The Cathay Pacific Group reported an attributable profit of HK$ 6,000 million for 2015. This compares to a profit of HK$ 3,150 million in 2014. The group’s performance in improved in 2015 with the business benefiting from low fuel prices. The high passenger load factors experienced in the first half of the year continued in the second half, reflecting strong economy class demand.
The group’s passenger revenue in 2015 was HK$ 73,047 million, a decrease of 3.5 per cent compared to 2014. Capacity increased by 5.9 per cent, reflecting the introduction of new routes and increased frequencies on existing routes. The load factor increased by 2.4 percentage points, to 85.7 per cent. Competition, reduction in fuel surcharges, unfavourable foreign currency movements and higher proportion of passengers connecting through Hong Kong, put pressure on yield, which decreased by 11.4 per cent to HK 59.6 cents. Economy class demand was strong, whereas, premium class demand improved on regional routes.
Total fuel costs for Cathay Pacific and Dragonair, before the effect of fuel hedging, decreased by 37.8 per cent compared to 2014, despite increases in capacity. A 40.3 per cent decrease in average prices was partially offset by a 4.3 per cent increase in consumption. Fuel is still the group’s most significant cost, accounting for 34.0 per cent of total operating costs in 2015 compared to 39.2 per cent in 2014. Fuel hedging losses reduced the benefit of lower fuel costs. After taking hedging losses into account, fuel costs decreased by 18.2 per cent compared to 2014.
The group’s operating expenses exclusive of fuel increased by 2.3 per cent in 2015 compared to 2014. This was mainly due to increased operations and a corresponding increase in the size of the workforce. Congestion at Hong Kong International Airport and air traffic control constraints in the Greater China region also increased operating expenses. Productivity improvements and favourable foreign currency movements kept the increase in non-fuel costs below the increase in capacity. There was a 3.1 per cent reduction in non-fuel costs per ATK.
The contribution from Air China was significantly higher in 2015 than in 2014. The improvement principally reflected low fuel prices and strong passenger demand. In August 2015, devaluation of the Renminbi led to significant foreign exchange losses for Air China. However, the foreign exchange losses were more than offset by savings from low fuel prices.
John Slosar, chairman, Cathay Pacific, said, “The operating environment was better in 2015 than in 2014, but we faced some significant challenges, which we expect to continue in 2016. Strong competition from other airlines in the region, foreign currency movements and weak premium class passenger demand will put pressure on passenger yield. Overall passenger demand remains strong and we expect to continue to benefit from low fuel prices. Our subsidiaries and associates are expected to continue to perform well.”
“We are confident of longer-term success, and we will continue to help our passengers to travel well. In January 2016, we announced that Dragonair is to be rebranded as Cathay Dragon, as part of an effort to create a more consistent travel experience between the two airlines. We will continue to invest in aircraft, in our products and in the development of our network. Our financial position is strong. Supported by our world-class team, we remain deeply committed to strengthening the aviation hub in Hong Kong, our home city for the past 70 years,” added Slosar.
