Analysts Briefing 24 June 2016 Cathay Pacific Airways Limited
Operating performance - overview Challenging business environment. Load factor lower than expectations on weakening passenger demand. Strong competition puts pressure on yields. Premium demand particularly weak. Cargo yields under intense pressure due to overcapacity in the market. Lower net fuel costs, but significant hedging losses. Solid performance from our share in associate companies, but impacted by RMB volatility.
Passenger Services
Operating performance - Passenger Increased capacity (ASK) Introduction of the Madrid route in June. Softening passenger load factor Weakening back-end demand. Front-end particularly weak. Yield under pressure Suspension of passenger fuel surcharge collection from February 2016. Strong competition. Increased proportion of connecting traffic. Lower corporate travel. Year to May 2016 Year to May 2015 % Var ASK Million 60,510 57,937 +4.4 Passengers carried 000 14,628 14,219 +2.9 Passenger load factor % 84.3 85.6-1.3pt
Passenger Load Factors 90.0% 88.0% 86.0% 84.0% 82.0% 80.0% 78.0% 76.0% 74.0% 72.0% 70.0% JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2013 2014 2015 2016
Operating performance Regions Europe ASK: +7.7% LF: -1.4%pt North Asia ASK: +2.4% LF: -1.5%pt North America ASK: +6.8% LF: -3.6%pt India, Middle East, Pakistan & Sri Lanka ASK: -4.4% LF: -2.6%pt Southeast Asia ASK: +4.4% LF: +2.3%pt Southwest Pacific & South Africa ASK: +4.0% LF: -0.3%pt
Network Development 2016 Mar May June Seasonal increase of one additional flight per week on the Sapporo route Seasonal increase of frequency on the Boston route to a 5-times-weekly service Introduced a 4-times-weekly service to Madrid
Cargo Services
Operating performance Cargo Weak demand Slower start compared to 2015, which benefited from industrial action on the west coast of the US. Modest capacity growth Reduced load factor Yields under pressure Strong competition. Suspension of cargo fuel surcharge collection from April 2016. Over-capacity in the air cargo market. More 6 th Freedom traffic. Year to May 2016 Year to May 2015 % Var Cargo capacity (ATK) Million 12,414 12,147 +2.2 Cargo & mail carried Cargo & mail load factor 000 tonnes 715 727-1.7 % 61.8 64.3-2.6pt
Operating performance Cargo Load Factors 70.0% 68.0% 66.0% 64.0% 62.0% 60.0% 58.0% 56.0% 54.0% 52.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 2014 2015 2016
Fuel
Fuel Hedging - Fuel prices 140 USD/Bbl - Brent- Daily Closing Price and 250 Day Simple Moving Average 2007 - June2016 120 100 80 60 40 20 Brent Daily Close Brent 250 Day SMA
Fuel Hedging 70% Fuel hedging coverage (as at 10 Jun 2016) 60% 50% 40% 30% 20% 10% 0% Brent (US$/barrel) Jun-Dec 2016 2017 2018 1H 2019
1-Jan-14 1-Feb-14 1-Mar-14 1-Apr-14 1-May-14 1-Jun-14 1-Jul-14 1-Aug-14 1-Sep-14 1-Oct-14 1-Nov-14 1-Dec-14 1-Jan-15 1-Feb-15 1-Mar-15 1-Apr-15 1-May-15 1-Jun-15 1-Jul-15 1-Aug-15 1-Sep-15 1-Oct-15 1-Nov-15 1-Dec-15 1-Jan-16 1-Feb-16 1-Mar-16 1-Apr-16 1-May-16 Fuel Hedging - Fuel prices USD/BBL 140.00 130.00 120.00 110.00 100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 CX Jet Cost and Calculated CX Brent Price Jet Actual Cost Calculated CX Brent Price Brent Daily Spot Note: Jet Actual Cost is net of 3 rd party handling charges Calculated CX Brent Price = Jet Actual Cost minus Crack, where Crack is assumed based on prior-month Sing Jet- Brent Crack
Revenue mix by currency YTD May-2016 FY 2015 CAD 2% JPY 4% TWD 4% GBP 4% AUD 5% EUR 5% INR 2% Others 10% RMB 16% USD 15% HKD 32% CAD JPY 2% 3% GBP 4% TWD 4% EUR 5% AUD 6% Others INR 9% 2% RMB 15% USD 16% HKD 34%
Foreign Currency Movements 8 Biggest From 1 st Jan to 31 st May 2016 From 1 st Jan to 31 st Dec 2015 From 1 st Jan to 31 st Dec 2014 RMB -0.79% -4.40% -2.42% AUD -0.94% -10.96% -8.00% EUR 2.54% -10.26% -12.10% TWD 0.66% -3.73% -5.77% GBP -1.78% -5.45% -5.97% JPY 8.87% -0.40% -12.13% INR -1.67% -4.23% -1.81% CAD 5.82% -16.10% -8.41%
Challenges Revised Scheme of Airport Charges - Upward adjustment of landing and parking charges. - In effect from September 2016. - Increase in parking charges once implemented. - Phased increase of landing charges, spread over three years. Airport Construction Fee (ACF) - To be collected on tickets issued on or after 1 August 2016. - Tiered charge based on class, distance and type of travel through HKIA.
On time performance 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Within 15 minutes (industry standard) On the dot (CX standard) 2014 2015 2016 2014 2015 2016
Fleet Profile
CX and KA Fleet Profile In operations Parked Passenger Freighter Total Passenger Freighter Total 1 Jan 2016 164 23 187-1 1 New deliveries 1-1 - - - Return to lessors - - - - - - Parked aircraft - - - - - - Deregistered (2) - (2) - - - 31 May 2016 163 23 186-1 1
CX Fleet Profile as at 31 May 2016 Aircraft type (includes parked aircraft) Owned Finance Leased Operating Leased Total A330-300 23 13 6 42 A340-300 4 1-5 A350-900 1 0 0 1 747-400 3-0 3 747-400F 4 - - 4 747-400BCF - - 1 1 747-400ERF - 6-6 747-8F 2 11-13 777-200 5 - - 5 777-300 12 - - 12 777-300ER 19 11 23 53 Total 72 42 31 145
CX Cargo Fleet Profile as at 31 May 2016 Aircraft type Number Parked In operations 747-400F 4 (1) 3 747-400ERF 6-6 747-400BCF 1-1 747-8F 13-13 Total 24 (1) 23
KA Fleet Profile as at 31 May 2016 Aircraft type Owned Finance Leased Operating Leased Total A320-200 5-10 15 A321-200 2-6 8 A330-300 10-9 19 Total 17-25 42
Aircraft Delivery & Retirement Plans Deliveries Aircraft type 2016 2017 2018 2019 2020 >2021 Total B747-8F 1 1 A350-900 11 10 21 A350-1000 6 10 10 26 B777-300ER 0 B777-9X 21 21 Total 12 10 6 10 10 21 69 Retirements B744 by end of 2016 Exit date Number Remaining 2016-3 0 A340 - by end of 2016 Exit date Number Remaining 2016-3 4 2017-4 0
Subsidiaries & Associates
Associates Air China Cathay Pacific has a 20.13% interest in Air China. Robust performance from Air China in 2016 compared to the same period in 2015. Results may be impacted by the weakening RMB. We account for Air China s results three months in arrears. Air China Cargo Results may be impacted by the weakening RMB. Yields under pressure. Strong competition in the air cargo market.
Major Subsidiaries AHK Air Hong Kong Capacity and load factor increased marginally. Performance largely in line with expectations. Cathay Pacific Catering Services Increase in the number of meals produced. Performance impacted by increased costs. Expanded facility with additional capacity expected to be operational in Q4 2016. Asia Miles Membership has exceeded 8 million worldwide. Increased business volume compared to 2015. Cathay Pacific Services Limited (Cargo Terminal) Addition of new aviation customers in 2016. Tighter management of operating costs.
Developments
Airbus A350-900 June 2016
The Pier Business Class Lounge Reopened June 2016
Vancouver lounges Opened May 2016
Branding Cathay Dragon Travel Retail Platform Introduced to Japan, Indonesia & Taiwan Self Service bag drop In use at HKIA from April
2016 Outlook The challenging business environment is expected to continue. Back-end and front-end to remain weak. Lower Hong Kong traffic with more 6 th Freedom travel. Corporate travel expected to remain slack. Cargo tonnage has stabilised, but yields continue to be under intense pressure. Solid performance expected from Air China, with other subsidiaries and associates impacted by the declining market. Focus on operational efficiencies and productivity improvements.
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