Singapore Air trounces Hong Kong’s Cathay in battle for skies

BLOOMBERG

The fortunes of Singapore Airlines Ltd and Cathay Pacific Airways Ltd, the flagship airlines of two of Asia’s most important financial hubs, differed during the pandemic and continue to diverge in its aftermath.
Their valuations are revealing — Singapore Air’s market value of $17 billion is almost three times that of Cathay’s.
Four years ago the difference was only about $2 billion. Singapore Air just ended a 12-day run of gains, the longest streak since 2008, and it is up about 40% this year. Cathay has fallen 9.3%.
While both are better placed than they were during the depths of Covid, Singapore Air is rebounding much faster and flying high on a relentless wave of travel demand. Its stock price reflects its status as “a poster child for the Asian airline recovery,” Bloomberg Intelligence analyst Tim Bacchus said.
Cathay’s rebuild, meanwhile, was severely hampered by the Hong Kong government’s reluctance to drop virus-related restrictions, and it is still struggling to restore staff numbers and services. The airline doesn’t expect to return to pre-pandemic levels of passenger capacity until the end of 2024.
A fresh and insatiable appetite for travel after Covid lockdowns hasn’t been dented by eye-popping airfares. That’s helped many airlines recover as they fill their planes with passengers willing to shell out on what has been dubbed “revenge travel.” Singapore Air posted record earnings of S$2.16 billion ($1.6 billion) for the year ended March, with revenue of S$17.8 billion exceeding pre-Covid levels. Cathay’s position is improving too, but revenue of HK$51 billion ($6.6 billion) last year was still less than half of what it was in 2019, before the crisis.
The company has now, at least, generated enough cash to cover a HK$1.52 billion dividend payment due to the government at the end of June.
Staff at Singapore Air are seeing the benefits — they’re in line for bonuses equivalent to about eight months’ salary. Spirits aren’t so high at Cathay, where recently announced pay adjustments have been met with skepticism.
“Pilot morale is rock bottom,” Paul Weatherilt, chairman of the union that represents Cathay pilots, said last week after the company revealed it was changing its salary policy. “They cut our pay permanently.”
Singapore Air is one of the world’s best-performing airline stocks over the past three months, surging 34%. Only Taiwan’s Eva Airways Corp has done better, rallying 56%. Singapore’s Straits Times Index is up about 2% over that period. Cathay has added 6.2%.
Singapore Air’s investors backed its effort to rebuild flight capacity, confident that it would lift earnings, said Jason Sum, an analyst at DBS Bank Ltd.
Advanced bookings also look attractive as competitors like Cathay face resource constraints, he said.