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Wednesday, September 11, 2019, 18:02
Cathay Pacific to cut capacity as demand for HK travel falls
By Reuters
Wednesday, September 11, 2019, 18:02 By Reuters

Tail fins of Cathay Pacific Airways Ltd aircraft are seen at Hong Kong International Airport in Hong Kong, March 5, 2019. (PAUL YEUNG / BLOOMBERG)

HONG KONG — Cathay Pacific Airways Ltd said on Wednesday it would cut capacity for the upcoming winter season after reporting an 11.3 percent fall in passenger numbers in the month of August as protests in Hong Kong hit demand.

The Hong Kong airline said inbound traffic to Hong Kong in August had fallen by 38 percent and outbound traffic by 12 percent compared with the previous year, and it did not anticipate September would be any less difficult.

Specifically, we are reducing our capacity growth such that it will be slightly down year-on-year for the 2019 winter season (from end October 2019 to end March 2020) versus our original growth plan of more than 6% for the period.

Ronald Lam, Chief customer and commercial officer, Cathay Pacific Airways Ltd

READ MORE: Cathay warns of 'significant' revenue impact from August

Hong Kong's finance secretary reported earlier this week that visitor arrivals plunged nearly 40% in August, deepening from July's 5% fall, as sometimes violent anti-government protests took a rising toll on the city's tourism, retail and hotel businesses.

The weak demand and cuts to capacity will place more pressure on Cathay at a time when it is grappling with management upheaval and is trying to complete a three-year financial turnaround plan driven by boosting revenue and slashing costs.

Cathay Chairman John Slosar last week announced plans to step down in November, less than three weeks after CEO Rupert Hogg left amid mounting regulatory scrutiny.

"Given the current significant decline in forward bookings for the remainder of the year, we will make some short-term tactical measures such as capacity realignments," Cathay Chief Customer and Commercial Officer Ronald Lam said in a statement.

"Specifically, we are reducing our capacity growth such that it will be slightly down year-on-year for the 2019 winter season (from end October 2019 to end March 2020) versus our original growth plan of more than 6% for the period."

ALSO READ: Cathay shares fall more than 2% after chairman resigns

Cathay said demand for premium class travel had fallen more significantly than for leisure travel, with demand from the Chinese mainland and Northeast Asia severely hit, although Australia and New Zealand were more positive.

The carrier said lower travel demand, an increased mix of transit passengers and the negative impact of a strengthening US dollar had placed passenger yields, a measure of the average fare paid per kilometre per passenger, under further pressure.

"We expect airfares to continue to fall in coming months as Cathay struggles to maintain load factors within reasonable bounds," BOCOM International analyst Luya You said, in reference to a measure of the percentage of seats filled. "In terms of earnings, the second half may be notably dismal considering plummeting yields across all classes."

Transit passengers are typically less lucrative for airlines because they face competition from more rival carriers than for non-stop flights, which places pressure on pricing.

The load factor fell by 7.2 percentage points to 79.9 percent in August, Cathay said. The amount of cargo carried fell by 14 percent amid a weak global market for air freight and the effects of tropical storms and disruptions at Hong Kong airport.


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