Cathay Pacific applies to sell US$2b in medium notes

[SINGAPORE] Cathay Pacific Airways Ltd, Asia's biggest international carrier, applied to raise US$2 billion in debt over the next 12 months.

The medium term note program, arranged by HSBC Holdings Plc, is expected to take effect Wednesday, Cathay Pacific said in a statement to the Hong Kong Stock Exchange late Tuesday. Such debt programs are offered to institutional investors and give issuers the flexibility to access foreign markets continuously as needed.

Chief executive officer Ivan Chu has ordered more than US$10 billion in new aircraft, including the Airbus Group SE A350 and Boeing Co 777X, to take on mounting competition from Chinese and Middle Eastern airlines.

Cathay Pacific has struggled to revive profitability, with the marquee Hong Kong carrier reporting this month that passenger yields - the money earned from carrying a passenger per kilometre and a key measure of an airline's profitability - slumped to the lowest in seven years.

Demand for more fuel-efficient models such as the A350 and 787 has increased from airlines seeking to trim their bills. Early customers for such models get hefty discounts from the manufacturers and can lock in years of reduced costs.

Cathay expects to take delivery of 12 A350s this year after its first in May. The carrier will add more flights to the UK using the A350 and continue to make long-term strategic investments including in lounges, Mr Chu said last week.

BLOOMBERG