Cathay Pacific Airways Limited

10 March 1999



Cathay Pacific Airways made a loss attributable to shareholders of HK$542 million during 1998, compared to a profit of HK$1,694 million in 1997. Turnover fell 12.9 percent to HK$26,695 million. This is the first time the company has made an annual loss since 1963.

The disappointing results reflect the full impact of the Asian financial downturn on the Company's operations. The widespread economic weakness saw reductions in both passenger loads and yields. The amount of cargo transported fell, and the airline's related businesses of catering, ramp-handling and aircraft maintenance were also adversely affected.

"1998 will stand out as one of the most difficult years in the history of Cathay Pacific, as the severe contraction of Asian economies inevitably took a heavy toll on many of our key markets," said Chairman Peter Sutch. "Nevertheless, we have taken this opportunity to overhaul many of our operations and we are confident that we will be stronger than ever once the anticipated recovery occurs."

It was a difficult year for the airline's passenger operations as the regional downturn, which began in 1997, continued unabated. Almost all routes served by the airline suffered as a result, particularly those to Japan and Southeast Asia. Long-haul services to Europe and North America performed better but even these were affected. On a positive note, the two new routes launched during the year, Istanbul and San Francisco, both performed creditably.

The weakening of Asian currencies, tough competition, and a reduction in First Class and Business Class travel resulted in yields declining much more sharply than passenger loads. Cathay Pacific's overall passenger load factor for the year was 67.5 percent, down by 0.7 percentage points from 1997. Average yield was HK45.2 cents per Revenue Passenger Kilometre, down by 18.9 percent.

The Group's cargo services reported turnover of HK$7,040 million, a 9.5 percent decrease over 1997. Cargo revenue accounted for 26.4 percent of the Group's total turnover. The cargo operations were seriously disrupted by the start-up difficulties at the new Hong Kong International Airport, which accounted for a substantial revenue loss during July and August.

Cathay Pacific has taken a number of steps to improve its competitiveness. These included the removal from service of seven older Boeing 747-200 aircraft, and the decision to remove a further 6 B747-300 aircraft during 1999. The airline has continued its rigorous cost-saving programme, which helped to reduce the unit operating cost from HK$2.57 per Available Tonne Kilometre in 1997 to HK$2.25 in 1998.

Despite the difficult operating conditions, Cathay Pacific pressed ahead with its extensive investment programme aimed at improving its products and services. These included accepting delivery of ten new Boeing and Airbus aircraft over the course of the year. This, coupled with the removal of the older aircraft, will make the overall fleet much younger and more efficient to operate.

Cathay Pacific also positioned itself to meet widening global competition by becoming a founder member of the new oneworld alliance along with American Airlines, British Airways, Canadian Airlines, and Qantas Airways. The airline also launched a new frequent flyer programme, Asia Miles, designed to be one of the most comprehensive in Asia. The programme is well ahead of its target to attract 350,000 members during its first year.

During 1998, Cathay Pacific completed many of its investments at the new Hong Kong International Airport, which opened on 6 July. The airline's new headquarters, Cathay Pacific City is now home to over 3,000 staff. Cathay Pacific's operations and facilities at the new airport, including innovative check-in services, and new lounge, "The Wing", have all been well received.

Mr Sutch added: "While the year ahead looks to be another difficult one, with these investments in place Cathay Pacific looks to the future with some confidence. The measures we have taken over the past year do mean we are now in a stronger position to benefit from the anticipated recovery of Hong Kong and the rest of Asia."

The Cathay Pacific Internet site can be found at To receive Cathay Pacific media information by e-mail, please register at Inside CX.

Source: Cathay Pacific Airways Limited
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