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Cathay Pacific says net profit tripled in 2013

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HONG KONG: Hong Kong carrier Cathay Pacific said net profit more than tripled last year on a rise in Chinese travelers and fuel-cost savings, but its cargo unit saw earnings fall while analysts warned of a tough future.
The city’s flag-carrier said profit jumped to HK$2.62 billion ($338 million) from HK$862 million in 2012 as revenue climbed 1.1 percent to HK$100.5 billion.
The 204 percent increase helped the firm recover from a painful 2012, when its bottom line was hammered by the effects of the eurozone crisis as well as persistently high fuel prices.
The result was in line with the average HK$2.74 billion net profit forecast by analysts in a poll by the Wall Street Journal.
However, the figure is still well down from the HK$5.5 billion profit seen in 2011.
“The operating environment remained challenging throughout 2013… It was therefore encouraging to see an improvement in our overall performance,” company chairman Christopher Pratt said in a filing to the Hong Kong Stock Exchange.
“Business outlook for 2014 looks to be improved when compared to 2013,” he added.
Cathay, which also owns Hong Kong-based airline DragonAir, said it transported almost 30 million passengers in 2013, up 3.3 percent on-year, helped by strong demand for travel from mainland China as well as promotional ticket programs.
While fuel prices were the most significant cost — at 39.0 percent of total costs in 2013 — the firm said it had addressed the problem partly by withdrawing older planes and using more fuel-efficient aircraft. It also said reshuffling schedules helped bring down fuel costs by 4.6 percent year-on-year.
The airline said last year saw a “strong” demand in its long-haul services as well as newly introduced premium economy class.
“Passenger demand was strong on long-haul routes in all classes of travel. The introduction of premium economy class has been well received and has improved overall economy class yield,” it said.
In 2013, Cathay Pacific acquired 19 new aircraft, including five Airbus A330-300 aircraft nine Boeing 777-300ER aircraft and five Boeing 747-8F freighters.
Cathay was trading down 1.8 percent at HK$15.5 early afternoon Wednesday in Hong Kong.
However, Mohshin Aziz, a Malaysia-based aviation analyst with Maybank Investment Bank, said the higher profit was “nothing to celebrate” as fuel costs remain high while Cathay faces growing competition in the region.
“Competitors have stepped up the game to capture the transit market. Also, low-cost carriers are growing,” he said, adding that more passengers were also opting for new airports in mainland China over Hong Kong.
The cargo business saw revenue falling 3.6 percent to HK$23.7 billion but the company said it remained confident in Hong Kong as an aviation hub, adding that investment of HK$5.9 billion in a new cargo terminal, which opened last year, “will bear fruit in the long term.”
However, Aziz said the terminal will likely add more costs in the near term as it was built on expectations of growth in the sector, an assumption that is being challenged as China’s economy shows ongoing signs of slowing down.
Cathay closed down 2.41 percent at HK$15.40.