justinlee
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CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 7:04 am

CX announced on March 13th, 2013 that their attributable profit was HK$916 million in 2012, which was an 83.3% fall compared to HK$5,501 million in 2011. The total turnover of CX was HK$99,376 million with an 1% increase in the last year.

Details:
http://www.cathaypacific.com/cpa/en_...8e4026d310VgnVCM62000007d21c39____
 
wedgetail737
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 7:17 am

Wow! I hope this isn't an indication that the airline industry profitability has peaked again and that we are starting our way down again.
 
infinit
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 7:38 am

This is shocking. I thought CX was doing fine and dandy when their CEO said they saw no shortage of growth in traffic being a part of China (in response to why they chose not to set up a LCC).. unlike SQ whose home-base is far smaller and probably would have to capitalise on the growth of their ASEAN neighbours like Indonesia particularly.
 
justinlee
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 9:08 am

Quoting infinit (Reply 2):
I thought CX was doing fine and dandy when their CEO said they saw no shortage of growth in traffic being a part of China

Actually...CX/KA hasn't increased a lot of capacity to Mainland China since 2008. It's losing the mainland market. For transfer passengers, they switch to KE/OZ(especially in North China) and CZ(for Southeast Asia and Oceania). For O&D, CX/KA now has a booming competitor, HX.
 
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zeke
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 10:15 am

Quoting wedgetail737 (Reply 1):

Wow! I hope this isn't an indication that the airline industry profitability has peaked again and that we are starting our way down again.

A cynical person said to me once, when Cathay has published low profit numbers in the fine print there is some large purchases.

That being said, I do know last year was not a stellar year globally for any passenger or air freight business.

Quoting infinit (Reply 2):
This is shocking.

I look forward to your reaction when SQ publish their numbers.

Quoting justinlee (Reply 3):
Actually...CX/KA hasn't increased a lot of capacity to Mainland China since 2008.

True, KA has not seen much growth at all in the past 6 years, that has been changing in the last year.

Quoting justinlee (Reply 3):
For O&D, CX/KA now has a booming competitor, HX.

Define booming ? I see their aircraft parked with covers on regularly.......
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
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DarkSnowyNight
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 10:23 am

Quoting infinit (Reply 2):
This is shocking. I thought CX was doing fine and dandy when their CEO said they saw no shortage of growth in traffic being a part of China (in response to why they chose not to set up a LCC)..

Well, I see no reason why both of these things can't be true. CX has made a few large capital expenditures recently, and as well growth doesn't always translate to immediate profit. On balance, they still look very strong and they seem to be managing their markets well. It will be interesting to see what the coming year brings.
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CX Flyboy
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 10:57 am

Quoting zeke (Reply 4):
Quoting wedgetail737 (Reply 1):

Wow! I hope this isn't an indication that the airline industry profitability has peaked again and that we are starting our way down again.

A cynical person said to me once, when Cathay has published low profit numbers in the fine print there is some large purchases.

I was expecting the 'other' announcement today too.
 
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zeke
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 11:04 am

Quoting CX Flyboy (Reply 6):
I was expecting the 'other' announcement today too.

Looks like they put US$1 billion away for a rainy day, and paid the shareholders some money. Probably another 6k or 1/2 month year for us.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
CX Flyboy
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 2:01 pm

Quoting zeke (Reply 7):
Looks like they put US$1 billion away for a rainy day, and paid the shareholders some money. Probably another 6k or 1/2 month year for us.

No theres a paragraph in the CEO's newsletter which specifically says that because of the "operating" loss for 2012 there will be nothing for us.

...but I was referring to another announcement about new planes.
 
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LAXintl
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 3:47 pm

Looking at their detailed results, its seems to be a picture of weak cargo, high fuel cost, and mediocre yields even in booming markets that are behind the profit dive.


Some Market commentary from their presentation;

HKG
o Leisure travel reasonably strong, but yields under pressure, more fare sales
o Corporate travel market weak, particularly financial sector firms
o Increasing competition as mainland China carriers start to fly direct to more overseas destinations

Southeast Asia
o Robust passenger demand
o Premium classes weakened in the second half of the year
o Indonesia, Thailand, Philippines performed well.

North Asia
o Mainland China economy slowed in 2012
o China trunk routes weaker then 2011, but secondary cites remained strong
o Japan routes generally robust but Tokyo not up to pre-earthquake levels
o Taiwan affected by growing cross straight capacity from mainland and increased competition.

Oceania
o Australia demand benefit from increased connections from North Asia markets
o Strong competition from Mainland China carriers
o New Zealand weaker. Entered into codeshare with NZ to share capacity.

India/Middle East
o Demand for travel to and from India was strong, though yields were under pressure due weakness of the Indian rupee
o Middle Eastern routes were affected by strong competition, put pressure on yields

Europe
o Significantly affected by the economic instability in the continent.
o Continental Europe were generally weak, London more stable with robust premium demand still
o Strong competition from Middle East carriers affected business on routes between Australia and Europe.
o Premium economy class has been very popular on the LHR route, with strong bookings. Also been well received on the FRA route.
o Replacing more 744 services with 77W improving operating economics of route

Americas
o Economy class demand was strong on all United States routes
o Canada routes were affected by strong competition and fare sales
o Premium class revenues on the New York route were adversely affected by the weakness of the financial sector
o Chicago route continued to improve
o Reduce some frequencies due adverse effect of high fuel prices

Cargo
o Economic difficulties continued to affect consumer and business confidence
o Demand remained weak in main markets for HKG and China for most of 2012
o There was no sustained cargo peak in 2012
o Managed capacity in line with demand, reducing scheduled freighter services
o Aggressive competition from Japanese, Korean and Taiwanese carriers
o Difficult to maintain yields in an oversupplied market
o High fuel prices significant impact on the profitability of cargo operations, particularly on long-haul routes
o Adjust current and future freighter fleet in response to demand
o Maintain long-term confidence in Hong Kong as as global center for airfreight

General comments
o Fuel is most significant cost. Fuel accounted for 41.1% of total operating costs, up 0.8%.
o Accelerate the retirement of less efficient Boeing 747-400 passenger aircraft - 6 to be retired in 2013.
o Withdrew from service four Boeing 747-400BCF converted freighters
o Manage capacity closer to demand on long-haul routes
o Focus on strategic goals - developing network and Hong Kong base; enhancing the quality of services; strengthening relationship with Air China; maintaining a prudent approach to financial risk management.

=
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BigGSFO
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 3:57 pm

Interesting how they still don't discuss an enhanced relationship with their oneworld parters as a go forward strategy.
 
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huaiwei
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 4:31 pm

Quoting infinit (Reply 2):
This is shocking. I thought CX was doing fine and dandy when their CEO said they saw no shortage of growth in traffic being a part of China (in response to why they chose not to set up a LCC).. unlike SQ whose home-base is far smaller and probably would have to capitalise on the growth of their ASEAN neighbours like Indonesia particularly.

Firstly, I would not consider a CEO's comment about mid-term to long-term growth prospects reliable in predicting profit margins for a fiscal year. Secondly, being based in a country with a larger captive market does not guarantee better profits. If so, American and European-based carriers will never run a loss.

Hence, nothing is much of a surprise here.

Quoting zeke (Reply 4):
I look forward to your reaction when SQ publish their numbers.

All indications, whether reliable or not, indicate that SQ will not be able to show stellar numbers when it publishes its full-year figures in May. The airline has been highlighting the bleak outlook for ages. If there are to be surprises, it can only be if SQ does better than expected.
It's huaiwei...not huawei. I have nothing to do with the PRC! :)
 
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mercure1
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 5:33 pm

I find interesting how many times they mentioned Chinese carriers as becoming growing competition and negatively effect CX performance.

Things are clearly changing, with Hong Kong no longer the defacto gateway to China as Chinese airlines fly directly to growing number of global markets, and also direct cross straights traffic increasing which robs CX of historic passengers.

So what should CX do to prepare ? Clearly they have a very important and large home market still in Hong Kong, but it seems to be an extremely competitive one. Also landscape in Asia changing with growing LCC and more direct service bypassing traditional hubs, so this is also more pressure on market and revenues for legacy airlines.
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KaiTak747
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 8:10 pm

A very respectable profit for any airline, given the weak demand/macroeconomic environment.

Quoting zeke (Reply 7):
Looks like they put US$1 billion away for a rainy day, and paid the shareholders some money. Probably another 6k or 1/2 month year for us.

Even more impressive.
 
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LAXintl
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 9:34 pm

Quoting BigGSFO (Reply 10):
Interesting how they still don't discuss an enhanced relationship with their oneworld parters as a go forward strategy.

Yeah seems OW is a bit of an afterthought for CX - bit like how SQ treats Star.

Instead they specifically mentioned "strengthening relationship with Air China".
Besides the cargo venture anyone have a clue what this would involve ?
From the desert to the sea, to all of Southern California
 
Lufthansa
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RE: CX's Profit Dropped 83.3% In 2012

Wed Mar 13, 2013 10:16 pm

I bet they regret not talking to Qantas now! If they worked together it would have made a huge difference to Cathay! Greed people.
 
lutfi
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 1:05 am

Uhm no, don't think talking to QF would make any difference. Remember CX owns about 20% of Air China, which is a bit more than talking, plus a 50/50 share in Air China Cargo.

But not good results at all. Big increase in debt, as lots of new planes arriving as well. Question for CX management is is this cyclical or structural? I.e. is lower demand & higher fuel costs here to stay, or just the point of the cycle? I think the former, in which case they need to review costs
 
Lufthansa
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 3:22 am

Quoting Lutfi (Reply 16):
hm no, don't think talking to QF would make any difference. Remember CX owns about 20% of Air China, which is a bit more than talking, plus a 50/50 share in Air China Cargo.

But not good results at all. Big increase in debt, as lots of new planes arriving as well. Question for CX management is is this cyclical or structural? I.e. is lower demand & higher fuel costs here to stay, or just the point of the cycle? I think the former, in which case they need to review costs

I think it would have. All the traffic QF is about to direct to Emirates could have gone largely on cathay. That would boost yeilds for sure. but good old CX has always been greedy in this regard because in the past it could happily poach QF's frequent flyer base giving little in return. Meaning...that part of the yields that are depressed partly due to the Middle east Carriers would be more than back at Cathay. Meaning Cathay's flights to secondary cities in europe would be better able to withstand the fact that carriers like CS air are flying directly to some of these places now.
 
rwy04lga
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 3:28 am

Quoting zeke (Reply 4):
That being said, I do know last year was not a stellar year globally for any passenger or air freight business.

Any passenger business (airline)? Delta had a $1.6 Billion profit last year. That's fairly stellar, IMHO!
Just accept that some days, you're the pigeon, and other days the statue
 
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sunrisevalley
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 3:28 am

This question is not specific to CX but are 744 operators finding that the projected residual values are not what they thought they were going to be and they are finding it necessary to take write downs on their 744 fleet ? If they are this will be hurting !
 
lutfi
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 3:49 am

Quoting Lufthansa (Reply 17):
I think it would have. All the traffic QF is about to direct to Emirates could have gone largely on cathay. That would boost yeilds for sure. but good old CX has always been greedy in this regard because in the past it could happily poach QF's frequent flyer base giving little in return. Meaning...that part of the yields that are depressed partly due to the Middle east Carriers would be more than back at Cathay. Meaning Cathay's flights to secondary cities in europe would be better able to withstand the fact that carriers like CS air are flying directly to some of these places now.

CX doesn't fly to secondary cities in Europe, so they had little to add to QF, unlike EK, Also, I don't think QF will direct traffic to EK. But people who before bought an EK ticket SYD-BCN will now buy a QF ticket (but still fly EK) and QF will earn commission. I think you overestimate the abilty of an airline to direct passengers how to fly. In my experience, passengers direct themselves to the flights with the best value for money & schedule.
 
dc1030cf
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 4:11 am

Quoting justinlee (Reply 3):

"CX/KA now has a booming competitor, HX"

The fact is, if not for the airline's owner which is HU, HX and sister carrier UO would've been folded by now. Both are using fake Hong Kong name to attract Mainland Chinese PAX and cheap local tour groups. Nothing but a cheap budget player.. Not in the same league as CX and will never be able to represent Hong Kong.
 
justinlee
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 4:18 am

Quoting dc1030cf (Reply 21):
The fact is, if not for the airline's owner which is HU, HX and sister carrier UO would've been folded by now. Both are using fake Hong Kong name to attract Mainland Chinese PAX and cheap local tour groups. Nothing but a cheap budget player.. Not in the same league as CX and will never be able to represent Hong Kong.

That's true. But the other truth is that most of the Mainland-HK passengers are low yield. So the strategy really works. The other factor is that HU doesn't care HX is profitable or not. Whenever HU can use HX to buy aircrafts without the regulation of CAAC, HX is precious.
 
manny
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 5:22 am

They should start charging fees and milk their clients of every lost penny and see the profit grow. Its called the "United Airlines Business Strategy".
 
lutfi
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 7:26 am

True. Things have changed from a few years back, it is now DL & UA that look to have the most successful business model (of legacy airlines). Provide basic transport cheap, make high margins on ancillary revenues
 
klinit
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 7:55 am

Quoting LAXintl (Reply 9):
India/Middle East
o Demand for travel to and from India was strong, though yields were under pressure due weakness of the Indian rupee
o Middle Eastern routes were affected by strong competition, put pressure on yields

Just curious - wouldn't a weak rupee increase demand/yields for traffic to India?
 
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zeke
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 9:17 am

Quoting rwy04lga (Reply 18):
Any passenger business (airline)? Delta had a $1.6 Billion profit last year. That's fairly stellar, IMHO!

I do not know DL numbers off hand, this is what I had read about 2 weeks ago..

"In a year-end report, the 10 US airlines that have reported full-year results for 2012 made a combined profit of $US152 ($149) million on revenue of $143.4 ($143) billion. That works out to a profit margin around 0.1 per cent. For each passenger they carried, US airlines made a scant 21 cents."

Read more: http://www.news.com.au/travel/news/a...frfq80-1226587502849#ixzz2NVGgO1Pv

Quoting sunrisevalley (Reply 19):

This question is not specific to CX but are 744 operators finding that the projected residual values are not what they thought they were going to be and they are finding it necessary to take write downs on their 744 fleet ? If they are this will be hurting !

I do not think the residuals are the problem, I think operating costs are higher and yields lower than projected.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
rwy04lga
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 10:33 am

Quoting zeke (Reply 26):
Quoting rwy04lga (Reply 18):
Any passenger business (airline)? Delta had a $1.6 Billion profit last year. That's fairly stellar, IMHO!

I do not know DL numbers off hand, this is what I had read about 2 weeks ago..

"In a year-end report, the 10 US airlines that have reported full-year results for 2012 made a combined profit of $US152 ($149) million on revenue of $143.4 ($143) billion. That works out to a profit margin around 0.1 per cent. For each passenger they carried, US airlines made a scant 21 cents."

Read more: http://www.news.com.au/travel/news/a...gO1Pv

I did read more...

"During the year, United reported a loss of $746 million, including items, as it suffered severe operational disruptions following a merger with Continental. Meanwhile American, which operated under Chapter 11 of the bankruptcy code throughout the year, reported a full-year net loss of $1.9 billion including reorganization costs and special items. The negative one-time numbers for two of the three biggest airlines negatively skewed industry results.

The second biggest airline, Delta, well past the costs of integration with Northwest, its 2009 merger partner, reported net income of $1 billion.''

Clearly, those two airlines dragged the numbers down a bit. But to say that no (airline) had a stellar year implies that you did not read the entire article that you referenced.

Delta's stand alone numbers paint a much rosier picture than you alluded to.
Just accept that some days, you're the pigeon, and other days the statue
 
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zeke
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RE: CX's Profit Dropped 83.3% In 2012

Thu Mar 14, 2013 11:15 am

Quoting rwy04lga (Reply 27):
Clearly, those two airlines dragged the numbers down a bit. But to say that no (airline) had a stellar year implies that you did not read the entire article that you referenced.

To be honest, when I read "reported net income of $1 billion" I was thinking it means "after tax income of $1 billion", not profit.

Maybe it is profit expressed in a way I am not familiar with.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News

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