Cathay Pacific 2004 Annual Report Download

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Table of contents

  • Page 1

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  • Page 6
    ... CATHAY PACIFIC Available tonne kilometres ("ATK") Passengers carried Passenger load factor Passenger yield Cargo carried Cargo and mail load factor Cargo and mail yield Cost per ATK Cost per ATK without fuel Aircraft utilisation On-time performance Million '000 % HK cents '000 tonnes % HK$ HK$ HK...

  • Page 7
    ... of HK$26,407 million. The launch of a new non-stop service to New York, new codeshare services to Barcelona, Madrid and Moscow and more frequent services to Bahrain, Brisbane, Colombo, Dubai, Manila, Osaka, Riyadh, Surabaya, Sydney and Taipei further strengthened Hong Kong as a global aviation hub...

  • Page 8
    ... 2004. A fourth weekly service to Perth will commence in 2005. - More frequent services were introduced to Bahrain, Brisbane, Colombo, Dubai, Manila, Osaka, Riyadh, Surabaya and Taipei, further strengthening Hong Kong as a global aviation hub. 4 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 9
    "Within two years, Cathay Pacific Airways and Air Hong Kong will together operate more than 110 wide-bodied aircraft." FLEET PROFILE Number as at 31st December 2004 Leased Aircraft type Owned Finance Operating Total '05 Firm orders '06 '07 Total '05 Expiry of operating leases '06 '07 '08 '12 ...

  • Page 10
    ... 10,800 are employed in Hong Kong. - Cathay Pacific regularly reviews its human resource and remuneration policy in the light of local legislation, industry practice, market conditions and the performance of both individuals and the Company. 6 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 11
    ... of drug abuse and promotes healthy lifestyles. LEAP reaches 70,000 students in more than 160 schools each year. - We have used event sponsorship to offer new opportunities to young people in Hong Kong. Champion sportsmen and women competing in Cathay Pacific sponsored events have coached young...

  • Page 12
    ...2003. Additional frequencies were added to a number of routes, a non-stop service was launched to New York and new codeshare services commenced to Barcelona, Madrid and Moscow. Demand from both business and leisure travellers remained...+9.2% +5.8% 8 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 13
    "Strengthening our network connections in Hong Kong and Beijing" Cathay Pacific Airways Limited 2004 Annual Report 9

  • Page 14
    ... of visa-free entry into Japan spurred demand among Hong Kong leisure travellers. With an improving Japanese economy, demand from Japan also increased. - Competition and additional capacity in the Taiwan market placed further pressure on yield. SOUTH WEST PACIFIC AND SOUTH AFRICA - A number of new...

  • Page 15
    ... Munich, strengthening our European operations. - Freighter services to Shanghai commenced in January 2005. ATK (million) 2004 2003 Change 2004 Load factor (%) 2003 Change Yield Change Cathay Pacific 8,748 7,715 +13.4% 68.7 68.7 - -1.1% Cathay Pacific Airways Limited 2004 Annual Report...

  • Page 16
    ... Hong Kong to build a second hangar at Hong Kong International Airport (HKIA). The new hangar, which is scheduled to open in early 2007, will strengthen HKIA's status as an aircraft maintenance hub. - Taikoo (Xiamen) Aircraft Engineering Company Limited, 54% owned by HAECO and 9% owned by Cathay...

  • Page 17
    ...Expiry of operating leases Total '06 '07 & beyond A320 A321 A330 B747-200F B747-300SF B747-400SF Total 2 2 2 1 3 10 2 3 6 4 5 10 6 10 1 3 30 1 3* 3* 1 6 2 1 4 4 4 5 15 4 2 5 3 3 5 12 3 12 * Aircraft will be on operating lease. Cathay Pacific Airways Limited 2004 Annual Report 13

  • Page 18
    ... Group reported an attributable profit of HK$4,417 million against a profit of HK$1,303 million in 2003. The substantial increase in profit reï¬,ects strong traffic demand. TURNOVER Group 2004 HK$M 2003 HK$M 2004 HK$M Cathay Pacific 2003 HK$M Passenger services Cargo services Catering and...

  • Page 19
    ... yield Cargo and mail yield 4,624 1,261 1,693 - 1,427 (129 ) 8,876 + 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 340 154 573 60 Cathay Pacific Airways Limited 2004 Annual Report 15

  • Page 20
    ...parking and route expenses rose as a result of increased operations. - Fuel costs increased mainly due to the 38% increase in the average fuel price. - Aircraft maintenance increased as a result of the ï¬,eet expansion and increased operations. 16 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 21
    ... due to the new aircraft deliveries. - Net finance charges decreased due to the lower average net borrowings. - Cathay Pacific's cost per ATK increased from HK$2.00 to HK$2.07 due to higher fuel prices. ASSOCIATED COMPANIES ASSETS - Total assets as at 31st December 2004 amounted to HK$75,284...

  • Page 22
    ... a key component of the financial risk management process. Exchange differences realised on the repayment of financial commitments are effectively matched by the change in value of the foreign currency earnings used to make those repayments. 18 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 23
    ... investments Share of profits of associated companies Total value added available for distribution Applied as follows: To employees - Salaries and other staff costs To governments - Corporation taxes To providers of capital - Dividends - paid - proposed - Minority interests - Net finance charges...

  • Page 24
    ... Hong Kong Aircraft Engineering Company Limited, and a Director of Swire Properties Limited and The Hongkong and Shanghai Banking Corporation Limited. He joined the Swire group in 1976 and in addition to Hong Kong has worked with the group in Australia, Dubai, Malaysia, Indonesia and the Philippines...

  • Page 25
    ... Limited. He joined the Swire group in 1977 and in addition to Hong Kong has worked with the group in Australia, the Philippines, Canada, Japan, Italy and the United Kingdom. + Member of the Remuneration Committee * Member of the Audit Committee Cathay Pacific Airways Limited 2004 Annual Report...

  • Page 26
    ...pages 42 and 43. ACCOUNTING POLICIES 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 airline catering, aircraft handling and aircraft engineering. The...

  • Page 27
    ... Rules") on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The transactions under the New Agreement are continuing connected transactions under the Listing Rules, in respect of which an announcement dated 1st December 2004 was published by the Company. As directors and employees...

  • Page 28
    ... published. The fees payable by DHL to AHK under the DHL Services Agreement totalled HK$715 million for the year ended 31st December 2004. The Stock Exchange has granted the Company a waiver from strict compliance with the disclosure requirements under the Listing Rules in relation to the agreements...

  • Page 29
    ...Hong Kong Dragon Airlines Limited ("Dragonair"), which competes or is likely to compete, either directly or indirectly, with the businesses of the Company as it operates airline services to certain destinations which are also served by the Company. Cathay Pacific Airways Limited 2004 Annual Report...

  • Page 30
    ..., 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 David Turnbull Chairman Hong Kong, 9th March 2005 26 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 31
    ... maintained. It also identifies and nominates qualified individuals, who are expected to have such expertise to make a positive contribution to the performance of the Board, to be additional Directors or fill Board vacancies as and when they Cathay Pacific Airways Limited 2004 Annual Report 27

  • Page 32
    .... In addition, of the executive officers, only Ronald Mathison holds 7,000 shares in the Company. The Board Safety Review Committee reviews and reports to the Board on safety and environmental issues. It meets three times a year and comprises three executive Directors, the CE, Tony Tyler and Derek...

  • Page 33
    ... highcalibre senior management team in the Company. Furthermore, as a substantial shareholder of the Company, it is in the best interest of Swire to see that executives of high quality are seconded to and retained within the Company. A number of Directors and senior staff with specialist skills are...

  • Page 34
    ... corporate assets, maintaining proper accounting records and ensure transactions are executed in accordance with management's authorisation. The system comprises a wellestablished organisational structure and comprehensive policies and standards. 30 Cathay Pacific Airways Limited 2004 Annual...

  • Page 35
    ... from investors are dealt with in an informative and timely manner. All shareholders are encouraged to attend the Annual General Meeting to discuss matters relating to the Company. Any inquiries from shareholders can be addressed to the Corporate Communication Department whose contact details...

  • Page 36
    ... as at 31st December 2004 and of the Group's profit and cash ï¬,ows for the year then ended and have been properly prepared in accordance with the Hong Kong Companies Ordinance. KPMG Certified Public Accountants Hong Kong, 9th March 2005 32 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 37
    ...in accounting policy 4 below. These accounts also comply with the requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Listing Rules of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The measurement basis used is historical cost modified...

  • Page 38
    ... items are translated at the rates ruling at the balance sheet date: (i) foreign currency denominated monetary assets and liabilities (including currency derivatives). (ii) the balance sheets of foreign subsidiary and associated companies. 34 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 39
    ... the investment revaluation reserve. On disposal or if there is evidence that the investment is impaired, the cumulative gain or loss on the investment is transferred from the investment revaluation reserve to the profit and loss account. Cathay Pacific Airways Limited 2004 Annual Report 35

  • Page 40
    ... can be utilised. Fuel derivatives are used to reduce exposure to ï¬,uctuating fuel prices. Gains and losses on these instruments are recognised upon contract expiry as a component of fuel expense during the period the related fuel is used. 36 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 41
    ...or entities. With the introduction of HKAS 24, parties that are subject to significant inï¬,uence by shareholders of Cathay Pacific are no longer defined as related parties. Comparatives have been restated to comply with this new definition. Cathay Pacific Airways Limited 2004 Annual Report 37

  • Page 42
    ... Note Turnover Passenger services Cargo services Catering and other services Total turnover Expenses Staff Route Fuel Aircraft maintenance Depreciation and operating leases Commissions Others Operating expenses Operating profit Finance charges Finance income Net finance charges Share of profits...

  • Page 43
    ...,383 31,052 86 4,126 4,212 86 3,895 3,981 The US$ figures are for information only and are translated at HK$7.8. The notes on pages 44 to 65 form part of these accounts. David Turnbull Henry Fan Director Hong Kong, 9th March 2005 Director Cathay Pacific Airways Limited 2004 Annual Report 39

  • Page 44
    ...,321 669 18,599 19,268 86 2,519 2,605 86 2,384 2,470 The US$ figures are for information only and are translated at HK$7.8. The notes on pages 44 to 65 form part of these accounts. David Turnbull Director Hong Kong, 9th March 2005 40 Cathay Pacific Airways Limited 2004 Annual Report Henry Fan...

  • Page 45
    ...) (281) (9) (847) (403) 724 20 341 1 3 (660) 11 (547) 867 7 94 (640) (9) (133) (3) 183 260 439 25 724 23 2,657 The US$ figures are for information only and are translated at HK$7.8. The notes on pages 44 to 65 form part of these accounts. Cathay Pacific Airways Limited 2004 Annual Report 41

  • Page 46
    ...) (1,330) 90 (89) (58) (1,387) 1,303 (935) (100) - 54 - 2 (1) 31,052 The notes on pages 44 to 65 form part of these accounts. 42 42 Cathay Cathay Pacific Pacific Airways Airways Limited Limited 2004 2004 Annual Annual Report Report

  • Page 47
    ...) - (1,510) - - - - - (1,504) 90 (96) (81) (1,591) 818 (935) (100) 54 2 (813) 19,268 The notes on pages 44 to 65 form part of these accounts. Cathay Pacific Airways Limited 2004 Annual Report 43

  • Page 48
    .... (b) Secondary reporting by business segment 2004 HK$M Revenue - external sales - Passenger services - Cargo services Unallocated revenue - Catering and other services 26,407 11,395 37,802 1,263 39,065 2003 HK$M 18,663 9,913 28,576 1,002 29,578 44 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 49
    ...and investments 1,522 (837) 685 92 - 92 8 6 791 (97) (111) (208) 583 Finance income and charges relating to defeasance arrangements have been netted off in the above figures. 2003 HK$M 1,678 (966) 712 112 (4) 108 3 14 837 (106) (111) (217) 620 Cathay Pacific Airways Limited 2004 Annual Report 45

  • Page 50
    ...615 2004 interim dividend paid on 4th October 2004 of HK¢20 per share (2003: HK¢3 per share) 2004 final dividend proposed on 9th March 2005 of HK¢45 per share (2003: HK¢17 per share) 2003 special dividend paid on 2nd June 2004 of HK¢28 per share 46 Cathay Pacific Airways Limited 2004 Annual...

  • Page 51
    ...for no consideration Weighted average number of ordinary shares used in calculating diluted earnings per share 9. FIXED ASSETS 3,362 17 3,379 3,338 19 3,357 Aircraft and related equipment Owned HK$M Group Cost At 1st January 2004 Exchange differences Additions Disposals Transfers At 31st December...

  • Page 52
    ... the underlying finance. (e) Properties held at 31st December 2004 included land held under medium-term leases in Hong Kong with a net book value of HK$1,549 million (2003: HK$1,586 million). 255 470 204 929 3,129 740 1,460 - 2,200 2003 HK$M 48 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 53
    ... shares at cost Net amounts due (to)/from subsidiary companies - Loan accounts - Current accounts Other investments (6,318) 530 18,682 13,108 Principal subsidiary companies are listed on page 64. (10,679) 2,176 22,055 13,766 214 2003 HK$M 214 Cathay Pacific Airways Limited 2004 Annual Report...

  • Page 54
    ... loans and other receivables Investments at fair value - listed in Hong Kong - listed outside Hong Kong - unlisted 2,891 51 731 4,076 157 51 612 1,263 2,715 49 731 3,890 403 2003 HK$M 443 2004 HK$M 395 Company 2003 HK$M 433 - 49 612 1,094 50 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 55
    ...2004 HK$M Bank loans - secured - unsecured Other loans - secured - unsecured Security deposits Amount due within one year included under current liabilities Repayable as follows: Bank...784 673 894 1,931 2,784 2003 HK$M 2004 HK$M Company 2003 HK$M Cathay Pacific Airways Limited 2004 Annual Report 51

  • Page 56
    ... amounting to HK$8,735 million and HK$1,556 million respectively (2003: HK$8,186 million and HK$1,554 million). Accordingly these liabilities and the related funds, as well as related expenditure and income, have been netted off in the accounts. 52 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 57
    ... meet the full cost of all benefits due by SGRBS to their employee members who are not required to contribute to the scheme. Staff employed by the Company in Hong Kong on expatriate terms before April 1993 were eligible to join another scheme, the Cathay Pacific Airways Limited Retirement Scheme...

  • Page 58
    ... 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 59
    ... are expected to be made during the years 2006 to 2014 (2003: 2005 to 2014) as follows: 2004 HK$M After one year but within five years After five years but within ten years After ten years 4,548 2,104 - 6,652 2003 HK$M 4,381 2,312 464 7,157 Cathay Pacific Airways Limited 2004 Annual Report 55

  • Page 60
    .... 18. LIQUID FUNDS Group 2004 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 securities listed outside Hong Kong - bank...

  • Page 61
    ... other related companies Bank overdrafts - unsecured 2,447 4,308 265 113 30 7,163 Group 2004 HK$M Analysis of trade creditors by age: Current One to three months overdue More than three months overdue 1,956 396 95 2,447 20. SHARE CAPITAL Company 2003 HK$M 2,051 3,216 197 65 14 5,543 2004 HK$M 2,252...

  • Page 62
    ... met by anticipated operating cash ï¬,ows. Exchange differences recorded in the Group's cash ï¬,ow hedge reserve are expected to be credited/(charged) to operating profit as noted on page 59 based on exchange rates ruling at 31st December 2004. 58 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 63
    ... 2003 HK$M 2,225 3,745 110 38 - 240 32 (460) (22) 288 321 (147) 6,370 5,247 3,801 84 29 17 420 (126) (557) 115 1,488 783 (706) 10,595 2004 HK$M Short-term deposits and bank balances Bank overdrafts 2,687 (30) 2,657 2003 HK$M 5,663 (14) 5,649 Cathay Pacific Airways Limited 2004 Annual Report...

  • Page 64
    ... amount charged to the Company. Bonus is related to services for 2003 but paid and charged to the Company in 2004. Allowances and benefits of Philip Chen and Raymond Yuen include housing allowances of HK$2,160,000 and HK$300,000 respectively. 60 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 65
    ... to services for 2003 and paid in 2004. 25. EMPLOYEE INFORMATION (a) The five highest paid individuals of the Company included four Directors (2003: four) and one Executive Officer (2003: one), whose emoluments are set out in note 24 above. (b) The table below sets out the number of individuals...

  • Page 66
    ... for each sector by multiplying the capacity, measured in tonnes available for the carriage of passengers, excess baggage, cargo and mail on that sector, by the sector distance. 2004 Fleet ATKs (in million tonne kilometres) 15,794 2003 13,355 62 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 67
    ... Subsidiary companies Associated company Staff - 20 415 435 2003 HK$M - 19 420 439 2004 HK$M 1,523 20 400 1,943 Company 2003 HK$M 916 19 405 1,340 (c) The Company has under certain circumstances undertaken to maintain specified rates of return within the Group's leasing arrangements. The Directors...

  • Page 68
    ... of HK$1 36,268,000 B shares of HK$1 Airline Property Limited Airline Stores Property Limited Airline Training Property Limited Cathay Holidays Limited Cathay Pacific Aircraft Acquisition Limited Cathay Pacific Aircraft Services Limited Cathay Pacific Catering Services (H.K.) Limited Cathay Paci...

  • Page 69
    ...Cathay Kansai Terminal Services Company Limited Cebu Pacific Catering Services Inc. Ground Support Engineering Limited Philippines Hong Kong Airline catering Airport ground engineering support and equipment maintenance Hong Kong Aircraft Engineering Company Limited Hong Kong Dragon Airlines Limited...

  • Page 70
    ... current liabilities (excluding liquid funds and bank overdrafts) Retirement benefit obligations Deferred taxation Minority interests Net assets Financed by: Shareholders' funds Per share Shareholders' funds EBITDA Earnings/(loss) Dividend Ratios Profit/(loss) margin Return of average shareholders...

  • Page 71
    ... (1,217) 1,746 28,930 2,149 (21,722) 13,926 (7,796) (2,639) - (3,954) (99) 16,591 16,591 5.79 2.40 103.4 48.0 10.0 19.6 2.2 6.3 1.31 0.47 Cathay Pacific Airways Limited 2004 Annual Report 67

  • Page 72
    ...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... - 1 80 68 Cathay Pacific Airways Limited 2004 Annual Report

  • Page 73
    ... 12 - 14 - - 19 4 2 4 7 - 62 12 3 77 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 Cathay Pacific Airways Limited 2004 Annual Report 69

  • Page 74
    ... Oct Nov Dec 2004 Cathay Pacific share price Hang Seng Index (HSI) 2004 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/Cash ï¬,ow 1.5 4.5 2003 2.00 1,825 11...

  • Page 75
    ... = Shareholders' funds per share = Revenue load factor = Return on average = shareholders' funds Breakeven load factor = Dividend cover = Passenger/Cargo and mail yield = Interest cover = Gross debt/equity ratio = Cost per ATK = Cathay Pacific Airways Limited 2004 Annual Report 71

  • Page 76
    ... toll free hotline: 1(888) BNY ADRS or 1(888) 269 2377 General line: 1(212) 815 2293 Fax: 1(212) 571 3050 Email: [email protected] Website: www.adrbny.com STOCK CODES AUDITORS KPMG 8th Floor, Prince's Building 10 Chater Road Hong Kong FINANCIAL CALENDAR Year ended 31st December 2004 Annual report...

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