Cathay Pacific Airways Limited

For the first half of 2022, revenue was HK$18.6 billion, up 17% year over year. Group attributable loss was HK$5 billion, versus HK$7.6 billion in the first half of 2021; the Cathay Pacific airline-only loss narrowed to HK$1.5 billion from HK$5 billion. Available liquidity at June 30 was HK$26.7 billion, down from HK$30.3 billion at December and HK$32.8 billion a year ago, and gearing was 0.74. Passenger capacity was reduced 26% year over year and averaged 4% of pre-pandemic levels in the half; passengers carried more than doubled to 335,000. Cargo revenue rose 9.3% despite a 31% capacity reduction. Management did not give full-year earnings guidance, but said passenger capacity could reach 25% by year-end if restrictions stay as they are, cargo capacity around 65% by year-end, and the business is targeting to be cash generative going forward.

Chief Customer and Commercial Officer Ronald Lam said the airline is preparing for recovery by progressively bringing parked aircraft back and starting a recruitment plan of several thousand frontline employees, including about 4,000 for Cathay Pacific. He said the key constraint remains Hong Kong’s COVID-related operating restrictions, which have limited capacity and delayed crew retraining, and he welcomed the government’s easing of quarantine rules while urging a clearer roadmap to full removal of restrictions. His tone was cautious but more optimistic about demand, citing improving travel sentiment and stronger forward bookings after the government announcement.

CFO Rebecca Sharpe emphasized improved first-half execution despite a still difficult operating environment. She highlighted HK$26.7 billion of available liquidity at June 30, the HK$7.8 billion government bridge loan facility that has not been drawn this year but remains available until June 2023, and over HK$4 billion of new financing raised in the first half. She also noted there were no impairment or one-off adjustments in the period, that operating cash turned positive toward the end of the half, and that fuel hedging remains in place under a prudent policy; she said bringing parked aircraft back will add maintenance costs, but not in a one-for-one way with capacity. On capital allocation, she said the deferred preference share dividend reflects prudent cash management and will depend on cash-flow affordability.

Analysts focused on whether higher passenger capacity would pressure yields, how much costs would rise as parked aircraft return, and why Cathay deferred its preference share dividend. Management said first-half passenger yields were unusually elevated because of an exceptional supply-demand setup, and that second-half yields should normalize as more capacity comes back, though they are hard to predict because route mix matters. On cargo, management said second-half peak demand should still be strong, but yields could soften as global belly capacity recovers and macro conditions weaken; on the dividend and fleet return, they said both decisions are being governed by cash-flow prudence and operational needs rather than a fixed timetable. On future capacity, management declined to give a 2023 forecast, saying it depends heavily on travel rules and crew restrictions.