Cathay Pacific slumps to surprise loss as crude hobbles recovery

Bloomberg

More passengers, higher ticket prices and a cargo rebound couldn’t save Cathay Pacific Airways Ltd. from slumping into yet another loss. For Chief Executive Officer Rupert Hogg, that means his restructuring efforts need to strengthen further to turn the tide.
After back-to-back annual losses, the carrier is midway through a transformation program under Hogg, who has been cutting jobs and improving services to lure back the premium traveller since taking over as CEO in May 2017. Rival Singapore Airlines Ltd., which has a budget carrier under its wings and earned a profit in the quarter through June, has also been restructuring as Asia’s two marquee airlines grapple with the threat from low-fare carriers and the expansion of Chinese companies.
“They need to take more drastic and deeper measures in their restructuring efforts,” said Shukor Yusof, founder of aviation consulting firm Endau Analytics. “They need to endure more pain.”
Cathay Pacific is “on track” to achieve sustainable long-term performance, Cathay Pacific Chairman John Slosar wrote Wednesday in a note to shareholders after saying earnings were dragged down by oil hedging losses and rising prices of jet fuel. Cathay shares fell 1.8 percent in Hong Kong after the numbers, the biggest loss in six weeks.
Under Hogg’s plan to tackle competition, Cathay Pacific has taken steps to improve its cabin offerings by providing wider choice of meals in business-class cabins on long-haul flights, added newer and more fuel-efficient aircraft to its fleet and started services to more destinations.
Also, at the back end of the aircraft the carrier is trying to boost revenue by adding another row of seats on its Boeing Co. 777 planes. The change will result in a 3-4-3 configuration, in line with the industry standard adopted by many premium carriers, although legroom would remain the same, Cathay said last year.
“Cathay Pacific’s earnings recovery should accelerate as it is benefiting from continued improvement in its core passenger business,” Bloomberg Intelligence analysts Rahul Kapoor and Chris Muckensturm said.