Cathay Pacific 2011 net profit plunges 61%

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Cathay Pacific on Wednesday said its 2011 net profit plunged 61 per cent as it struggled with high fuel prices as well as softening demand for its cargo business and warned of a challenging 2012.

The Hong Kong-based carrier said it earned HK$5.5 billion ($709 million) last year, well below the record HK$14.0 billion profit it recorded in 2010, despite a 9.9 per cent increase in total revenue.

"After a record year in 2010, we faced a number of major challenges in 2011," chairman Christopher Pratt said in a statement to the Hong Kong stock exchange, where the airline is listed.

Passenger revenue for the year rose 14.2 per cent to HK$67.78 billion. It carried a total of 27.6 million passengers last year, a rise of 2.9 per cent from 2010, as demand for premium class travel remained robust.

Pratt said the challenges included the instability of the global economy, the weakness of the air cargo market, the impact of natural disasters in Japan and Thailand, unrest in the Middle East and continued high jet fuel prices.

"Fuel is our biggest single cost and the persistently high jet fuel prices had a significant effect on our operating results in 2011," Pratt said, adding that gross fuel costs surged HK$12.46 billion or 44 per cent, in 2011.

The airline also noted weakened demand for cargo shipments from its two key markets, Hong Kong and mainland China, as well as the European market, due to falling exports amid weak consumer sentiment.

Cargo revenue for 2011 was up 0.3 per cent to HK$25.98 billion compared with 2010, but the load factor fell.

Pratt warned of a challenging year ahead, with pressure on Cathay's economy class yields and cargo business due to global economic uncertainties.

"As a result, 2012 is looking even more challenging than 2011 and we are therefore cautious about prospects for this year," he said.

"We will continue to be vigilant in managing our costs while not compromising the quality of our products and services or our long-term strategic investment in the business. Our financial position remains strong."