Cathay Pacific Airways Limited (293) Earnings Call Transcript & Summary

I'm still getting a lot of questions on yields and fares. So perhaps if we can address some of them in a bit more detail.

So for example, considering the supply in the market will continue to be released, how does -- how do Cathay view the market in 2025? Do we expect the fares to continue to decline compared to 2024? And would the decline be less when compared to 2024, I guess, meaning '24 and '23? So perhaps we can shed some more colors on that.

Okay. Thank you for the question. I think yields and fares is always the top question that I got. I think as we have promised over the last few years when, at some point, and some customers say that, oh, your fares are high. We always said that fares is really a demand-and-supply situation. It's market-driven. We will maintain competitive fares to cope with what the market expects. So rightfully, as we continue to add capacity, and we will continue to add capacity, there's no saying that we are holding back or whatever. So we just mentioned that we are reaching 100% by this month already. And for 2025, we have already announced a whole bunch of new destinations and additional flights. So yes, supply will continue to increase, at least from the Cathay Group side. I believe some of our competitors will also add. So I think it really depends on how the demand and supply balance works. So if demand stays the same and supply continues to increase, then obviously, the fares or yields will drop. But we're also seeing good demand out there, well, globally and within the region. So hopefully, even as we continue to add supply, maybe demand can also go up as well. But at the moment, we -- or in 2024, we did see that the yields continue to normalize, especially on the regional routes, as Rebecca has just mentioned. On the long-haul routes, I think last time when we met in August, we did say that relatively speaking, I think long-haul yields are still a bit higher than pre-pandemic. And again, that's because of the supply/demand imbalance, primarily because some of -- especially between China and U.S., some of the direct lines have not resumed. So that's why a lot of passengers still transit via Hong Kong to get on our U.S. flights. So again, so that whole situation will depend on the supply situation, not just only out of Hong Kong but in other parts, especially out of Chinese Mainland, will go. But we do expect that as we continue to add more and more supply at least, yes, there will be -- likely be a continued normalization of yields.

Lavinia, if I may stay with you. After addressing passenger yields, there's another group of questions on cargo, obviously. So perhaps can you shed more colors on the outlook on the cargo rates and also whether we have any views or comments on the potential tariffs that may affect the trade coming up.

Thanks for the question. I think cargo yields were very robust in 2024, especially during the peak season. I think it was a good surprise or a nice surprise to us. At this point, when we look at the overall market demand, we still see it being pretty strong. So of course, we have just passed through the peak. So traditionally, we'll be a little bit quiet in -- when we start the new year. But otherwise, I think there's no indication that the demand for cargo, especially for e-commerce goods will subside at this point. As to tariff, of course, I think we are watching it really, really very closely. I think our sales team keep talking to all the key shippers and forwarders almost everyday just to ensure that we get the latest market insight. As of now, no one really have a crystal ball. It seems the consensus is that there will be an increase. But to what magnitude and in terms of time frame, there's no -- no one really knows. So as Rebecca also just mentioned, I think what we can do is to control what we can control. We'll continue to keep a close look at the market. And whereas in our back pocket, we'll also have different plan Bs looking at, well, if there's a network change, if the source country is different, how can we redeploy our resources in a very agile manner in order to capture the market. But -- so that is what we are doing, but as of this -- as of now, I think there's no particular change in the market which suggests that we need to be overly concerned.

Next question on currency from Bloomberg Intelligence. So Rebecca, if I may. So the Chinese yuan has been weakening and is becoming closer to par with the Hong Kong dollar. What impact might this have on business? And is this material, considering potentially stronger cargo exports offset by weaker Chinese outbound travel? Presumably, renminbi cash and renminbi liabilities are less material.

Thank you for the question. I can guess who raised that. Of course, some of the answer to that, I can't really share specific details. Yes, renminbi is a currency that we're obviously generating a fair bit of revenue in and we have a reasonable number of cost in. So it's something we will be monitoring, as we do with all our currencies. So in terms of foreign exchange, we do, do a smaller amount of hedging in order to help mitigate the currency exposure we have. And as I say, specifically for renminbi, we have costs as well as revenues in that currency. But in terms of specific details, I can't really share too much more.

All right. A question on our people. So does the 30,000 year-end employee number indicate a better-than-expected hiring campaign? From Bloomberg Intelligence, saying that they believe in August, the presentation showed 29,000 staff target.

I can comment and then Lavinia can add. I think we haven't been -- or met the objectives we set ourselves for recruitment. I think it has been positive and probably has achieved slightly more than we anticipated overall. I think it's been a good sign. We've done -- I mean, 2024 was a huge year for us in terms of recruitment and the teams have worked hard to succeed in delivering that, both recruitment, training, promotions for people in different ranks, et cetera, et cetera. So yes, 2024, I would say, has been a positive year for us in terms of achieving our goals to resource the capacity we want to be able to deliver.

Okay. Next question is about HK Express, so coming from JPMorgan. The question is, how many of the HKE's GTF engine aircraft are parked now, and when will they resume operation?