Hong Kong's Cathay Pacific to report H1 net profit up 23-41
They noted, however, that Cathay's results may be weighed down somewhat by the weak performance of its cargo business.
Cathay Pacific increased its stake in Air China to the current level of 17.64 pct from 10 pct following a complex five-party agreement in June last year which provided for Cathay to acquire the remaining 82.21 pct of regional carrier Dragonair.
Morgan Stanley said in a research report that it expects Cathay to report first-half net profit of 2.36 bln hkd, up 41 pct year-on-year, driven by the full benefits of the integration into its operations of Dragonair and the earnings contribution that it received for its minority interest in Air China.
"The first half traffic performance continued to underscore a strong passenger market due to tight capacity, particularly for the premium travel market," the US investment house said.
"The extremely tight capacity and reduced threat from Gulf carriers launching aggressive capacity to the Asia/Pacific market will keep passenger yields firm this year despite declining fuel surcharges," Morgan Stanley said.
Meanwhile, Merrill Lynch estimated Cathay's first half earnings to come in at 2.05 bln hkd, up 23 pct from the same period last year.
"We believe that Cathay has already begun to extract significant revenue and cost synergies from its stake (in Dragonair), while a downsizing by mainland airlines of their Hong Kong routes will also have helped," it said.
"This should help drive pricing higher and push net income to a record 5.5 bln hkd in the full year," it said.