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Cathay Pacific first-half net profit falls 59%
by Staff Writers
Hong Kong (AFP) Aug 10, 2011

Cathay Pacific said on Wednesday net profit tumbled in the first six months of the year but added it would push on with its expansion plans by ordering 12 aircraft from Boeing worth more than $3 billion.

The Hong Kong-based carrier said it earned HK$2.8 billion ($359 million) in January-June, 59 percent below the HK$6.84 billion a year earlier due to soaring fuel prices as well as impact of the Japan earthquake.

Revenue rose 13.2 percent to HK$46.79 billion.

Cathay Chairman Christopher Pratt described the first-half results as "a standard Cathay Pacific year", after the carrier booked a record net profit of HK$14.05 billion in 2010 -- nearly triple the HK$4.69 billion in 2009.

"I don't think anybody realistically expected a repeat of last year's phenomenal performance," Pratt told a Hong Kong press briefing Wednesday.

"Quite satisfactory is how I would describe today's results, as they have been achieved in a very challenging environment of rising and doggedly high oil prices."

Fuel tends to be an airline's single-biggest outlay with Cathay saying costs soared almost 50 percent in the first half of the year compared with the same period in 2010.

The March 11 earthquake-tsunami and ensuing atomic crisis in Japan saw a "significant" drop off in demand from what Cathay said was one of its most important markets, while the global freight market also weakened.

"The weaker cargo business is a reflection, I think, of the worryingly uncertain economic situation we find ourselves in today," Pratt said.

Ivan Chu, the carrier's chief operating officer, said the key Japan market was improving but remains "not as good as it was".

Cathay, meanwhile, had launched a "detailed, in-depth investigation" into photos published in local Chinese-language media that allegedly showed a flight attendant performing oral sex on a pilot aboard one of its aircraft, it said.

"This is a serious issue," Chief Executive John Slosar told reporters, declining to identify the people in the photos or give further details.

"Personally, I find those photos very much unacceptable...We will get to the bottom of it."

Despite the profit drop, Cathay said it was pushing ahead with plans to boost its ageing fleet, saying it had agreed to buy 12 planes from US aircraft maker Boeing at a list price of $3.28 billion.

However the actual price tag will be well below that figure because the carrier had won "significant price concessions" from Boeing, Cathay said.

The deal includes four 777-300ER passenger jets and eight 777-200F freighter aircraft with delivery to start in 2013, Cathay said, adding that they would "replenish and expand the fleet capacity of the company".

"They will principally serve long-haul destinations in North America and Europe," it added.

The latest plane purchase comes after Cathay said in March that it was buying and leasing 27 aircraft from Airbus and Boeing in a deal worth as much as $6.55 billion.

The latest results saw the carrier book passenger revenue of HK$31.77 billion, up 15.9 percent over the previous year, with Cathay and its regional unit Dragonair carrying 13.2 million passengers, up 1.7 percent over 2010.

Demand for economy class seats was "slightly less than expected" but premium seat sales "remained strong, despite economic uncertainties in a number of world economies", Cathay said.

The carrier's cargo business "performed reasonably" in the first quarter but then began to soften in its key Hong Kong and mainland China markets, it said.

Cargo revenue for the first half of 2011 was up 7.7 percent year-on-year at HK$11.63 billion.

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