- Cathay annual profit up 9.5%, slightly ahead of estimates
- Shares trade 4% higher after results
- Airline posts record revenue but warns of volatile environment
HONG KONG, March 11 (Reuters) - Cathay Pacific Airways said on Wednesday it would expand passenger capacity by 10% this year but remain agile as the Middle East conflict leads to "drastic changes" in demand and higher jet fuel prices.
The growth forecast was made as Hong Kong's flagship airline posted a 9.5% rise in full-year profit driven by higher passenger numbers and robust cargo demand, its third consecutive annual profit after three years of losses during the pandemic.
Cathay's shares closed up 4% after the results.
However, the U.S.-Israeli war on Iran - now in its 12th day - has disrupted global aviation operations due to airspace closures, increased jet fuel costs and led some carriers to raise fares and boost fuel surcharges.
Cathay CEO Ronald Lam told analysts that the airline's fuel surcharges for passengers and cargo were likely to increase due to a doubling in jet fuel prices, but fare hikes would depend on supply and demand and the action of its competitors.
"There's quite drastic changes in terms of demand patterns due to the Middle East situation," Lam said.
TO TAKE DELIVERY OF EIGHT AIRCRAFT
Cathay has cancelled its flights to Dubai and Riyadh through the end of March and is instead adding more services to London and Zurich, taking advantage of a spike in demand for Asia-Europe flights that avoid the Middle East.
Lam said flights to and from Europe were already pretty full before the conflict, giving Cathay a limited ability to take on new bookings, while its freighter flights to Europe were bypassing Dubai and could carry less cargo as a result.
Cathay Chairman Patrick Healy said the 80-year-old airline will boost passenger capacity as it takes delivery of eight new narrowbody aircraft and adds frequencies and destinations to its network, which would also lift cargo capacity.
The planned 10% growth rate, however, is less than the 26% rise in passenger capacity in 2025 at its main brand, when it added 20 destinations and grew its passenger network to more than 100 locations worldwide.
Cathay has hedged about 30% of its fuel at or just under $70 a barrel for 2026, Chief Financial Officer Rebecca Sharpe told analysts, but she noted that was based on benchmark Brent oil prices rather than the jet fuel price, which has risen far more steeply.
RECORD REVENUE
Cathay's net profit rose to HK$10.8 billion ($1.4 billion) for the year ended December 31, slightly ahead of an LSEG SmartEstimate for HK$10.05 billion.
Revenue climbed 11.9%, driven by a 15.8% surge in passenger revenue as Cathay expanded its long-haul network to North America and Europe. The carrier flew 28.9 million passengers during the year, a 26.5% increase from 2024, achieving an 85.2% load factor.
Based at the world's busiest cargo airport, Cathay is also one of Asia's largest air freight carriers and has benefited in recent years from rising volumes of e-commerce out of China.
Its cargo operations, traditionally a pillar of its earnings, remained robust despite global trade uncertainties, with revenue edging up 1.2% to HK$24.3 billion.
Cathay's total dividends for 2025 came to HK$0.84 per share, representing a payout of HK$5.23 billion - a 21.7% increase from the prior year.
But not all units were profitable. HK Express, Cathay's wholly owned budget arm, reported a full-year loss before net finance charges and taxation of HK$996 million, significantly wider than the HK$204 million loss recorded in 2024.
The company attributed the setbacks to aircraft groundings due to engine issues and challenges from newly launched routes requiring time to mature. But it said it expects HK Express to return to sustained profitability in the coming years.
($1 = 7.8261 Hong Kong dollars)
Reporting by Julie Zhu in Hong Kong; Additional reporting by Sameer Manekar in Bengaluru; Writing by Jamie Freed; Editing by Edwina Gibbs
Source: Reuters