CX Annual "Negative Profit"

[Cpt. Underpants]

Any pundits care to hazard a guess? All punts to be posted before 0500Z.

I'll start.

- HKD5.8 BN

[Frogman1484]

-8.45 Bil HKD :eek:

[Loiter1]

A hundred billion billion dollars.

http://www.google.com.au/images?q=tbn:pWqVxjePvhu4OM::www.canpages.ca/blog/wp-content/uploads/2008/12/dr-evil.jpg (http://www.google.com.au/imgres?imgurl=http://www.canpages.ca/blog/wp-content/uploads/2008/12/dr-evil.jpg&imgrefurl=http://www.canpages.ca/blog/%3Fcat%3D39&h=411&w=510&sz=23&tbnid=pWqVxjePvhu4OM::&tbnh=106&tbnw=131&prev=/images%3Fq%3Ddr%2Bevil&hl=en&usg=__KdwePXYpU4Km6V20VOosFexq_Zw=&ei=zgW3SZeBFYbRkAXBkJTpCQ&sa=X&oi=image_result&resnum=2&ct=image&cd=1)

[A Scaler]

HK7 Billion

[JLQ]

Loiter1 - Very funny

Glad to see a sense of humour being maintained through this...:ok:

[777300ER]

30,145,828.26 Thai Baht...

[sisyphos]

brilliant, loiter:D

[HEALY]

So does the 2009 13th month Chrissy Bonus get included in this loss?

Oh before I forget....7.5 billion

[Freehills]

http://www.hkexnews.hk/listedco/listconews/sehk/20090311/LTN20090311085.pdf

-8.558 :(

[iceman50]

-8558M takeaway fuel hedging "paper" loss -7950M = -608M

-608M adjusted for CARGO FINE (60M us$) 465M = -143M

-143M adjusted for 3cents Dividend / Management Bonus = ?:=

[Loiter1]

Well, over the last year we have been barraged by the weekly doom and gloom reports. Now that they have dropped the big one we can expect the final assault. Brace yourself lads.:eek:

[hongkongpilot]

Yes, it is all about bad management !
Have they been sacked for gambling on the fuel hedging ?:rolleyes:

[Kitsune]

Cathay Pacific posts record $1bn loss
HONG KONG, March 11 – Cathay Pacific Airways, Hong Kong’s dominant airline, posted a record loss in the second-half of 2008, dented by heavy fuel hedging losses and weak passenger demand due to the global financial crisis.

Cathay, Asia’s fifth-largest airline by market value, reported a HK$7.9bn ($1.02bn) net loss in the July-December period, according to Reuters calculations based on previously reported figures. That compared with a net profit of HK$4.4bn in the same period a year earlier.

The results were worse than an average forecast of a HK$7.3bn shortfall from 11 analysts polled by Reuters.

For the full year, Cathay posted a record net loss of HK$8.6bn, its first shortfall in a decade. But revenues rose 14.9 per cent to HK$86.6bn. The carrier announced a loss per share of HK$2.12, down sharply from earnings per share of HK$1.78 a year ago.

Shares in Cathay rose 2.1 per cent to HK$7.15 in morning trade on Wednesday ahead of the results announcement. But the firm’s stock has plunged by 41.3 per cent in the second half of 2008, underperforming the 35 per cent loss on the benchmark Hang Seng Index in the same period.

[bobrun]

85%-90% of the loss is due to the fuel hedging paper loss. Again: paper loss.

[Kitsune]

As it's only a paper loss you must be expecting oil to rise to the hedge strike price..... how many put options on oil have you got, and what colour is the sky on your planet?

[bobrun]

If oil prices remains low, or go even lower, the fuel hedging losses will be even larger and become real losses. However, the actual savings resulting from the fuel price being lower will more than make up for that loss.

Quote from reported news:
"Passenger and cargo demand are expected to remain weak and, if fuel prices remain at their present levels, further losses on fuel hedging contracts will be incurred (although they will not be at the levels incurred in 2008 and the actual cost of fuel will be substantially lower than in 2008)."

Tough times may be ahead, but remember that this huge 2008 loss is due to the low cost of oil. Surely nobody believes that low oil prices hurt the business, although on paper it makes it look that way. Having taken the hedging losses for the next three years into account in 2008, I don't see how the company won't largely profit from the low current prices.

[fly123456]

Fuel Hedging losses: (7,970)
Settlement of the United States Department of Justice cargo investigations (468)

Sum: 8438 mHK$
Declared loss: 8558 m$

Although I agree fuel prices have hurt badly (13 billion$ difference compared to 2007)

If
- fuel price stay where they are through 2009
- there's no hedging f**k up
- no more cargo fine

the airline might well post a nice profit next year.

[jed_thrust]

Exactly: the market agrees.

CX shares are up 5.86% today, with most of the gains after the release of the results.

[N1 Vibes]

OK, OK - we admit it - engineering spent $800 million more on a/c maintenance in 2008 - it must have been those infra-red 1st class taps - Sorry! :O

[Liam Gallagher]

Whilst this has been done to death; just to make the point again about Fuel Hedging losses. The way in which CX has handled the financial reporting of their Fuel Hedges is not of CX's choosing, but a dictate by various worldwide Financial Regulators. However, consider this possibility.

Lets say CX has hedged about 10% of 2009 Fuel needs at an average of $US120/ barrel. Lets also say that CX has forward sold about 10% of all their 2009 freight capacity and pax seats assuming that it will cost $US120/ barrel, and based upon that price they make a profit. Having partially secured a cashflow, they are in a position to approach a bank to get a line of credit to buy some of Mr Boeing's finest for delivery through 2009-10. Now some questions;

Hongkong pilot. Is that gambling? Is that bad management?

Fly123456. Is this a f**k up?

Bobrun. Just dealing with the 10% hedged fuel...Does it really matter what the price of fuel does when you have fixed the buy price and effectively the sell price.

It been said many times, but some on this thread seem to be missing the point. A low fuel price is good news for CX (however, the reasons for the low oil price might be bad); a high fuel price that enables them to cash in their hedged postions will not be a cause to crack the champers on the 9th floor....

[sirhcttarp]

Yes but germans managed to squeak a profit.... So yes it is a FU*K UP!




By GEORGE FREY, AP Business Writer George Frey, Ap Business Writer – Wed Mar 11, 6:37 am ET

FRANKFURT – Deutsche Lufthansa AG, Germany's largest airline, reported Wednesday a 65 percent drop in net profit for 2008, as the economic slowdown and higher fuel prices ate into its bottom line. The company also lacked the large one-time gains it booked in 2007.
The Cologne-based airline said net profit for the year fell to euro599 million ($755 million), compared with euro1.7 billion in 2007.
Lufthansa's operating profit fell 2.2 percent to euro1.35 billion in 2008 from euro1.38 billion in 2007, when the company booked one-time gains, including euro503 million from the sale of its stake in travel company Thomas Cook.
The company, which did not immediately release fourth quarter figures, said revenues were 14 percent higher at euro25 billion, from euro22 billion in 2007.
Lufthansa Chief Executive Wolfgang Mayrhuber said the company is well equipped to cope with the global economic crisis, although the company said it's "not possible to forecast the duration and extent" of the downturn.
"One of the most challenging years in its history lies ahead of the aviation industry" Lufthansa said.
The company said the global economic slowdown has been particularly felt in its passenger and catering business segments.
The passenger business segment was hurt by record fuel costs, strike-related losses and a decline in demand caused by the dowturn in the world economy during the second half of the year.
Passenger revenues rose 15 percent for the year to euro18.4 billion, while the passenger business operating profit fell 13 percent to euro722 million.
Catering saw revenues decline 4 percent to euro2.3 billion, while the catering business operating profit fell 30 percent to euro70 million.
Less demand for airfreight also affected Lufthansa Cargo, particularly in the second half of the year, as the economic crisis hurt demand. Still, for the full year 2008 the cargo segment was able to post gains, with revenues up 7 percent to euro2.9 billion. Operating profit rose 21 percent to euro164 million.
Lufthansa's aircraft maintenance, repair and overhaul business saw revenues rise 3 percent, while the MRO business operating profit rose 2 percent.
Lufthansa said it "intended to maintain our lead in the far more challenging environment of 2009." Lufthansa is poised to surpass AirFrance-KLM by sales for 2008, which would make Lufthansa Europe's largest airline by that measure. AirFrance-KLM is scheduled to report its earnings in May.
Shares of Lufthansa were 1.2 percent higher at euro8.30 in Frankfurt morning trading.

[AD POSSE AD ESSE]

And this just in..

Airline braces for more pain following 2008 record loss
Posted On: 12 Mar 2009



Briefings for staff on Thursday - conducted by Chief Executive Tony Tyler and Chief Operating Officer John Slosar - pulled no punches in giving details of why the Cathay Pacific Group made a big loss last year, and why the situation seems to be going from bad to worse.

The reasons behind the HK$8.6 billion loss - the triple whammy of a soaring fuel bill, fuel hedging losses and a recession-drive in passenger and cargo demand - were clearly outlined, with both Tony and John going into some detail to explain how the hedging losses came about. "The airline business was a bad business to be in last year and the hedging situation just made it worse," said John.

Staff were shocked to discover that, disregarding hedging and other variables, CX and KA actually made a HK$1.34 billion operating loss in 2008 compared to a HK$5.2 billion gain in 2007, and that there was a significant drain on the Group's cash reserves last year.

Tony made it clear that the big worry is what will happen in the months to come. Hedging losses are still being made - HK$1.9 billion in the first two months of 2009 - but the major concern now is the continued impact of the economic downturn on the airline's core business.

"We budgeted for an overall reduction in revenue this year, but cargo revenue is well down even against this low budget and passenger revenue is also well behind," said Tony. "We are filling up the back end, but at very low yields, while our front end revenue for January and February was down 34% on 2008. And remember that every premium passenger we lose is worth many in Economy Class."

John explained that negative currency effects are also taking a big bite out of earnings. "Generally we'd like the dollar to be weak because it means the tickets we sell in other currencies can be turned into more Hong Kong dollars, but at the moment we have a 'perfect storm' of currencies working against us to push down yields."
Yields are also being driven down by a slew of cheap fares that are propping up back-end business, and to make it a perfect storm all round the airline's hedging position means it is not getting the full benefit of the low fuel price.

Both the CE and COO concluded that 2009 is going to be a very tough year. The weakening revenue picture makes it clear that even the airline's revised budget and general belt tightening will not be sufficient.
"If we don’t take action now we are looking at another, possibly even larger operating loss for 2009. Given the rate at which our cash balance has been depleted this would place the airline in a very precarious position," John said.

A thorough review of every flight - passenger and cargo - to every destination is now being undertaken and management will soon have a clearer picture of which flights the airline cannot afford to keep operating. This will give an estimate of what surplus capacity there is and whether aircraft need to be parked. The team is already looking at lease renewals and the possibility of deferring deliveries.
In terms of conserving cash, cancelling some flights will help and further efforts will be made to reduce non-customer costs and defer capital expenditure. Both John and Tony made it clear that some difficult decisions might have to be made.

"I know that job security is uppermost in everyone’s minds and it remains our wish and intention to do all we can to keep the network intact, and to keep the team together. However, at the end of the day our ability to do that will depend on the market - and the market has got much worse than we expected," Tony said.

"I fear it’s inevitable that there is going to have to be some pain, which will be shared by all of us on the team. To get our costs down and to preserve our cash balances I think it’s unavoidable that we will be asking for more unpaid leave. And I can’t rule out the possibility of even more painful measures being needed to be taken."

In a sharp and painful downturn "we need to plan for the worst. But eventually the market will recover - and Asia will probably lead the charge when it does," Tony said. "Our job is to make sure CX is alive and well and ready to take advantage when that happens and we will do everything we can to guide the company through these challenges.

"Right now, what you can all do to help is to do your job as well as you possibly can."
CCD





..and so the spin continues to try and soften up everyone for the 1-2 days, or perhaps a week-months unpaid leave that will be FORCED down our throats very shorty..whilst there are the likes of ex-Oasis DEC's who SHOULD NOT BE in CX in the first place!!!!:yuk:

[goathead]

So are they going to take there bonuses as well , or not ?:rolleyes:

[hongkongpilot]

Liam Gallagher
Yes, that is gambling and that is bad management.
Could you remember someone said that fuel price is too high to be hedged before ? (Of course, situation is changing every minute.)

[bobrun]

While individuals take unpaid leave, you are protecting the guys at the bottom, namely the DECs

Exactly. Hiring DECs was wrong to begin with, why should we then forfeit some salary so that they can keep their job! Junior guys are already suffering a financial loss from their delayed progression due to direct entry guys. If it comes to forced unpaid leave, it will be wrong to now ask of them to make a sacrifice when DECs at the bottom of the list could simply be laid off.

[Zeke]

Anyone notice this "Our associate Air China also incurred unrealised mark to market losses on fuel hedging contracts and a provision of HK$1 billion has been made covering fourth quarter losses."

from page 6 http://downloads.cathaypacific.com/cx/investor/2008_Annual_Results_EN.pdf

[Fly747]

Sorry Bob, it wouldn't be that easy to lay the KA guys off first. Although now at the bottom of the CX seniority many have worked for "Cathay Group" for some years and would have recourse to a UK industrial tribunal if they were discriminated against for redundancy.
The Oasis DEs may be a different matter.

[bobrun]

Fly747,
That is very true. I could have been clearer. I was only referring to the DEC from Oasis. They also happen to have delayed the command courses of more senior staff, who now probably won't see any course at all for awhile actually. With this kind of (mis)management that we're now accustomed to, I'm sure "forced" unpaid leave will be well accepted :rolleyes:

[BIMBO HIMONASHI]

Slossar mentioned negative currency effects -- can't you hedge against those......sorry forgot about the fuel hedging !

[BIMBO HIMONASHI]

You guys have been around longer than me........does unpaid leave apply to GM's and Directors as well ?
Does this reduce bonuses ?

[volarecantare]

Can I just clarify something.
Are you saying that you would prefer to see someone loose their job rather than to 1. volunteer 2. Be issued with a months unpaid leave? All of this based on your luxurious position on a seniority list that you, lets face it, would fly in the face of in a SECOND should you yourself be offered a base near home.

Also VERMIN, (nice you named yourself and saved us the trouble) your with KA I see. You are here trying to turn us CX guys against DEC oasis and KA captains...whats up pal, you regretting not taking the offer yourself or you not have a EU passport? I can just imagine you and your mate Trevfly sitting in the plaza with voodoo dolls. Really jealously is an ugly thing.:{

When you end up at the bottom of the CX seniority list after the merge and are forced to eat your new CX hat.
When that happens you may be talking yourself into the first batch you claim should be dumped, while the rest of us listen to your advice , nah couldn't be bother taking a months leave so Vermin keeps his job.


Be very careful what your wishing for son! Oh , and quit the stirring...:=

[AD POSSE AD ESSE]

1.YES
2.YES

volarecantare..go play with yourself cupcake...:)

[volarecantare]

Really, I admire your honesty.

I would gladly relish my cupcakes in a front row seat at your karmic showdown...

If you fancy a pint posse, don't be lonely, head to DB and play with the Vermin and (trev)flies:}, you would be calling each other "mate" in no time.:}

That friendship would last right up until an Aussie base opportunity offered for them and they had to leapfrog you for the chance...


Now please Posse, all retorts in Latin ... much cuter..

[Busdude]

Volare:
Your english is terrible. I would like to know what you're saying but it's lost in the translation of your first language. English is not my first language either, but I do try.
Cheers

[Dynasty Trash Hauler]

Yes
Yes.

Cathay. An airline full of greedy, narrow minded misfits who show up in the most polluted city in the world because they have nowhere else to go.

I am so glad I left all those years ago.

Here's a tip Ad Posse, there's a big world outside of your goldfish bowl.

[2 cents]

And what big world would that be? Living in TPE-which makes HKG look like paradise- flying for China Airlines? No thanks. Enjoy, and please feel free to drop by Pprune from time to time to insult us all.

[Dynasty Trash Hauler]

Never lived in TPE but did a stint with Dynasty, obviously.

But that was 2 jobs ago.

Back in the land of the green grass and blue sky - and loving it.

For what its worth, most who remove the golden handcuffs have no regrets.

[volarecantare]

Busdude, which part do you want me to clarify? Maybe you write better than you read ;)

[sisyphos]

the handcuffs ain't no golden no more..:}

[badairsucker]

DTH

Just how many jobs have you had?????

[Cider30]

Volare.


Are you saying that you would prefer to see someone loose their job rather than to 1. volunteer 2. Be issued with a months unpaid leave? All of this based on your luxurious position on a seniority list that you, lets face it, would fly in the face of in a SECOND should you yourself be offered a base near home.



Taking unpaid leave to save someone in their 20s or 30s, two kids and a mortgage from being laid off - Yes most definitely

Taking unpaid leave to save someone in their 60s, with a full retirement from someplace else - Not a chance

I do agree though, we should offer unpaid leave. Any voluenteers - knock yourself out. But that is all is should be - AN OFFER. Your second statement about being issued with unpaid leave, i.e. forced - see my statement above.

Cider30

[volarecantare]

I agree Cider.

However KA guys coming on here trying to stir things up in CX for their own personal vendettas is not on.

We are all in the luxury stage just now of discussing this but I hope if the time comes to anyone being made redundant we have all done our bit to avoid that happening. That includes those DEC's and quote : "someone in their 60s, with a full retirement from someplace else" In short anyone who can afford to take unpaid leave when its offered should! If not then it will be issued and probably before redundancies. That makes better business sense as the cost of future training and recruitment would be much bigger.

It also should include management, should they offer it to us they should accompany it with a statement of how many of them are taking it also.

[Lowkoon]

Why dont we run down paid leave first? How is it that the bulk of us cant get the leave slots we want, yet they can miraculously find those slots suddenly when it is unpaid? Anyone else had a leave application denied lately? Once there is no more paid leave on the books, then we should be talking about unpaid.

[bobrun]

Once there is no more paid leave on the books, then we should be talking about unpaid.

Makes sense. But there's no immediate savings in doing the right thing. So the question is: once "forced" unpaid leave is announced, how many will say No to it, considering it can only be done on a voluntary basis?

[SMOC]

how many will say No to it

Mate heaps will, BUT NOT MANY WILL ACTUALLY DO IT!!!!!! :ugh:

[ACMS]

Before I take ANY forced unpaid leave I require NR and all the 3rd floor managers to show they will 1/ not receive ANY bonus and 2/ they will take the unpaid leave as well. PROOF they will not be making it back another way through some sneeky ex-gratia payment.

Till then I will NOT be taking any un paid leave.

Oh, and they can get rid of the 150 extendees as well.

[fly123456]

The airline would better NOT do any profit in 2009, if we are requested to take unpaid leave.

What would be the point to take some if it's to see even a "half-record" profit.

Like TT said, 2008 is behind, and that's when we should have spared some cash and taken our UPL. Oh, wait, we were short of staff... nevermind.

[FlexibleResponse]

The last time the staff were forced to take unpaid leave (the SARS year), the Directors were rewarded with increased bonuses.

The increased bonus was recorded in the annual report following the SARS event. The savings on forcing the staff to take unpaid leave more than paid for the increased bonuses.

Strangely enough, the recovery in the second half of the SARS' year provided the company with a very healthy profit. So, instead of paying a normal 13th month's pay, the staff were instead, compensated for their unpaid leave.

What one hand giveth, the other taketh away...

[404 Titan]

FlexibleResponse

My recollection of the events of 2003 and the SARS “Special Leave Scheme” was at the end of the year we all got paid for the unpaid leave we took plus two weeks of the 13th month.

[Lowkoon]

Well, which ever it was, as long as the managers got fatter paychecks, thats all that matters it would seem. Im sure their efforts were instrumental in discovering the source of the SARS virus. :hmm:

[jsshousestaff]

Gents,

Remember most of the directors in the report work for Swires and not Cathay Pacific. Their bonuses are based upon John Swire and Son performance and not single companies, so no matter how well or how badly CX does their bonuses are based on how the private group have made. Also remember that generally their base salaries are less then A scale senior captains and the figure reported includes their housing and other benefits.

[Liam Gallagher]

I'll reword and finish your final sentence for the removal of confusion....

"Remember that generally their base salaries are less than A Scale Captains; however when Housing, Education, Entertainment, Staff, Car, travel, performance bonus, profit share, share options, loans, tea and coffee, Guaranteed Pension are added in, the package far in exceeds that of an A Scale Captain. When compared to the B-Scale, which is now the more relevant package, the B-scale package would appear as a rounding error on Swire Prince's Tax Return.....

There... that's much better....

[trevfly]

Me a stirer, haha I'm just stating the facts of life, aviation style.

When you resign from one company(eg KA) and join another (like CX), sh1t can happen, and usually does.

Dont bleat about it. If you become a junior through low seniority, you are exposed, period. But you know the risks, esp when jumping seniority in a legacy carrier to take someones command.

Been at the bottom of a seniority list, but I wouldnt want to be there now. But no doubt senior guys in CX will swallow their seniority and come to the DEc/DEFOs rescue.

How honarable.

[WeakForce]

honarable? I think that's the spelling Cathay management uses___and applies:bored:

[broadband circuit]

Although they correctly state that he is the brother of the first HK Chief Executive, the article failed to mention that he was also a director of CX. (maybe he still is, can someone confirm please)

[N1 Vibes]

I do love seeing the "Show me NR's bonus being given back" etc

Have a look out of the window - you are not living in Washington, and Mr Barack Obama is not going to come over the hill on his white charger shouting - "NR Give back the bonus that you embarrassingly received from CX, before putting any downtrodden pilots to suffer unpaid leave!"

You are actually living in HK, and the man 'in charge' of government type things here is called Donald Tsang (the one with a penchant for bow-ties) - he is NOT going to say what Mr Obama would say - he will say "Well done CX executive team - you are protecting HK's glorious economic future for the motherland...."

Regards,

N1 Vibes

[volarecantare]

"Been at the bottom of a seniority list, but I wouldnt want to be there now"

Trev, you do realise son that you will be very soon below all of these as KA is pasted onto the bottom of our CX list. So knock yourself out till then.

How are you doing on your new CX SOP's by the way?

..silly silly boy!

[jsshousestaff]

Liam,

Most house staff would love to get a B scale salary, why do you think we lost so many of these guys back a bit earlier this decade, the pay was poor. To quote one of the guys who left, Champagne lifestyle on beer money. If you know any of them left in CX ask to see their JSS pay slip, I know this was done some years ago when a certain FO did not believe how much a Prince earned until the pay slip was shown. We would all like more but look around and smell the grass, been in the US or Europe recently? Not pretty.

[Liam Gallagher]

"If you know any of them left in CX ask to see their JSS pay slip..."

I'll ask you then..... not interested in your basic pay.... total package including bonus, provident fund etc..... thanks... Oh and like for like please: a 10 year experienced Swire Prince to compare with FO's and a 20 year experienced to compare with Captains and a 30 year with STC's.

As aside, I recall when Kim Jong-Phil replaced NR as GMA asking myself, did Phil's total package exceed that of NR's (bear in mind Phil continued to fly to a limited degree)? If it did, why was it attractive to Swire's to use Phil? Perhap's Phil was really a cheaper option.....

PS... whilst I am asking questions; what's the Retirement Age at Swire's?