Cathay Pacific Orders 25 Planes After Tripling Annual Profit

 Mar 9, 2011 9:57 AM GMT+040t

Cathay Pacific Airways Ltd. posted full-year net income of HK$14 billion, according to a statement to the Hong Kong stock exchange today. Photographer: Nelson Ching/Bloomberg

Cathay Pacific Airways Ltd. (293) ordered 25 widebody planes, boosting its total backlog to $24 billion at list prices, after almost tripling annual profit on China travel and cargo demand.

The carrier agreed to buy 15 Airbus SAS A330-300s and 10Boeing Co. (BA) 777-300ERs, it said in a press release today. It also announced plans to lease two A350-900s. Net income jumped to HK$14 billion ($1.8 billion) last year from HK$4.7 billion a year earlier, it said separately.

Cathay said it may also buy another 14 planes, without elaboration, even as incoming Chief Executive Officer John Slosar oversees an 11 percent expansion in passenger capacity this year on China and Asia travel. The carrier’s hometown rival Hong Kong Airlines yesterday agreed to order 38 Boeing planes.

“Cathay needs to renew its fleet and further expand,” said Jim Wong, a Nomura Holdings Inc. analyst in Hong Kong. “Demand is still very strong, but people are concerned about the fuel prices.”

The airline, Hong Kong’s biggest, rose as much as 5.2 percent, the most in almost four months. It was up 4.2 percent at HK$18.88 at 1:43 p.m., the best performance in the benchmark Hang Seng Index. (HSI)

Air China Stake

The carrier’s 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 Hong Kong-based cargo handler and a plane-maintenance company.

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. Sales climbed 34 percent to HK$89.5 billion. Cathay in November said that full-year net income would be at least HK$12.5 billion.

The 27 new planes announced today will be handed over by the end of 2015, Cathay said. 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, it said.

Passenger numbers, including at unit Hong Kong Dragon Airlines Ltd., jumped 9.1 percent to 26.8 million last year 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 yields surged 25 percent.

“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 this year on China exports.”

Fuel Prices

Cathay may face slower demand this year as China tightens lending and oil trades near its highest since 2008. The carrier’s fuel costs, excluding hedging, rose 40 percent last year because of higher oil prices and expanded operations, the airline said. Fuel accounted for 36 percent of costs, it said.

Fuel prices are now higher than was expected at the beginning of the year, the airline said. Oil prices could damp economic growth and travel demand, it said.

“The airline industry is challenging and unpredictable,” Chairman Christopher Pratt said in the statement.

Worldwide airline earnings may fall almost 50 percent this year because of rising oil prices and a slowdown in trade, the International Air Transport Association said March 2, cutting an earlier forecast.

The airline group also raised its average Brent crude price prediction to $96 a barrel from $84 on political unrest in the Middle East and North Africa. That would cost carriers an extra $10 billion, it said.