Paul Lewis/SINGAPORE
Leading finance houses are cutting their year-end profit forecasts for Cathay Pacific Airways by as much as 30% after a fourth month of sharply curtailed passenger traffic for the Hong Kong carrier which has coincided with its hand-over to China at the end of June.
Cathay Pacific's management has called a series of meetings in recent weeks to brief Hong Kong-based aviation analysts on the situation. To reinforce the message, sales general manager Willy Boulter writes in the airline's in-house newspaper: "Everyone in the company should be aware by now that 1997 is the worst year in decades for passenger business."
As a result, forecasts for 1997 profits are again being revised downwards, many for the second time in as many months, by between 14% and 30%. Merrill Lynch's estimate for 1997 has been reduced to as little as HK$2 billion ($258.3 million), down from HK$2.9 billion, while HG Warburg has cut its forecast by a further 20%, to HK$2.1 billion.
Salomon Brothers, similarly, has amended its earlier figure of just under HK$3 billion to HK$2.65 billion. Deutsche Morgan Grenfell and Credit Suisse First Boston's more-bullish forecasts of $3.59 billion and $3.7 billion respectively have both now come down to HK$3.1 billion.
Official Cathay passenger traffic figures were down by 12% in June and 13% in July. Load factors for July slumped to 67%, having hit 84% in the same month in 1996; figures for June were similar. The airline warns that its yet-to-be-released figures for August and September - the busiest time of the year - will not be much better.
The dramatic drop-off in traffic has been attributed to the continued poor state of the Japanese economy, the more recent financial crisis in South-East Asia, and what Cathay Pacific chairman Peter Sutch describes as "hand-over hangover" or general tourist disinterest in Hong Kong following its return to China.
One effect of the downturn in business will almost certainly be to push back Cathay's anticipated large order for new Boeing 747-400s and Airbus A330/340s. This is now expected in early 1998.
Source: Flight International
