Cathay: Hong Kong Express's booking volume between Hong Kong and Japan has recovered, adding new routes to diversify risks

CATHAY PAC AIR (00293.HK) announced its interim results, with its subsidiary Hong Kong Express recording a pre-tax loss of HKD 524 million. CATHAY PAC AIR's CEO, Ronald Lam, indicated that the performance was primarily based on two reasons, including rumors of an earthquake in Japan, which significantly reduced demand for travel between Hong Kong and Japan in May and June. However, as the rumors subsided in July, flight bookings between Hong Kong and Japan began to recover, with a significant increase in bookings in August. He believes that normalization will still take time.

Additionally, Hong Kong Express launched many new routes in the past year to diversify risks. Previously, Japan accounted for about 50% of the overall routes, but with the introduction of new routes to South Korea, Taiwan, and others, the proportion of Japanese routes will gradually decrease. He stated that these new routes will take time to mature and will not be immediately profitable, but he believes the company is moving in a positive direction, with improvements in unit costs and aircraft utilization rates. He is confident that the company will return to a positive financial trajectory. CATHAY announced an additional order for 14 Boeing 777-9 aircraft, and Ronald Lam stated that they will carefully review investments to ensure the group's financial stability.

Regarding ticket prices, Chief Customer and Commercial Officer, Vivian Liu, stated that CATHAY has increased capacity on many long-haul routes, such as a 50% increase in capacity on North American routes; the increase in supply has led to a reduction in ticket prices, which is expected. In terms of yield, the higher proportion of lower-margin long-haul routes and transit passengers has a negative impact on yield, but at the same time, the increase in passenger volume and the rise in business class occupancy rates have a positive effect. Looking ahead to the second half of the year, she believes that the momentum in occupancy rates can be maintained, and the passenger business will continue to add new destinations and increase the frequency of existing routes. In terms of cargo, she mentioned that although the first half was affected by tariffs and other factors, the performance was still good, partly due to customers rushing to ship before the implementation of tariffs. The group will remain flexible and adjust allocations accordingly.

Regarding recruitment, Chairman Augustus Tang stated that due to the group being in a rebuilding phase over the past few years, and now that the rebuilding phase has passed, the group will continue to recruit, but the scale will be similar to historical averages. Ronald Lam mentioned that by the end of the year, the group will have about 4,000 mainland employees, which accounts for a significant portion of the total workforce of 36,000.

Looking ahead to the second half of the year, Ronald Lam stated that there are still uncertainties, including the unclear trade war, but the group will continue to invest, with future investments exceeding the previously committed HKD 100 billion. CATHAY will continue to work with the Airport Authority to build Hong Kong's role as an international aviation hub