Cathay Pacific first-half net profit falls 59pc

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HONG KONG: Cathay Pacific on Wednesday said 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.

"After an exceptionally strong 2010, in which we made record profits, 2011 is proving to be more challenging," Chairman Christopher Pratt said in a statement to Hong Kong's stock exchange.

"High fuel prices are increasing costs and recovering them through higher tariff may affect demand."

He added that the "outlook for the world economy is uncertain and a return to recessionary economic conditions would also affect demand and possibly average price levels."

Fuel is usually an airline's single-biggest cost with Cathay saying costs soared almost 50 percent in the first half of the year compared with the same period on 2010.

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.

"The Boeing aircraft will replenish and expand the fleet capacity of the company," it said in a separate statement Wednesday.

"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.

That announcement came as Cathay posted a record net profit of HK$14.05 billion for 2010, nearly triple the HK$4.69 billion in 2009.

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.

However 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.

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.