Cathay Pacific reported its worst first-half loss in at least two decades of HK$2.05 billion in the first six months of 2017 and said it did not see conditions improving for the rest of the year, as it continues to lose customers to competitors.
The company's passenger revenue in the first six months of 2017 was HK$32.1 billion, a decrease of 3.9% compared to the same period in 2016.
“We do not expect the operating environment in the second half of 2017 to improve materially,” Cathay Pacific's chairman John Slosar said in the statement.
“In particular, the passenger business will continue to be affected by strong competition from other airlines and our results are expected to be adversely affected by higher fuel prices and our fuel hedging positions.”
Meanwhile, Slosar said a “stellar performance” at Cathay's cargo business helped ease some of the pain, thanks to strong demand for exports from China and the rest of Asia combined with global e-commerce growth.
Companies like China Eastern and China Southern Airlines are offering direct services to Europe and the United States from the mainland, while budget carriers like Spring Airlines have targeted regional travellers, undermining Cathay's position.
The airline is also losing premium travellers as it comes under pressure from Middle East rivals which are expanding into Asia and offer more luxurious touches.
“Broadly speaking, we have no plans to start a low-cost airline,” said Rupert Hogg to Bloomberg, who took over as Cathay's chief executive on 1 May.
“But we compete with low cost carriers on lots of different routes and clearly we have to have a proposition that price sensitive travelers, new travelers and first time travelers find attractive and prefer to fly on our airline relative to the alternatives.”
Meanwhile, under the new management, the airline has sought to regain lost ground through an overhaul that included a three-year transformation programme, hundreds of staff layoffs and other cost reduction efforts.
The reorganisation had resulted in HK$244 million in redundancy costs, Cathay said. It also made gains of HK$830 million from share disposals.