Cathay Pacific Cut Fuel Surcharges

The fuel surcharges approved by the Civil Aviation Department of Hong Kong for CX were reduced for the two-month period beginning from 1 October. Surcharges for short-haul routes in Southeast and Northeast Asia dropped from HK$231 to HK$196, while the long-haul surcharge went from HK$924 to HK$832.

 

Crude oil prices have been falling recently but the price of jet fuel remains high compared to previous years and continues to pose a challenge to CX’s profitability. The average jet fuel price paid by the airline in the first eight months this year was US$142 per barrel - 67 percent higher than what was paid in same period.

 

CX fuel surcharges still lag a long way behind surcharges imposed by other international airlines on comparable routes outside Hong Kong.

 

The global financial meltdown is already having a clear impact in Hong Kong - Cathay Pacific’s most important business segment.

 

The airline is highly exposed to financial institutions in Hong Kong with 16 of its top 20 corporate clients in the financial sector. Corporate business accounts for one-third of the total Hong Kong revenue, which in turn makes up 25 per cent of the airline’s overall revenue.

 

General Manager Sales PRD & HK James Tong says corporate travel has been edging down since the second quarter but there were further significant drops – for both current and advance bookings - in the latter part of September.

 

“A lot of companies are now trading down - from First to Business Class, or from Business to Economy - and a number are cutting travel altogether,” says James.

 

“The worst hit is front-end travel for long-haul flights, with a significant drop compared to last year when there was a lot of IPO activity from Mainland China companies.”

 

According to James this is “just the beginning”, and he fears a further falloff in the next couple of months as the credit crunch bites deeper.

 

“There aren’t too many bright spots at the moment but we’re doing what we can,” says James.