Cathay Pacific Rises Most in 10 Months as Tyler Says Demand `Very Good'

Cathay Pacific Airways Ltd., Hong Kong’s largest carrier, rose the most in 10 months on the city’s stock exchange after saying reservations are “looking very good” as an economic recovery revives travel demand.

“We can look forward to the next six months with some confidence,” Chief Executive Officer Tony Tyler said in a Bloomberg Television interview in Hong Kong today. “Forward- bookings are looking very good for the rest of the summer. Cargo is looking good for the rest of the year.”

Cathay climbed as much as 7.3 percent, the most in intraday trading since October 2009, to HK$19.40 and traded at HK$18.86 as of 10:30 a.m. local time. The carrier announced orders yesterday for 30 Airbus SAS A350s and six Boeing Co. 777s after boosting first-half profit more than eightfold on asset sales and an 8.5 percent jump in passenger numbers.

“New aircraft orders will improve product appeal and lower unit costs,” Corrine Png, an analyst at JPMorgan Chase & Co., said in a note to clients today. “The A350-900s promise substantial fuel cost savings and other efficiencies given their extensive use of light-weight composite materials.”

The A350s will allow Cathay to fly to secondary cities in Europe and the U.S. that don’t have enough demand to fill larger planes, Tyler said. The Rolls-Royce Group Plc-powered A350s will enter service from 2016.

Cathay has risen 31 percent in Hong Kong trading this year to the highest level since January 2008, the best performance in the Hang Seng Index, which has lost 1.5 percent.

Fuel Hedging

The airline has hedged about 30 percent of its fuel requirements for the rest of this year and into 2011, Tyler said. He declined to comment on the prices.

The airline is “reasonably satisfied with the hedging book,” he said.

Cathay made a record first-half profit of HK$6.84 billion ($881 million) helped by the sale of stakes in a maintenance company and an air-cargo handler. Operating profit before one- time gains more than doubled to HK$4.96 billion.

The carrier, which has a group fleet of 166 planes, flew 13 million travelers in the first half. The tally includes unit Hong Kong Dragon Airlines Ltd. Passenger yield, a measure of average sales, rose 17.5 percent to 58.4 HK cents, while cargo yields surged 36 percent.

Asian airlines will likely make their first region-wide annual profit in three years because of rebounding travel, according to the Association of Asia Pacific Airlines.

To contact the reporters on this story: Rishaad Salamat in Hong Kong at rishaad@bloomberg.net; Wing-Gar Cheng in Hong Kong at wgcheng@bloomberg.net

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