Cathay Pacific 2003 Annual Report Download

Download and view the complete annual report

Please find the complete 2003 Cathay Pacific annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 76

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76

ANNUAL REPORT 2003

Table of contents

  • Page 1
    A N N U A L R E P O RT 2 0 0 3

  • Page 2
    ... Balance Sheet Company Balance Sheet Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Notes to the Accounts Principal Subsidiary and Associated Companies Statistics Glossary Corporate and Shareholder Information Hong Kong

  • Page 3
    ...,000 staff in Hong Kong. The airline's two major shareholders are both Hong Kong companies listed on the Hong Kong Stock Exchange, as is Cathay Pacific itself. Cathay Pacific is the major shareholder in AHK Air Hong Kong Limited, an all cargo carrier that offers scheduled services in the Asia region...

  • Page 4
    ... Group Financial Statistics 2003 2002 Change Results Turnover Profit attributable to shareholders Earnings per share Dividend per share Profit margin Balance Sheet Shareholders' funds Net borrowings Shareholders' funds per share Net debt/equity ratio Operating Statistics - Cathay Pacific HK...

  • Page 5
    ...were added to the freighter network together with additional frequencies to Brussels, Manchester, Milan and cities in the United States. The Group's 2003 cargo revenue increased 5.6% over the previous year. However, cargo yield fell 1.1% to HK$1.78. Our other aviation related service businesses were...

  • Page 6
    4 Cathay Pacific Airways Limited Annual Report 2003

  • Page 7
    ... leading travel industry publication TTG Asia. • Italy's annual Air Cargo Market Conference named us "Best Overall Cargo Airline" and "Best Cargo Airline to Oceania". Canadian Cathay Pacific Airways Limited Annual Report 2003 Transportation & Logistics magazine also named Cathay Pacific Cargo in...

  • Page 8
    ... Cargo along with Japan Airlines Cargo, Qantas Freight and Singapore Airlines Cargo launched Ezycargo, an Internet service portal for freight forwarders and airlines. • COINS, our new revenue management system, started operation in February. 6 Cathay Pacific Airways Limited Annual Report 2003

  • Page 9
    ...HK$5.54 million in aid of UNICEF through our Change for Good inflight fundraising programme. • We made a three-year commitment, with Credit Suisse First Boston, to jointly sponsor the Hong Kong Rugby Sevens tournament, starting in 2004. • For the first time we sponsored horse racing in Hong Kong...

  • Page 10
    ...by the end of September and additional services were added to the winter schedule. Passenger numbers and yield improved in the fourth quarter of the year. Passenger yield for 2003 declined 4.6% to HK43.3 cents. Load factor by region % Passenger load factor and yield % HK cents 90 80 60 80 70 70...

  • Page 11
    ... London route, services were increased in August to three times daily. All three daily services performed well. • A fifth weekly service was added to Rome following our first codeshare with oneworld partner Qantas. • Strong European currencies helped to increase our dollar revenues. North Asia...

  • Page 12
    Review of Operations Cargo services 2003 was a good year for cargo, both in terms of revenue and freight tonnage. Growth was driven by demand for goods exported through Hong Kong, in particular to markets in Europe, Japan and the United States. Cargo revenue contributed 33.5% to the Group turnover....

  • Page 13
    ...2007 . Review of affiliated businesses and associated companies Cathay Pacific Catering Services (H.K.) Limited ("CPCS") • CPCS, a wholly owned subsidiary of Cathay Pacific, is the principal flight kitchen in Hong Kong. • The company produced 13 million meals and accounts for 72% of the airline...

  • Page 14
    ... by Cathay Pacific, had a profitable year. A third hangar was opened in 2003. • Hong Kong Aero Engine Services Limited, HAECO's joint venture with Rolls-Royce plc and SIA Engineering Pte Limited, continued to achieve good results with high workloads. Hong Kong Dragon Airlines Limited ("Dragonair...

  • Page 15
    ...of 2004. • With the relaxation on individual travel from Mainland China to Hong Kong and the signing of the Closer Economic Partnership Arrangement, Dragonair is optimistic about the demand for air travel between Hong Kong and Mainland China. Cathay Pacific Airways Limited Annual Report 2003 13

  • Page 16
    14 Cathay Pacific Airways Limited Annual Report 2003

  • Page 17
    ....8%. • Despite the 6.0% reduction in capacity in terms of available seat kilometres, the passenger load factor still decreased by 5.6 percentage points to 72.2%. • Passenger yield decreased by 4.6% to HK¢43.3 as a result of special offers. Cathay Pacific Airways Limited Annual Report 2003 15

  • Page 18
    ... effect on changes in yield and load factor is set out below: HK$M + 1 percentage point in passenger load factor + 1 percentage point in cargo and mail load factor + HK¢1 in passenger yield + HK¢1 in cargo and mail yield 257 137 428 53 16 Cathay Pacific Airways Limited Annual Report 2003

  • Page 19
    Financial Review Operating expenses Group 2003 HK$M 2002 HK$M Change 2003 HK$M Cathay Pacific 2002 HK$M Change Staff Inflight service and passenger expenses Landing, parking and route expenses Fuel Aircraft maintenance Aircraft depreciation and operating leases Other depreciation and operating ...

  • Page 20
    ... as at 31st December 2003 amounted to HK$75,037 million. • During the year, additions to fixed assets were HK$5,121 million, comprising HK$5,027 million for aircraft and related equipment and HK$94 million for properties and other equipment. 18 Cathay Pacific Airways Limited Annual Report 2003

  • Page 21
    ...00 01 02 03 0 Shareholders' funds Net borrowings Net debt/equity ratio Group maturity profile by currency: borrowings Financial risk management policy • In the normal course of business the Company is exposed to movements in foreign exchange rates, interest rates and jet fuel prices. • These...

  • Page 22
    ... foreign currency earnings used to make those repayments. 67 10 65 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 0 Effective into wing fuel price Volume hedged Group interest rate profile: borrowings % 100 80 60 40 20 0 99 00 01 02 03 Floating Fixed 20 Cathay Pacific Airways Limited Annual Report 2003

  • Page 23
    Financial Review Value added The following table summarises the distribution of the Group's value added in 2002 and 2003. 2003 HK$M 2002 HK$M Total revenue Less: Purchases of goods and services Value added by the Group Add: Income from investments Share of profits of associated companies Total ...

  • Page 24
    ...also a Director of Swire Pacific Limited. Raymond Yuen#, aged 58, has been a Director of the Company since September 1998. He is General Manager China Affairs of the Company and is also a Director of John Swire & Sons (H.K.) Limited and Hong Kong Dragon Airlines Limited. He joined the Swire group in...

  • Page 25
    .... SECRETARY Margaret Yu#, aged 58, has been Company Secretary since September 2002. She joined the Swire group in 1978. Member of the Remuneration Committee Employees of the John Swire & Sons Limited group * Member of the Audit Committee # + Cathay Pacific Airways Limited Annual Report 2003 23

  • Page 26
    ... The profit of the Group for the year ended 31st December 2003 and the state of affairs of the Group and the Company at that date are set out in the accounts on pages 35 to 65. DIVIDENDS We recommend the payment of a special dividend of HK¢28 per share and a final dividend of HK¢17 per share for...

  • Page 27
    ... overhaul of aircraft and related equipment accounted for approximately 3% of the airline's operating costs in 2003. Like the Company, HAECO is an associated company of Swire Pacific Limited; all contracts have been concluded on normal commercial terms in the ordinary course of the business of both...

  • Page 28
    ...showed that Directors held the following beneficial interests (all being personal interests) in the shares of Cathay Pacific Airways Limited and Tenzing Communications, Inc., its associated corporation (within the meaning of Part XV of the SFO): 26 Cathay Pacific Airways Limited Annual Report 2003

  • Page 29
    ..., offer themselves for re-appointment. A resolution for the re-appointment of KPMG as Auditors to the Company is to be proposed at the forthcoming Annual General Meeting. By order of the Board James Hughes-Hallett Chairman Hong Kong, 10th March 2004 Cathay Pacific Airways Limited Annual Report 2003...

  • Page 30
    ... the adequacy and effectiveness of the internal control system and provides assurance to the Board on legal and regulatory compliance issues. The external auditors, the Finance Director and the Internal Audit Manager also attend these meetings. 28 Cathay Pacific Airways Limited Annual Report 2003

  • Page 31
    ... company, Hong Kong Airport Services Limited, and the aircraft maintenance company, HAECO. CODE OF BEST PRACTICE The Company has complied throughout the year with the Code of Best Practice as set out in the Listing Rules of the Stock Exchange. Cathay Pacific Airways Limited Annual Report 2003...

  • Page 32
    ...the Company as at 31st December 2003 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, 10th March 2004 30 Cathay Pacific Airways Limited Annual Report...

  • Page 33
    ...associated companies represent the Group's share of net assets and loans to those companies. In the Company's balance sheet, investments in associated companies are stated at cost less any impairment loss recognised and loans to those companies. Cathay Pacific Airways Limited Annual Report 2003 31

  • Page 34
    ...including intra-Group balances of an equity nature) and related long-term liabilities are taken directly to reserves. The treatment of exchange differences on foreign currency operating cash flow hedges is supported by International Financial Reporting Standards. In the opinion of the Directors this...

  • Page 35
    ... the expected average remaining working lives of the employees participating in the plans. 11. DEFERRED TAXATION With the introduction of HK SSAP 12 (revised), "Income taxes" , provision for deferred tax is now made on all temporary differences. Cathay Pacific Airways Limited Annual Report 2003 33

  • Page 36
    ... significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or entities. 34 Cathay Pacific Airways Limited Annual Report 2003

  • Page 37
    ... per share Basic Diluted Dividend per share The US$ figures are for information only and are translated at HK$7 .8. 8 8 7 39.0¢ 38.8¢ 48.0¢ 119.5¢ 118.7¢ 44.0¢ 15.3¢ 15.2¢ 5.6¢ The notes on pages 41 to 65 form part of these accounts. Cathay Pacific Airways Limited Annual Report 2003 35

  • Page 38
    ... are for information only and are translated at HK$7 .8. 20 21 5,831 31,156 (104) 31,052 669 30,383 31,052 James Hughes-Hallett Director Hong Kong, 10th March 2004 Henry Fan Director The notes on pages 41 to 65 form part of these accounts. 36 Cathay Pacific Airways Limited Annual Report 2003

  • Page 39
    ... US$ figures are for information only and are translated at HK$7 .8. 20 21 (4,084) 19,268 669 18,599 19,268 James Hughes-Hallett Director Hong Kong, 10th March 2004 Henry Fan Director The notes on pages 41 to 65 form part of these accounts. Cathay Pacific Airways Limited Annual Report 2003 37

  • Page 40
    ...funds with investment managers Purchase of minority interest in a subsidiary company Net increase in short-term deposits maturing beyond three months Payments for fixed and intangible assets Net cash outflow from investing activities Financing activities New financing Net cash benefit from financing...

  • Page 41
    ...,250 45 7,207 21 106 106 412 (1,313) (727) (2,040) 559 (14) (1,313) (727) 106 (14) (14) (1,948) 3,983 (167) (534) 45 1 (1) 32,115 The notes on pages 41 to 65 form part of these accounts. Cathay Pacific Airways Limited Annual Report 2003 39

  • Page 42
    Company Statement of Changes in Equity for the year ended 31st December 2003 Non-distributable Share capital HK$M Retained profit HK$M Share premium HK$M Capital redemption reserve HK$M Investment Cash flow revaluation hedge reserve reserve HK$M HK$M Total HK$M At 1st January 2003 Exchange ...

  • Page 43
    ... transportation services, airline catering and other services provided to third parties. (a) Primary reporting by geographical segment 2003 HK$M 2002 HK$M Turnover by origin of sale: North Asia - Hong Kong and Mainland China - Japan, Korea and Taiwan South East Asia and Middle East Europe Pacific...

  • Page 44
    ... equipment Cost of stock expensed Exchange differences Auditors' remuneration Income from unlisted investments Income from listed investments (13) 933 (244) 6 (267) (6) (75) 1,156 (179) 6 (90) (5) 324 675 19 368 444 34 1,930 1,815 110 2,238 1,591 120 42 Cathay Pacific Airways Limited Annual Report...

  • Page 45
    ... for the year. Overseas tax is calculated at rates of tax applicable in countries to which the Group is assessable for tax. Tax provisions are reviewed regularly to take into account changes in legislation, practice and status of negotiations. 43 Cathay Pacific Airways Limited Annual Report 2003

  • Page 46
    ... 1,756 (307) 246 80 (143) (137) (84) (64) (409) 4,331 (693) 471 74 (263) 21 62 (328) Of the profit attributable to the shareholders, a profit of HK$818 million (2002: HK$2,865 million) has been dealt with in the accounts of the Company. 44 Cathay Pacific Airways Limited Annual Report 2003

  • Page 47
    ... 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 3,338 19 3,357 3,333 23 3,356 Cathay Pacific Airways Limited Annual Report 2003...

  • Page 48
    Notes to the Accounts - Balance Sheet 9. FIXED ASSETS Aircraft and related equipment Owned HK$M Other equipment Owned HK$M Properties Owned HK$M Leased HK$M Leased HK$M Total HK$M Group Cost At 1st January 2003 Exchange differences Additions Disposals Transfers At 31st December 2003 ...

  • Page 49
    ... that provide the underlying finance. (e) Properties held at 31st December 2003 include land held under medium-term leases in Hong Kong with a net book value of HK$1,586 million (2002: HK$1,622 million). 289 427 232 948 3,677 636 2,052 41 2,729 Cathay Pacific Airways Limited Annual Report 2003 47

  • Page 50
    ... shares at cost Net amounts due (to)/from subsidiary companies - Loan accounts - Current accounts Other investments 214 (10,679) 2,176 22,055 13,766 214 (15,879) 4,181 27,623 16,139 Principal subsidiary companies are listed on page 64. 48 Cathay Pacific Airways Limited Annual Report 2003

  • Page 51
    ...Company 2002 HK$M 2003 HK$M 2002 HK$M Staff housing loans and other receivables Investments at fair value - listed in Hong Kong - listed outside Hong Kong - unlisted 443 157 51 612 1,263 527 134 51 746 1,458 433 49 612 1,094 484 49 746 1,279 Cathay Pacific Airways Limited Annual Report 2003...

  • Page 52
    ... - after five years 60 393 263 108 824 46 76 172 199 493 (540) (963) 3,090 60 64 220 108 452 (2,052) 3,115 46 50 172 156 424 (373) 2,570 Security deposits Amount due within one year included under current liabilities (542) (1,983) 4,387 50 Cathay Pacific Airways Limited Annual Report 2003

  • Page 53
    ...: Group 2003 HK$M Company 2002 HK$M 2003 HK$M 2002 HK$M Within one year After one year but within two years After two years but within five years After five years Total future payments Interest charges relating to future periods Present value of future payments Security deposits, notes and...

  • Page 54
    ... schemes: (a) Defined benefit retirement schemes The Swire Group Retirement Benefit Scheme ("SGRBS") in Hong Kong, in which the Company and Cathay Pacific Catering Services (H.K.) Limited ("CPCS") are participating employers, provides resignation and retirement benefits to its members, which include...

  • Page 55
    ... employed in Hong Kong are eligible to join the CPA Provident Fund. Under the terms of these schemes, other than the Company contribution, staff may elect to contribute from 0% to 10% of the monthly salary. During the year, the benefits forfeited in accordance with the schemes' rules amounted to HK...

  • Page 56
    ... are expected to be made during the years 2005 to 2014 (2002: 2004 to 2012) as follows: 2003 HK$M 2002 HK$M After one year but within five years After five years but within ten years After ten years 4,381 2,312 464 7,157 4,144 2,777 6,921 54 Cathay Pacific Airways Limited Annual Report 2003

  • Page 57
    .... 18. LIQUID FUNDS Group 2003 HK$M Company 2002 HK$M 2003 HK$M 2002 HK$M Short-term deposits and bank balances Short-term deposits maturing beyond three months when placed Funds with investment managers - debt securities listed outside Hong Kong - bank deposits Other liquid investments - debt...

  • Page 58
    Notes to the Accounts - Balance Sheet 19. TRADE AND OTHER PAYABLES Group 2003 HK$M Company 2002 HK$M 2003 HK$M 2002 HK$M Trade creditors Other payables Due to associated companies Due to other related companies Bank overdrafts - unsecured 1,947 3,228 197 157 14 5,543 1,520 3,431 187 126 16 5,...

  • Page 59
    ...flow hedge reserve relates to exchange differences on borrowings, lease obligations, currency derivatives and related security deposits which are arranged in foreign currencies such that repayments can be met by anticipated operating cash flows. Cathay Pacific Airways Limited Annual Report 2003 57

  • Page 60
    Notes to the Accounts - Balance Sheet 21. RESERVES (continued) Exchange differences recorded in the Group's cash flow hedge reserve are expected to be credited/(charged) to operating profit as noted below based on exchange rates ruling at 31st December 2003. 1st half HK$M 2nd half HK$M Total HK$M...

  • Page 61
    ... Hong Kong Companies Ordinance is as follows: 2003 HK$M 2002 HK$M Fees Emoluments - Salaries, allowances and benefits in kind - Contributions to retirement schemes 34 3 37 35 3 38 Housing costs accounted for 26% (2002: 20%) of emoluments. Cathay Pacific Airways Limited Annual Report 2003 59

  • Page 62
    ...and Employees 25. EMPLOYEE INFORMATION The five highest paid individuals of the Company included four (2002: four) Directors, whose total emoluments are included in the amounts set out in note 24 above, and one (2002: one) other whose emoluments comprised: 2003 HK$M 2002 HK$M Salaries, allowances...

  • Page 63
    ...the normal course of business on commercial terms are summarised below: 2003 Associated companies HK$M 2002 Associated companies HK$M Other related parties HK$M Other related parties HK$M Turnover Aircraft maintenance costs Route operating costs Dividends received Fixed assets purchase (b) Other...

  • Page 64
    ...: Group 2003 HK$M Company 2002 HK$M 2003 HK$M 2002 HK$M Authorised and contracted for Authorised but not contracted for 3,865 105 3,970 3,609 445 4,054 919 919 58 443 501 Operating lease commitments are shown in note 9 to the accounts. 62 Cathay Pacific Airways Limited Annual Report 2003

  • Page 65
    Notes to the Accounts - Supplementay Information 28. COMMITMENTS AND CONTINGENCIES (continued) (b) Guarantees in respect of bank loans and other liabilities outstanding at the year end: Group 2003 HK$M Company 2002 HK$M 2003 HK$M 2002 HK$M Subsidiary companies Associated company Staff 19 420 ...

  • Page 66
    ... paid up share capital Abacus Distribution Systems (Hong Kong) Limited Airline Property Limited Airline Stores Property Limited Airline Training Property Limited Cathay Holidays Limited Cathay Pacific Aircraft Services Limited Cathay Pacific Catering Services (H.K.) Limited Cathay Pacific Loyalty...

  • Page 67
    ... Limited Cebu Pacific Catering Services Inc Hong Kong Aircraft Engineering Company Limited Hong Kong Dragon Airlines Limited VN/CX Catering Services Limited * Shareholding held through subsidiary companies. Hong Kong Japan Philippines Hong Kong Hong Kong Vietnam Airport ground support and general...

  • Page 68
    ...9,746 (14,278) (1,764) (7,836) (93) 31,308 31,308 HK$ HK$ HK cents HK cents 9.29 1.87 39.0 48.0 4.4 4.1 0.8 3.6 0.85 0.36 9.63 2.71 119.5 44.0 12.0 12.6 2.7 6.4 0.71 0.30 9.40 1.64 19.7 17.5 2.2 2.0 1.1 1.5 0.77 0.46 % % Times Times Times Times Cathay Pacific Airways Limited Annual Report 2003

  • Page 69
    ... 0.32 7.63 2.06 119.7 53.0 12.1 17.8 2.1 9.8 0.99 0.22 5.79 2.40 103.4 48.0 10.0 19.6 2.2 6.3 1.31 0.47 4.78 2.16 82.8 42.0 9.0 17.6 2.0 5.6 1.61 0.52 67 Cathay Pacific Airways Limited Annual Report 2003

  • Page 70
    ... factor Cargo carried Cargo and mail tonne kilometres Cargo and mail load factor Excess baggage carried Mail carried Length of scheduled routes network Destinations at year end Staff number at year end ATK per staff On-time performance Departure (within 15 minutes) Average aircraft utilisation A330...

  • Page 71
    ... 12 11 6 19 4 2 4 4 62 7 3 72 11 6 13 19 4 2 4 59 3 62 10 2 5 13 19 4 2 4 59 3 62 7 4 13 19 4 2 8 57 57 2 13 18 4 1 17 55 55 69 Cathay Pacific Airways Limited Annual Report 2003

  • Page 72
    ... Cathay Pacific share price Hang Seng Index (HSI) 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 Productivity Cost per ATK ATK per HK$'000 staff cost Aircraft utilisation Share prices High Low Year-end Price ratios (Note) Price/Earnings Market capitalisation/ Shareholders' funds Price...

  • Page 73
    .../Cargo and mail tonne kilometres = Profit/(loss) margin = Shareholders' funds per share = Return on average shareholders' funds = Breakeven load factor = Dividend cover = Interest cover = Gross debt/ equity ratio = Cost per ATK = Cathay Pacific Airways Limited Annual Report 2003

  • Page 74
    ... Hong Kong FINANCIAL CALENDAR Year ended 31st December 2003 Annual General Meeting 2003 final dividend payable Six months ending 30th June 2004 Interim results announcement Interim dividend payable August 2004 October 2004 12th May 2004 2nd June 2004 72 Cathay Pacific Airways Limited Annual Report...

  • Page 75
    DESIGN: FORMAT LIMITED PRINTED IN HONG KONG THIS REPORT IS PRINTED ON RECYCLED PAPER www.format.com.hk

  • Page 76
    www.cathaypacific.com