Cathay Pacific flags recovery in airfares, shares surge

Cathay Pacific Airways expects airfares will recover further this year after four years of declines, a senior executive said, offering a positive outlook for the Hong Kong airline that sent its shares 7.6% higher Thursday. The carrier posted Wednesday a smaller-than-expected annual loss of HK$1.26b ($160m) due to a rebound in the cargo market, a slower pace of decline in ticket prices and lower fuel hedging losses. At an analyst briefing after the results, Cathay Pacific said passenger yields, a proxy for airfares, had fallen by only 1.5% in H2 2017, compared to a 5.2% decline in H1. H2 yields were 3.1% higher than H1. “We expect that the trend in passenger yield will continue the momentum we had in the last half of last year, and so far this year the trend has been promising,” said Paul Loo, Cathay’s chief customer and commercial officer. Cathay plans to add 4.2-4.3% capacity in its passenger business and 5% capacity in its cargo business in 2018, Loo said, with cargo yields expected to rise in H1 given stronger market conditions than a year ago. The rebound in the cargo market was a major contributor to Cathay posting a HK$792m profit in H2 2017 after an H1 loss. Cathay is aiming to boost profitability through a three-year turnaround program targeting HK$4b in savings. “We have done what we need to do to lay the foundation really to make substantive change in the business,” CEO Rupert Hogg told analysts, adding there was “still a lot of work to be done”. The 777 refurbishment will begin next month, with all 65 jets to be completed by the end of 2019, Loo said.<br/>