Cathay Pacific Returns to Profit on Fuel-Hedging Gain (Update1)
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By Wendy Leung
Aug. 5 (Bloomberg) --
Cathay Pacific Airways Ltd., Hong Kong’s biggest carrier, returned to profit in the first half after a HK$2.1 billion ($271 million) fuel-hedging gain offset a drop in traffic amid the global recession.
The airline posted net income of HK$812 million compared with a restated loss of HK$760 million a year earlier, the carrier said in a Hong Kong stock exchange filing today. The airline was estimated to make a HK$475 million profit, based on the median of six analysts.
The carrier ended a run of two straight losses helped by paper profits from fuel hedging following a 57 percent jump in the price of oil. The gain allowed Cathay to weather a plunge in global air travel that contributed to
Singapore Airlines Ltd.’s first quarterly loss in six years.
“Full-year earnings will depend on a pick-up in premium traffic,” said
Winson Fong, who helps manage about $2 billion at SG Asset Management H.K. Ltd. “Fuel-hedging gains really aren’t something to evaluate the company’s performance on.”
Cathay made an operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, of HK$2 billion, according to the statement. Sales fell 27 percent to HK$30.9 billion.
Less Capacity
The airline has altered its network, cut capacity, offered staff unpaid leave and delayed a new cargo terminal to curb costs amid the travel slump.
“Yields plunged rapidly in the second quarter,” said
Allen Wong, an analyst at Quam Ltd. “Earnings in the second half may improve on increasing traffic as the impact of swine flu eases and the economies of the U.S. and China recover.”
Across the Asia-Pacific region, international passenger traffic fell 15 percent in June on the economy and concerns about H1N1, according to the
International Air Transport Association. Carriers worldwide may lose a combined $9 billion this year, IATA has said.
Singapore Airlines said last week it may post its first annual loss in 24 years because of plunging traffic. British Airways Plc also reported a quarterly loss last week and said that yields will continue to decline.
Cathay, controlled by Swire Pacific Ltd., rose 2.4 percent to HK$12.94 as at the 12:30 p.m. trading break in Hong Kong. The earnings came after the end of the morning session. The carrier has risen 48 percent this year, compared with an 21 percent gain for Singapore Airlines.
The Hong Kong carrier slumped to its first annual loss in a decade last year after making HK$7.6 billion of unrealized losses on fuel hedges stretching out until 2011. The carrier suffered the losses after oil prices tumbled 69 percent from a record in less than six months last year.
The airline may make a HK$1.3 billion full-year profit, according to the median of eight analyst estimates complied by Bloomberg.
To contact the reporter on this story:
Wendy Leung in Hong Kong at
[email protected]
Last Updated: August 5, 2009 00:52 EDT