UBS: CATHAY PAC AIR (00293) is expected to raise fuel surcharges again only partially easing cost pressures, maintaining a "buy" rating.

UBS released a research report stating that CATHAY PAC AIR (00293) will once again increase fuel surcharges starting from April 1, with an increase of about 34%, accumulating by 174% compared to the level before the Iran conflict at the end of February. The bank estimates that the cumulative increase will lead to an approximately 11% rise in average ticket prices compared to pre-conflict levels. It maintains a "buy" rating with a target price of 14.9 Hong Kong dollars. The bank pointed out that although adjusting ticket prices is a more effective leverage to offset cost pressures, it estimates that under unchanged conditions, for every 1% increase in ticket prices, it can only offset the impact of a $3.7 rise in fuel prices on profitability. Therefore, the current fuel surcharge mechanism can only partially alleviate cost pressures. In addition, whether the company can transfer profit pressure will depend on the price elasticity of flight demand, with leisure passengers who are sensitive to prices often experiencing larger revenue declines.