Cathay Pacific to cut capacity as demand for Hong Kong travel falls

Wed, 2019-09-11 10:11

HONG KONG: Cathay Pacific Airways Ltd. said on Wednesday it
would cut capacity for the upcoming winter season after reporting
an 11.3% fall in passenger numbers for August as anti-government
protests in Hong Kong hit demand.
The airline said inbound traffic to Hong Kong in August had fallen
by 38% and outbound traffic by 12% compared with the previous year,
and it did not anticipate September would be any less
Hong Kong’s finance secretary reported earlier this week that
visitor arrivals plunged nearly 40% in August, deepening from
July’s 5% fall, as sometimes violent anti-government protests
took a rising toll on the city’s tourism, retail and hotel
The weak demand and cuts to capacity will place more pressure on
Cathay at a time when it is grappling with management upheaval and
is trying to complete a three-year financial turnaround plan driven
by boosting revenue and slashing costs.
“Given the current significant decline in forward bookings for
the remainder of the year, we will make some short-term tactical
measures such as capacity realignments,” Cathay Chief Customer
and Commercial Officer Ronald Lam said in a statement.
“Specifically, we are reducing our capacity growth such that it
will be slightly down year-on-year for the 2019 winter season (from
end October 2019 to end March 2020) versus our original growth plan
of more than 6% for the period.”
Cathay has become the biggest corporate casualty of anti-government
protests after China demanded it suspend staff involved in, or who
support, demonstrations that have plunged the former British colony
into a political crisis.
Chairman John Slosar announced plans last week to step down in
November, less than three weeks after CEO Rupert Hogg left amid
mounting regulatory scrutiny.
Cathay said on Wednesday demand for premium class travel had fallen
more significantly than for leisure travel, with demand from
mainland China and Northeast Asia severely hit, although Australia
and New Zealand were more positive.
The carrier said lower travel demand, an increased mix of transit
passengers and the negative impact of a strengthening US dollar had
placed passenger yields, a measure of the average fare paid per
kilometer per passenger, under further pressure.
“We expect airfares to continue to fall in coming months as
Cathay struggles to maintain load factors within reasonable
bounds,” BOCOM International analyst Luya You said, in reference
to a measure of the percentage of seats filled. “In terms of
earnings, the second half may be notably dismal considering
plummeting yields across all classes.”
Transit passengers are typically less lucrative for airlines
because they face competition from more rival carriers than for
non-stop flights, which places pressure on pricing.
The load factor fell by 7.2 percentage points to 79.9% in August,
Cathay said. The amount of cargo carried fell by 14% amid a weak
global market for air freight and the effects of tropical storms
and disruptions at Hong Kong airport.

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Source: FS – All-News-Economy
Cathay Pacific to cut capacity as demand for Hong Kong travel falls