Cathay Pacific shares plunge on cost-cutting drive

Hong Kong – Shares in Cathay Pacific plunged Thursday, after the Hong Kong flag carrier announced a raft of cost-cutting measures and warned of “disappointing” first-half results due to high fuel prices.

The firm, which is listed at the Hong Kong stock exchange, fell 5.54 percent to HK$12.62 in morning trade, while the benchmark Hang Seng Index was 0.93 percent lower.

Cathay said Wednesday there was “no sign of a sustained recovery” in its cargo business due to rising fuel costs, and that its 2012 financial results scheduled to be announced on August 8 “are expected to be disappointing”.

The last time Cathay had issued a profit warning was in 2008 before it posted full-year losses of HK$8.56 billion amid the global financial crisis.

The airline also cut its capacity growth forecast from the original seven percent to two percent, and said it will reduce the frequency of some long-haul routes to North America and Europe to ease outlays.

Other cost-cutting measures would include the earlier retirement of older aircraft, deployment of more fuel-efficient jets, a ground staff hiring freeze and voluntary unpaid leave for cabin crew.

“This is not just a Cathay Pacific problem, it is clearly an industry-wide issue, and continued high fuel prices in particular are hitting airlines hard across the globe,” chief executive John Slosar has said.

The firm in March reported a 61 percent plunge in its net profit for 2011 and has warned that 2012 could be “even more challenging” than 2011.

One of Cathay’s regional rivals, Singapore Airlines said Wednesday its 2011 net profit slumped 69 percent after it posted a fourth-quarter loss of Sg$38.2 million ($30.54 million).
The International Air Transport Association in March cut its forecast for the sector’s profits this year to $3.0 billion, from $3.5 billion, and warned some airlines could go bankrupt if fuel prices continued to soar.