Cathay Pacific has its first profitable year since 2019, aiming for a brighter future ahead

Cathay Pacific announced on Wednesday that it had its first profitable year since 2019.

Cathay Pacific has its first profitable year since 2019, aiming for a brighter future ahead
Cathay Pacific employees work at Hong Kong International Airport, in Hong Kong, China March 8, 2023. REUTERS/Lam Yik/File Photo

The backstory: Because of COVID, Cathay Pacific – Hong Kong's flagship airline – had a big workforce cut and had to deal with a shortage of pilots. Cathay struggled to hire new pilots and also underestimated the level of seasonal illnesses. This led to it canceling nearly 70 flights during the holiday period, from December to February, to ensure smooth running across the Lunar New Year. During this time, Chief Operations and Service Delivery Officer Alex McGowan said that the airliner fell short of 500 pilots for its premium carrier and budget airline, HK Express. The pandemic has also disrupted Hong Kong's tourism sector, and it's taken longer than expected to recover since the city eased all restrictions at the start of 2023. This was compounded even more by flight capacity limitations. 

More recently: While Cathay has since been able to hire new pilots while promoting and training many of its first officers, these 20 or so new hires need about 13 months of training. The airline apologized and put together a task force to tackle the problem after the city's leader, John Lee, asked the company just to fix the problems "very quickly and effectively." An association of Cathay pilots also said in late February that the airline is continuing to face a staff shortage, but Cathay denied this, saying it's been running at 70% of its pre-pandemic capacity since the end of 2023 while also recruiting more employees.

The development: Cathay Pacific announced on Wednesday that it had its first profitable year since 2019, making HK$9.79 billion (US$1.25 billion) for 2023, compared with a loss of HK$6.62 billion (US$848.72 million) the year before. Cathay Chairman Patrick Healy said the company expects to return to 80% of its pre-pandemic passenger flight capacity in the second quarter of this year. Cathay's CEO, Ronald Lam, also said that the company aims to reach 100% of its pre-pandemic passenger capacity by the first quarter of 2025, which is three months later than the previously announced target period.

Moving forward, the airline's overall priority is to ensure sustainable growth and prepare for the full operation of Hong Kong International Airport's third runway by the end of the year. Lam added that they intend to hire 20% more staff (around 5,000 people) this year to cope with demand.

Key comments:

"The imbalance between supply and demand resulted in high yields and contributed to a strong financial performance in both halves of the year," Cathay Chairman Patrick Healy said, adding that the discrepancy would diminish this year as capacity was restored.

Lawmaker Michael Tien Puk-sun said, "Visitors and flight capacity are two variables that need to complement each other to maximize efficiency. While capacity can be estimated, attracting passengers is the real challenge and it's currently a topic of concern throughout Hong Kong."

According to DBS equity research analyst Jason Sum, "Even if Cathay falls short of its capacity goals, the resulting tighter capacity could support passenger yields, potentially benefiting the group overall."