Cathay Pacific Airways posted an annual operating profit for the first time since 2019, after Hong Kong opened for quarantine-free travel again following more than two years of Covid restrictions.
Operating profit in 2022 was HK$3.55 billion ($610 million; US$452 million), comfortably beating the HK$2.87 billion average estimate from analysts. Revenue grew 12% to HK$51.04 billion, Hong Kong’s main airline said in a statement Wednesday, missing analysts’ HK$52.7 billion average forecast.
A net loss of HK$7.16 billion to ordinary shareholders reflected a deficit from Air China Ltd., which has flagged a preliminary annual loss of 39.1 billion yuan ($5.6 billion). Analysts had expected that loss for Cathay — which held a stake of about 18% in Air China last year — to be HK$4.98 billion.
“Consensus underestimated Air China’s associate loss contribution,” Bloomberg Intelligence analysts Tim Bacchus and Eric Zhu wrote. “This could happen again for its 2023 earnings.”
Cathay Chief Executive Officer Ronald Lam said in Wednesday’s filing that the airline has entered a “new exciting phase” after the challenges of Covid.
“We were very encouraged to see a bright light at the end of the tunnel in the second half of 2022, and the positive momentum has continued into 2023,” said Lam, who became CEO at the start of this year.
See also: SIA to adjust conversion prices of 1.625% convertible bonds due 2025 after interim dividend
Cathay is still playing catchup after Hong Kong took much longer than elsewhere beyond China to dismantle its Covid controls. Mainland China is the carrier’s key market, yet only really started to reopen this year. Meanwhile, Cathay is also struggling to bring in staff, while many pilots and crew are disaffected following cuts to perks and pay made during the pandemic, when passenger capacity was as low as 2% of pre-Covid days.
Lam told Bloomberg News in October that a full recovery wasn’t expected until the end of 2024, a target the company reiterated Wednesday. That’s behind others, including Singapore Airlines Ltd., which was back to about 85% of pre-pandemic passenger capacity in January.
The International Civil Aviation Organization, a United Nations agency, forecasts air passenger demand to recover to pre-Covid levels on most routes by the first quarter this year and to about 3% above 2019 levels by year-end.
See also: SIA and Sats on two different trajectories following the post-pandemic boom
Hong Kong is trying to boost tourism and its flagging economy after the damage of Covid, including by giving away 500,000 airline tickets. Cathay and the city’s other airlines will distribute the free tickets, which were purchased by Hong Kong’s airport authority. More information here.
Cathay Chairman Patrick Healy said the carrier would continue to take a “measured and prudent” approach to spending, despite generating cash in the full year. In an analyst presentation Wednesday afternoon, Cathay said it generated HK$1.1 billion in cash per month on average in 2022.
“The overall picture may still be challenging,” Joanna Lu, Asia Consultancy head at Ascend by Cirium, said on Bloomberg Television ahead of the results. “There should be an improvement in the second half of 2022 in terms of operation and financial performance.”
Lu said 28% of Cathay’s fleet is still grounded. It had 222 aircraft by the end of the year.
Cathay shares were little changed Wednesday afternoon. Cathay has dropped about 8% this year, the second-worst performer on a 29-member Bloomberg World Airline Index. It was the best performer in 2022 with a 33% gain.
