Cathay Pacific has warned of “tremendous pressure” on yields amid strong competition and slowing demand for air travel.
While the airline group reported higher passenger numbers for May, it said there were worrying signs for the period ahead which had impacted yields, an industry term measuring average airfares per passenger per kilometre.
“Whilst we have seen solid improvement in the first half driven by a good first quarter, our passenger revenue outlook for the coming few months has shown signs of slowdown,” Cathay Pacific commercial and cargo director Ronald Lam said in the company’s monthly operating statistics for May published on June 20.
“With declining travel demand in the market, especially to and from our long-haul destinations, overall yield has come under tremendous pressure.”
Cathay Pacific said passenger numbers across its two flying operations – Cathay Pacific and regional wing Cathay Dragon – rose 4.7 per cent to 2.96 million in May, compared with the prior corresponding period.
Load factors, a measure of how full flights were, rose 0.9 percentage points to 82.9 per cent.
Capacity, measured by available seat kilometres (ASK), was up 6.6 per cent in May.
“Overall passenger demand was strong in May. Growth in travel volume outpaced increases to capacity, though yield remained under pressure due to intense competition,” Lam said.
“Japan in particular generated strong revenue growth, capitalising on the long Golden Week holiday during the first half of May.”
In June, the International Air Transport Association (IATA) downgraded its forecasts for airline profitability for calendar 2019, citing trade tensions, rising fuel prices and a slumping cargo markets.
IATA said it expected airlines to earn US$28 billion in net profit in calendar 2019. This was below a reported US$30 billion in calendar 2018 and down from IATA’s previous forecast of US$35.5 billion outlined in December 2018.
Cathay Pacific said its cargo tonnage fell 3.9 per cent to 168,270 tonnes in May, with load factors down 4.7 percentage points to 63.9 per cent.
Further, cargo tonnage has fallen five per cent in the first five months of calendar 2019, compared with the prior corresponding period.
“Our cargo business continued to be adversely affected by geopolitical tensions and resulting dampened market sentiment,” Lam said.
“Despite positive capacity growth in May, cargo revenue saw negative growth over last year. Both volume and yield incurred decline year-on-year. We shall remain vigilant in order to best match our capacities to changes in market demand and trade flow.”