Cathay Pacific 2006 Annual Report Download - page 23

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Cathay Pacific
• Staff costs increased due to an increase in the
average number of staff with 209 staff being
transferred from Dragonair following the integration.
• Inflight service and passenger expenses rose due
to an 8.4% increase in passenger numbers.
• Landing, parking and route expenses increased as
a result of additional flights.
• Fuel costs increased due to an 18.5% increase
in the average into-plane fuel price to US$86 per
barrel and a 5.8% increase in consumption to
29 million barrels. Fuel surcharges increased from
HK$3,948 million to HK$6,470 million.
• Fuel hedging gains increased by HK$181 million to
HK$426 million and include unrealised mark to market
gains of HK$158 million (2005: HK$19 million).
• Aircraft maintenance increased as a result of the
fleet expansion.
• Aircraft depreciation and operating leases increased
due to the new aircraft deliveries and were partly
offset by the return of two wet leased freighters.
• Net finance charges decreased due to higher
income from investment funds.
• Cathay Pacific’s cost per ATK increased from
HK$2.19 to HK$2.21 due to higher fuel prices.
Dragonair
• Dragonair became a wholly owned subsidiary of
Cathay Pacific following the completion of the
shareholding realignment involving Air China, Cathay
Pacific, CNAC, CITIC Pacific and Swire Pacific.
• Synergies and opportunities that arise from
linking Cathay Pacific’s international network with
Dragonair’s extensive Mainland China services will
bring benefits to both carriers. As a result, goodwill
of HK$7,214 million has been recognised.
• Passenger revenue was high as a result of strong
demand. During the year 5.6 million passengers
were carried. Passenger load factor was 67.8%
with yield at HK¢83.3.
• Cargo turnover decreased with yield declining to
HK$1.94 as a result of strong competition and
softening markets. The airline carried 395,385
tonnes of freight during the year. Cargo load factor
was 72.7%.
• The high price of fuel continued to affect the
airline’s profitability. Fuel costs now account for
19% of the airline’s total net operating expenses.
• The Group result includes 100% of Dragonair’s
profit from 1st October 2006. This amounts to
HK$28 million.
0
10
30
50
70
20
40
60
80
90
0
2
6
10
14
4
8
12
16
18
1%
8%
37%
8%
2007
Swaps
2007
Collars
2007 3-way
Options
2008 3-way
Options
Fuel hedging
Barrels
in million
US$ per barrel
(IPE Brent)
Volume hedged/Figures represent
% of volume hedged
Call written
Call bought
Put written
Swap bought
13% Depreciation and
operating leases
12% Aircraft maintenance
1% Net finance charges
1% Commissions
2% Others
30% Fuel
15% Landing, parking and
route expenses
5% Inflight service and
passenger expenses
21% Staff
Total net operating expenses
21
Cathay Pacific Airways Limited Annual Report 2006
Financial Review