Cathay Pacific Airways Ltd. expects to report a profit for the first six months of 2023, finally emerging from the most damaging period in its 76-year history and raising the likelihood of a first annual profit since 2019.
(Bloomberg) — Cathay Pacific Airways Ltd. expects to report a profit for the first six months of 2023, finally emerging from the most damaging period in its 76-year history and raising the likelihood of a first annual profit since 2019.
“The Cathay Group has seen a strong rebound in the performance of our airlines,” Chief Customer and Commercial Officer Lavinia Lau said in a statement Friday.
Cathay posted a run of record losses as Covid caused even more damage to an airline already bruised by anti-government protests and unrest in Hong Kong.
Now it is benefiting from elevated ticket prices and strong demand for travel in the wake of the pandemic, and rushing to rebuild staffing ranks and services to cater to the influx of customers. Even so, Cathay has said it doesn’t expect passenger capacity to return to pre-Covid levels until the end of next year.
Hong Kong’s main airline said cash-flow has improved. Its figures will be boosted by a one-off gain of about HK$1.9 billion ($243 million) following a trimming of its Air China Ltd. stake to 16.26% from 18.13%. Still, Cathay’s figures take into account the performance of Air China three months in arrears, which includes one of the Beijing-based carrier’s worst quarterly losses.
Cathay posted a loss of more than HK$5 billion in the first half last year, and even bigger losses in the first six months of 2020 and 2021.
Read More: Chinese Airlines’ Targets, Earnings Views Cut by HSBC Amid Rout
Rivals such as Emirates, Singapore Airlines Ltd. and Qantas Airways Ltd. are reporting or expecting record profits as demand for flights remains strong despite high airfares.
Staff shortages remain a critical issue for Cathay and Hong Kong International Airport, which plans to bring in thousands of foreign workers to fill low-paid manual positions. Cathay is also adjusting pay for pilots and cabin crew. The increases are minor compared with Singapore Airlines, which handed out bonuses worth about eight months’ salary following its record annual results.
What Bloomberg Intelligence Says:
Cathay Pacific’s expectation of a 1H consolidated profit, after accounting for offsetting Air China-related amounts, isn’t a surprise but could mean consensus’ HK$3.5 billion net-profit estimate for 2023 is too light in the current high-fare environment.
Profit this year is likely to be constrained only by Cathay’s capacity ramp-up, which lags peers that are reporting record earnings.
– Tim Bacchus and Eric Zhu, BI aviation analyst
In another sign of Cathay’s improving fortunes, the airline said on June 6 it would pay an outstanding dividend of HK$1.52 billion to the Hong Kong government at the end of the month. It also said it wouldn’t need to use a HK$7.8 billion bridge loan.
Cathay fell 0.5% Friday morning. Its shares are down about 4% this year.
The airline also said Friday it carried 1.42 million passengers in May, with a load factor of 85.1%. It flew less that 58,000 passengers in the same month last year. Japan and Thailand are particularly popular destinations, Lau said.
“The peak summer season looks promising as we expect to get a boost from students returning to Hong Kong after the school term ends,” she said.
Cathay is resuming its Christchurch service from Dec. 16 to Feb. 29 with three return flights per week, having already announced it will start flying again to Johannesburg and Chicago from August and October, respectively.
(Updates with share reaction and Bloomberg Intelligence note.)
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