Cathay Pacific lowers full-year profit expectations as Hong Kong protests bite

HongKong'sCathayPacificAirways Ltdon Friday lowered itsexpectationsforfull-yearprofitdue to "incredibly challenging" conditions in its home market racked by anti-governmentproteststhat it expected to persist for the rest of 2019.

The airline reported a 7.1 per centdrop in passenger numbers for the month of September as travellers avoidedHongKongdue to widespread and sometimes violentprotests, and said its second-half financial results were likely to be below the first half.

Cathay, which is trying to complete a three-yearfinancial turnaround plan, has become the biggest corporate casualty of theHongKongprotestsafter China demanded it suspend staff involved in, or supporting, the demonstrations that have plunged the former British colony into a political crisis.

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The airline in August reported a HK$1.347 billion first-halfprofit. At that time,Cathaysaid second-halfprofitwas likely to be higher than the first-half, as is typically the case for the airline, based on seasonality.

The consensus estimate before Friday's update was for the airline to report afull-yearprofitof HK$3.2 billion, according to 11 analysts polled by Refinitiv, although some last month predicted a poor second half.

Cathayshares were trading 1.4 per centlower at 0510 GMT.

"We continue to see a significant shortfall in inbound bookings for the remainder of 2019 as compared to the same snapshot lastyear,"CathayChief Customer and Commercial Officer Ronald Lam said in a statement on Friday.

Cathaylast month said it would cut capacity for the upcoming winter season.

BOCOM International analyst Luya You on Friday said further cuts might be needed in 2020 and even 2021 given there was no way of determining a timeline for when the political turmoil inHongKongwould be resolved.

Inbound traffic toHongKongwas down 38 per centin September, unchanged from August, with demand from the mainland Chinese market hit especially hard, the airline said.

The 7.1 per centfall in passenger numbers in September was better than the 11.3 per centdrop in August, butCathaysaid an increasing reliance on transit passengers had affected its yields - a measure of the average fare paid per kilometre per passenger.

BOCOM's You said even if passenger numbers outside China appeared to stabilise in the coming months, that was likely to come at the cost of significantly lower fares.

Cathayalso said cargo volumes fell 4.4 per centin September, but that there were signs of improvement as it headed into air freight's traditional high-demand season.