Cathay sheds 5 jets from fleet, sees tough outlook
Reuters - Saturday, November 1* To leave fleet over 2 yrs
* Revenue from passenger services, cargo below targets
* Industry outlook remains very challenging
By Joanne Chiu
HONG KONG, Oct 31 - Cathay Pacific <0293.HK>, scrambling to cut costs in a worsening travel and aviation environment, said it planned to shed five jets from its fleet and warned of slowing bookings.
Asia's fifth-largest airline said the planes would be replaced eventually and it would continue to grow its fleet, although at a slower pace, according to a report posted on Cathay's internal websit on Friday.
Chief Executive Tony Tyler said in the report that cash from a disposal of five Boeing
777-200 aircraft would be useful, but added the airline was not certain a deal could go through in the current climate.
A Cathay spokeswoman confirmed the internal report had been posted on the website.
"The outlook remains very challenging with continued stress on the premium segment and weakening demand in the economy cabin. This means consistently weaker forward bookings for the rest of the year compared to 2007," Tyler said in the report.
Cathay also said that in the week ended Oct. 25, net revenue from passenger services, cargo and mail and excess baggage was 4.4 percent below target. The target was not specified.
Cathay, which owns regional carrier Dragonair and has an 18.1 percent stake in mainland carrier Air China <0753.HK><601111.SS>, posted a January-June net loss of HK$663 million , its first interim loss in five years, on soaring fuel costs.
Despite global oil prices falling more than half to $64 per barrel this week from a record $147 in July, Cathay may not benefit as much as expected.
"First, we will inevitably see a reduction in fuel surcharges soon. Second, the hedging protection we benefit from when prices rise has to be paid for by benefiting less when prices fall," the report said.
Aviation analysts warned this week that Asian airlines will fail as tourism in the region slows and a worsening global economic outlook leads carriers such as Singapore Airlines to cut back flights. [ID:nSIN353347]
The financial crisis is moving into the real economy as layoffs hurt consumer sentiment, leading airlines from China to India to post losses or lay off staff and hoteliers to focus on budget travellers as the luxury market takes a hit.
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