Key Takeaways:
Cathay Pacific Airways (0293.HK) expects H1 attributable profit of as much as HK$6.5 billion, nearly double last year, as travel demand surged despite a sharp rise in jet fuel costs.
"The strong core profit beat reflects Cathay's ability to pass on higher fuel costs to customers while capturing transit demand from the Middle East disruption," Citigroup analysts wrote in a note, reiterating a Buy rating with a HK$16.2 target price and naming the carrier their top Asia-Pacific airline pick.
Profit attributable to shareholders for the six months ended June 30 is projected at HK$6.0 billion to HK$6.5 billion, compared with HK$3.7 billion a year earlier. The figure includes a HK$1.4 billion non-cash gain from the dilution of Cathay's stake in Air China Ltd. Excluding that item, core profit of HK$4.6 billion to HK$5.1 billion far exceeded the market consensus of about HK$3.3 billion, implying roughly 33% year-on-year growth at the midpoint.
The earnings beat comes despite jet fuel prices rising about 55% year-on-year, driven by the U.S.-Israel conflict with Iran. Cathay carried 17.5% more passengers in the first half, with load factor improving 2.7 percentage points to 87.5%. Cargo tonnage rose 9% over the same period. The airline benefited from Hong Kong's role as a transit hub as Middle East disruptions redirected traffic through the city, boosting both passenger and cargo demand.
Citigroup estimated Cathay's combined unit revenue — passenger and cargo — rose about 14% year-on-year in the first half, with the second quarter likely showing even stronger growth. The bank expects full-year 2026 consensus estimates to be revised higher following the guidance.
The guidance signals Cathay's pricing power remains intact even as operating costs climb. Investors will watch the interim results announcement expected in August for updated segment margins and the dividend payout, a key consideration for Hong Kong-listed airline investors.
This article is for informational purposes only and does not constitute investment advice.
