Cathay Pacific Airways announced solid annual results on March 11 but warned of a bumpy ride ahead, as the war in Iran sends fuel prices soaring and spreads alarm across the global aviation industry.
The Hong Kong flag carrier said its revenue for 2025 came to HKD 116.76 billion (USD 14.9 billion), up 11.9% on the year, while its net profit attributable to ordinary shareholders jumped 12.7% to HKD 10.82 billion (USD 1.4 billion).
Chairman Patrick Healy said in a statement that the upswing in financial performance “was driven by increased capacity, solid passenger load factors and resilient cargo demand,” although the gains were partially offset by a fall in ticket prices and a loss at low-cost arm HK Express, which swelled to almost HKD 1 billion (USD 127.7 million).
While Healy told reporters later in the afternoon that he remains “highly confident” and expects passenger capacity to grow by about 10% this year, through additions of flights and destinations, he cautioned that the “prevailing global geopolitical environment is volatile.”
He confirmed that Cathay is “seeing sudden and unexpected shifts in passenger and cargo traffic flows as well as jet fuel prices,” the airline’s single largest expense, which totaled HKD 31.34 billion (USD 4 billion) last year, including fuel hedging losses of HKD 707 million (USD 90.3 million). “Ongoing supply chain disruption and cost inflation continue to impact delivery of new aircraft, cabin products and parts,” Healy added.
The strong annual results allowed Cathay to declare a second dividend payment of HKD 0.64 (USD 0.1) per share, to be paid on May 7. Including the interim dividend already paid, the total shareholder payouts for 2025 will reach HKD 5.22 billion (USD 666.8 million), an increase of 17.7% from 2024.
Healy also disclosed that employees would receive more than 11 weeks worth of eligible pay in the form of a “discretionary bonus” for the year, on top of salary increases.
Following the earnings disclosure, Cathay’s share price shot up almost 6% to reach HKD 13.36 (USD 1.71) in early afternoon trading. It finished the day up over 4%, at HKD 13.17 (USD 1.68).
Cathay had been bullish just a few days before the US and Israel struck Iran, changing the face of the Middle East and disrupting travel in and out of Gulf aviation hubs that serve as vital transfer points between Europe, Asia, and Australasia.
On February 24, chief customer and commercial officer Lavinia Lau Hoi-zee described the company’s start to 2026 as “solid,” thanks to “momentum from the robust year-end travel peak sustaining into early January.” Cathay, she disclosed, carried 11% more passengers in January compared with the same month of 2024, while HK Express achieved an 8% increase. The good times continued into February, with the two carriers logging a record-breaking 128,000 passengers on Valentine’s Day.
Like many of its peers, however, Cathay is now on edge due to the Iran war.
CEO Ronald Lam Siu-por reminded reporters that both passenger and cargo flights serving Dubai and Riyadh—one flight per day connecting Hong Kong with each—are canceled until the end of March. Their resumption will depend on the situation in the Middle East at that time.
In the latest incident highlighting the threat, Dubai’s media office said on March 11 that two drones fell “in the vicinity” of Dubai International Airport, causing four injuries, although air traffic continued to operate.
A pressing issue from a business perspective is the cost of fuel. Lam said the jet fuel price in March has almost doubled compared to the average in January and February. Without going into details, Lam said Cathay will make an announcement about increasing its fuel surcharges “very soon” to cope with the spiking operational costs.
Cathay has been using crude oil hedging to mitigate the impact of volatility in the jet fuel market for decades. Rebecca Sharp, the airline’s chief financial officer, said around 30% of its estimated volume of fuel was hedged as of the end of last year. This hedging is conducted under a standard policy followed regardless of market conditions. “We don’t have any plan to change from what we are doing,” she added, as the hedging market for jet fuel is too “thin” and therefore the cost is too “expensive.”
Lau observed that travel patterns are changing, especially on routes connecting Hong Kong and Europe, “as travelers are trying to find alternatives” to using Middle Eastern hub airports. While Cathay is adding passenger flights to London and extra capacity to Zurich in March in response, Lau also sees rising demand for routes between India and North America, with Hong Kong emerging as another option for connections.
Other airlines across the Asia Pacific region are scrambling to adjust to the new reality.
Australia’s Qantas Airways said it will be increasing fares to varying degrees this week “in response to rising costs, including the significant increases in jet fuel prices,” which it said have soared by “up to 150% over the past fortnight.” This is swelling expenses across the group despite hedging maneuvers, Qantas said.
Qantas does not operate flights to the Middle East, and its services connecting with Europe are running as scheduled, the airline said. But flights between Perth and London are temporarily making a fuel stop at Singapore, enabling up to 60 additional passengers to travel on each northbound journey.
The Australian carrier said it has seen “strong bookings in recent weeks across parts of our international network for travel over the coming months,” and added that it is “exploring options to redeploy capacity into Europe on existing routes in the coming months.”
Cathay’s hometown competitor Hong Kong Airlines said on March 10 that it will increase fuel surcharges for the second time since the US-Israeli attack against Iran. In the latest round of hikes, affecting tickets issued from March 12 onward, an extra USD 23.3 or more will be charged for shorter flights, while USD 94.6 will be added to long-haul tickets from Hong Kong to destinations such as North America, Europe, India, and Africa.
The turmoil in the Middle East is forcing some carriers to reconsider their earnings estimates.
Air New Zealand announced on March 10 that it has suspended its earnings guidance for the financial year that ends in June, owing to “unprecedented volatility in global jet fuel markets.” The airline disclosed on February 26, just two days before the US and Israeli strikes, that its second-half earnings would be “broadly in line with, or modestly below the first half,” for which it reported a net loss of NZD 59 million (USD 35.1 million).
As its assumed average jet fuel price was USD 85 per barrel for the second half, and even though it was 83% hedged against Brent crude oil until the end of June, the company said it is still exposed to movements in the “crack spread,” the price difference between crude oil and jet fuel.
Air New Zealand said its jet fuel price assumption “is no longer appropriate,” and the “crisis is expected to meaningfully affect second-half earnings.”
The carrier also said it has made “initial fare adjustments” and may need to make further changes to pricing, its network and schedules.
Apart from the Middle East strain, Cathay reported a loss at HK Express before net finance charges and taxation of HKD 996 million (USD 127.2 million) for 2025, worsening from HKD 204 million (USD 26.1 million) a year earlier. CEO Lam described the amount as “substantial” and attributed it partly to short-term factors, including new routes that “will take time to mature.” The disclosure document also said that some aircraft were “grounded due to industrywide Pratt & Whitney engine issues that continued without improvement.”
A bigger problem was shifting customer behavior, especially last summer, when many travelers shunned Japan over an unfounded rumor that a major earthquake was about to hit the country. Lam said this had a “rather big impact” on traffic, as HK Express relies heavily on Japanese routes.
Lam said that this is no longer a factor and that the budget carrier’s traffic has rebounded, but refrained from making any predictions about a return to the black.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.
Note: HKD figures are converted to USD at rates of HKD 7.83 = USD 1 based on estimates as of March 16, 2026, unless otherwise stated. USD conversions are presented for ease of reference and may not fully match prevailing exchange rates.