Cathay Pacific’s interim result does not make for encouraging reading. Operating profit margin dropped into negative territory in the first half of 2008, compared to a double-digit margin in the full year of 2007.
Cathay’s earnings report stated the big change in the company’s financial performance ‘was entirely due to the relentless rise in the cost of jet fuel in recent months’. Cathay’s non-fuel unit costs also rose 2.4%.
Overall, the airline’s cost base, including fuel, ballooned by a third, against a 22.6% revenue increase.
Cathay’s total fuel bill rose 94% in the first half year-on-year, due to reduced hedging benefits and the airline’s double-digit capacity increases.
Fuel now accounts for 45.3% of total costs.
Chairman Christopher Pratt said, ‘It is inevitable that fares for passengers and shippers will have to rise to reflect the new cost of operation.’
He added that ‘it is difficult to forecast with any degree of accuracy the extent to which these higher fares will reduce demand, but thus far it has remained robust.’
Source: Centre for Pacific Education