Despite a flurry of 'buy' ratings, the airline continues to face threats both old and new
The share price of Hong Kong's flagship carrier has flown into enough heavy turbulence in recent years, yet in the face of economic meltdown, terrorism, industrial action, war and disease, Cathay Pacific Airways has always exhibited remarkable powers of recovery.
The Sars outbreak hammered the airline's revenues, but, as it has done before, Cathay bounced back quickly. Passenger numbers reached 83.6 per cent last month, up 1.5 per cent year on year.
The airline's rebound has led many brokerages to issue 'buy' ratings on Cathay, sending its share price skywards in the past few weeks, a momentum continued yesterday as it jumped 2.05 per cent to close at $12.40.
With Hong Kong equities likely to gain significantly until the year-end, many analysts expect the stock to continue gliding higher, but closer inspection of the weathervane suggests more than a few gathering storm clouds could darken Cathay's clear horizons.
Sentiment on the company was considerably bolstered by Cathay's July passenger numbers, but, as UBS aviation analyst Tim Ross observes, they were preceded by four or five discount schemes aimed at getting people to fly again.
Resurgent demand has meant that airlines are rushing capacity back to pre-Sars levels, but Mr Ross said this could give shareholders a bumpy ride come the fourth quarter when all the discounts ran out. 'It's going to mean more seats chasing bums at higher prices ... something's got to give.'
