6 August, 1997
FOR IMMEDIATE RELEASE
Half-yearly earnings of the Cathay Pacific Group totalled HK$1,068 million (US$211 million) for the period ending 30 June 1997. Turnover was HK$15,775 million (US$1,944 million), an increase of 4 percent on 1996. The result is marginally below that of 1996 which was HK$1,106 million before an exceptional item.
"The first half of 1997 presented a series of difficult challenges for Cathay Pacific," said Chairman Peter Sutch. "Currency fluctuations, a weak summer travel market and the brief suspension of A330-300 operations created a number of obstacles for the airline."
On May 24 of this year, Cathay Pacific took the unprecedented step of suspending operations of its Rolls-Royce Trent 700 powered fleet of A330-300s due to reliability concerns about the engine. In line with Cathay Pacific's corporate commitment to place safety ahead of all other considerations operations of the aircraft type were suspended. A modification that improved lubrication to the engine's step-aside gear box eliminated the problem and, after just over two weeks, the fleet resumed operations. The engines are now performing very satisfactorily.
"This was a tough decision to take but one we felt was necessary to avoid any risk, however small, to the safety of passengers and staff," said Mr Sutch.
Other events which had an impact on revenues in the first half of the year included a much anticipated summer travel peak that failed to materialise. Initial estimates indicated that demand for air travel would be extremely high over the period of Hong Kong's reunification with China.
"The travel industry was a victim of its own success over the handover period," said Mr Sutch. "Such interest was created that many potential visitors simply assumed Hong Kong would be overflowing and that discouraged them from coming. Pricing of accommodation was also seen as being very high."
Whilst passenger load factors were strong up to April, they have declined substantially since May. Overall revenue load factor was up slightly during the first half, averaging 71.2 percent, but downward pressure on yields and the weakness of certain European currencies reduced revenues on many routes. The Japanese market has seen a considerable decline in visitors to Hong Kong.
"The second half of the year traditionally brings a stronger demand for air travel, although there is still a hesitation in some markets to visit Hong Kong in the light of misleading media reporting. We are also looking forward to some significant milestones along the road to Chek Lap Kok," said Mr Sutch. The new Cathay Pacific City is on schedule and budget and plans for the airline's move to the new facility in April of next year are well underway. Cathay Pacific's investment in the headquarters at Chek Lap Kok totals more than HK$4.9 billion and additional investments in ground handling, cargo, catering and related services raises the total to over HK$7.8 billion
As 1998 approaches the challenges of the aviation industry will remain, but there is much reason to be optimistic about Cathay Pacific, said Mr Sutch. "Hong Kong's reunification with China has been handled smoothly, we are operating in a stable political environment and the economy continues to grow. These are conditions that in the long run will lead to continuing prosperity for Cathay Pacific."
The Cathay Pacific Internet site can be found at http://www.cathaypacific-air.com
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