Cathay Pacific Group swung to a full-year net profit in 2023 – for the first time in four years – as it pushes back its full recovery forecast and flags a normalisation of yields and “ongoing” manpower and supply chain headwinds.
The group – comprising Cathay and its low-cost arm HK Express – expects to operate at pre-pandemic capacity within the first quarter of 2025, up to three months later than previously forecast.
Says airline chief Ronald Lam: “We acknowledge this would be up to three months later than our previous projections; however, we have learned from our recent experiences and our focus continues to be rebuilding in a measured and responsible manner.”
Lam does not elaborate further the reasons for the slower recovery. The airline had cut its operating schedules from late-2023 through February as it battled a “higher than expected” pilot absenteeism.
The airline would later acknowledge it had underestimated the pilot shortage issue while ramping up operations post-Covid.
As at end-2023, Cathay group was operating at 70% of pre-pandemic capacity, with a network of around 80 points around the world. It expects to operate at 80% by mid-2024 before gradually hitting full recovery in 2025.
Still, Lam calls the airline’s recovery – it was only able to properly restart operations in early 2023 – “truly remarkable”. Mainline operator Cathay carried close to 18 million passengers during the year, nearly six times higher than 2022.
Capacity increased four-fold year on year, outpaced by the increase in passenger traffic, which grew close to five-fold.
The strong travel demand drove up passenger ticket prices, contributing to the group’s record financial performance in 2023.
Cathay group posted a full-year operating profit of HK$15.1 billion ($1.9 billion) – its highest in over a decade. Attributable net profit stood at HK$9.8 billion, against 2022’s HK$6.6 billion net loss.
Revenue for the year rose 85% year on year to HK$94.4 billion, while costs increased 67% to HK$84.2 billion.
Lam says that while the “global imbalance between supply and demand” drove up yields, the airline group “expects this imbalance to diminish” in 2024, with yields normalising.
“However, there will continue to be an impact from inflationary pressure along the entire aviation supply chain, which has persisted since the pandemic,” adds Lam.
Other issues will also persist, Lam notes: “We have seen that the magnitude of the challenge that the aviation industry faces is truly significant. These challenges include but are not limited to recruitment, training and supply chain shortages. We are navigating similar challenges and are working diligently to mitigate their effects on our operation.”
Cathay chair Patrick Healy adds that the group’s priority in 2024 is to ensure “ensure high-quality and sustainable growth”, echoing Lam’s comments.
“Our investments will span our fleet, our customer experience and our people,” he says. For instance, the group is looking to expand its workforce by about 20% – adding around 5,000 people, in 2024.
Cathay will also be rolling out new cabin products through 2026, starting with new seats in business- and premium-economy- class on its Boeing 777-300ERs.
In 2025, when its first 777-9s arrive, the airline has promised a “new world-leading first-class experience”. Lam also discloses that Cathay will unveil a new regional business-class product in 2026.
