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Cathay Pacific has announced it will spend $13bn over seven years on new aircraft, airport lounges and cabin revamps as it tries to restore its pandemic-hit reputation and regain its global premium airline crown.
Patrick Healy, chair of Hong Kong’s flagship carrier, said it was “turning the page” with “bold” plans to invest more than HK$100bn (US$12.8bn) on its fleet, cabins and airport lounges in Hong Kong, Beijing and New York, as well as other upgrades.
Cathay announced on Wednesday it would buy 30 Airbus widebody aircraft and now has more than 100 new aircraft in its delivery pipeline. It expects to launch improvements to first-class seats in 2025 and a fresh flatbed business-class product in 2026.
“We want to get back to being the very best in the world,” Healy said. “And this requires investment. We need to invest in the customer products, in the fleet . . . to be able to maintain the premium pricing position that we’ve enjoyed.”
He added that the carrier was “confident” continuing results would be “sufficient to fund the investment programme”.
Cathay has been ranked by consultancy Skytrax as world’s best airline four times, most recently in 2014. It was ranked as the world’s fifth-best airline this year.
The carrier reported a first-half profit of HK$3.6bn (US$460mn) on Wednesday, down from HK$4.3bn a year earlier. It attributed the drop principally to lower ticket prices despite “robust” demand for travel.
Cathay, which declared an interim dividend of 20 HK cents per ordinary share, said it was on track to a full post-pandemic recovery in passenger capacity by the first quarter of next year. Its Hong Kong shares closed 2.4 per cent lower.
Business travel demand, including on routes from the US to Hong Kong and mainland China, as well as leisure travel from its home market in Hong Kong were strong, the carrier said. But passenger yields — an indicator of profitability — were lower as flights were added.
It was the second consecutive year that Cathay recorded a first half-year profit, after a three-year streak of losses amid the coronavirus pandemic and Hong Kong’s tough quarantine curbs. The airline has been on a recovery path after a pilot exodus and the effects of the pandemic had tarnished its reputation.
The airline has also been under pressure from Hong Kong’s government to boost capacity and service quality as a third runway nears completion this year at its home base. Growth of Cathay’s international network would help boost Hong Kong’s status as a global aviation hub.
Rival Singapore Airlines recorded a surge in profits to S$2.7bn (US$2bn) in May for its financial year to March. But global airlines in recent weeks have warned of downward pressure on ticket prices as the two-year travel surge post-reopening shows signs of losing steam.
Healy said the lowering of airfares had so far been “fairly benign” and “manageable” in affecting profits. Cathay chief executive Ronald Lam added that short-haul prices had come down faster than long-haul, but ticket pricing and revenue for this summer were still “satisfactory”.
JPMorgan analyst Karen Li wrote in a note last month that Cathay benefited from “healthy demand across leisure [and] business” as well as transit passengers in Hong Kong going to and from mainland China.
