Cathay Pacific Hit By September 11 Attacks

by Mary Swire, Tax-News.com, Hong kong

07 March 2002

Announcing its results for 2001, Hong Kong-based Cathay Pacific Airways, Asia's fourth largest carrier by passenger capacity, said the 11 September attacks pushed its profits down sharply in the second-half of 2001. Hong Kong's main carrier posted an 87% drop in net profit HK$657m, below analyst's expectations and in a striking contrast to the record HK$5bn in 2000. Cathay sold 5% fewer seats in 2001 than in the previous year.

Cathay Pacific Airways sees only a slow recovery this year as the world's airlines continue their struggle to claw back business lost after September 11. The airline, which is 25.8% owned by Citic Pacific and 45.9% by conglomerate Swire Pacific, said a profit of HK$1.31 billion in the first half of the year swung into a HK$662 million loss in the second half as the September 11 terrorist attacks reduced air travel and deepened the global economic slowdown.

At a press briefing yesterday afternoon, Cathay chairman James Hughes-Hallett told reporters: "Challenging times clearly lie ahead. Full recovery may be a long time coming and will depend to some extent on the recovery of the US economy, fuel costs and our ability to leverage yield".

The company's biggest problem has been the slowdown in demand for business and first class travel - its bread and butter products. The fall in overall customer demand has prompted intense competition and widespread discounting in many markets. Chief executive David Turnbull said: "We clearly suffered in the second half of last year. September made a bad situation much worse - we were in a down spot for a while. Things have recovered. But going out to the airport, you can see it is difficult to get people to fly. Many airlines have resorted to heavy discounting, or in our case, giving tickets away," Mr Turnbull said, referring to the company's recent promotional giveaway of 10,000 free tickets to Hong Kong.

Shares in Cathay fell as much as 3.36% but ended just 1.26% lower at HK$11.75 against a 0.15% rise by the Hang Seng Index.

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