Cathay Pacific Profit Plummets 83% on High Fuel Prices and Weak Cargo Demand

Asia's biggest international carrier Cathay Pacific Airways has reported a slump in yearly profit as the company's operations suffered from high fuel prices and weak air cargo demand.

Attributable profit for full year 2012 declined 83.3 percent to HK$916m ($118m, £79m) or 23.3 cents per share from HK$5.5bn or 139.8 cents per share in 2011.

Nevertheless, the yearly profit beat analysts' average estimate for a profit of HK$538.7m, according to Bloomberg.

Yearly turnover increased by 1 percent to HK$99.4bn with passenger revenues increasing 3.5 percent to HK$70.1bn. Meanwhile, cargo revenues declined 5.5 percent to HK$24.6bn.

The company attributed the decline in profit to "the high price of jet fuel, pressure on passenger yields and weak air cargo demand."

Further, the financial crisis in the eurozone and increasing competition in the aviation sector affected the company. The company's share of profits from associated companies including Air China declined significantly in 2012.

Hong Kong-based Cathay Pacific noted that the fuel prices were at sustained high levels throughout much of 2012 and accounted for 41.1 percent of total operating costs for the year. The Group's fuel costs, excluding the effect of fuel hedging, increased by 0.8 percent from 2011.

"It was a challenging year for the aviation industry generally," Chairman Christopher Pratt said in a statement.

"The high cost of fuel made it more difficult to operate profitably, particularly on long-haul routes operated by older, less fuel-efficient, Boeing 747-400 and Airbus A340-300 aircraft".

Looking ahead, Pratt expects fuel costs to remain the biggest challenge for the company, despite its plans to withdraw aircrafts that are not fuel efficient.

"We believe 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," Pratt said.

The company, which also owns regional Hong Kong-based carrier Dragonair, recommended a final dividend of 8 cents, compared to 52 cents it paid last year.