Cathay Pacific announces $13 billion investment to 'become the world's best again'

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Cathay Pacific has said it will spend $13 billion over seven years on new planes, airport lounges and cabin renovations as it tries to restore its pandemic-battered reputation and regain its crown as the world’s premium airline.

Patrick Healy, chairman of Hong Kong’s flagship carrier, said it was “turning the page” with “bold” plans to invest more than HK$100 billion (US$12.8 billion) in its fleet, cabins and airport lounges in Hong Kong, Beijing and New York, as well as other improvements.

Cathay Airlines announced Wednesday the purchase of 30 Airbus widebody aircraft and now has more than 100 new planes in the pipeline. It plans to launch first-class seat upgrades in 2025 and a new flat-bed business class product in 2026.

“We want to get back to being the best in the world,” Healy said. “And that requires investment. We need to invest in customer products, in the fleet … to be able to maintain the premium pricing position that we enjoy.”

He added that the carrier was “confident” that continued results would be “sufficient to fund the investment programme”.

Cathay has been ranked the world’s best airline four times by consultancy Skytrax, most recently in 2014. It was ranked the world’s fifth best airline this year.

The carrier reported first-half profit of HK$3.6 billion (US$460 million) on Wednesday, down from HK$4.3 billion a year earlier. It attributed the decline mainly to lower ticket prices despite “robust” demand for travel.

Cathay, which declared an interim dividend of 20 Hong Kong cents per ordinary share, said it was on track for a full recovery of passenger capacity after the pandemic by the first quarter of next year. Its shares in Hong Kong closed down 2.4%.

Demand for business travel, particularly on routes from the United States to Hong Kong and mainland China, as well as leisure travel from its home market in Hong Kong, was strong, the carrier said. But passenger yield – a measure of profitability – declined as flights were added.

This is the second consecutive year that Cathay has posted a first-half profit, following three straight years of losses due to the coronavirus pandemic and strict quarantine measures in Hong Kong. The airline is on the road to recovery after the pilot exodus and the effects of the pandemic tarnished its reputation.

The airline is also under pressure from the Hong Kong government to increase capacity and service quality, with a third runway set to be completed this year at its home base. Growing Cathay’s international network would help strengthen Hong Kong’s status as a global aviation hub.

Rival Singapore Airlines reported a profit increase to S$2.7 billion (US$2 billion) in May for its financial year ended March. But in recent weeks, global airlines have warned of downward pressure on ticket prices as a two-year surge in travel after reopening shows signs of slowing.

Mr Healy said the drop in airfares had so far been “fairly benign” and “manageable” in terms of the impact on profits. Cathay Chief Executive Ronald Lam added that short-haul prices had fallen faster than long-haul ones, but that ticket prices and revenues for this summer were still “satisfactory”.

JPMorgan analyst Karen Li wrote in a note last month that Cathay was benefiting from “healthy leisure (and) business demand” as well as passengers transiting through Hong Kong to and from mainland China.