HONG KONG (Reuters) -Cathay Pacific reported its first annual profit in four years as the airline left behind the pandemic distress that drove heavy losses and layoffs, pushing its shares to a four-year high.
Hong Kong's flagship airline announced on Wednesday it made a HK$9.79 billion ($1.25 billion) net profit in 2023, above the average HK$8.67 billion estimated in an LSEG survey of nine analysts and the highest since the HK$14 billion made in 2010.
Cathay said it will pay its first dividend to ordinary shareholders since 2019, which brokerage Jefferies said was the "key surprise" in the results. The airline also said it plans to expand its workforce by around 20%, or 5,000 people, this year.
A jump in demand after the lifting of COVID-related travel restrictions contributed to the strong financial performance, Cathay Group Chair Patrick Healy said in a statement. Hong Kong and mainland China lifted international travel restrictions in early 2023.
Revenue rose 85% in 2023 to HK$94.5 billion.
Cathay's stock price soared more than 6% after the results to its highest level since February 2020, outpacing a 0.6% rise for the benchmark Hong Kong index.
Shares in Cathay's largest shareholder, Swire Pacific, were up more than 3% on Wednesday afternoon.
The airline was offered a $5 billion pandemic-related rescue package led by the Hong Kong government in 2020. It will repay the remaining half of the Hong Kong government's preference shares by the end of July this year. Cathay had posted a loss of HK$6.6 billion in 2022.
The airline said it aims to reach 80% of its pre-pandemic passenger flights within the second quarter of this year, and 100% by the first quarter of 2025 - three months later than a previously stated target.
The carrier has restored capacity more slowly than its closest rival, Singapore Airlines, because it faced tighter quarantine rules for longer, and needed to hire more staff to bring back services.
A shortage of staff led the airline to cancel and reduce flights.
CHALLENGES AHEAD
While the results indicate how far Cathay has come in its recovery journey, Asia's aviation industry is facing uncertainties as travel conditions normalise and as China's economy shows no signs of a sustained recovery.
A global imbalance between supply of flights and travel demand last year drove up ticket prices and airline yields.
"We expect this imbalance to diminish and yields to continue to normalise throughout 2024 as airlines around the world continue to add capacity," Cathay CEO Ronald Lam said.
Singapore Airlines last month also warned that the high yields of the post-pandemic travel boom were coming under pressure from high fuel prices, inflation, supply chain shortages and increased competition as airlines restore capacity.
Cathay reiterated that it is still in the market to order new mid-size wide-body aircraft.
Cathay Pacific is a full service passenger and cargo airline, with two subsidiaries: low cost carrier HK Express and cargo carrier Air Hong Kong.
($1 = 7.8243 Hong Kong dollars)
(Reporting by Lisa Barrington in Seoul; Additional reporting by Hong Kong Newsroom; Editing by Muralikumar Anantharaman)
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