Cathay Pacific on track to end three-year streak of annual losses

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Cathay Pacific is on track to end a three-year streak of annual losses, as the Hong Kong carrier emerges from years of pandemic restrictions that fuelled the exodus of hundreds of pilots and crew.

The Hong Kong flagship carrier posted a HK$4.3bn ($550mn) profit in the first half of the year on Wednesday, up from a HK$5bn loss in the same period last year. The rise came despite a decrease in cargo revenue that had supported the airline’s business during the coronavirus pandemic.

“We expect to continue to see a solid performance through the rest of the year,” said Cathay chair Patrick Healy at a press conference. “We think that the current performance shows that we are well on the way on our rebuilding journey.”

The results show how Cathay’s recovery is starting to pick up momentum as the carrier looks to reach the levels of regional peers including Singapore Airlines, despite Cathay still operating at about half of its pre-pandemic passenger capacity.

The airline’s shares are up 7.7 per cent over the past month while shares of Singapore Airlines, which reported its biggest quarterly net profit ever in the three months to June, have dipped by 1.4 per cent. Analysts have upgraded Cathay’s buy recommendations.

Cathay had been continuing “to build capacity as fast as we can”, Healy added. The airline said pilot turnover had returned to normal and new pilots and cabin crew recruitment would be able to support its recovery.

The airline expects to reach 70 per cent capacity by the end of this year and recover to pre-pandemic levels by the end of 2024. Singapore Airlines, which is operating at about 80 per cent of pre-pandemic levels, expects to reach 90 per cent capacity by March next year.

“Cathay is doing well,” said Brendan Sobie, an independent aviation analyst based in Singapore. The carrier had been “about one year behind” Singapore Airlines due to Hong Kong’s later reopening of its borders but “both returned to profitability at about the same point in that curve,” he added.

Analysts from JPMorgan and HSBC expect Cathay to benefit from more long-haul Chinese transit travellers.

“Cathay Pacific has largely preserved its market share,” said JPMorgan’s Karen Li in a note last month. The airline was positioned “well to capitalise on the inevitable traffic recovery” and domestic travel demand, she said.

High airfares were expected to “normalise” as capacity increases, said Cathay’s chief customer and commercial officer Lavinia Lau, but supply chain challenges in the aviation industry and inflationary factors would continue to add to cost pressures.