Cathay Pacific outlook: HK Express & runway 3 are golden opportunities
Hong Kong's aviation market is approaching an important juncture as Cathay Pacific prepares to acquire the low cost airline HK Express and starts to consider long term options for expansion following the 2024 opening of a third runway.
HK Express will increase Cathay's share of seat capacity in Hong Kong from approximately 45% to 50% and finally give one of Asia's largest airline groups a play in the faster growing bottom end of the region's booming aviation market. Cathay is poised to become the 17th full service airline in Asia Pacific with an LCC subsidiary but is not late to the game in terms of the Hong Kong market, which has an LCC penetration rate of only 12%.
Cathay Pacific is in the last year of a three-year transformation programme that has already resulted in a financial turnaround. Driven by significant yield improvements, the airline group was back in the black in 2018 after two years of losses.
Cathay Pacific has been able to grow revenues despite slot constraints by improving yields and pursuing long haul expansion. Regional capacity is also growing, albeit modestly, through upgauging.
The third runway will open up a new wave of regional growth opportunities - at both the full service and low cost ends of the market - as well as the possibility of introducing smaller aircraft. Cathay is considering taking advantage of the third runway to expand its fleet by approximately 50% - or 100 aircraft excluding HK Express - and could place a new batch of aircraft orders as early as this year.
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