Cathay Pacific Reports Slight Increase in Annual Profits Amid Strong Cargo Demand and Cost Efficiency
Cathay Pacific ended the year with a slight increase in profits, driven by cargo demand and cost optimization, while competition continues to impact airfares.
Cathay Pacific Airways reported a modest increase in annual profits, driven by higher cargo demand and cost efficiencies, despite pressure on airfares due to intense regional competition.
The flagship airline of Hong Kong posted a 1% increase in net profit, reaching HK$9.89 billion (US$1.27 billion) as of December 31. The results were supported by higher cargo demand, increased passenger traffic, lower fuel costs, and improved operational efficiency.
However, according to Reuters, Cathay Pacific shares fell 1.8% at the close of the trading session, after initially rising nearly 4% to their highest level since May 2019 following the earnings release.
Cathay Pacific’s annual yield, a key indicator of airfares, fell by 12%, while at its low-cost subsidiary HK Express, the decline was 23%. Chief Financial Officer Rebecca Sharpe noted that regional fares have returned to pre-pandemic levels, although long-haul flight prices may continue to decline.
Challenges for HK Express
HK Express, acquired by Cathay in 2019, reported an annual loss of HK$400 million, in contrast to the HK$433 million profit recorded the previous year. The airline attributed this loss to strong competition on regional routes, which has pushed fares down, and technical issues with Pratt & Whitney engines on its Airbus A320neo aircraft, forcing part of its fleet to be grounded in 2024.
Despite these challenges, aviation consultancy OAG recognized HK Express as the fastest-growing airline in 2024. Cathay Pacific stated that it expects its subsidiary to achieve sustained profitability as it expands operations and improves efficiency.
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As one of Asia’s leading cargo airlines, Cathay Pacific has capitalized on the rise of e-commerce from China. Cargo revenue grew by 3% year-over-year, although the company warned that global trade tensions could impact this segment.
“The cargo outlook remains uncertain,” said CEO Ronald Lam, though he noted that the airline has not yet seen a significant impact.
Geopolitical Considerations
Regarding air routes, while many Western airlines avoid Russian airspace following Russia’s invasion of Ukraine, Cathay Pacific continues to use it for some flights to North America, though not on its European routes. Lam stated that the airline would reassess its strategy if geopolitical conditions change.
Investments and Expansion
After posting its second consecutive annual profit following three years of pandemic-related losses, Cathay Pacific increased its revenue by 10.5%, reaching HK$104.37 billion, in line with market expectations. This marks the first time since 2019 that the company has surpassed HK$100 billion in revenue, Sharpe noted.
Following a restructuring phase between 2023 and 2024, the airline plans to invest HK$100 billion over the next seven years, primarily in acquiring new aircraft. Among its fleet expansion plans, Cathay expects to receive its first Boeing 777X in early 2027.
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