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On August 7, Cathay Pacific Airways released its 2024 half-year performance report. Cathay Pacific Group's net profit was HK$3.613 billion, a year-on-year decrease of 15.3%. Compared with the explosive growth of Cathay Pacific's performance in the same period of 2023, in the first half of 2024, as supply and demand gradually balanced and air ticket prices normalized, Cathay Pacific's load factor and yield rate declined, and passenger revenue was returning to rationality. However, Cathay Pacific's overall performance was not affected. According to data from the Hong Kong Tourism Board, in the first half of this year, the number of mainland visitors to Hong Kong increased by 60% year-on-year, and the number of non-mainland passengers increased by 80% year-on-year. Under this circumstance, Cathay Pacific Airways continued to introduce new aircraft, further expand its fleet size and increase its capacity. It has currently ordered more than 100 aircraft; on the other hand, it also kept a close eye on the high-end user market and responded to the return of business travelers by providing free wireless network services, upgrading or launching VIP lounges and other measures.

Long-haul flight fares fell more than 20% year-on-year

In the first half of 2024, Cathay Pacific Group (including airlines, subsidiaries and affiliates) had a net profit of HK$3.613 billion, compared with HK$4.268 billion in the first half of 2023, a year-on-year decrease of 15.3%.

Regarding the reasons for the year-on-year decline in net profit, Cathay Pacific Group Chairman John Heather said at Cathay Pacific's half-year results conference on August 7 that with the continued increase in passenger flights in the civil aviation market, ticket prices and yields have begun to return to normal.

According to the financial report, Cathay Pacific's overall load factor in the first half of the year fell by 4.8 percentage points year-on-year, and its overall yield fell by 11% year-on-year.

Cathay Pacific Group CEO Paul Lam admitted that the normalization of fares means price reduction, and from a shortage of supply to a balance between supply and demand, fares will inevitably show this trend. He said that 2023 is the first year of Cathay Pacific's capacity reconstruction, and demand far exceeds supply, which makes air ticket prices high. As the capacity reconstruction process continues to accelerate, Cathay Pacific's short-haul fares have returned to normal levels first, and are now basically the same as the 2019 fare level; while long-haul flight fares from Hong Kong, China have fallen by more than 20% year-on-year. Among them, the recovery of the Hong Kong-US route is relatively slow, and the demand for mainland Chinese passengers to travel to the United States via Hong Kong, China is still large, so the normalization of fares is still in progress.

Lin Shaobo also mentioned that Cathay Pacific's US routes are continuing to recover, and it is expected that flights to the US East Coast will be fully restored by October this year, and flights to the US West Coast will be fully rebuilt by April next year. By then, the ticket prices of the corresponding flights will also return to normal.

He Yili also said that the decline in ticket prices and yields was in line with Cathay Pacific's previous expectations and did not affect its performance too much. The financial report also disclosed that tourism demand continued to be strong in the first half of the year. According to data from the Hong Kong Tourism Board from January to June, the number of mainland tourists visiting Hong Kong increased by 60% year-on-year, and the number of non-mainland tourists increased by 80% year-on-year.

Talking about the summer passenger situation, Cathay Pacific's Chief Customer and Commercial Officer, Kate Lau, said that July and August are traditionally the peak travel season, market demand is very healthy, and ticket prices and yields are developing in line with Cathay Pacific's forecast. The overall situation in the second half of the year will depend on travel demand, and Cathay Pacific will continue to increase flight supply and further stimulate travel demand by improving product experience to maintain ticket prices.

Ordered over 100 aircraft to expand fleet

Judging from the passenger performance disclosed in the financial report, Cathay Pacific's capacity in all major regions increased year-on-year in the first half of the year. The overall capacity increased by 42.7% year-on-year, and the capacity of each regional market also increased year-on-year.

He Yili said that Cathay Pacific's passenger flights have been restored to 80% of 2019 levels as planned in the second quarter of 2024, and it is hoped that they will be able to recover to 100% in the first quarter of 2025.

While restoring capacity, Cathay Pacific is accelerating the pace of replenishing its fleet.

On the same day, Cathay Pacific also announced the purchase of 30 Airbus A330-900 aircraft. These aircraft are expected to be delivered in 2028 and will be used for short-haul routes to mainland China, Northeast Asia, Southeast Asia and South Asia.

Prior to this, Cathay Pacific had already announced orders for Airbus A321neo, A320neo, Boeing 777-9 and A350F freighters. Lin Shaobo said that Cathay Pacific has ordered more than 100 aircraft so far, and has the right to order an additional 80 aircraft.

It is worth noting that the financial report disclosed that Hong Kong Express had a net loss of HK$73 million in the first half of the year, while it made a profit of HK$333 million in the first half of 2023. The reasons for the loss include the grounding of some A320neo aircraft due to Pratt & Whitney engine problems, which had an adverse impact on its performance in the first half of the year.

Regarding the problems encountered by Hong Kong Express, Lin Shaobo said that Cathay Pacific and Hong Kong Express have been actively discussing compensation with suppliers, and a solution satisfactory to both parties has been reached. There will be no further adverse financial impact on Hong Kong Express in the future. Hong Kong Express's flight volume has reached 1.4 times that of 2019, and it will further develop more destinations overseas and in mainland China based on passenger demand.

Hong Kong Express Airways CEO Mo Kit-keung previously revealed that most of the 32 A320neo and A321neo aircraft ordered by Cathay Pacific in September 2023 are to expand Hong Kong Express's fleet size, and delivery is expected to be completed before 2029.

Focus on the high-end user market

In addition to increasing investment in capacity and fleet, Cathay Pacific is also keeping a close eye on the high-end user market.

Lin Shaobo said that Cathay Pacific will gradually provide free wireless Internet services to business class passengers and Cathay Pacific Diamond Card members in the next few months, and will also launch new seat products in business class, first class and premium economy class of various aircraft models. In terms of ground services, Cathay Pacific will launch a newly designed flagship lounge in Hong Kong and Beijing in the next three years, and will also launch an exclusive lounge in New York for the first time.

The above-mentioned measures show that Cathay Pacific attaches great importance to the high-end user market.

Li Hanming, an insider in the civil aviation industry, said that high-end users often contribute a large amount of ticket revenue to airlines. Generally speaking, if a high-end user takes about 30 flights a year, he or she can surpass 95% of the country's passengers, and if he or she takes about 40 flights a year, he or she can surpass 99% of the passengers.

Therefore, high-end users are one of the most important markets for airlines. Since the beginning of this year, the three major airlines have continued to increase their investment in the high-end user market. Air China, China Eastern Airlines and China Southern Airlines have successively issued notices on the upgrade of their membership systems in March, July and August.

According to Cathay Pacific's financial report, Hong Kong and other cities in the Greater Bay Area held a number of large-scale convention and exhibition events and trade shows in the first half of the year. The demand for front cabin on flights to and from Hong Kong, China from March to April and the demand for business passengers from the United States from May to June were strong.

Liu Kaishi said at the performance meeting that Cathay Pacific expects that business travelers will continue to return in the future, so it needs to take various measures to further meet the needs of the business travel market.

Beijing Business Daily reporter Guan Zichen Niu Qingyan