{"text":[[{"start":10.79,"text":"Three years after grounding to a virtual halt, long-haul flights that are the mainstay at Hong Kong International Airport have returned to pre-pandemic levels. That’s signaling the completion of a comeback for Cathay Pacific Airways Ltd. (0293.HK), the city’s flagship carrier, after a difficult period that saw its business nosedive."}],[{"start":36.08,"text":"Full-year results issued by the company last week show that Cathay has largely completed its post-pandemic recovery. But while that turbulence has subsided, new bumpy air still lies ahead as fare premiums gradually fade and the company’s low-cost carrier (LCC) business continues losing money. That’s causing investors to start focusing on the next critical question, namely, can Cathay sustain its profit growth in the current atmosphere of more normal competition?"}],[{"start":67.32,"text":"The company’s latest annual financial report looks impressive. Cathay recorded revenue of HK$117 billion ($14.9 billion) in 2025, up 11.9% from 2024. Its profit reached HK$10.83 billion, up 9.5% from HK$9.89 billion in 2024, marking the third consecutive year it recorded annual profits of around HK$10 billion."}],[{"start":100.6,"text":"The rising profits are partly the result of significant improvements to the company's finances. Its net borrowings decreased to HK$46.8 billion during the year, down 19.2% from 2024. Its net debt-to-equity ratio also fell from 1.1 times to 0.78 times, showing Cathay is gradually reducing the high debt it accumulated during the pandemic. For capital-intensive industries such as airlines, this improvement holds greater significance than simple profit growth."}],[{"start":138.89999999999998,"text":"Its passenger business is the primary contributor for Cathay, considered one of Asia’s leading airlines that frequently ranks near the top of its class. The company’s revenue passengers carried jumped by 26.5% year-over-year to 28.9 million last year. Its passenger load factor increased to 85.2%, improving from 83.2% the previous year. Those improvements helped to lift Cathay’s passenger revenue by 15.8% to HK$72.5 billion last year. The company added 20 new destinations in 2025, extending its route network to over 100 cities globally."}],[{"start":182.72999999999996,"text":"Receding premiums fares"}],[{"start":185.80999999999997,"text":"While most of the signals looked positive, the report also revealed a more ominous signal in diminishing fare premiums post-pandemic. Cathay's passenger yield declined by 10.3% year-over-year in 2025, while passenger revenue per available seat kilometer also decreased by 8%. Those declines reflect a wider trend for the global airline industry, whereby high fares that resulted from short supply during the pandemic are decreasing as capacity gets restored."}],[{"start":220.49999999999997,"text":"Meantime, data on Cathay’s cargo business reveals a different structural shift. The company’s cargo revenue increased just 1.2% to HK$24.28 billion last year, while its cargo yield actually fell by 4.6%. Against a backdrop of slowing cross-border e-commerce growth and heightened global trade uncertainty, management highlighted that high-tech products and AI-related equipment are becoming new drivers for its cargo operations."}],[{"start":252.89,"text":"Things were looking similarly bumpy for Cathay's low-cost subsidiary, HK Express, whose loss of HK$996 million last year was significantly higher than the HK$204 million loss for 2024. The company blamed the widening loss on its launch of several new routes, which require time to become profitable, and the grounding of some A320neo aircraft due to issues with their Pratt & Whitney engines. Management said the low-cost carrier still has strong potential, adding that operational data from early 2026 is already showing signs of improvement."}],[{"start":292.62,"text":"As its recovery winds down, the company has resumed much of its normal spending. It said it’s committed to investing over HK$100 billion for fleet modernization, cabin upgrades, and digitalization. Last August, Cathay further exercised purchase rights to acquire an additional 14 Boeing 777-9 aircraft, increasing its total order book for the model to 35 units. By year-end, Cathay had more than 100 new aircraft awaiting delivery. As those arrive, management forecast the company’s passenger capacity will increase by about 10% this year."}],[{"start":333.21000000000004,"text":"Boeing’s next-generation 777-9 aircraft are scheduled to enter service in Cathay’s fleet next year, giving the company a new first-class product. Some A330 aircraft operating on regional routes will also introduce flat-bed business class seats. Such investments are aimed at reinforcing Cathay's competitiveness in the premium long-haul market, since premium cabin passengers are typically the most profitable for most airlines."}],[{"start":361.40000000000003,"text":"Oil price volatility"}],[{"start":364.98,"text":"While most factors surrounding its business are relatively controllable, a major factor outside that perimeter stems from the volatile energy market. The recent conflict in the Middle East has intensified volatility in international oil prices, sending them to levels not seen since 2022. That’s causing headaches for airlines, since jet fuel typically accounts for about 30% of their operating costs, meaning their profits will get squeezed if prices remain elevated or continue to rise."}],[{"start":399.72,"text":"Citigroup noted that Cathay has currently hedged only approximately 30% of its anticipated 2026 fuel requirements at an average price equivalent to about $70 per barrel for Brent crude oil. The bank is bearish on the airline’s stock, maintaining a “sell” rating with a target price of HK$11.20 – about 11% lower than its Tuesday close of HK$12.62."}],[{"start":431.17,"text":"Despite facing headwinds from high oil prices and geopolitical risks, Cathay Pacific's shares are only down slightly over the past month. That’s notably better than some international peers. Over the same time, shares of Germany’s Lufthansa (LHA.DE) are down about 9%, while Singapore Airlines (C6L.SI) shares are also down about 4%. Cathay is between those two peers in terms of valuation, with its forward price-to-earnings (P/E) ratio of around 9.2 positioned between Lufthansa's 7.3 and Singapore Airlines' 17.5."}],[{"start":469.75,"text":"The substantial improvement of Cathay’s finances, combined with the gradual restoration of Hong Kong's status as a regional aviation hub, should help to provide some support for the company’s shares over the medium to longer haul. Still, declining fare yields and volatile oil prices could present some short-term earnings turbulence not just for Cathay, but also the entire airline industry. That means short-term investors may want to adopt a wait-and-see strategy until the outlook for oil prices and geopolitical risks becomes clearer."}],[{"start":516.27,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1773822417_1269.mp3"}