Cathay Pacific 1999 Annual Report Download

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Hiroshima
Kaohsiung
Sendai
Osaka
Fukuoka
*Nagoya
*Osaka
Seoul
Taipei
Tokyo
Brussels
Dubai
Manchester
Amsterdam
*Belfast
*Edinburgh
Frankfurt
*Glasgow
Istanbul
London
Manchester
Paris
Rome
*Zurich Bahrain
Mumbai (Bombay)
Colombo
Dubai
Bangkok
Cebu
Denpasar
Hanoi
Ho Chi Minh City
Jakarta
Kuala Lumpur
Manila
Penang
Singapore
Surabaya
*Johannesburg
HONG KONG
Bandar Seri Begawan
Dhaka
Kota Kinabalu
Kuching
Phnom Penh
Phuket
Adelaide
Brisbane
Cairns
Melbourne
Perth
Sydney Auckland
*Christchurch
Beijing
Changsha
Chengdu
Chongqing
Dalian
Fuzhou
Guilin
Haikou
Chicago (freighter)
Los Angeles
New York
San Francisco
Toronto
Vancouver
Hangzhou
Kunming
Nanjing
Qingdao
Shanghai
Wuhan
Xiamen
Xian
Cathay Pacific
Dragonair
Air Hong Kong
*
Codeshare services
Contents
4 Financial and Operating Highlights
5 Chairman’s Letter
8 1999 in Review
12 Review of Operations
18 Financial Review
25 Directors and Advisers
27 Directors’ Report
31 Auditors’ Report
32 Principal Accounting Policies
35 Consolidated Profit and Loss Account
36 Consolidated Balance Sheet
37 Company Balance Sheet
38 Consolidated Cash Flow Statement
39 Statement of Recognised Gains and Losses
39 Reconciliation of Movements in
Shareholders’ Funds
40 Notes to the Accounts
62 Principal Subsidiary and
Associated Companies
64 Statistics
68 Glossary
69 Corporate and Shareholder Information
A Chinese translation of this Annual Report is
available upon request from the Company’s
Registrars.

Table of contents

  • Page 1
    ...Los Angeles New York San Francisco Toronto Vancouver HONG KONG Bahrain M um bai (Bom bay) Colom bo Dubai Bangkok Cebu Denpasar Hanoi Ho Chi M inh City Jakarta Kuala Lum pur M anila Penang Singapore Surabaya Bandar Seri Begaw an Dhaka Kota Kinabalu Kuching Phnom Penh Phuket * Johannesburg Adelaide...

  • Page 2
    Cathay Pacific Airways, based in Hong Kong, is an international airline offering scheduled passenger and cargo services to 48 cities in five continents. Cathay Pacific has a 75 percent shareholding in the all-freight carrier AHK Air Hong Kong Limited, which operates scheduled cargo services to Japan...

  • Page 3
    ... our cabin crew and airport staff; and in November we celebrated the grand opening of our new corporate headquarters, Cathay Pacific City. We made solid progress in the development of our one world global airline alliance, and successfully launched our new frequent-flyer programme, Asia Miles. The...

  • Page 4
    ...its fleet and completed its new corporate headquarters, Cathay Pacific City, at Hong Kong International Airport. The new headquarters was officially opened in November. Cathay Pacific remains committed to improving its customer service, introducing new products and supporting the Hong Kong community...

  • Page 5
    ...Taipei. • Cathay Pacific and Japan Airlines launched new codeshare services between Hong Kong and Osaka in March, and Hong Kong and Nagoya in April. The codeshare services on both routes provide a non-stop daily flight operated by Cathay Pacific. • Cathay Pacific and South African Airways signed...

  • Page 6
    ...31st December 1999. Aircraft operated by AHK. People • The Flight Training Centre, the Headland Hotel and the Dakota Club leisure complex at Cathay Pacific City were all opened during the year. • Responding to the need to improve productivity, Hong Kong ground personnel and cabin crew agreed to...

  • Page 7
    ... result of the study will lead to a number of initiatives in 2000. • All the Company's staff in Hong Kong now have access to the new desktop infrastructure GalaCXy. GalaCXy was also rolled out to a number of overseas offices during the year. CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999 11

  • Page 8
    ... through Hong Kong). one world and codeshare arrangements also helped our revenue grow th. Available seat kilometres ("ASK"), load factor and yield: ASK (m illion) 1999 1998 Change Load Factor (%) 1999 1998 Change Yield Change Europe Pacific and South Africa N orth Asia South East Asia and...

  • Page 9
    ... 90 Passenger load factor and yield % 80 H K cents 70 80 60 60 70 40 50 60 50 20 40 40 Europe Pacific and South Africa N orth Asia South East Asia and Middle East 0 30 95 96 97 98 Yield 99 95 96 97 98 99 Passenger load factor CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999 13

  • Page 10
    ... revenue. Front-end business reduced while economy class travel was boosted by "sixth-freedom" traffic to destinations such as Australia and Denpasar. The earthquake in Turkey had a negative impact on our Istanbul service. Pacific and South Africa North American routes performed well in 1999...

  • Page 11
    ... mail load factor AHK Air Hong Kong Limited ("AHK") AHK, a 75% owned subsidiary, is an all-cargo carrier with scheduled services to Brussels, Dubai, Manchester and Osaka. Its fleet consists of three B747-200 freighters leased from Cathay Pacific. The company achieved a satisfactory profit in 1999...

  • Page 12
    ...in which Cathay Pacific holds a 19% interest, is a Hong Kong-based airline operating scheduled and charter services to 25 destinations in Asia, 16 of which are in China. No new destinations were added in 1999. Services to Tianjin and Ningbo were temporarily suspended with effect from May 1999 due to...

  • Page 13
    ... n s In 1999, the company completed its A320 fleet renewal by replacing these aircraft with new A320 and A321 aircraft powered by International Aero A5 engines. Dragonair joined the Asia Miles frequent-flyer programme in September 1999. Dragonair is constructing its own headquarters building at...

  • Page 14
    .... Turnover Group 1999 1998 HK$M HK$M Cathay Pacific 1999 1998 HK$M HK$M Passenger services Cargo services Catering and other services Turnover 18,979 8,391 1,332 28,702 18,532 6,955 1,123 26,610 18,979 7,071 - 26,050 18,532 5,738 - 24,270 18 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999

  • Page 15
    ... role in the success of Cathay Pacific. The airline is amongst the largest carriers of cargo in the w orld and, to provide for future grow th, has invested heavily in new cargo facilities at Hong Kong International Airport. Cathay Pacific carries cargo in both its fleet of 56 w ide-bodied passenger...

  • Page 16
    ... as cargo and mail tonne kilometres rose by 14.3% against a slight increase of 4.3% in capacity. AHK Air Hong Kong's load factor decreased by 7.3 percentage points to 67.6% . At the Cathay Pacific company level, the increase in turnover of HK$1,780 million was a result of: HK$M Revenue load factor...

  • Page 17
    ... 1999 1998 HK$M HK$M Change Staff Inflight service and passenger expenses Landing, parking and route expenses Fuel Aircraft maintenance Aircraft depreciation and operating leases O ther depreciation and operating leases Commissions Exchange loss O thers Operating expenses N et finance charges Total...

  • Page 18
    ... Liquid funds decreased by 5.9% to HK$11,595 million as a result of aircraft acquisitions and the completion of the airline hotel, the flight training centre and other facilities at Cathay Pacific City. Net borrowings decreased by 11.7% to HK$13,216 million. The Group's shareholders' funds increased...

  • Page 19
    ... are effectively matched by the change in value of the foreign currency earnings used to make those repayments. Derivative financial instruments are used to manage the interest rate profile of the foreign currency commitments. • • CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999 23

  • Page 20
    ... sales of investments Share of profits of associated companies Total value added available for distribution A pplied as follow s: To employees - Salaries and other staff costs To government - Corporation taxes To providers of capital - Dividends - M inority interests - N et finance charges Retained...

  • Page 21
    ... joined the Swire Group in 1976. Tony Tyler, aged 44, has been Director Corporate Development since December 1996 and was previously Director Service Delivery. He is also a Director of John Swire & Sons (H.K.) Limited, Hong Kong Aircraft Engineering Company Limited, Hong Kong Dragon Airlines Limited...

  • Page 22
    ... the Company since August 1997. He is a Director of China National Aviation Corporation (Group) Limited and Hong Kong Dragon Airlines Limited. * Member of the Audit Committee Executive Officers Robert Cutler, aged 46, has been Director Service Delivery since December 1996. He joined the Swire Group...

  • Page 23
    ... 1999 which are on pages 32 to 63. Activities The Cathay Pacific Group ("the Group") is predominantly managed and controlled in Hong Kong. As well as operating scheduled airline services, the Group is engaged in other related areas, including aircraft engineering and airline catering. The airline...

  • Page 24
    ... in Cathay Pacific Catering (Holdings) Pty Limited, which operated its Australian flight kitchens, to Gate Gourmet for a consideration of HK$113 million. M ajor customers and suppliers 6.0% of sales and 16.1% of purchases during the year were attributable to the Group's five largest customers and...

  • Page 25
    ...Pacific Airways Limited or any of its associated corporations, a party to any arrangements to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999...

  • Page 26
    ... December 1999 the Company had been notified of the following interests, being 10% or more of the Company's issued share capital. These interests are in addition to those disclosed above in respect of the Directors. Remarks 1. 2. 3. 4. 5. John Swire & Sons Limited Swire Pacific Limited John Swire...

  • Page 27
    ... the Group as at 31st December 1999 and of the Group's profit and cash flows for the year then ended and have been properly prepared in accordance with the Hong Kong Companies Ordinance. KPMG Certified Public Accountants Hong Kong, 8th March 2000 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999...

  • Page 28
    ... and associated companies, at the rates ruling at the balance sheet date; and (b) for foreign currency transactions entered into during the year, at the market rates ruling at the relevant transaction dates. Exchange differences arising on the translation of foreign currencies into Hong Kong dollars...

  • Page 29
    ... reductions of obligations based on the interest rates implicit in the leases. Operating lease payments and income are charged and credited respectively to the profit and loss account on a straight line basis over the life of the related lease. CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999 33

  • Page 30
    ... actuarial valuation method. The Group profit and loss account is charged each year with actuarially determined contributions based on such valuation. 15.Frequent-flyer programme The Group operates a new frequent-flyer programme called Asia Miles through a wholly-owned subsidiary. The incremental...

  • Page 31
    ... services Cargo services Catering and other services Total turnover Expenses Staff Route Fuel Aircraft maintenance Depreciation and operating leases Commissions O thers Operating expenses Operating profit/ (loss) Finance charges Finance income N et finance charges Profit on sale of investments Share...

  • Page 32
    ... Stock Trade and other receivables Liquid funds 18 19 22,430 648 3,832 11,595 16,075 Current portion of long-term liabilities Related pledged security deposits N et current portion of long-term liabilities Trade and other payables Unearned transportation revenues Taxation Proposed dividend...

  • Page 33
    ... Stock Trade and other receivables Liquid funds 18 19 30,476 628 3,364 1,252 5,244 Current portion of long-term liabilities Related pledged security deposits N et current portion of long-term liabilities Trade and other payables Unearned transportation revenues Taxation Proposed dividend...

  • Page 34
    ... associated companies N et interest paid Dividends paid - to shareholders - to minority interests N et cash outflow from returns on investments and servicing of finance Tax paid Investing activities Sales of fixed assets Payments for fixed assets N et decrease in long-term receivables Sales of funds...

  • Page 35
    ... shareholders: - Dividends paid and proposed - Payment for purchase of Company's shares Shareholders' funds at end of the year 25,795 2,249 (1,016) - 27,028 26,363 (210) (339) (19) 25,795 T he notes on pages 40 to 63 form part of these accounts. CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999...

  • Page 36
    ...The Cathay Pacific Group ("the Group") is predominantly managed and controlled in Hong Kong. As well as operating scheduled airline services, the Group is engaged in other related areas, including aircraft engineering and airline catering. The airline operations are principally to and from Hong Kong...

  • Page 37
    ... Cathay Pacific Airways Limited and in freight traffic ("Cargo") through Cathay Pacific Airways Limited and AHK Air Hong Kong Limited. Cathay Pacific catering services and other airline supporting services which supplement the Group's operating business are included in unallocated revenue. Analysis...

  • Page 38
    ...the sale of a 4.5% shareholding in a company operating a computerised reservation system business in Asia. The Company still maintains an 8.4% shareholding in this business. 7. Taxation The taxation charge/(credit) comprises: 1999 HK$M 1998 HK$M The Company and its subsidiary companies: H ong Kong...

  • Page 39
    ... number of ordinary shares used in calculating basic earnings per share Deemed issue of ordinary shares for no consideration Weighted average number of ordinary shares used in calculating diluted earnings per share 3,384 23 3,407 3,384 - 3,384 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999...

  • Page 40
    ... Fixed assets Aircraft and related equipm ent Ow ned Leased HK$M HK$M Other equipm ent Ow ned Leased HK$M HK$M Properties under construction HK$M Properties HK$M Total HK$M GROUP Cost At beginning of the year Exchange differences Additions Disposals Disposal on sale of subsidiary Transfers At end...

  • Page 41
    ... (a) Finance leased aircraft Certain aircraft are subject to leases with purchase options to be exercised by the Group at the end of the respective leases. The remaining lease terms range from 2 to 16 years. Some of the rent payments are on a floating bases which are generally linked to market rates...

  • Page 42
    ...associated companies - listed - unlisted 17 91 108 Dividends received and receivable by the Company and its subsidiary companies from associated companies 48 40 132 172 89 - - - 38 - - - 24 Principal associated companies are listed on page 63. 46 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999

  • Page 43
    ... Security deposits Amount due within one year included under current liabilities (1,914) (617) 3,345 346 7,227 (2,024) (980) 4,223 - 4,433 - (486) 3,947 - 5,549 - (909) 4,640 82 65 228 92 - 52 126 221 5,078 451 5,522 1,039 3,981 400 4,303 899 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999 47

  • Page 44
    ...defeased by funds and other investments totalling HK$25,226 million (1998: HK$32,847 million). Accordingly, these liabilities and the related funds, as well as related expenditure and income, have not been included in the consolidated accounts. 48 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999

  • Page 45
    .... The Company's obligations under finance leases exceeded the Group's by HK$1,819 million in 1998 as a result of net amounts owing to subsidiary companies on certain aircraft financing arrangements, which have been eliminated on consolidation. CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999 49

  • Page 46
    ... HK$M 1998 HK$M Com pany 1999 1998 HK$M HK$M Trade debtors and other receivables Prepayments Due from associated companies Due from other related companies 3,630 185 17 - 3,832 3,313 166 21 2 3,502 3,189 168 7 - 3,364 2,894 138 13 1 3,046 50 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999

  • Page 47
    ...subscribe to shares at a price not less than the higher of 80% of the average of the closing prices of the Company's shares on The Stock Exchange on five trading days immediately preceding the date of grant, and the nominal value of the shares. CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999 51

  • Page 48
    ... Included in retained profit is an amount of HK$769 million (1998: HK$724 million) relating to retained profit attributable to associated companies. Investment revaluation reserve relates to changes in the fair value of long-term investments. 52 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999

  • Page 49
    ... security deposits which are arranged in foreign currencies such that repayments can be met by anticipated operating cash flows. Exchange differences recorded in the cash flow hedge reserve are expected to be credited/(charged) to operating profit as noted below, based on exchange rates ruling...

  • Page 50
    ...066 (b) Disposal of a subsidiary company 1999 HK$M 1998 HK$M N et assets disposed of: Fixed assets Bank balances Stock Trade and other receivables Trade and other payables 56 4 2 12 (19) 55 Goodwill previously written off Gain on disposal 8 50 113 Satisfied by: Cash 113 (c) Analysis of the net...

  • Page 51
    ... Funds with investment managers O ther liquid investments Short-term deposits maturing beyond three months when placed N et liquid funds at end of the year 1,786 7,130 2,527 124 11,567 2,119 7,316 2,719 86 12,240 1,814 (28) 1,786 2,205 (86) 2,119 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999...

  • Page 52
    ... e Acco u n t s - D i r ect o r s a n d E m p lo yees 27. Directors' remuneration Directors' remuneration disclosed pursuant to Section 161 of the Hong Kong Companies Ordinance is as follows: 1999 HK$M 1998 HK$M Fees Emoluments: Salaries, allowances and benefits in kind Contributions to retirement...

  • Page 53
    ...Ordinance. Most of the employees engaged outside Hong Kong are covered by appropriate local arrangements. Retirement benefit costs for the year were: 1999 HK$M 1998 HK$M Swire Group Retirement Benefit Scheme Cathay Pacific Airways Limited Retirement Scheme CPA Provident Fund 1993 O ther schemes 79...

  • Page 54
    ... valuation method Assumed long-term average return on investment Market value at date of valuation Asset market valuation as a percentage of the present value of past service liabilities 31st December 1998 Watson Wyatt Hong Kong Limited Attained age 1% higher than assumed average salary increase HK...

  • Page 55
    ... of the year was HK$305 million (1998: HK$279 million). (iii) The Company received agency commission and services fees from Hong Kong Dragon Airlines Limited ("Dragonair"). The services fees were received in respect of computer support, engineering, station and ground services provided to Dragonair...

  • Page 56
    ...Rules of The Stock Exchange of Hong Kong Limited, that exchange has granted to the Company a waiver from full compliance with the provisions of Chapter 14 of the Listing Rules, which relates to notifiable transactions, in relation to the acquisition or disposal of aircraft. As a result of the waiver...

  • Page 57
    ... changes to the presentation of various items. The comparative information has been presented in a format consistent with the new requirements. Adoption of these new standards has no impact on the reported profit or loss of the current or prior periods. CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT...

  • Page 58
    ... of GBP1 2,000 shares of US$1 12,000 shares of US$1 3,700 shares of H K$500 Principal subsidiary and associated companies are those which materially affect the results or assets of the Group. * Shareholding held through subsidiary com panies. 62 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999

  • Page 59
    ...Limited Cathay Kansai Terminal Services Company Limited Cebu Pacific Catering Services Inc H ong Kong Aircraft Engineering Company Limited H ong Kong Airport Restaurant Caterers Company Limited H ong Kong Dragon Airlines Limited VN /CX Catering Services Limited * Shareholding held through subsidiary...

  • Page 60
    ... 19.6 1.9 9.2 1.74 0.56 18.8 3.5 10.0 2.84 13.2 30.6 2.5 11.4 1.78 0.55 9.0 2.4 5.0 2.97 14.4 38.8 2.5 15.3 1.96 0.64 9.7 3.4 5.6 3.00 15.4 49.3 2.5 22.5 2.00 0.66 6.7 3.0 4.1 2.92 N ote: Based on year end share prices, w here applicable. 64 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999

  • Page 61
    ...99 Within 1 year Between 2-5 years Between 1-2 years O ver 5 years Currency analysis of borrowings H K$ m illion 12,000 10,000 8,000 6,000 4,000 2,000 0 90 JPY USD 91 EUR 92 GBP 93 H KD 94 AUD CAD 95 CH F 96 O thers 97 98 99 CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999 65

  • Page 62
    ... M illion % Revenue load factor % Passenger load factor '000 Tonnes Cargo carried Cargo and mail M illion tonne kilometres % Cargo and mail load factor Tonnes Excess baggage carried Tonnes M ail carried Length of scheduled route network '000 Kilometres Number Destinations at year end Staff number at...

  • Page 63
    ... of staff 18,000 ATK per HK$'000 staff cost 1,800 15,000 1,500 12,000 1,200 9,000 900 6,000 600 3,000 300 0 0 90 91 92 93 94 95 96 97 98 99 90 91 92 93 94 95 96 97 98 99 H ong Kong ground staff Cabin Cockpit Ports CATHAY PACIFIC AIRWAYS LIM ITED ANNUAL REPORT 1999...

  • Page 64
    ... security deposits, notes and zero coupon bonds. Borrowings and bank overdraft less liquid funds. Capacity, measured in tonnes available for the carriage of passengers, excess baggage, cargo and mail on each sector multiplied by the sector distance. Departure within 15 minutes of scheduled departure...

  • Page 65
    ... Shareholder Information For further information about the Cathay Pacific Airways Group, please contact: Corporate Communication Department Cathay Pacific Airways Limited 8th Floor, North Tower Cathay Pacific City Hong Kong International Airport Hong Kong Tel: 2747 5210 Fax: 2810 6563 Cathay Pacific...