UBS: Cathay Pacific's March passenger demand is strong but fuel costs have surged, maintaining a "buy" rating.

UBS released a research report stating that both passenger and freight demand for Cathay Pacific Airlines rebounded strongly in March this year. Benefiting from the disturbance in the Middle East situation, Cathay Pacific's passenger revenue per kilometer increased by 22% year-on-year, significantly higher than the 9% capacity growth, driving passenger load factor to a historical high of 92.2%. Management expects demand to remain strong in April, supported by increased bookings for Easter holiday travel and long-haul routes. Despite strong demand for passenger and cargo transportation, aircraft fuel prices have soared, rising from $99.4 per barrel at the end of February to $197.8 per barrel in early April. To alleviate cost pressures, the company has raised fuel surcharges and plans to reduce flights from mid-May to the end of June, with capacity reductions of 2% for Cathay Pacific and 6% for Cathay Dragon. The bank believes that these measures can only partially offset the cost pressures brought by the rising fuel prices, and short-term profits still face headwinds. However, UBS believes that Cathay Pacific is relatively well-positioned among airlines in the Asia-Pacific region, with strong pricing power as a full-service airline, and its related business accounts for about 62% of the group's revenue in 2025. The bank has set a target price of HK$14.9 for Cathay Pacific and maintains a "buy" rating.