HK Express Suffers $9.4 Million Loss Amid Pratt & Whitney Engine Troubles

HK Express, a subsidiary of the Cathay Group, reported a significant loss of HKD 73 million (USD 9.4 million) in the first half of 2024. The loss primarily stemmed from ongoing issues with Pratt & Whitney engines and declining yields, as stated by Rebecca Sharpe, CFO of Cathay Group, during the half-yearly group results presentation on August 7.

The airline, which operates out of Hong Kong International Airport, faced operational challenges that resulted in grounded aircraft and reduced capacity. HK Express, which uses the A320N aircraft equipped with Pratt & Whitney geared turbofan engines, has experienced several technical difficulties leading to six of its A320-200Ns being currently out of service. This has significantly impacted the airline’s ability to offer full capacity, contributing to its financial losses.

Despite achieving an average passenger load of 85% and generating revenues close to HKD 3.18 billion (USD 407.2 million), HK Express struggled to remain profitable. The airline was operating flights to 25 airports with flight frequencies at 147% of the levels seen in 2019, yet these efforts were insufficient to offset the financial strain caused by the engine issues.

Sharpe highlighted another factor affecting the airline’s profitability: the normalization of yields. With the resurgence of regional capacity, competition has intensified, driving yields down and further challenging the profitability of HK Express. Despite these setbacks, the CFO expressed confidence in the airline’s long-term prospects and emphasized its role in Cathay Group’s future growth plans.

Cathay Group CEO Ronald Lam also commented on the situation, noting that the issues with Pratt & Whitney engines are expected to persist for a few more years. He revealed that the company had reached a financial settlement with the engine manufacturer, although specific details of the agreement were not disclosed.

In contrast to HK Express’s challenges, Cathay Group reported a robust half-yearly profit of HKD 3.6 billion (USD 462 million) and announced its first interim dividend since 2019, amounting to approximately HKD 1.3 billion (USD 170 million). On the same day as the earnings announcement, Cathay Pacific confirmed a firm order for thirty A330-900Ns with options for an additional 30 units, with deliveries slated to begin in 2028.

Despite the temporary setbacks faced by HK Express, the broader Cathay Group remains on a positive trajectory, bolstered by strategic expansions and financial agreements aimed at overcoming current challenges.

Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com