Cathay Pacific Posts Staggering Loss For First Half of 2017

Aug 16, 2017

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

For years, Cathay Pacific has offered one of the best first-class products, and a fantastic business class as well, and the airline continues to make efforts to further improve its (overall fairly young) fleet, retiring the beloved but gas-guzzling 747 and adding the brand-new Airbus A350, which it will soon fly to San Francisco and Newark. But despite these passenger improvements (or perhaps partially because of them), Cathay has already lost a tremendous amount of money this year.

Just how much are we talking? Well, in the first half of 2017, Cathay Pacific lost a total of $262 million (2.051 billion Hong Kong dollars), compared to a profit of $45 million during the same period last year — even though the airline has actually marginally increased revenue, by a fraction of a percent. According to Hong Kong newspaper South China Morning Post, this first-half performance puts Cathay on track for another year in the red, the carrier’s first consecutive annual loss in its 70 years of existence.

So what’s going on? Here’s Cathay’s explanation, offered during its first-half earnings call:

Fundamental structural changes within the airline industry continue to affect the operating environment for our airlines and created difficult operating conditions in the first half of 2017. The factors which affected our performance were largely the same as in 2016. Intense competition with other airlines was the most significant. Other major adverse factors were higher fuel prices (including the effect of our hedging), the adverse effect of the strength of the Hong Kong dollar on revenues denominated in other currencies, and higher aircraft maintenance costs.

Competition from low-cost carriers continues to be an issue for legacy airlines in Asia and beyond, and with Hong Kong Airlines about to launch nonstop service to the US with the Airbus A350 (and perhaps other destinations as well), the situation is unlikely to improve anytime soon.

Competition from carriers like Hong Kong Airlines are impacting Cathay Pacific's bottom line. Image by Alex Macheras.
Competition from carriers like Hong Kong Airlines are impacting Cathay Pacific’s bottom line. Image by Alex Macheras.

Cathay Pacific has begun implementing a plan to cut costs by reducing headcount, while recognizing that “We must strengthen our brand while maintaining our high standards, identity and excellence in a challenging environment.”

In addition to adding the A350 (of which it now operates 17), the carrier recently launched service to Tel Aviv and a seasonal flight to Barcelona, and will begin flying to Christchurch, New Zealand later this year. Cathay has also boosted service to a handful of cities around the world, with more flights on the way throughout the rest of the year. Additionally, an increase in seat density on the 777 (expected to begin mid-2018) should eventually have a positive impact on the airline’s bottom line, although unfortunately that increased revenue comes at the cost of economy passenger comfort.

Would you choose to pay more to fly Cathay Pacific over a low-cost carrier?

Delta SkyMiles® Platinum American Express Card

Earn 50,000 bonus miles and 5,000 Medallion® Qualification Miles (MQMs) after you spend $2,000 in purchases on your new card in your first three months of card membership. Plus, earn up to $100 back in statement credits for eligible purchases at U.S. restaurants with your card within the first 3 months of membership.

With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.

Apply Now
More Things to Know
  • Earn 50,000 bonus miles and 5,000 Medallion® Qualification Miles (MQMs) after you spend $2,000 in purchases on your new Card in your first 3 months.
  • Plus, earn up to $100 back in statement credits for eligible purchases at US restaurants with your card within the first 3 months of membership.
  • Accelerate your path to Medallion Status, with Status Boost®. Plus, in 2021 you can earn even more bonus Medallion® Qualification Miles (MQMs) to help you reach Medallion Status.
  • Earn 3X Miles on Delta purchases and purchases made directly with hotels.
  • Earn 2X Miles at restaurants worldwide, including takeout and delivery and at U.S. supermarkets.
  • Earn 1X Miles on all other eligible purchases.
  • Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. *Payment of the government imposed taxes and fees of no more than $75 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
  • Enjoy your first checked bag free on Delta flights.
  • Fee Credit for Global Entry or TSA Pre✓®.
  • Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
  • No Foreign Transaction Fees.
  • $250 Annual Fee.
  • Terms Apply.
  • See Rates & Fees
Regular APR
15.74%-24.74% Variable
Annual Fee
$250
Balance Transfer Fee
N/A
Recommended Credit
Excellent/Good
Terms and restrictions apply. See rates & fees.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.