"Fundamental structural changes within the airline industry continued to create a challenging operating environment for our airline businesses," Cathay Pacific Chairman John Slosar said.
Cathay's fuel bill, which accounted for around a third of the company's expenses, rose 11.3% in 2017, despite fuel hedging contracts designed to minimize price swings. The airline also had to pay a $71 million fine to the European Commission, settling a multi-year case involving a number of air cargo carriers that allegedly colluded to fix fuel and security surcharge rates. Fortunately, the airline's cargo transport division helped offset some of the costs, with a 19% revenue jump in 2017.
The 2017 numbers mark the airline's first time experiencing back-to-back losses in the company's 71-year history. That being said, analysts said the numbers were better than predicted.
The flagship carrier of Hong Kong is in the middle of a three-year restructure that will ultimately save Cathay more than $510 million in cost savings. The corporate reorganization has led to around 600 layoffs so far, as the airline struggles to compete against low-cost carriers as well as mainland Chinese and Middle Eastern airlines encroaching upon the coveted Asia consumer demographic.
“We took decisive action through our transformation program to make our businesses leaner and more agile,” Slosar said. “Our focus in 2017 was on building the right foundations, structure and strategy to improve revenue and to better contain costs.”
