During an analysts’ briefing, Cathay Pacific has said that it expects to post higher profits in the second half of 2023, resulting in its first annual profit since pre-pandemic. This elevated profitability will be driven by increased passenger traffic for Cathay and its subsidiaries, a solid air cargo peak season and positive profit contribution from associates including Air China (in which Cathay Pacific holds a 12.6% interest).
Noting that cargo demand had been stronger than expected in the traditional peak season of the fourth quarter (Q4) 2023, especially for e-commerce shipments out of China, Cathay expects cargo load factors to continue to rise during November and December. In Q4 2023, average air freight rates from Hong Kong to the US and Europe have recovered around 17-18% quarter-on-quarter.
Strong travel demand post-pandemic is also helping Cathay’s passenger numbers return to pre-pandemic levels, with overall October figures at 65% of 2019’s level, on track to meet the airline’s target of 70% by year end. The North American sector also saw the highest recovery at nearly 72% of pre-2019 levels.
The Q4 figures continue a trajectory of recovery for the company. In the first half of 2023 (ending 30 June), total revenue for the group already saw a 135% increase from 2022 at HK $43,593 million (US $5,588 million), with an increase in cargo carried of 23.8%: rising from 526,000 to 651,000 tonnes.
Cathay Pacific also intends to buy back 50% preference shares of HKD9.75 billion (USD $1.25 billion) in December 2023, and the remainder by July 202; forecasting a recurring profit (before pref. dividends) of HKD7bn (vs HKD2bn in 1H23). ‘We are 6% above consensus on 2023 recurring profits and 39-63% above in 2024-5,’ estimates the company; concluding that ‘the clearer timeline for redemption of preference shares and the resumption of growth capex should boost investors' confidence around its liquidity and earnings recovery’.