Cathay Pacific 1998 Annual Report Download - page 8

6CATHAY PACIFIC AIRWAYS LIMITED ANNUAL REPORT 1998
Chairman’s Letter
The Cathay Pacific Group’s attributable loss for 1998 was
HK$542 million, as compared with a profit of HK$1,694
million in 1997. Turnover was HK$26,695 million, down by
12.9 percent compared to the previous year.
The results for 1998 reflect the extreme difficulties facing Cathay
Pacific due to the Asian economic downturn. The regional crisis, which
first became apparent in the middle of 1997, worsened significantly
during 1998 and its effect began to be felt in other economies.
Faltering economic growth and rising unemployment dampened
demand for both tourism and business travel across the region and
had an adverse impact on our revenues. At the same time, the
comparatively higher costs of operating in Hong Kong due to the
devaluation of regional currencies reduced our competitiveness.
From the middle of the year, there was some recovery in passenger
loads, but at the expense of yields. Management has taken a number
of steps to increase efficiency and productivity across all our activities.
These actions, combined with external factors such as favourable fuel prices, helped to reduce unit
operating costs to their lowest level in more than a decade. This will benefit Cathay Pacific when the
economy turns around.
Apart from focussing on costs, we have also taken the initiative in launching a series of
promotions to boost demand in various markets to and from Hong Kong. The largest was our highly
successful “Hong Kong Super Offer”, which ran through January and February 1998, and involved
two-for-one airfares to Hong Kong and in October and November we ran our “Fly to Win” promotion
with further attractive incentives.
While taking steps to ensure our short-term competitiveness, our fundamental confidence in Hong
Kong’s long-term prosperity remains firm. We have no doubt that Hong Kong will recover
economically and that it has the potential to become Asia’s premier aviation hub. Cathay Pacific, as
Hong Kong’s largest and longest established carrier, is proud to be an important part of Hong Kong
and, despite the current economic difficulties, we have continued our extensive investment
programme to prepare us for the anticipated market recovery. The past year saw several elements of
that programme come to fruition.
The completion of our new headquarters and associated facilities at the new Hong Kong
International Airport at Chek Lap Kok, represents an overall investment of more than HK$7,300
million. Our new headquarters, Cathay Pacific City, is now home to over 3,000 staff and the Cathay
Pacific Catering Services new flight kitchen is one of the largest flight kitchens in the world.
Our other major investment at the airport, the hangar complex of Hong Kong Aircraft Engineering
Company Limited, is able to accommodate three wide-body aircraft side-by-side. We have also made
substantial investments to upgrade our passenger services at the new airport, including new check-in
facilities and our new airport lounges known as The Wing.
The opening of the new airport was marred by a series of teething problems, a number of which
cost us dearly. The difficulties involving the airport’s new cargo terminal resulted in substantial lost
revenue for Cathay Pacific, compounding what was already a difficult year. However, with the
opening difficulties now behind us, the airport has already established a reputation as being one of