Cathay Pacific’s Covid rebound gathers pace with profit forecast

CATHAY Pacific Airways 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 on Friday (Jun 23). 

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 (S$326.4 million) following a trimming of its Air China stake to 16.26 per cent from 18.13 per cent. 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. 

Rivals such as Emirates, Singapore Airlines and Qantas Airways 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.

“Enhanced incentives for cockpit and cabin-crew compensation are probably an indication that the airline’s financial fortunes are picking up and could boost staff morale at the margins,” Bloomberg Intelligence analysts Tim Bacchus and Eric Zhu wrote in a June 16 note. “Cathay crew salaries were cut some 40 per cent in the pandemic, and as profits return we expect labor will begin to claw some of that back.”

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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’s shares are down about 4 per cent this year.

The airline said Friday that it carried 1.42 million passengers in May, with a load factor of 85.1 per cent. 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. BLOOMBERG