InvestIdeas

Not logical. Business travel is down and so is leisure travel..

Cathay Pacific shares surge 30pc

Cathay Pacific Airways (0293), Hong Kong's largest carrier, surged the most in 18 years in the city.

The shares gained 30 percent to HK$9.20 at the close of trading, the biggest rise since March 21, 1990, according to data compiled by Bloomberg.

BLOOMBERG

actually, there is another resistant at 8.83 (where the tenkan sen is)

see if it goes down tomorrow.

Cathay Pacific warns of disappointing 2008 result

Cathay Pacific warned on Wednesday that potential fuel hedging losses of about HK$2.8 billion would contribute to ``disappointing'' results for 2008, as Hong Kong's largest carrier grappled with volatile markets.

The hedging losses were estimated on a mark-to-market basis as of October 31 and are not actual, realized cash losses, the company stressed.

Aviation analysts have warned that Asian airlines will fail as tourism in the region slows and a worsening global economic outlook leads carriers such as Singapore Airlines to cut back flights.

The rapid drop in the jet fuel price has caused mark-to- market losses to be incurred on certain fuel hedging contracts, Cathay said in the statement.

REUTERS

SHANGHAI - Air China Ltd. has received central government approval to raise its stake in Cathay Pacific Airways Ltd. , an official newspaper reported on Friday, paying about US$693 million to double its 10 percent stake.

Demand drop hinders takeoff for Cathay shares by Dr. Check

Cathay Pacific (0293) is one of the world's best airlines. But it warned last week that its full-year profit would be disappointing due to slumping revenue and losses from fuel hedging.

The airline's fuel-hedging contracts that run through 2011 had an estimated mark- to-market loss of HK$2.8 billion at the end of October. The contracts were meant to protect against surging oil prices which reached a record US$147 a barrel in July.

But oil is now around US$60. The unrealized loss is reasonable and stockholders should not blame the company.

Every airline should use oil derivatives to hedge fuel costs. Actually, Cathay has successfully used hedging contracts to counter rising fuel costs. From 2003 to the first half of 2008, it made a profit of around HK$3.4 billion through hedging.

Second, Cathay did not over-hedge. Based on an average price of US$132 per barrel, the company's jet fuel costs are expected to be about HK$40 billion this year. A mark-to-market loss of HK$2.8 billion only accounts for 7 percent of the total jet fuel cost. The day after the profit warning, Cathay shares plunged 14 percent to HK$8.08. I would say the market overreacted.

Actually, we should focus more on the carrier's weaker revenue projection as demand from first-class and business-class travelers falls. The number of Cathay and Dragonair passengers dropped from 2.13 million in August to 1.88 million in September.

Passenger numbers in September were down 0.7 percent from a year earlier.

Cathay closed at HK$8 yesterday - an historical price earnings ratio of 4.5 times. Citibank expects the company to incur a loss of HK$ 4.96 billion in 2008. Goldman Sachs set a target price at HK$7.

It looks like we need to wait before going bargain hunting.

The same applies for SIA. If I remember correctly, they hedged their fuel at around $120 crude price.

January 7, 2009, 7.45 pm (Singapore time)

Cathay Pacific books US$974 mln loss over oil hedging

HONG KONG - Cathay Pacific airline said on Wednesday it would include a write-down of HK$7.6 billion (US$974 million) in its 2008 results due to potential losses on oil hedging contracts.

The Hong Kong carrier said in a statement to the Hong Kong stock exchange that the provision increased from HK$2.8 billion in October as the oil price continued to decline.

It added that weakening customer demand would also hit its year-end results, which it expected to be 'disappointing'.

'Since (November) revenue has continued to weaken. First and business class traffic in particular have fallen significantly,' the statement said.

'This decline and the impact of currency movements have caused a weakening of passenger yields. Advance bookings for the first quarter of 2009 are markedly down on the same period in 2008.'

The statement added that the air cargo market out of Hong Kong and mainland China was also struggling.

Cathay said the potential oil hedge loss was booked after the prices tumbled 69 per cent between July and the end of the year, although it said its realised losses so far were only HK$300 million.

Fuel hedging contracts were taken out to counter the high cost of oil earlier in the year.

Cathay Pacific said last month its passenger and cargo traffic continued to drop in November as global demand was hit by the dire economic environment. -- AFP

January 13, 2009, 5.21 pm (Singapore time)

Cathay passenger, cargo figures drop again in December

HONG KONG - Cathay Pacific suffered a 0.3 per cent year-on-year drop in passengers in December, company figures released on Tuesday showed, as the global slowdown piled further pressure on the Hong Kong carrier.

Combined figures for Cathay and Dragonair fell to 2.11 million in the final month of 2008, following a 2.2 per cent year-on-year drop in November.

Airlines have been particularly hit by a cut in business and first class travel during the ongoing slowdown.

The two airlines carried a total of 115,232 tonnes of cargo and mail in December, down 23.9 per cent compared with December 2007.

For the year as a whole, passenger numbers increased 7.3 per cent while cargo and mail fell 1.6 per cent.

Cathay Pacific's revenue manager Tom Owen said the apparently reasonable performance in passenger numbers in December had followed aggressive measures to boost ticket sales.

'Chasing the available economy cabin demand however, coupled with the continued slump in premium traffic and weak Hong Kong route demand, led to lower yields per ticket - and we expect a similar situation for Chinese New Year,' he said in a statement.

'Meanwhile, the premium cabin performance continues to grind downwards.'

Last week, Cathay said it would include a write-down of HK$7.6 billion (US$974 million) in its 2008 results due to potential losses on oil hedging contracts. -- AFP

DJ MARKET TALK:Cathay Pac FY08 Loss "Not That Bad" -Credit Suisse

1421 [Dow Jones] STOCK CALL: Cathay Pacific's (0293.HK) FY08 loss of HK$8.6 billion is "not that bad," Credit Suisse says, despite coming in worse than house's forecast for HK$7.0 billion loss. Notes carrier managed to break even in 2H08, excluding exceptional items. Says yields also came in better than expected.

However, notes management says operating environment deteriorated further in first two months of year. "We think CX is in a disadvantaged position, due to its status as a premium carrier, net short in USD operationally (the USD has been strengthening), high exposure in the weaker cargo segment (28% FY08 revenue) and significant fuel hedging (less benefit from falling oil prices).

" Notes up to February, carrier incurred another HK$1.9 billion unrealized fuel-hedging loss. Puts estimates under review; currently rates Neutral, target HK$8.20. Shares up 2.4% at HK$7.62.

July 13, 2009, 6.41 pm (Singapore time)

Cathay passenger, cargo figures slide due to H1N1

HONG KONG - Cathay Pacific suffered a 18.1 per cent year-on-year drop in passenger numbers in June, the company said on Monday, as the H1N1 outbreak has severely dampened appetite for travelling.

Combined passenger figures for the Hong Kong carrier and its affiliate Dragonair fell to 1.74 million last month, compared with June last year, the airline said in a statement.

For the year to date, the number of passengers carried has fallen 4.2 per cent.

The drop in cargo traffic last month was the sharpest this year, the statement said. The two airlines carried a total of 124,000 tonnes of cargo and mail in June, down 10 per cent from the same month last year.

Tonnage has fallen 15.4 per cent for the year to date.

Tom Owen, Cathay's general manager for revenue management, said the figures in June were depressed by the ongoing economic downturn and the reluctance of passengers to fly because of the H1N1 outbreak.

'The H1N1 situation had a particularly severe impact in our largest market, Hong Kong, and within the region, especially on Japanese routes,' he said in the statement.

'Aggressive competition for Economy Class passengers in all markets continued to provide very few opportunities for sustainable yield improvement,' he added.

More than 1,200 cases of H1N1 flu were reported in Hong Kong, while Japan's tally of cases topped 2,000 last week. But no death has been reported in either. -- AFP