The carrier, Hong Kong’s biggest, rose the most in almost five months on the city’s stock exchange after announcing deals to buy 15 Airbus A330-300s and 10 Boeing 777-300ERs. Net income jumped to HK$14 billion ($1.8 billion) last year from HK$4.7 billion a year earlier, it said separately.
The airline also may buy 14 more planes, it said without elaborating, as incoming-Chief Executive Officer John Slosar prepares for rising Asian travel demand and growing competition in the carrier’s home market. Rival Hong Kong Airlines yesterday agreed to order 38 Boeing widebody planes.
“Cathay needs to renew its fleet and further expand,” said Jim Wong, a Nomura Holdings Inc. analyst in Hong Kong. “Passengers prefer taking new planes.”
The carrier will lease two A350-900s from International Lease Finance Corp. in addition to the 30 it ordered last year, it said in a press release. The 27 planes announced today, all of which will be delivered by 2015, raised the value of the carrier’s backlog to about HK$185 billion at list prices, it said. Planemakers usually give customers discounts.
This year, the carrier will boost passenger capacity 11 percent and increase cargo capacity 12 percent, said Slosar, who moves up to CEO from chief operating officer on March 31. The airline is due to add 15 new planes this year, including six freighters.
Passenger and cargo yields, a measure of average fares, have returned “most of the way” to levels reached before the global recession, Slosar said at a press briefing in Hong Kong.
The airline recommended a final dividend of 78 Hong Kong cents, up from 10 Hong Kong cents a year earlier. Its shares rose 4.5 percent to close at HK$18.94 today, the best performance in the benchmark Hang Seng Index. (HSI)
Profit last year included a HK$2.5 billion contribution from its stake in Beijing-based Air China Ltd. (601111), the nation’s largest international carrier. It also had HK$2.2 billion of one-time gains from the sale of stakes in a cargo handler and a plane-maintenance company.
Sales climbed 34 percent to HK$89.5 billion, the airline said. The carrier was expected to make a full-year profit of HK$13.4 billion based on the average of 15 analyst estimates compiled by Bloomberg. Cathay said in November that full-year net income would be at least HK$12.5 billion.
The airline now has 91 aircraft on order, including leases, for delivery by 2019, it said. It plans to retire its 21 Boeing 747-400s and 11 Airbus A340-300s by the end of the decade. The carrier had a total fleet of 167 planes at the end of last year.
“We need to keep pace with what we see in the growth in Hong Kong’s economy and the increasing opportunities our integration with the mainland China will bring,” said Chairman Christopher Pratt.
Last year, passenger numbers, including at unit Hong Kong Dragon Airlines Ltd., jumped 9.1 percent to 26.8 million as business and leisure travelers resumed flying because of the global economic pickup. Yields, a measure of average fares, climbed 20 percent. Cargo volumes rose 18 percent and freight yields surged 25 percent.
Cargo growth will probably cool “a little bit” this year as 2010 was an “extraordinary year” with the end of the global recession and the introduction of Apple Inc.’s IPhone and IPad stoking demand, Slosar said.
“It’s impossible to maintain such a strong growth rate,” said Kelvin Lau, a Hong Kong-based analyst at Daiwa Institute of Research. “Cargo is sure to slow.”
Cathay may face slower demand this year as China tightens lending and oil trades near its highest since 2008. The price of fuel, which accounted for 36 percent of costs last year, is also now higher than the carrier had predicted, it said.
The carrier has hedged from 20 percent to 30 percent of its fuel needs over the next one-to-three years, said Chief Financial Officer James Hughes-Hallett. The carrier is generally shortening the length of its hedging positions to two years or less, he said.
“Demand is still very strong, but mostly people are concerned about the fuel prices,” Wong said. “Still, it’s different from what happened in 2008. This time, demand is out there.”