Cathay Pacific Airway’ LTD’s (OP: CPCAY) 2011 net profit dropped 61% due to the rising cost of fuel and softer demand for the company’s freight services. The company is also expecting continued weakness for the cargo operation for the year 2012.
The company said on Wednesday that the net profit for the year 2011 was HK $5.5 billion which is down quite a lot from the net profit of HK $14.05 billion in 2010. This is also due in part though to a one-off gain of HK $3.03 billion that helped to boost the 2010 figure. Without factoring in this one-off gain the airline’s net profit was still down by 50.1% in 2011.
These reports fall slightly below the average HK $5.65 billion net profit prediction from 19 separate analysts that were pulled before the release of the numbers.
Pratt was quoted to say “while these uncertainties continue, we expect pressure on economy class yields and are cargo business in particular to remain weak.”
Pratt did note though that the carrier has been busy investing in the recent years to grow the company’s fleet as well as enhance services with plans to include taking delivery of 19 new aircraft’s in 2012.
In 2011 the airline revamped its services and started offering premium economy seats on long-haul flights and the company is expected to have 87 aircrafts with that feature by the end of 2013. Currently the Hong Kong-based airline and sister company Hong Kong Dragon Airlines operate a total of 164 aircraft as was reported at the end of 2011.
The biggest hit on the profitability of 2011 comes down to fuel prices alone as fuel makes up over 40% of the company’s total operating costs. The company has created a fuel hedging program which allowed them to profit HK $1.81 billion from fuel hedging activities in 2011.
