Cathay Pacific suffers another 3% passenger volume dip

Fleet utitlisation was getting bearish.

According to Barclays Research, Cathay Pacific has just released its Dec operating stats. Passenger volumes dropped another 3% y/y in Dec RPK, being the fourth month of y/y decline. For full-year 2012, RPK was +2% y/y, below our full-year forecast of +3% y/y.

The company cut capacities to long-haul routes aggressively in Dec, with the biggest cuts North American routes -15% y/y in ASK. North America was the biggest market for Cathay, accounting for 25% of the total RPK in Dec.

Here's more from Barclays:

With such capacity cuts, we estimate its fleet utilization was declining in Nov-Dec, ie the aircrafts were spending increasingly more time on the ground rather than in the air. Passenger load factors edged up slightly y/y in Dec, mainly as a result of capacity cuts. We believe the overall yield level was still under pressure with premium cabins’ demand lower than expected, according to the management.

Cargo volumes (RFTK) was flat y/y in Dec and -7% y/y for full-year 2012. While gaining sequential strength, the demand tailed away after the pre-Christmas rush, according to the management. Cathay's freighter fleet was running close to a full schedule in Dec.

The shares are trading at 1.0x 2013E P/B vs 6% 2014E ROE, which we find fair.