Cathay Pacific: depressed results but there may be rays of hope. Time to regain the initiative

Premium Analysis

Cathay Pacific on 16-Aug-2017 reports financial results for 1H2017. These results follow from 2016 when Cathay for the first time since 2008 posted a group loss and became a whipping post: Bloomberg referred to "a horror story when it comes to Cathay". The South China Morning Post described "a flawed business model in a changing world".

No reprieve is expected in 1H2017, when Cathay embarked on a restructuring programme, which as is typical has a ramp-up period but front-loaded transformation costs. Fuel hedges are winding down but losses will still be pronounced. Cargo is the bright spot with an unexpected boost in yields. Passenger over-capacity persists in all key markets, and exacerbated especially in Europe and from Cathay's A350 deliveries. Declining passenger yields are closely watched and now may be re-balanced with less aggressive load factors.

There is considerable work ahead for Cathay. Yet any "horror story" would have been magnified by uncertainty. This may be fading with a change in practices and management. Cathay will now seek vindication of its premium hub strategy, geography and brand. While lack of detail will invite criticism, Cathay's future is in focus.

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