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Cathay Pacific on turnaround path after annual loss below expectations

Reuters  |  SHANGHAI/SINGAPORE 

By and Jamie Freed

SHANGHAI/SINGAPORE (Reuters) - posted a smaller than expected annual loss due to a rebound in the cargo market, moderating ticket price falls and lower fuel hedging losses, prompting analysts to call that the worst was over for the Hong Kong

Poor hedging bets on fuel prices and fierce competition from mainland Chinese and Middle Eastern rivals have hurt Cathay, pushing it into losses for the past two years and forcing the to undertake a three-year turnaround programme targeting HK$4 billion ($510.12 million) in savings.

While analysts said it was still too early to say whether the efforts under were bearing fruit, they said the firm was benefiting from a global recovery in the cargo market and profits at its associates and subsidiaries.

Cathay reported on Wednesday a net loss of HK$1.26 billion for 2017, its biggest in nine years. The loss was wider than the prior year's HK$575 million but much smaller than an average loss estimate of HK$2.15 billion drawn from 11 analysts polled by

Full-year revenue grew 4.9 percent to HK$97.28 billion. The reported a profit of HK$792 million in the second half which offset its first half loss of HK$2.05 billion.

Cathay shares rose as much as 3.2 percent after the results on Wednesday to its highest in almost two-and-a-half years, before ending unchanged.

"We believe the worst is over for and we forecast Cathay to turn around with a small net profit of HK$377 million this year," said Corrine Png, of transport research firm

"2019 will be a much better year for as its expensive fuel hedges finally roll over."

YIELD DECLINES MODERATING

Cathay's loss for 2017 was its first consecutive annual loss and the fourth yearly loss since it was founded in 1946. Under the revamp plan launched last year, it has announced job cuts and plans to boost productivity including increasing the number of economy-class seats on 777 planes.

Paul Loo, Cathay's chief customer and commercial officer, said at a press conference that did not currently have plans for more layoffs, and declined to comment on whether the firm had set a cost target for 2018. The firm announced its biggest job cuts in 20 years last May.

He said Cathay expects continued growth in its cargo and mail business, which saw yields rise 11.3 percent in 2017 thanks to drivers like He added that did not expect proposed tariffs by U.S. on Chinese goods to impact the cargo business.

Cathay reported a 3.3 percent decline in yields, a proxy for ticket prices, in 2017, although it said they had improved by 3.1 percent in the second half of the year compared with the first half.

Rivals such as and have also reported a moderating pace of yield declines in recent months amid higher fuel prices that have added to Cathay's mainland Chinese competitors have yet to report 2017 financial results.

Cathay's warned in a statement that the Hong Kong carrier's operating costs were increasing due to rising fuel costs, even though its losses from expensive fuel hedging contracts shrank 24.6 percent over the year.

Hong Kong-listed is Cathay's biggest shareholder with a 45 percent stake, followed by which owns 30 percent through a cross-shareholding. owns a 9.94 percent stake in Cathay.

($1 = 7.8413 Hong Kong dollars)

(Reporting by in SHANGHAI and in SINGAPORE; Additional Reporting by Tina Ge in HONG KONG; Editing by and Muralikumar Anantharaman)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, March 14 2018. 15:41 IST
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