Cathay Pacific 1H2014 profit: slightly improved as growth has required fare discounting

The Cathay Pacific Group has reported a rise in profit but has only moved from a meagre 2.1% operating margin to a weak 3.1%. The outlook continues to be subdued as Cathay largely banks on time: for the A350's Feb-2016 arrival to reduce costs and Hong Kong's forthcoming runway saturation to limit direct competition. But even then markets will be more competitive and Cathay will be sharing space in North Asia with more airlines, with improving brands, than in the past.

Cathay Pacific managed 5.3% ASK growth but this came at the expense of a 3.5% drop in yields. North America, Cathay's largest market, saw yields decline 4.4%, and this over-capacity market will get worse - possibly well into 2015. Only Europe saw gains across capacity, load factor and yield. Freight continues to be a problem and dedicated freighters are losing emphasis as Cathay carried as much freight in passenger aircraft bellies as dedicated freighters. Increasing costs are also a problem but Cathay is becoming less worried about Jetstar Hong Kong, although Chairman John Slosar repeated vague statements that Jetstar could not have "free use" of Hong Kong rights "without giving up" unspecified interests - possibly Australian bilateral access - in exchange. Nonetheless, Cathay is growing in its third largest long-haul market of Australia through seat density and up-gauging.