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Cathay must cut costs, experts say

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Airline group suffers 80% drop in profits
Cathay Pacific does not consider itself to be in crisis, despite its first-half group profits dropping by over 80%. But it will have to slash costs, airline industry analysts CAPA report.
Cathay Pacific Airways reported first-half profit that failed to reach expectations, as losses from jet-fuel hedges mount and competition with Chinese airlines cut yields.
Net income fell 82% to HK$353 million (€40.25 million) for the first six months of 2016, well short of the HK$1.07 billion median estimate in a Bloomberg survey of four analysts. Sales were down 9.3%.
Investors are squirming at the news, but unlike airlines in Europe or the US, Cathay does not answer to the market and has no need to produce quarterly improvements.
There may be questions about the future of the group’s chief executive, Ivan Chu, but the vision of the majority owners, Swire and Air China, is long term.
The question is, CAPA believes, whether it can achieve its long-term goal of being a travel and lifestyle brand, not just a premium airline. Until then, cost-cutting is needed.
CAPA / Bloomberg

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