Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

Equity Bottom-Up

Cathay Pacific Airways / Equity Bottom-Up

<ul>
<li>Cathay Pacific's strong end to 2023 has been well flagged but we think expectations are too low for 2024.</li>
<li>ANA, JAL and Korean Air have each seen unit pax revenue momentum accelerate into calendar 4Q23 which bodes well for 2024 prospects, particularly as manpower challenges slow capacity restoration.</li>
<li>Our 2024 EBITDAR is 5% ahead of consensus while we are 11% ahead at the net income level.</li>
</ul>


Cathay Pacific's strong end to 2023 has been well flagged but we think expectations are too low for 2024.
ANA, JAL and Korean Air have each seen unit pax revenue momentum accelerate into calendar 4Q23 which bodes well for 2024 prospects, particularly as manpower challenges slow capacity restoration.
Our 2024 EBITDAR is 5% ahead of consensus while we are 11% ahead at the net income level.


Cathay Pacific – Strong Pax Momentum Suggests 2024 Can Outperform Expectations

Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

<ul>
<li>All positives from management: strong demand, loads and yields strong, cargo improving, costs are high but can cope, big profits coming but have to redeem preference shares  </li>
<li>The near-term future is a golden runaway for Cathay Pacific. All the parameters are in the right place and we think this will persist until 1H-2024 at the very least </li>
<li>Cathay Pacific is a value <strong>BUY</strong>, our target price of HK$9.90 (+21% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival <a href="https://www.smartkarma.com/entities/singapore-airlines-ltd" target="_blank" data-smartkarma-citation="entities:74:1" rel="noopener">Singapore Airlines (SIA SP)</a>. </li>
</ul>


All positives from management: strong demand, loads and yields strong, cargo improving, costs are high but can cope, big profits coming but have to redeem preference shares  
The near-term future is a golden runaway for Cathay Pacific. All the parameters are in the right place and we think this will persist until 1H-2024 at the very least 
Cathay Pacific is a value BUY, our target price of HK$9.90 (+21% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP). 


Cathay Pacific (293 HK, BUY, TP HK$9.90): Inputs from Analyst Briefing

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

<ul>
<li>Several US customs brokers have been suspended under new, tighter rules</li>
<li>The new rules could make 'de minimis' imports slightly more difficult</li>
<li>Whether it lists in London or NYC, additional rule changes could threaten SHEIN</li>
</ul>


Several US customs brokers have been suspended under new, tighter rules
The new rules could make 'de minimis' imports slightly more difficult
Whether it lists in London or NYC, additional rule changes could threaten SHEIN


SHEIN: Several US Customs Broker Suspensions Tied to Tighter 'de Minimis' Rules

Thematic (Sector/Industry)

<ul>
<li>In aggregate, traffic among the Big-3 Chinese airlines was up 67% YoY in February and +18% vs 2019. Incontestable proof that China has regained its air travel mojo. </li>
<li>Published March schedules show total implied capacity is 31% higher YoY and 9% higher than 2019 levels. This is driven by domestic travel, international remains depressed. </li>
<li>Driven by domestic travel, international remains depressed. POSITIVE for China Eastern and other North Asian carriers that provide the missing North America link. </li>
</ul>


In aggregate, traffic among the Big-3 Chinese airlines was up 67% YoY in February and +18% vs 2019. Incontestable proof that China has regained its air travel mojo. 
Published March schedules show total implied capacity is 31% higher YoY and 9% higher than 2019 levels. This is driven by domestic travel, international remains depressed. 
Driven by domestic travel, international remains depressed. POSITIVE for China Eastern and other North Asian carriers that provide the missing North America link. 


China BIG-3 Mainland Airlines Traffic 18% Higher than 2019!

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>Speculations on <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (753 HK)</a> seeking control of <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific (293 HK)</a> reappeared recently. We think a change in CX's ownership is just a matter of time.</li>
<li>CX has been a more important profit contributor to Air China after the pandemic, and depends on pricing, Air China is expected to benefit from such acquisition.</li>
<li>Both are trading on 0.5SD below their 5-year P/B average and we prefer CX in the short term, but Air China looks to be a better long-term choice. </li>
</ul>


Speculations on Air China Ltd (753 HK) seeking control of Cathay Pacific (293 HK) reappeared recently. We think a change in CX's ownership is just a matter of time.
CX has been a more important profit contributor to Air China after the pandemic, and depends on pricing, Air China is expected to benefit from such acquisition.
Both are trading on 0.5SD below their 5-year P/B average and we prefer CX in the short term, but Air China looks to be a better long-term choice. 


Hong Kong

Cathay Pacific Airways Limited operates scheduled airline services. The Company also provides related services, including airline catering, aircraft handling, and engineering.

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Cathay Pacific Airways (293 HK)

Cathay Pacific – Strong Pax Momentum Suggests 2024 Can Outperform Expectations

Detailed analysis of Cathay Pacific's 2024 earnings prospects including pax unit revenue momentum and cost control that mirrors its North Asian peers

Neil Glynn

Cathay Pacific (293 HK, BUY, TP HK$9.90): Inputs from Analyst Briefing

Cathay Pacific analyst briefing states that passenger demand is solid, cargo is improving and cost is fairly manageable. Recovery is here and we...

Mohshin Aziz

SHEIN: Several US Customs Broker Suspensions Tied to Tighter 'de Minimis' Rules

US Customs and Border Protection has tightened the rules under which SHEIN and Temu import cheap goods into the US. As a result, six US customs...

Tracking Traffic

China BIG-3 Mainland Airlines Traffic 18% Higher than 2019!

Chinese airlines see significant increase in traffic, with domestic travel driving growth while international remains depressed. China's air...

Mohshin Aziz

Air China (753 HK): Up Stakes in CX?

With the significant improvement in profit at Cathay Pacific in FY23 and the sustained recovery in international traffic, Air China has an even...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Cathay Pacific – Strong Pax Momentum Suggests 2024 Can Outperform Expectations

Detailed analysis of Cathay Pacific's 2024 earnings prospects including pax unit revenue momentum and cost control that mirrors its North Asian peers

Neil Glynn

Cathay Pacific (293 HK, BUY, TP HK$9.90): Inputs from Analyst Briefing

​Cathay Pacific analyst briefing states that passenger demand is solid, cargo is improving and cost is fairly manageable. Recovery is here and we...

Mohshin Aziz

SHEIN: Several US Customs Broker Suspensions Tied to Tighter 'de Minimis' Rules

US Customs and Border Protection has tightened the rules under which SHEIN and Temu import cheap goods into the US. As a result, six US customs...

Tracking Traffic

China BIG-3 Mainland Airlines Traffic 18% Higher than 2019!

​Chinese airlines see significant increase in traffic, with domestic travel driving growth while international remains depressed. China's air...

Mohshin Aziz

Air China (753 HK): Up Stakes in CX?

With the significant improvement in profit at Cathay Pacific in FY23 and the sustained recovery in international traffic, Air China has an even...

Osbert Tang, CFA

Cathay Pacific analyst briefing states that passenger demand is solid, cargo is improving and cost is fairly manageable. Recovery is here and we...

Chinese airlines see significant increase in traffic, with domestic travel driving growth while international remains depressed. China's air...