Cathay Pacific Airways (CPCAY), a Hong Kong carrier, has projected a sharp rise in first-half profit as strong passenger and cargo demand helped offset pressure from higher oil prices linked to the Iran conflict. The company expects net income of between HK$6 billion ($765 million) and HK$6.5 billion, which would represent its second-highest first-half result and compare with approximately HK$3.7 billion a year earlier. Cathay Pacific shares climbed as much as 3% following the announcement, marking the stock's strongest intraday advance in two weeks.
Cathay Pacific's earnings are also expected to include a HK$1.4 billion gain from the further dilution of its holding in Air China, an airline in which Cathay's stake declined from 15.05% to 12.85%. Passenger volumes increased 17.5% from a year earlier to 16 million customers between January and June, supported partly by travelers avoiding disrupted routes through the Gulf and selecting alternative carriers. This rerouted demand appears to have positioned Cathay Pacific as one of the larger beneficiaries of Middle Eastern travel disruption during the period.
Higher jet fuel costs could still weigh on the carrier's operating performance, although Cathay Pacific has hedged 30% of its fuel requirements and introduced fuel surcharges for passenger and cargo services. HSBC Holdings, a banking and financial-services group, analyst Parash Jain expects the airline's cargo division to show strength as freight volumes benefit from artificial-intelligence-related shipments. Investors may view the combination of rising passenger traffic, stronger cargo activity and partial fuel-price protection as supportive for earnings, while elevated energy costs remain an important risk to monitor.