Cathay Pacific reports eight-fold surge in net profit
HONG KONG - Cathay Pacific Airways Ltd.
HONG KONG – Cathay Pacific Airways Ltd. on Wednesday reported a higher-than-expected eight-fold surge in first-half net profit, boosted by the proceeds of two asset sales and a significant recovery in passenger and cargo demand.
The Hong Kong-based airline said its capacity and services are now close to where they were before the global financial crisis started, and it has placed orders for 30 Airbus A350-900 long-haul jets to meet future expansion and aircraft-replacement needs.
“If present trends continue, we expect our financial results to continue to be strong in the second half of 2010,” Cathay Pacific Chairman Christopher Pratt said in a statement.
Cathay Pacific, which is controlled by conglomerate Swire Pacific Ltd., said its net profit for the six months ended June 30 was HK$6.84 billion (US$877 million), a first-half record for the company and up sharply from HK$812 million a year earlier when the global aviation industry was hit hard by the global downturn.
The results included HK$2.17 billion worth of gains from the sale of stakes in sister company Hong Kong Aircraft Engineering Co., and in Hong Kong Air Cargo Terminals Ltd.
Revenue rose 34% to HK$41.34 billion from HK$30.92 billion. The airline recommended a first-half dividend of HK$0.33. It didn’t recommend a first-half dividend last year.
Cathay Pacific’s first-half earnings were much higher than the average HK$4.24 billion forecast of seven analysts, mainly because most of the analysts had expected the company to book the proceeds from its Haeco sale in the second half. Even excluding those proceeds, however, Cathay Pacific’s results were above the average forecast.
“The robust rebound in earnings shows that a recovery of the industry is in place, supported not only by strong cargo demand but a gradual comeback of premium passenger air services,” said Kelvin Lau, an analyst at Daiwa Capital Markets.
The financial crisis that began in late 2008 led to a sharp fall in global export volumes and air passenger travel demand. Reacting to the dramatic downturn in the industry, Cathay Pacific reduced passenger capacity by 3.7% and cargo capacity by 13.1% in 2009.
However, cargo and passenger business has improved markedly since the last quarter of 2009 and Cathay’s cargo traffic is now back to its pre-crisis levels, while demand for the airline’s first- and business-class services, though not yet back to where they were in 2008, have rebounded significantly. As such, Cathay Pacific and its China-focused unit, Hong Kong Dragon Airlines Ltd., have been restoring their cut capacity.
During the first half this year, the airline carried 12.95 million passengers, 8.5% more than a year earlier. The total cargo it carried rose 24.4% to 871,585 metric tons.
Cathay Pacific’s passenger yields–a key measure of airline profitability–rose 17.5% in the first half to 58.4 HK cents from 49.7 HK cents, reflecting higher average prices. Yields for cargo operations jumped 36% to HK$2.26 from HK$1.66.
In a separate statement Wednesday, Cathay Pacific said it signed a letter of intent with Airbus to buy 30 A350-900 aircraft as part of its expansion plans. Though the planes have a list price of US$7.82 billion, the actual purchase price will be lower, the airline said.
The airline said it also plans to exercise purchase rights for six Boeing 777-300 extended range aircraft from Boeing Co. Those aircraft have a catalog price of around US$1.61 billion, it said.