Cathay Pacific is an airline that has been trying to turn themselves around, after a rough 2016 and 2017. In those two years the airline lost significant amounts of money (~73 million USD and ~160 million USD, respectively), despite historically being profitable.
Cathay Pacific’s biggest issue was huge losses related to fuel hedges, though they also faced many of the same challenges as other airlines, but were slow to adopt — this includes too much capacity in some markets, increased competition on some key routes, a fleet that’s not very efficiently configured, and a high cost structure in many areas.
In 2017 Cathay Pacific appointed a new CEO, Rupert Hogg, and under his leadership the airline has been making some necessary changes that are starting to pay off. This has included cutting some routes, reducing the workforce in some areas, and also densifying their 777s, by adding an extra seat per row in economy.
Cathay Pacific has reported impressive results for 2018, and is once again making money. It has been announced today that a preliminary review of the unaudited consolidated management accounts of Cathay Pacific show profits for 2018 to be 2.3 billion HKD (~293 million USD).
Going from a loss of ~160 million USD to a profit of ~293 million USD the next year is quite a turnaround. Notably Cathay Pacific’s results also significantly beat what investors were expecting, as most were only expecting the airline to report a profit about half that much.
Cathay Pacific attributes the positive 2018 performance to capacity growth, a focus on customer service, and improved revenue management. They note that their yields increased year over year, while load factors remained steady, in spite of increased competition.
It’s expected that Cathay Pacific will publish their full 2018 results in March, as this is just a preliminary review.
Bottom line
It’s good to see Cathay Pacific making money again, though this was expected by most. Their previous losses stemmed largely from bad fuel hedging, though there were still some areas they could optimize otherwise, and they’ve done a good job with that.
I just hope they don’t get too many more cost cutting ideas!
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