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<Research> BNP Paribas Downgrades CATHAY PACIFIC (00293.HK) to 'Neutral', Expects Negative Impact on 2H Demand from Fuel Surcharge Increase
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BNP Paribas published a research report indicating that CATHAY PACIFIC (00293.HK) raised its fuel surcharge twice in March to cope with soaring fuel costs. The long-haul route fuel surcharge increased from HKD569 to HKD1,560, equivalent to approximately HKD0.09 per available seat kilometer (HKD/ASK), resulting in about a 15% increase in ticket prices for Cathay's top eight long-haul routes, which account for approximately 40% of total capacity. However, the bank's calculations show that considering the group's disclosure of about 30% fuel hedging, the price increase can only offset about 70% of the March jet fuel price increase (approximately HKD0.12 per available seat kilometer). Therefore, it is expected that Cathay will face profit pressure later this year in a high oil price environment. The bank forecasts that the average jet fuel price will be USD140 per barrel in 2026, compared to USD86 in the second half of last year, and expects it to gradually normalize to around USD80 from the second half of 2027 following oil price trends. Although air traffic in the Middle East is disrupted, some demand from Asia to Europe may transit through Hong Kong, which is a short-term positive for Cathay. However, the increase in fuel surcharge will negatively impact demand and load factors starting from the second half of 2026. Based on the updated oil price forecast, the bank has lowered Cathay's earnings forecast for this year and next by 13% and 5% to HKD7.5 billion and HKD8.9 billion, respectively. The target price has been reduced by 18% from HKD13.1 to HKD10.7, and the rating has been downgraded from 'Outperform' to 'Neutral', with downside risks to valuation. (hc/da) This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. Auto-translated by AI AASTOCKS Financial News |
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