Cathay Pacific Profit Beats Estimates as Travel Demand Gains

Cathay Pacific Airways Ltd. (293), Asia's biggest international carrier, reported annual profit that beat analyst estimates after higher passenger numbers helped mask a drop in cargo traffic.Net income in 2012 was HK$916 million ($118 million), compared with HK$5.5 billion a year earlier, the company said in a Hong Kong stock exchange filing today. The city-based carrier was expected to make a profit of HK$538.7 million based on the average of 19 analyst estimates compiled by Bloomberg. Sales increased 1 percent to HK$99.4 billion, it said.Chief Executive Officer John Slosar's introduction of promotional fares helped boost passenger numbers 5 percent last year while Wall Street's job cuts weighed down on premium travel. With the rise in jet fuel prices, Cathay cut costs and is paring capacity this year as Middle East carriers such as Emirates increase competition by expanding into Asia-Pacific.
"Peak seasons of summer and Christmas holidays in the second half helped boost demand,"Geoffrey Cheng, an analyst at Bank of Communications Co., said before the announcement. "Cathay is likely to see a recovery this year, especially on the long-haul travel market, as the U.S. economy is improving."The airline's shares fell 0.7 percent to HK$14.16 as of the noon trading break in Hong Kong. The stock has declined 0.4 percent this year.Cathay posted a surprise first-half loss of HK$935 million, weighed down by slower cargo demand and losses from affiliates.Singapore Airlines Ltd. (SIA), the biggest carrier in Southeast Asia, last month reported profit that missed estimates for a fifth consecutive quarter as competition pushed down fares."We have taken the right measures to deal with current challenges and will take whatever further measures are necessary should the business environment not improve," Cathay Chairman Christopher Pratt said in the statement. "The cost of fuel remains the biggest challenge."Passenger yield, including fuel surcharges, rose 1.2 percent to 67.3 Hong Kong cents last year and the airline, according to the statement. Cathay and its Hong Kong Dragon Airlines Ltd. unit filled on average 80.1 percent of its seats little changed from 80.4 percent a year earlier, according to the statement.Slosar told staff in November the carrier was facing a "very challenging year" in 2012. Cathay has said it will cut passenger capacity 1.6 percent this year to cope with slowing international travel demand. In December, Slosar said the capacity reductions are intended to accelerate replacement of the oldest Boeing Co. (BA) 747 planes.