a non cash item, which reduces our Net income for taxes. Add that depreciation (and other non cash items) back to the profit to see how much money CX really put in the bank (cash flow statement). You will notice tomorrow, that this number will not even be shown on intraCX, to prevent rioting. The net income number (albeit not completely meaningless) will be heavily talked about though - just wait!
Free cash flow, my friend, will be how big the pot is. You must be mgt and understand this though.. which is why your profit share will be meaningful. All you have to do is lie to people, and they pay you more money.... It all comes full circle eventually.
Check out the depreciation on all assets tomorrow. Depreciation is a non cash item, which reduces our Net income for taxes. Add that depreciation (and other non cash items) back to the profit to see how much money CX really put in the bank (cash flow statement). You will notice tomorrow, that this number will not even be shown on intraCX, to prevent rioting. The net income number (albeit not completely meaningless) will be heavily talked about though - just wait!
Free cash flow, my friend, will be how big the pot is. You must be mgt and understand this though.. which is why your profit share will be meaningful. All you have to do is lie to people, and they pay you more money.... It all comes full circle eventually.
Wow such incredible stuff, we fly fuel efficient 777's and carry huge numbers of pax with a fuel price so low it's crazy and we get $2,000 HKD profit share.....
Someone upstairs needs to be fired......
What a f***ing joke.
Someone upstairs needs to be fired......
What a f***ing joke.
Fat Anna and her cronies just don't get it do they? Better to give nothing than a paltry, insulting amount like this.
Two fills of my old 4 x 4 diesel tank. Thanks for that - and you expect me to save fuel for you by the bucket load!!
We'll see about that..........
Two fills of my old 4 x 4 diesel tank. Thanks for that - and you expect me to save fuel for you by the bucket load!!
We'll see about that..........
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Challenge to CX
The company can pick a charity. I will donate my $2000 to that charity if the company match it with another $2000. I bet hundreds of us would be up for that. Are the company?
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Here’s what other airlines have announced on profit sharing:
– Delta Air Lines employees will divide up nearly $1.1 billion in profit sharing.
– Southwest Airlines employees will get $355 million in profit sharing.
– United Airlines employees will get $235 million in profit sharing, to be distributed Feb. 13.
If one simply divides the profit-sharing pool by the number of employees, the average is $8,883 at Alaska, $13,621 at Delta, $7,671 at Southwest and $2,919 at United.
– Delta Air Lines employees will divide up nearly $1.1 billion in profit sharing.
– Southwest Airlines employees will get $355 million in profit sharing.
– United Airlines employees will get $235 million in profit sharing, to be distributed Feb. 13.
If one simply divides the profit-sharing pool by the number of employees, the average is $8,883 at Alaska, $13,621 at Delta, $7,671 at Southwest and $2,919 at United.
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Delta 2014 profit margin, 13.1%
Cathay profit margin, 3%
Ouch
Profit Sharing
Delta’s broad based employee profit sharing program pays 10% of the company’s adjusted annual profit up to $2.5 billion
and 20% above that amount. Adjusted annual profit is calculated as the company’s annual pre-tax income before profit
sharing expense, special items and certain other items. Profit sharing expense is accrued at a blended rate based on the
company’s estimated profitability for the full year.
Cathay profit margin, 3%
Ouch
Profit Sharing
Delta’s broad based employee profit sharing program pays 10% of the company’s adjusted annual profit up to $2.5 billion
and 20% above that amount. Adjusted annual profit is calculated as the company’s annual pre-tax income before profit
sharing expense, special items and certain other items. Profit sharing expense is accrued at a blended rate based on the
company’s estimated profitability for the full year.