(1/2)A Cathay Pacific plane takes off from the airport during the coronavirus disease (COVID-19) pandemic in Hong Kong, China, March 31, 2022. REUTERS/Tyrone Siu/File photo
HONG KONG, Aug 9 (Reuters) – Cathay Pacific Airways (0293.HK) posted its best first-half profit in more than a decade on Wednesday and announced plans to order more planes and repay the Hong Kong government’s bailout after a major shift in travel In demand.
Interim net profit of HK$4.3 billion ($550.22 million) met profit guidance of up to HK$4.5 billion, compared with a HK$5 billion loss a year earlier when Hong Kong imposed strict COVID-19 quarantine rules.
“While we are only half way through our rebuilding journey, our results for the first six months of 2023 show we are on the right track,” Cathay Pacific Chairman Healy said in a statement.
Cathay Pacific has been slower to restore capacity than its closest rival Singapore Airlines (SIAL.SI) as it faces tougher quarantine rules for longer and needs to train more staff and restore grounded planes.
The Hong Kong carrier expects to reach 70% of its pre-pandemic capacity by the end of this year and 100% by the end of 2024. That compares with nearly 60% capacity now and 3% a year ago.
“It’s a very rapid increase,” Healy said at a news conference. “We’ve got a late start, but the recovery trajectory is definitely on track compared to where our main regional competitors started off.”
Cathay Pacific said it intends to exercise its purchase option to buy 32 Airbus (AIR.PA) A320neo family planes, hoping to increase the size of its fleet as demand rebounds. The aircraft is expected to be delivered in 2029, bringing the total number of new deliveries to more than 70.
As part of a long-haul Boeing 777-300ER cabin redesign, the company will also bring a “new business class experience” in the second quarter of 2024 and a new first class experience on the 777-9 in 2025.
The airline said it would also buy back 50% of the HK$19.5 billion preference shares held by the Hong Kong government by the end of 2023 and the remaining shares by the end of July 2024, subject to completion of the proposed capital reduction and business conditions of.
Cathay issued the shares in 2020 as part of a HK$39 billion rescue package from the government and its biggest shareholders, Swire Pacific (0019.HK) and Air China, (601111.SS) that shored up its finances after travel demand collapsed during the Pandemic.
“The performance is not bad, but the second half may lack special business highlights,” said Eugene Law, director of business development at brokerage China Galaxy International, adding that some investors may choose to take profits after the previous earnings report.
Cathay Pacific pared gains to 0.2 percent from 0.9 percent as of 0605 GMT after results were released. The Hang Seng Index (.HSI) fell 0.2 percent overall.
Chief executive Lim Chung Kee said the main challenges facing the industry globally, namely manpower shortages and supply chain issues, are expected to improve and normalize by 2024.
“I must say, compared to the challenges we have faced during the past three years during the epidemic, all of these are … happy questions, right?” Lin said.
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Reporting by Jessie Pang, Clare Jim and Donny Kwok; Editing by Jamie Fried and Gerry Doyle
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