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By Clare Jim and Jessie Pang
HONG KONG, Aug 9 (Reuters) - Cathay Pacific Airways reported on Wednesday its best first-half profit in more than a decade and announced plans to order more planes and repay a Hong Kong government rescue package after a major turnaround in travel demand.
The interim net profit of HK$4.3 billion ($550.22 million), in line with its guidance for earnings of up to HK$4.5 billion, compared with a HK$5 billion loss a year earlier, when Hong Kong's strict COVID-19 quarantine rules were in place.
"While we are still only part way along our rebuilding journey, our results for the first six months of 2023 demonstrate that we are on the right track," Cathay Chairman Patrick Healy said in a statement.
Cathay has restored capacity more slowly than its closest rival, Singapore Airlines, because it faced tighter quarantine rules for longer, and needed to train more staff and bring back grounded planes.
The Hong Kong carrier expects to reach 70% of its pre-pandemic capacity by the end of the year, and 100% by the end of 2024. That compares to nearly 60% now and 3% a year ago.
"That's a very rapid rise," Healy told a news conference. "We started later, but the trajectory of that recovery, when compared with the trajectory of the recovery from the starting points of our key regional competitors, is absolutely on track."
Cathay said it intended to exercise purchase rights to buy 32 Airbus A320neo family aircraft, looking to add to its fleet as demand rebounds. It expected the aircraft to be delivered by 2029, bringing total new deliveries to more than 70.
It will also bring an "all-new business class experience" in the second quarter of 2024 as part of the redesign of its long-haul Boeing 777-300ER cabins, and a new first class cabin onto the 777-9 aircraft in 2025.
The airline said it would also buy back 50% of the HK$19.5 billion of preference shares held by the Hong Kong government by the end of 2023, and the remainder by the end of July 2024, subject to completion of a proposed capital reduction and business conditions at the time.
Cathay issued the shares in 2020 as part of a HK$39 billion rescue package from the government and its biggest shareholders, Swire Pacific and Air China, that shored up its finances after travel demand collapsed during the pandemic.
"The results are not bad, but they may lack special business highlights in the second half," said Eugene Law, business development director of brokerage China Galaxy International, adding that some investors may choose to take profit after the earnings after the previous rally.
Shares of Cathay Pacific shrank gains to 0.2% as of 0605 GMT after the result announcement from 0.9%. The broader Hang Seng Index eased 0.2%.
CEO Ronald Lam said the main challenges faced by the industry globally, namely manpower shortages and supply chain issues, are expected to improve and normalise into 2024.
"I must say, compared to the challenges we faced in the last three years during the pandemic, all these are ... happy problems, right?" Lam said.
($1 = 7.8151 Hong Kong dollars) (Reporting by Jessie Pang, Clare Jim and Donny Kwok; Editing by Jamie Freed and Gerry Doyle)