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Cathay Pacific forward bookings drop amid Hong Kong protests

By Jamie Freed and Farah Master
FILE PHOTO: Guests descend from a Cathay Pacific Airways Airbus A350 after a tour of the aircraft cabin at Hong Kong Airport

By Jamie Freed and Farah Master

SINGAPORE/HONG KONG (Reuters) - Cathay Pacific Airways Ltd is facing a decline in forward bookings for travel to Hong Kong "in the region of double digits" due to widespread protests in the Asian financial centre, a senior company executive said on Wednesday.

There is also some weakness in outbound traffic, Chief Customer and Commercial Officer Paul Loo said, adding that transfer traffic had been hit less but that the overall situation was placing pressure on average fares.

His comments came after Cathay swung to its first profit for the January-June period since 2016 and said the second half was likely to be better.

The airline reported an HK$1.347 billion ($171.84 million) net profit for the six months ended June 30, compared with an HK$263 million loss for the first half of 2018.

Rising passenger revenue and lower fuel costs helped to offset a decline in the air cargo market linked to the U.S.-China trade war.

Cathay is a bellwether for Hong Kong's economy, which grew less than expected in the second quarter as mass anti-government protests rocked the territory.

The airline said widespread protests had reduced inbound passenger traffic in July and were adversely impacting forward bookings. The carrier cancelled dozens of flights on Monday due to a general strike.

Chairman John Slosar said people were taking a "wait and see" attitude before booking flights.

"The fact forward bookings are down doesn't mean those bookings are gone," he told reporters. "People just aren’t booking as far out as they were before."

However, Cathay said it normally achieved better financial results over July-December and, despite headwinds and other uncertainties, it expected that to be the case in 2019.

"We believe this removes a key earnings concern," Jefferies analyst Andrew Lee said in a note, maintaining a "buy" rating.

Over a 10-year period, Cathay's second-half profit has averaged double or more than the first half due to seasonal differences, Slosar said.

Cathay is forecast to report a full-year profit of HK$4.3 billion, according to an average of 18 analyst estimates compiled by Refinitiv.

Cathay's first-half revenue rose 0.9% to HK$53.55 billion at a time when passenger capacity increased by 6.7%.

Passenger yields, a measure of the average fare per kilometre flown, fell 0.9% in the first half due to competition in premium classes and long-haul economy class.

Cargo revenue fell 11.4%.

Hong Kong is the world's largest air freight hub and Cathay receives a higher proportion of revenue from cargo than peers like Singapore Airlines and Qantas Airways.

The International Air Transport Association in June slashed its 2019 profit forecast for global airlines by 21%, partly due to the impact of the trade war on cargo revenue.

Cathay last month completed the purchase of low-cost airline Hong Kong Express from cash-strapped Chinese conglomerate HNA Group, giving Cathay its first foothold in a rapidly growing budget travel market in Asia.

Loo said Hong Kong Express could look to add destinations and lease or buy more planes but no firm plans had been set.


(Reporting by Jamie Freed in Singapore and Farah Master in Hong Kong; Editing by Muralikumar Anantharaman and Himani Sarkar)