ANNUAL REPORT 2021
Cathay Pacic Airways Limited
Stock Code: 00293
CONTENTS
MANAGEMENT DISCUSSION
AND ANALYSIS
3 Financial and Operational Highlights
4 Chairman’s Statement
7 Review of Operations
23 Financial Review
29 Sustainable Development Review
CORPORATE GOVERNANCE
32 Directors and Officers
34 Directors’ Report
41 Corporate Governance Report
FINANCIAL STATEMENTS
57 Independent Auditor’s Report
62 Consolidated Statement of Profit or
Loss and Other Comprehensive Income
63 Consolidated Statement of
Financial Position
64 Consolidated Statement of
Cash Flows
65 Consolidated Statement of
Changes in Equity
66 Notes to the Financial Statements
118 Principal Subsidiaries and
Associates
120 Principal Accounting Policies
130 Statistics
135 Glossary
136 Corporate and Shareholder Information
136 Disclaimer
A Chinese translation of this Annual Report is available
upon request from the Company’s Registrars.
本年報的中文譯本於本公司的股份登記處備索。
Cathay Pacific Airways Limited
Cathay Pacific Airways Limited (“Cathay Pacific”), with its subsidiaries Hong Kong Express Airways
Limited (“HK Express”) and AHK Air Hong Kong Limited (“Air Hong Kong”), had 234 aircraft at the
end of 2021, of which 74 were held at parking locations outside of Hong Kong. Immediately prior
to the onset of COVID-19, our airlines directly connected Hong Kong to 119 destinations in
35 countries worldwide (255 and 54 respectively with codeshare agreements), including
26 destinations in the Chinese Mainland. The Cathay Pacific Group was the world’s eighth-largest
carrier of international passengers, and the third-largest carrier of international air cargo prior to
the COVID-19 pandemic, according to IATA’s 2019 World Air Transport Statistics.
Cathay Pacific was founded in Hong Kong in 1946. The Group has been deeply committed to its
home base over the past 75 years and remains so, making substantial investments to develop
Hong Kong as one of the world’s leading international aviation centres. There are 53 new
passenger aircraft scheduled to join the fleet in the coming years.
Cathay Pacific itself had 193 passenger and cargo aircraft at the end of 2021. The Group’s other
investments include its catering, laundry, ground-handling and cargo terminal companies,
and its corporate headquarters at Hong Kong International Airport.
HK Express, a low-cost airline based in Hong Kong offering scheduled services within Asia,
is a wholly owned subsidiary of Cathay Pacific and had 27 aircraft at the end of 2021.
Air Hong Kong, an express all-cargo carrier offering scheduled and charter services in Asia,
is a wholly owned subsidiary of Cathay Pacific operating 14 aircraft at the end of 2021.
Cathay Pacific owns 18.13% of Air China Limited (“Air China”), the national flag carrier and a leading
provider of passenger, cargo and other airline-related services in the Chinese Mainland.
At the end of 2021, Cathay Pacific and its subsidiaries employed more than 21,600 people
worldwide, of whom around 17,700 are employed in Hong Kong. Shares of Cathay Pacific are listed
on The Stock Exchange of Hong Kong Limited, as are the shares of its substantial shareholders
Swire Pacific Limited (“Swire Pacific”) and Air China.
Cathay Pacific is a founding member of the oneworld global alliance, whose combined network
serves more than 1,000 destinations worldwide.
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Cathay Pacific Airways Limited Annual Report 2021
GROUP FINANCIAL STATISTICS
2021 2020 Change
Results
Revenue HK$ million 45,587 46,934 -2.9%
Loss attributable to the shareholders of Cathay Pacific HK$ million (5,527) (21,648) -74.5%
Loss per ordinary share HK cents (95.1) (424.3) -77.6%
Dividend per ordinary share HK$ – – –
Loss margin % (12.1) (46.1) +34.0%pt
Financial position
Funds attributable to the shareholders of Cathay Pacific HK$ million 72,244 73,257 -1.4%
Net borrowings
(a)
HK$ million 70,570 73,788 -4.4%
Available unrestricted liquidity HK$ million 30,250 28,593 +5.8%
Ordinary shareholders’ funds per ordinary share
(b)
HK$ 8.1 8.3 -2.4%
Net debt/equity ratio
(a)
Times 0.98 1.01 -0.03 times
OPERATING STATISTICS – CATHAY PACIFIC
2021 2020* Change
Available tonne kilometres (“ATK”) Million 11,354 14,620 -22.3%
Available seat kilometres (“ASK”) Million 13,228 34,609 -61.8%
Available cargo tonne kilometres (“AFTK”) Million 10,094 11,329 -10.9%
Revenue tonne kilometres (“RTK”) Million 8,615 10,220 -15.7%
Passenger revenue per ASK HK cents 32.9 32.7 +0.6%
Revenue passenger kilometres (“RPK”) Million 4,120 20,079 -79.5%
Revenue passengers carried ‘000 717 4,631 -84.5%
Passenger load factor % 31.1 58.0 -26.9%pt
Passenger yield HK cents 105.5 56.3 +87.4%
Cargo revenue per AFTK HK$ 3.21 2.17 +47.9%
Cargo revenue tonne kilometres (“RFTK”) Million 8,220 8,309 -1.1%
Cargo carried ‘000 tonnes 1,333 1,332 +0.1%
Cargo load factor % 81.4 73.3 +8.1%pt
Cargo yield HK$ 3.94 2.96 +33.1%
Cost per ATK (with fuel)
(c)
HK$ 3.88 4.14 -6.3%
Fuel consumption per million RTK Barrels 1,612 1,708 -5.6%
Fuel consumption per million ATK Barrels 1,223 1,195 +2.3%
Cost per ATK (without fuel)
(c)
HK$ 3.32 3.41 -2.6%
Underlying
(d)
cost per ATK (without fuel) HK$ 3.24 3.06 +5.9%
ATK per HK$’000 staff cost Unit 1,174 1,074 +9.3%
ATK per staff ‘000 679 752 -9.7%
Aircraft utilisation (including parked aircraft) Hours per day 3.4 4.3 -20.9%
On-time performance % 86.2 86.7 -0.5%pt
Average age of fleet Years 10.5 10.1 +0.4 years
GHG emissions Million tonnes of CO
2
e 5.6 7.0 -20.0%
GHG emissions per ATK Grammes of CO
2
e 491 480 +2.3%
Lost time injury rate
Number of injuries per 100
full-time equivalent employees
0.81 2.28 -64.5%
*
Included Cathay Dragon
(a) Net borrowings and the net debt/equity ratio excluding leases without asset transfer components are HK$53,979 million and 0.75 respectively. Further
details can be found in note 12 to the financial statements.
(b) Ordinary shareholders’ funds are arrived at after deducting preference share capital of HK$19,500 million and unpaid cumulative dividends attributable
to the preference shareholder of HK$824 million and HK$228 million as at 31st December 2021 and 31st December 2020 respectively.
(c) Cost per ATK represents total operating costs, including impairment and restructuring costs, over ATK for the period.
(d) Underlying costs exclude impairment and related charges, restructuring costs and gains on deemed disposal of an associate.
FINANCIAL AND
OPERATIONAL HIGHLIGHTS
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Cathay Pacific Airways Limited Annual Report 2021
In our previous annual report, I wrote that 2020 was the
most challenging year in our history. The unprecedented
disruption caused by COVID-19 to the global aviation
industry and the subsequent travel and operational
restrictions around the world have continued to affect our
business severely. Notwithstanding these challenges, the
situation did improve as 2021 progressed.
The second half of the year is traditionally stronger than the
first half, and this was the case for us in 2021. The
exceptional performance of our cargo business, especially
during the second-half peak season, was extremely
encouraging. Nevertheless, we continued to face serious
challenges and despite the considerable improvement in
results in the second half of the year, our overall loss for the
full year was still substantial.
The Cathay Pacific Group’s attributable loss was HK$5,527
million in 2021 (2020: loss of HK$21,648 million). The loss
per ordinary share in 2021 was HK95.1 cents (2020: loss per
ordinary share of HK424.3 cents). The Group’s attributable
profit was HK$2,038 million in the second half of 2021 (2021
first half: loss of HK$7,565 million; 2020 second half: loss of
HK$11,783 million). Cathay Pacific reported an attributable
profit of HK$3,303 million in the second half of 2021 (2021
first half: loss of HK$5,031 million; 2020 second half: loss of
HK$10,032 million).
The loss for 2021 includes impairment and related charges
of HK$832 million, mainly relating to 12 aircraft that are
unlikely to re-enter meaningful economic service before
they retire or are returned to lessors, HK$385 million in
restructuring costs and a HK$210 million gain on the
dilution of an associate interest in Air China Cargo. This
compares to impairment and related charges of HK$4,056
million in 2020 relating to 34 aircraft (and to certain airline
service subsidiaries’ assets) and HK$2,383 million of
restructuring costs. Adjusting for these exceptional items,
the Cathay Pacific Group’s attributable loss for 2021 was
HK$4,520 million (2020: loss of HK$15,209 million), and
Cathay Pacific’s loss for 2021 was HK$776 million (2020:
loss of HK$12,195 million).
CHAIRMAN’S STATEMENT
Cathay Pacific celebrated an important milestone in our
history in 2021 as we marked 75 years of bringing people
together as Hong Kong’s home airline. Though we have
certainly experienced our share of challenges over the
years, COVID-19 key among them, we have also had
incredible successes. Throughout our history, we have
connected people to new destinations, welcomed the
arrival of state-of-the-art aircraft and launched exciting
innovations. As our home city has grown, so have we, and
we are immensely proud to have represented Hong Kong
over the past 75 years and to have helped it grow into one of
the leading international aviation hubs in the world.
But 2021 was not just a year for reflecting on our past. The
launch of “Cathay”, our new premium travel lifestyle brand,
has opened an exciting new chapter. Cathay aims to bring all
that we love about travel together with everyday lifestyle.
This will simplify the way our customers interact with us,
including how they earn status and use miles, and will
enable us to engage with them not only when they fly with
us, but every day.
We also celebrated the inaugural flight of the newest
addition to our fleet, the Airbus A321neo, in August. These
state-of-the-art passenger aircraft provide the best short-
haul experience in the world. Cathay Pacific has already
taken delivery of five A321neos and will have 16 in its fleet
by the end of 2023.
We continued our commitment to achieving greener
aviation by pledging to use sustainable aviation fuel for 10%
of Cathay Pacific’s total fuel consumption by 2030, and by
becoming a founding member of the Aviation Climate
Taskforce, a new non-profit organisation founded to tackle
the challenge of eliminating carbon emissions in aviation
through innovation and collaboration. These initiatives will
help the Group achieve its goal of net-zero carbon
emissions by 2050.
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Cathay Pacific Airways Limited Annual Report 2021
CHAIRMAN’S STATEMENT
BUSINESS PERFORMANCE OF
CATHAY PACIFIC
The introduction of strict quarantine requirements for
Hong Kong-based aircrew in February 2021 had a
substantial impact on our travel business. To operate the
remaining schedules, we introduced voluntary closed-loop
duty cycles for our Hong Kong-based aircrew, comprising
a 21-day duty cycle followed by a 14-day quarantine period.
These arrangements have been very demanding for our
aircrew and we are incredibly appreciative to them for their
support and their tireless professionalism in the face of
extremely challenging circumstances.
Operational and travel restrictions remained in place
throughout the year, and this heavily constrained our ability
to operate more flights. We reduced our flight schedule
towards the end of December in response to the latest crew
quarantine requirements in Hong Kong, and ended the year
operating a considerably smaller amount of our pre-
COVID-19 passenger capacity than we had planned.
Comparing 2021 with 2020 as a whole, the operating
performance in 2021 was generally weaker due in large part
to the first two months of 2020 being relatively strong
ahead of the full impact of COVID-19. Passenger revenue
decreased by 61.6% to HK$4,346 million in 2021 compared
with 2020. Revenue passenger kilometres (RPK) decreased
by 79.5%. Capacity, measured in available seat kilometres
(ASK), was down by 61.8%. We carried 717 thousand
passengers, an average of 1,965 per day, 84.5% fewer than
in 2020. Passenger load factor was 31.1% compared with
58.0% in 2020.
Our cargo business performed exceptionally well. Cargo
revenue in 2021 was HK$32,377 million, an increase of
31.8% compared to 2020. Cargo revenue tonne kilometres
(RFTK) decreased by 1.1%. Capacity, measured by available
cargo tonne kilometres (AFTK), decreased by 10.9%. Load
factor increased by 8.1 percentage points to 81.4%. Yield
increased by 33.1% to HK$3.94.
Cargo demand grew ahead of the traditional peak season in
the second half of the year. In the months leading up to the
end of 2021, we operated our freighter fleet at peak
capacity, and supplemented our cargo capacity with
additional cargo-only passenger flight operations. We also
operated six of our Boeing 777-300ER passenger aircraft
that have been partially converted into “preighters” by
removing some of the seats in the passenger cabins to
provide additional cargo-carrying capacity. In October, we
carried more than 136,000 tonnes of cargo – the most we
have carried in a single month since the start of COVID-19.
Our airlines have carried more than 190 million COVID-19
vaccines since the start of COVID-19.
We remained focused on effective cash and cost
management. Executive pay was cut for the whole of 2021
and we introduced a third unpaid leave scheme in the first
half of the year, with an 80% voluntary uptake. Employee
furlough, leave without pay, voluntary separation and early
retirement schemes were implemented for a broad range of
employee groups, and we are extremely grateful to all of our
employees who participated in such schemes. Overall, our
non-fuel costs decreased by 24.4% to HK$37,708 million.
Cathay Pacific’s total fuel costs (before the effect of fuel
hedging) increased by HK$927 million (or 11.9%) compared
to 2020. This reflected increased fuel prices.
BUSINESS PERFORMANCE OF OTHER
SUBSIDIARIES AND ASSOCIATES
HK Express reported a loss of HK$1,978 million for 2021
(2020: loss of HK$1,723 million). The results were adversely
affected by low demand for passenger travel and by COVID-
19-related travel restrictions and quarantine requirements,
including those affecting Hong Kong-based aircrew.
Air Hong Kong recorded a profit in 2021, benefitting from
strong cargo demand. The all-cargo airline flew extra
sectors for Cathay Pacific.
Our airline services subsidiaries’ financial performance was
better than in 2020.
Air China (accounted for three months in arrears) was
adversely affected by COVID-19. Its results were worse than
those in 2020.
FINANCIAL POSITION
The exceptionally strong cargo performance, together
with our continued focus on effective cash and cost
management, had a positive impact on our monthly
operating cash burn, to the extent that we were marginally
cash generative in the second half of 2021.
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Cathay Pacific Airways Limited Annual Report 2021
CHAIRMAN’S STATEMENT
At 31st December 2021, our available unrestricted liquidity
balance was HK$30.3 billion. During the year we raised
HK$6.7 billion from a convertible bond issue and US$650
million (equivalent to HK$5.1 billion) from a straight bond
issue under our medium-term note programme. We
welcomed the Hong Kong SAR Government’s agreement
toextend the drawdown period of the HK$7.8 billion loan
facility made available as part of our 2020 recapitalisation
by 12 months to June 2022. This provides us with more
flexibility to manage our liquidity position.
PROSPECTS
We have had an extremely challenging start to 2022.
Following the emergence of the Omicron variant, the
HKSAR Government tightened the quarantine requirements
for Hong Kong-based aircrew, notably those operating
cargo flights, and temporarily banned all flights from nine
countries, including the UK and the US, which are major
markets for us. Passengers from high-risk places were
banned from transiting through Hong Kong International
Airport. All this constrained our ability to operate flights as
planned. As a result, we expect to operate around 2% of
pre-COVID-19 passenger flight capacity, and our cargo
flight capacity is likely to remain less than one-third of
pre-COVID-19 levels while current restrictions remain in
place. We are trying our best to maintain our passenger and
cargo networks as far as possible and will try to increase our
cargo capacity as much as practicable.
As Hong Kong goes through a particularly challenging
phase of this pandemic, I’d like to express my empathy and
concern for all the people across Hong Kong who are
affected. In the early days of COVID-19, Cathay Pacific crew
bravely volunteered to operate evacuation flights to bring
Hong Kong people home, and during this latest phase, we
are doing everything we can to support the city, bringing in
vaccines, rapid antigen test kits and essential food and
medical supplies, and working with the authorities to
support the pandemic response.
As Hong Kong’s home airline, we are resolutely committed
to keeping the flow of people and cargo between Hong
Kong and the rest of the world safely moving, and to
protecting and enhancing the city’s aviation hub status
despite the challenging circumstances presented by
COVID-19. We have absolute confidence in the long-term
future of Hong Kong. Everything we do at Cathay Pacific is
in the service of Hong Kong. Cathay Pacific has been
proudly serving our home city as its de facto flag carrier
through thick and thin for over 75 years.
We are excited by the possibilities provided by the launch of
our new premium travel lifestyle brand and we will continue
to launch new offers and enhancements that will give our
customers more reasons to travel, to shop and to interact
with us. Our commitments to sustainable aviation will
continue as we strive to reach our net-zero target by 2050,
and we will further build on our digital leadership
capabilities. We continue to position ourselves to capitalise
on the opportunities presented by the Greater Bay Area,
and the growth potential afforded by the opening of the
third runway at Hong Kong International Airport.
Though we are still facing many challenges, we have the
utmost confidence in the long-term future of Cathay Pacific.
We have been privileged to fly out of Hong Kong as its home
airline for the past 75 years and, as those years have shown,
Cathay Pacific is an enduring airline.
Finally, I would like to extend my sincere appreciation to all
of our people, who have been working tirelessly to keep the
airline operating under incredibly challenging conditions. In
particular, I would like to thank our aircrew, who have kept
Hong Kong safely connected to the world under the most
difficult conditions for any airline anywhere in the world. In
2021, our crew spent more than 62,000 nights in quarantine
hotels. In addition, over 1,000 of our people, many of them
aircrew, but also people from our services, operations and
head office teams, have spent over 11,000 nights in the
Penny’s Bay quarantine facility. Collectively, our crew took
over 230,000 COVID-19 tests in 2021, with only 16 positive
cases despite our people, who are of course all fully
vaccinated, flying continuously to many of the highest-risk
countries in the world. The professionalism they have
shown in upholding safe operations throughout this period
have been unparalleled.
Patrick Healy
Chairman
Hong Kong, 9th March 2022
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Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
In 2021, the Cathay Pacific Group continued to be significantly affected by the unprecedented
disruption caused to the global aviation industry by the COVID-19 pandemic and the subsequent
travel and operational restrictions that have been introduced around the world. The pace of
recovery has been slower and more uncertain than we had hoped for; however, the situation did
improve. The second half of the year is traditionally stronger than the first half, and overall this was
the case for the Group in 2021.
Our travel business was the most significantly affected by
the pandemic. We resumed flights to more destinations, in
particular during the spring and summer months. However,
the tightening of quarantine requirements for travellers
arriving in Hong Kong from 16 overseas places in mid-
August greatly affected inbound demand and traffic around
what is our traditional summer peak season. We also
reduced our flight schedule in December, affecting a
number of flights to and from Hong Kong, and ended the
year operating a considerably smaller amount of our
pre-pandemic passenger flight capacity than we had
originally planned.
The exceptional performance of our cargo business was
extremely encouraging. While quarantine requirements for
Hong Kong-based aircrew had a notable impact on our
capacity and tonnage carried in the first half of the year, our
performance in the second-half of the year – the traditional
cargo peak season – was strong. In October, we carried
more cargo than in any other month since the start of the
pandemic, while sectors operated by our converted
“preighter” aircraft (passenger aircraft that have had some
of the seats in the cabins removed to provide additional
cargo-carrying capacity) also reached their highest point.
Meanwhile in November, we operated record-high numbers
of cargo-only passenger flights (services operated using
passenger aircraft but carrying exclusively cargo). Load
factor was also high, averaging 81.4% and reaching 86.4% in
March 2021 – the highest since the pandemic began.
As the home carrier of Hong Kong, we are fully committed
to protecting and enhancing Hong Kong’s aviation hub
status and to keeping Hong Kong safely connected with the
rest of the world despite the challenging circumstances
presented by the pandemic. All our aircrew are fully
vaccinated and are required to have received their third
dose of COVID-19 vaccine by 30th April 2022. We also
introduced enhanced medical surveillance measures for
aircrew, including daily testing after their arrival in Hong
Kong, to further safeguard the public health of Hong Kong.
Aircrew who are exempt from quarantine upon arrival in
Hong Kong, including aircrew operating closed-loop cargo
flights, are required to self-isolate at a hotel for seven days
after they arrive in Hong Kong. Throughout the pandemic,
our aircrew have operated with the highest standards of
compliance and safety, with 100% vaccination rates and
over 230,000 tests undertaken in 2021.
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Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
PREMIUM TRAVEL LIFESTYLE BRAND LAUNCH
On 5th July 2021, we launched “Cathay”, a new premium
travel lifestyle brand that aims to bring all that we love about
travel together with everyday lifestyle. Over the second half
of the year, we rolled out a range of new offers in spending,
dining, shopping and hotels, enabling us to engage with our
customers not only when they fly with us, but every day.
“Cathay” brings together Cathay Pacific, Marco Polo Club
and Asia Miles all in one place, simplifying the way our
customers interact with us, including how they earn status
and use miles. At the same time, “Cathay” also makes our
proposition more appealing. By integrating our offerings
and through better partnerships, we brought a wider range
of products and services to the benefit of our customers,
including:
• A new range of co-branded Standard Chartered Cathay
Mastercard Credit Cards with Standard Chartered Bank
(Hong Kong) Limited and Mastercard. These credit cards
allow customers to earn miles faster and more easily than
ever, and provide an array of other exciting offers and
privileges, including complimentary Cathay Pacific
Business Class Lounge access, priority check-in and
boarding services, or complimentary Marco Polo Club
Silver or Gold membership during the promotional period.
• A new online shopping experience that provides the
fastest way to earn miles from online shopping.
Customers can earn miles when purchasing the carefully
curated selection of products and experiences on offer,
and can even pay using a mix of miles and cash with our
newly launched Miles Plus Cash payment option.
• A new dining and digital payment experience in
partnership with dining platform OpenRice that enables
customers to use the upgraded Cathay app to search for
partner restaurants, make table reservations, and make
payments – including with Miles Plus Cash. Members also
earn miles when spending cash at partner restaurants.
From July 2022, we will be bringing the best of Marco Polo
Club and Asia Miles together under a single Cathay
membership. As a Cathay member, customers will have
access to more benefits and more rewards, and it will be
simpler to discover life-changing flights, meaningful
experiences and curated products.
Importantly, Cathay Pacific continues as the brand of our
airline globally. Initially, the Cathay brand will only be
available in Hong Kong while Cathay Pacific will continue to
be our brand around the rest of the world. Over time, we will
aim to expand the “Cathay” premium travel lifestyle brand to
other markets.
9
Cathay Pacific Airways Limited Annual Report 2021
5,000
10,000
15,000
25,000
20,000
30,000
35,000
40,000
0 30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
0
20,000
40,000
100,000
80,000
60,000
0.0
10.0
20.0
30.0
50.0
40.0
HK$ million
Passenger capacity, load factor and eciency
HK cents
Passenger revenue and yield trend
Million HK cents
Available seat kilometres (ASK)
Load factor (as a proportion of ASK)
Passenger revenue
Passenger yield
Data in 2017-2020 included Cathay Dragon.
Data in 2017-2020 included Cathay Dragon.
Passenger revenue per ASK
1H18 2H181H17 2H17 1H19 2H19 1H20 2H20 1H21 2H21 1H182H171H17 2H18 1H19 2H19 1H20 2H20 1H21 2H21
REVIEW OF OPERATIONS
Passenger services • Cathay premium travel lifestyle brand • Loyalty and reward programmes
CATHAY PACIFIC PASSENGER SERVICES
Our passenger revenue was severely affected by COVID-
19-related travel restrictions and quarantine requirements
in place in Hong Kong and other markets worldwide. It
decreased by 61.6% to HK$4,346 million compared to 2020.
Revenue passenger kilometre (RPK) traffic decreased by
79.5%, while available seat kilometre (ASK) capacity
decreased by 61.8%. Load factor decreased by 26.9
percentage points, to 31.1%. Yield increased by 87.4% to
HK105.5 cents. Cathay Pacific carried 717 thousand
passengers in 2021, an average of 1,965 passengers per
day and 84.5% fewer than in 2020.
In February 2021, the Hong Kong SAR Government
introduced strict quarantine requirements for Hong Kong-
based aircrew. This significantly limited our ability to
operate passenger flights. To operate the remaining cycles,
we introduced voluntary, longer “closed-loop” duty cycles
for our Hong Kong-based aircrew comprising a 21-day duty
cycle followed by a 14-day quarantine period. These
arrangements are very demanding for our aircrew, and we
are very grateful to all our aircrew who volunteered. Our
travel performance was helped by student traffic demand
from Hong Kong and the Chinese Mainland to the US and
the UK – particularly in August – along with pockets of
demand for flights within Asia. We gradually resumed flights
to more destinations, in particular those on the Chinese
Mainland. The inaugural flight of our new Airbus A321neo
narrow-body aircraft from Hong Kong to Shanghai (Pudong)
took place on 4th August and the aircraft was also deployed
on flights to Guangzhou, Hangzhou, Qingdao, Kaohsiung
and Taipei.
The tightening of quarantine requirements in mid-August
for travellers arriving in Hong Kong from 16 overseas
placesgreatly affected inbound demand and traffic around
what is our traditional summer peak season. We revised
ourplanned passenger flight capacity levels for the
remainder of the year and in December we also reduced
ourflight schedule, affecting a number of flights to and
fromHong Kong. Overall, by the end of 2021 we were
operating just 11.4% of our pre-pandemic passenger flight
capacity – a considerably smaller amount than we had
originally planned.
10
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Passenger services • Cathay premium travel lifestyle brand • Loyalty and reward programmes
AVAILABLE SEAT KILOMETRES (“ASK”), LOAD FACTOR AND YIELD CHANGE BY REGION FOR
CATHAY PACIFIC PASSENGER SERVICES FOR 2021 WERE AS FOLLOWS:
ASK (million) Load factor (%) Yield
2021 2020* Change 2021 2020* Change Change
Americas 4,870 10,762 -54.7% 40.5 54.3 -13.8%pt +104.9%
Europe 2,662 7,276 -63.4% 45.5 58.5 -13.0%pt +61.6%
Southwest Pacific 3,183 5,341 -40.4% 9.0 60.7 -51.7%pt +153.4%
North Asia 1,344 4,693 -71.4% 28.1 61.0 -32.9%pt +112.2%
Southeast Asia 1,016 4,258 -76.1% 22.2 57.1 -34.9%pt +71.0%
South Asia, Middle East and Africa 153 2,279 -93.3% 30.4 63.6 -33.2%pt +90.9%
Overall 13,228 34,609 -61.8% 31.1 58.0 -26.9%pt +87.4%
*
Included Cathay Dragon
INNOVATION
• We launched a WhatsApp customer care service in
HongKong in January 2021, and this social messaging
approach has since been extended to cover most
territories worldwide. This allows customers to contact us
via social messaging platforms with enquiries related to
their bookings.
• We collaborated with the Airport Authority Hong Kong,
The Commons Project and Prenetics on a trial using
digital health platform CommonPass that involved
volunteer Cathay Pacific pilots and cabin crew on a March
2021 flight from Hong Kong to Los Angeles. We followed
this with two live trials in July involving volunteer
customers travelling between Hong Kong and Singapore,
becoming the first airline to complete a trial with
CommonPass involving both testing and vaccination
records on an end-to-end, round-trip journey, as well as
the first airline in Asia Pacific to trial the use of official
vaccination records with customers in a live flight
environment. These trials were part of our efforts to help
shape the future deployment of digital health passports,
which contain travellers’ health credentials, aiding the
secure and seamless reopening of travel.
• We launched a brand new payment option, Miles Plus
Cash, in March 2021 that gives customers the flexibility to
pay using a mix of miles and cash when booking seats on
our website. Miles Plus Cash is also available for shopping
on the Cathay shop and making payments on the Cathay
lifestyle app at our partner restaurants.
• We launched our state-of-the-art Airbus A321neo
aircraftoffering the world’s most enjoyable short-haul
experience. With the launch of the A321neo, Cathay
Pacific is the first airline in the world to provide 4K
ultra-high-definition screens, a 4K video-on-demand
experience as well as Bluetooth audio streaming (being
introduced progressively) across all cabins. Customers
can watch 4K Hollywood and Asian blockbusters using
their own Bluetooth-enabled headphones on our flights.
• Cathay Pacific’s Economy fares were redesigned to give
customers greater choice and flexibility when booking
flights. The new and simple-to-understand Light,
Essential and Flex fares offer increasingly more control
and greater benefits, from enhanced baggage allowances
to flexible rebooking and upgrade options. The
redesigned Economy fares were introduced progressively
across Cathay Pacific’s network in phases, ending with
Hong Kong in the first quarter of 2022.
• Our innovative new tool ‘Fly Ready’ was launched last year
and has been progressively rolled out to select markets.
With Fly Ready, customers flying to Hong Kong can
upload their COVID-19 test results and other important
health documents for verification before they arrive at the
airport, making check-in more simple, seamless and
straightforward.
11
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Passenger services • Cathay premium travel lifestyle brand • Loyalty and reward programmes
AWARDS
• Cathay Pacific won “Best First Class Sparkling” at the
Cellars in the Sky 2020 awards announced in February
2021 organised by Business Traveller magazine.
• At the Skytrax 2021 World Airline Awards, Cathay Pacific
won “Best Business Class Lounge in Asia”, was a recipient
of the “COVID-19 Airline Excellence Award”, and was
named among the top 10 of the World’s Top 100
Airlines2021.
• Cathay Pacific was named sixth in AirlineRatings.com’s
20 Top Airlines in the World for 2021.
• Cathay Pacific’s The Wing, First lounge at Hong Kong
International Airport was named “Asia’s Leading Airline
Lounge – First Class 2021” at the World Travel
Awards2021.
• Cathay Pacific was named Best Airline for Transpacific
Service at the Best in Business Travel Awards for 2021
organised by Business Traveler (USA) magazine.
HOME MARKET – HONG KONG AND GREATER
BAY AREA
• In February 2021, the Hong Kong SAR Government
introduced new mandatory quarantine measures for
Hong Kong-based crew, which had a significant impact
on our ability to service our travel markets.
• In April, we launched our “Arm up, let’s fly again!”
campaign to build awareness about the importance of
getting vaccinated as soon as possible. The response
was very positive.
• The Hong Kong SAR Government relaxed the mandatory
quarantine requirement for fully vaccinated Hong Kong-
based pilots and cabin crew operating passenger flights
in May.
• Quarantine requirements for travellers arriving in Hong
Kong from 16 overseas places were tightened in mid-
August, greatly affecting inbound demand and traffic
around our traditional summer peak season.
• Effective 15th November, Hong Kong International
Airport’s Departures level was separated into two
passenger zones – one for those travelling to the Chinese
Mainland, and another for those travelling to any other
destinations as well as all transit passengers. As a result,
we reopened The Pier, Business lounge to cater to
passengers in the departure zone for non-Chinese
Mainland travel. The Wing, First lounge remained open for
eligible customers travelling to the Chinese Mainland.
• In November, the Hong Kong SAR Government tightened
boarding and quarantine requirements for passengers
arriving from countries with reported cases of the
Omicron coronavirus variant, and placed these countries
in the highest-risk “Group A” category of specified places.
• In late December 2021, the Hong Kong SAR Government
tightened the quarantine requirements for Hong Kong-
based aircrew and subsequently announced in 2022
place-specific flight suspensions for Australia, Canada,
France, India, Nepal, Pakistan, the Philippines, the United
Kingdom and the United States of America that remain in
place at the date of this report.
AMERICAS
• Our US and Canada routes experienced occasional
pockets of strong student travel and transit demand to
and from Hong Kong and the Chinese Mainland,
especially in August.
• At the end of 2021, Cathay Pacific was operating
passenger flights serving the following destinations in the
Americas: Chicago, Los Angeles, New York, San
Francisco, Toronto and Vancouver (to and from Hong
Kong); Boston (from Hong Kong only).
EUROPE
• The Hong Kong SAR Government’s ban on flights arriving
into Hong Kong from the UK that was introduced in
December 2020 remained in place until May 2021. This
had a considerable impact on our travel business.
• Cathay Pacific supported the operation of two special
flights to bring Hong Kong residents home from the UK in
April 2021. These marked our first flights operated by fully
vaccinated aircrew, and our first flights from London since
the ban was introduced.
• In May, Cathay Pacific resumed operating regular flights
from London Heathrow following the relaxation of the ban
on flights to Hong Kong from the UK.
12
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Passenger services • Cathay premium travel lifestyle brand • Loyalty and reward programmes
• Our UK routes experienced occasional pockets of strong
student travel demand to and from Hong Kong and the
Chinese Mainland after the lifting of the ban, particularly
in September.
• At the end of 2021, Cathay Pacific was operating
passenger flights serving the following destinations in
Europe: London, Manchester and Milan (to and from Hong
Kong); Amsterdam, Frankfurt, Madrid and Paris (from
Hong Kong only).
SOUTHWEST PACIFIC
• Due to the Australian government’s restrictions on
inbound traffic, all our ex-Hong Kong flights to Australia
were subject to passenger quotas between 1st January
and 31st October 2021.
• From 1st November, fully vaccinated Australian citizens,
permanent residents and their immediate family were
able to fly to Sydney and Melbourne quarantine-free,
without quotas. As a result, we operated increased
capacity on our flights to/from Sydney and Melbourne for
eligible customers.
• At the end of 2021, Cathay Pacific was operating
passenger flights serving the following destinations in
theSouthwest Pacific: Brisbane, Melbourne, Perth and
Sydney (to and from Hong Kong); Auckland (from Hong
Kong only).
NORTH ASIA
• In April, we resumed operating regular services to
Chengdu and Xiamen in the Chinese Mainland, and
Kaohsiung in Taiwan.
• In May, we resumed operating regular services to Fuzhou
and Hangzhou in response to increased demand for travel
from the Chinese Mainland under the Hong Kong SAR
Government’s Return2HK scheme.
• In June, we resumed passenger flights from Guangzhou
to Hong Kong.
• We resumed flights to Wuhan in July and to Qingdao
inAugust.
• Chinese Mainland sales provided good support to our
network, particularly for long-haul operations serving the
UK and the US.
• In August, we marked the inaugural flight of our new
Airbus A321neo aircraft from Hong Kong to Shanghai
(Pudong). The aircraft was also deployed on flights to
Guangzhou, Hangzhou, Qingdao, Kaohsiung and Taipei.
• At the end of 2021, Cathay Pacific was operating
passenger flights serving the following destinations in
North Asia: Beijing, Chengdu, Kaohsiung, Seoul, Shanghai,
Taipei and Tokyo (to and from Hong Kong); Fuzhou,
Guangzhou, Hangzhou, Qingdao, Wuhan and Xiamen (to
Hong Kong only); and Osaka (from Hong Kong only).
SOUTHEAST ASIA
• Demand to and from Indonesia was strong starting in the
second quarter, supported by transit passenger traffic
within Asia.
• The Hong Kong SAR Government introduced a temporary
ban on all flights arriving in Hong Kong from the
Philippines in mid-April and from Indonesia in late-June,
under its place-specific suspension mechanism in view of
the COVID-19 situation in those two countries. This
affected our flights from Cebu, Manila, Jakarta and
Surabaya.
• The planned launch of the Hong Kong-Singapore Air
Travel Bubble at the end of May was suspended.
• At the end of 2021, Cathay Pacific was operating
passenger flights serving the following destinations in
Southeast Asia: Cebu, Hanoi, Ho Chi Minh City, Jakarta,
Kuala Lumpur, Manila, Phnom Penh, and Singapore (to and
from Hong Kong); Bangkok and Phuket (from Hong Kong
only).
SOUTH ASIA, MIDDLE EAST AND AFRICA
• In May, we resumed operating regular services to Dubai.
• We resumed flights to Dhaka in December.
• At the end of 2021, Cathay Pacific was operating
passenger flights to the following destinations in South
Asia, the Middle East and Africa: Dhaka, Dubai and Tel Aviv
(to and from Hong Kong).
13
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Passenger services • Cathay premium travel lifestyle brand • Loyalty and reward programmes
CATHAY PREMIUM TRAVEL LIFESTYLE BRAND
• In July, we launched “Cathay” – a new premium travel
lifestyle brand that brings all that we love about travel
together with everyday lifestyle. Under “Cathay”, we rolled
out a range of new offers in spending, dining, shopping
and hotels, enabling us to engage with our customers not
only when they fly with us, but every day.
• Cathay Pacific continues as the brand of our airline
globally. Initially, the Cathay brand will only be available in
Hong Kong while Cathay Pacific will continue to be our
brand around the rest of the world. Over time, we will aim
to expand the “Cathay” premium travel lifestyle brand to
other markets.
• We launched a new range of co-branded Standard
Chartered Cathay Mastercard Credit Cards with Standard
Chartered Bank (Hong Kong) Limited and Mastercard.
These credit cards allow customers to earn miles faster
and more easily than ever, and provide an array of other
exciting offers and privileges, including complimentary
Cathay Pacific Business Class Lounge access, priority
check-in and boarding services, or complimentary Marco
Polo Club Silver or Gold membership during the
promotional period.
• We introduced a new online shopping experience that
provides the fastest way to earn miles from online
shopping. Customers can earn miles when purchasing
the carefully curated selection of products and
experiences on offer, and can even pay using a mix of
miles and cash with our newly launched Miles Plus Cash
payment option. The new online shopping experience
also provides next-day delivery in Hong Kong (subject to
terms and conditions).
• Cathay partnered with dining platform OpenRice on a new
dining and digital payment experience that enables
customers to use the upgraded Cathay app to search for
partner restaurants, make table reservations, and make
payments – including with Miles Plus Cash. Members also
earn miles when spending cash at partner restaurants.
LOYALTY AND REWARD PROGRAMMES
MARCO POLO CLUB
• The Marco Polo Club loyalty programme provides
benefits and services to the frequent flyers of
CathayPacific.
• Club points are earned by reference to airline, cabin fare
class and distance travelled.
• Silver members (and above) have unlimited access to
lounges when flying on Cathay Pacific. All members are
entitled to priority boarding and check-in.
• From July 2022, we will be bringing the best of Marco Polo
Club and Asia Miles together under a single Cathay
membership. As a Cathay member, customers will have
access to more benefits and more rewards, and it will be
simpler to discover life-changing flights, meaningful
experiences and curated products.
ASIA MILES
• Asia Miles is a leading travel and lifestyle rewards
programme in Asia. It has more than 12 million members
and over 800 partners worldwide, including 26 airlines,
more than 150 hotel brands and over 400 dining partners
and shops.
• There was a 49% decrease in redemptions by Asia Miles
members on Cathay Pacific flights in 2021 compared to
the same period last year (which included Cathay Dragon),
but redemptions for non-flight-related channels
increased by 52%.
• In March 2021, Cathay Pacific launched a brand new
payment option, Miles Plus Cash, that gives customers
the flexibility to pay using a mix of miles and cash when
booking seats on our website. Miles Plus Cash is also
available for shopping on the Cathay shop and making
payments on the Cathay lifestyle app at our partner
restaurants.
• Marco Polo Club members are also members of
AsiaMiles.
• From July 2022, we will be bringing the best of Asia Miles
and Marco Polo Club together under a single Cathay
membership. As a Cathay member, customers will have
access to more benefits and more rewards, and it will be
simpler to discover life-changing flights, meaningful
experiences and curated products.
14
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Cargo services • Fleet
0
4,000
2,000
6,000
8,000
10,000
0.0
2.0
1.0
3.0
4.0
5.0
1.0
3.0
2.5
2.0
1.5
3.5
4.0
4.5
3,000
6,000
9,000
12,000
15,000
24,000
21,000
18,000
Cargo capacity, load factor and eciency
Million
Cargo revenue and yield trend
HK$ million HK$HK$
Data in 2017-2020 included Cathay Dragon.
Data in 2017-2020 included Cathay Dragon.
Cargo revenue
Cargo yield
Available cargo tonne kilometres (AFTK)
Load factor
Cargo revenue per AFTK
1H18 2H181H17 2H17 1H19 2H19 1H20 2H20 1H21 2H21 1H18 2H181H17 2H17 1H19 2H19 1H20 2H20 1H21 2H21
CATHAY PACIFIC CARGO SERVICES
Cargo revenue in 2021 was HK$32,377 million, an increase
of 31.8% compared to 2020. Cargo revenue tonne kilometre
(RFTK) traffic decreased by 1.1%, while available cargo
tonne kilometre (AFTK) capacity decreased by 10.9%. Load
factor remained high, increasing 8.1 percentage points to
81.4%, and reaching 86.4% in March – the highest it has
been since the start of the pandemic. Yield increased by
33.1% to HK$3.94.
The strict quarantine requirements for Hong Kong-based
aircrew introduced in February and relaxed in May had a
notable impact on our cargo capacity and tonnage carried
in the first half of the year. These improved in the second
half, with cargo demand continuing to grow as we entered
the traditional peak cargo season. October saw us carry
more than 136,000 tonnes of cargo – the most we have
carried in a single month since the start of the COVID-19
pandemic.
We continued to add capacity to the market wherever
possible. This included operating 7,867 pairs of cargo-only
passenger flights (services operated using passenger
aircraft but carrying exclusively cargo) and “preighters” (six
passenger aircraft that have had some seats in the cabins
removed to provide additional cargo-carrying capacity). We
also chartered flights from our all-cargo subsidiary, Air
Hong Kong.
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Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Cargo services • Fleet
AVAILABLE CARGO TONNE KILOMETRES (“AFTK”), LOAD FACTOR AND YIELD CHANGE FOR
2021 WERE AS FOLLOWS:
AFTK (million) Load factor (%) Yield
2021 2020* Change 2021 2020* Change Change
Cathay Pacific 10,094 11,329 -10.9% 81.4 73.3 +8.1%pt +33.1%
*
Included Cathay Dragon
• In January, we launched a new scheduled freighter
service between Hong Kong and Riyadh to meet the
strong demand for shipments of e-commerce and other
general cargo such as garments.
• The impact of crew quarantine restrictions in Hong Kong
was felt most severely in April, with the number of
freighter and cargo-only passenger flight operations
lower than at any point since the COVID-19 pandemic
began. The situation improved from May onwards.
• Cathay Pacific Cargo took the lead in its third pilot of
IATA’s ONE Record initiative and established the first
airline-forwarder connection in the air cargo industry via
One Record API at its home hub, Hong Kong, marking a
significant step in the end-to-end digitalisation of the
global supply chain. IATA’s ONE Record creates a “Virtual
Shipment Record” for all shipments; a single-record view
of a shipment that will enable data to be shared by all
stakeholders across the air cargo industry.
• Cathay Pacific Cargo became the first Asian air-cargo
carrier to offer the Envirotainer Releye RLP for carriage on
its aircraft fleet, adding to its extensive cool-chain
options for customers with temperature-sensitive
shipments. This new container provides greater load
flexibility and the latest cool-chain technology.
• We launched Ultra Track, a next-generation track-and-
trace system that monitors shipment information
including temperature, GPS location and humidity using
Bluetooth technology. The system offers greater visibility
to customers who can now monitor shipments in near real
time, and enables us to take proactive steps and
corrective actions if and when they are necessary. Cathay
Pacific Cargo has introduced Ultra Track to its network
with a phased introduction at 27 ports across the globe
as of the end of 2021.
• We operated six of our Boeing 777-300ER passenger
aircraft that have been partially converted into
“preighters” by removing some of the seats in the
passenger cabins to provide additional cargo-carrying
capacity.
• Demand remained strong during the Northern
Hemisphere summer holiday period, typically a quieter
time of the year, and our freighter schedule ramped up to
peak-season levels towards the end of August.
• October saw 78 sectors operated by our converted
“preighters”, while November saw us operate 1,035 pairs
of cargo-only passenger flights – both record-high
numbers.
• We recommenced our seasonal cargo service between
Hobart and Hong Kong in November, transporting
Tasmanian produce to key Asian markets.
• We launched our new digital booking platform, Click &
Ship, progressively across our network, which has been
well received by our customers. The platform promises
booking transparency and speed, enabling customers to
view prices and capacity, and book cargo with instant
confirmation.
• In December, we received IATA’s CEIV Live Animal
Certification, affirming our commitment to continuously
improve our standards for carrying sensitive cargo.
• More stringent crew quarantine requirements in Hong
Kong began to have a major impact on our long-haul
capacities from the end of December.
16
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Cargo services • Fleet
VACCINE SHIPMENTS
• Building on our many years of experience in transporting
pharmaceutical shipments, Cathay Pacific developed a
Vaccine Solution specifically for the fast and effective
distribution of COVID-19 vaccines across the globe. The
solution includes Ultra Track as well as 24/7 monitoring by
dedicated cargo professionals at our newly established
Operations Control Centre in Hong Kong.
• In February, Cathay Pacific flew the first shipments of
COVID-19 vaccines to Hong Kong. We have also flown
vaccines for distribution to countries including
Bangladesh, Cambodia, India, Indonesia, Malaysia,
Mexico, Nepal, the Philippines, Singapore, Thailand
andVietnam.
• To date, our airlines have shipped more than 190 million
COVID-19 vaccines around the world.
AWARDS
• In May 2021, Cathay Pacific Cargo’s performance in 2020
was recognised with two industry-wide high scores in the
Air Cargo Customer Experience analysis, which is based
on the findings from the Air Cargo Excellence Survey
organised by Air Cargo World magazine. The airline
received a high score of 4.8 out of 5.0 points across all
airlines for availability and quality of specialty cargo
operations, and took home the highest overall score,
which had a strong showing from Asia-Pacific airlines,
of 4.6 out of 5.0.
• Cathay Pacific was named “Best in Future of
Connectedness” at the 2021 IDC Future Enterprise
Awards for its development of its next-generation track-
and-trace solution, Ultra Track, which applies Internet of
Things (IoT) technology to monitor shipments.
• Cathay Pacific Cargo was named “Best Air Cargo
Carrier– Asia” at the 2021 Asian Freight, Logistics and
Supply Chain (AFLAS) Awards organised by Asia Cargo
News magazine.
FLEET DEVELOPMENT
• At the end of 2021, Cathay Pacific had 193 aircraft
(including 14 Cathay Dragon aircraft that are either
pending to be reassigned to Cathay Pacific and HK
Express, or to be lease returned or retired), HK Express
had 27 aircraft and Air Hong Kong had 14 aircraft (a total
of 234 aircraft).
• Given current conditions, approximately 37% of our
passenger aircraft are parked in locations outside of
Hong Kong in keeping with prudent operational and
asset-management considerations. This is subject to
change as we continue to reassess our passenger
flightcapacity.
• Cathay Pacific took delivery of six new aircraft in 2021. HK
Express took delivery of one new aircraft in 2021. These
deliveries were all firm commitments made earlier that will
help to modernise our fleets and improve efficiency.
• Six of our Boeing 777-300ER passenger aircraft have
been partially converted into “preighters” by removing
some of the seats in the cabins to provide additional
cargo-carrying capacity.
17
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Cargo services • Fleet
FLEET PROFILE*
Number at
31st December 2021
Leased** Orders Expiry of operating leases**
Aircraft type Owned Finance
Operating
Total
Average
age ‘22 ‘23
‘24 and
beyond Total ‘22 ‘23 ‘24 ‘25 ‘26
‘27 and
beyond
Cathay Pacific:
A320-200 5 2 7 16.6 2
(a)
A321-200 2 3 5 16.7 2
(b)
1
A321-200neo 5 5 0.7 7 4 11 5
A330-300 37 10 4 51 15.2 2 2
A350-900 19 7 2 28 4.1 2 2 2
A350-1000 10 5 15 2.6 3 3
747-400ERF 6 6 13.0
747-8F 3 11 14 8.9
777-300 17 17 20.2
777-300ER 25 5 15 45 9.4 4
(c)
2 3 2 4
777-9 21 21
Total 124 38 31 193 10.9 10 6 21 37 8 3 3 4 6 7
HK Express:
A320-200 6 6 10.8 1
(d)
1 4
A320-200neo 10 10 2.8 10
A321-200 11 11 4.2 1 2 8
A321-200neo 1 6 9 16
Total 27 27 5.2 1 6 9 16 1 1 4 1 2 18
Air Hong Kong***:
A300-600F 9 9 17.6 5 3 1
A330-243F 2 2 10.0 2
A330-300P2F 3 3 14.0 3
Total 14 14 15.8 5 3 6
Grand total 124 38 72 234 10.5 11 12 30 53 14 7 7 5 14 25
*
The table does not reflect aircraft movements after 31st December 2021.
**
Leases previously classified as operating leases are accounted for in a similar manner to finance leases under accounting standards. The majority of
operating leases in the above table are within the scope of HKFRS 16.
***
The nine Airbus A300-600F, two Airbus A330-243F and three Airbus A330-300P2F freighters are considered to be operated by Air Hong Kong, even
though the arrangement does not constitute a lease in accordance with HKFRS 16.
(a) The operating leases of two Airbus A320-200 aircraft expired in January and February 2022. The aircraft were returned to their lessors.
(b) The operating lease of one Airbus A321-200 aircraft expired in February 2022. The aircraft was returned to its lessor.
(c) The operating lease of one Boeing 777-300ER aircraft expired in January 2022. The aircraft was returned to its lessor.
(d) The operating lease of one Airbus A320-200 aircraft expired in February 2022. The aircraft was returned to its lessor.
18
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Digital leadership
DIGITAL LEADERSHIP
Our vision is for Cathay Pacific to become one of the world’s
greatest service brands, by transforming into a digital
leader famous for its strong digital culture and capabilities.
These are considered a core competitive edge of ours,
alongside our traditional strengths on brand, customer
experience and people.
To achieve this goal, we developed a comprehensive Digital
Leadership Vision comprising three layers:
• IT Enablement – delivering agile, cost-efficient, scalable,
secured and reliable solutions.
• Digital Enablement – pioneering and enabling consistent
and scalable data analytics, technology and change-
management capabilities.
• Business Transformation – applying our IT and Digital
capabilities to deliver customer and business outcomes.
Critical to the success of our vision is for the entire
organisation to exhibit a strong digital innovation culture.
This includes understanding evolving digital trends,
embracing digital data and technologies in major business
innovation initiatives, adopting an agile approach of
“experiment often and fail fast” in applicable business areas
and “think big but start small”, and ensuring data integrity,
quality and compliance.
The success of our Digital Leadership Vision will be
characterised by our ability and maturity in advanced data
analytics, innovative technologies, and transformational
business changes. Through these, Cathay Pacific will
improve customer service, productivity, employee
performance and sustain future growth.
19
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Review of other subsidiaries and associates
REVIEW OF OTHER SUBSIDIARIES AND
ASSOCIATES
The share of results from other subsidiaries and associates
in 2021 was HK$3,799 million of losses compared to a share
of losses of HK$4,255 million in 2020. Set out below is a
review of the performance and operations of principal
subsidiaries and associates.
HONG KONG EXPRESS AIRWAYS LIMITED
(“HK EXPRESS”)
• HK Express is Hong Kong’s only low-cost carrier, focusing
on serving leisure travel destinations.
• HK Express typically operates flights to 25 destinations
including Bangkok, Da Nang, Fukuoka, Nagoya, Ningbo,
Osaka, Phuket, Saipan, Seoul, Taichung and Tokyo.
• At the end of 2021, HK Express had an all-Airbus narrow-
body fleet of 27 aircraft, including six Airbus A320-200
aircraft, 11 Airbus A321-200 aircraft and 10 Airbus A320-
200neo aircraft. The young fleet had an average age of
5.2 years.
• HK Express took delivery of one new aircraft in 2021.
• From 2022, HK Express will receive delivery of an order
previously allocated to Cathay Dragon for 16 Airbus
A321-200neo aircraft, which is the most fuel efficient of
its type. Such a modern fleet enables HK Express to
leverage new opportunities within the region and help
strengthen Hong Kong’s position as Asia’s leading
international aviation hub.
• At the end of 2021, HK Express was operating flights to
Bangkok, Kaohsiung, Phuket and Taipei.
• In 2021, capacity amounted to 71 million available seat
kilometres, reflecting the airline’s substantial capacity
reductions in response to significantly reduced demand
as well as travel restrictions and quarantine requirements
in place in Hong Kong and other markets amid the
ongoing global COVID-19 pandemic. The average flown
load factor was 8.8%, a decrease of 62.2 percentage
points versus the comparative period.
• HK Express recorded an after-tax loss of HK$1,978 million
in 2021, compared with a HK$1,723 million loss in 2020.
• Ancillary revenue penetration as a percentage of total
revenue was 27.4% in 2021. This included non-flight
scheduled revenue, which arises from the sale of
baggage, priority boarding, allocated seats and
administration fees, all directly attributable to the low-fare
business of HK Express.
20
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Review of other subsidiaries and associates
For the year ended
31st December 2021
HK$M
For the year ended
31st December 2020
HK$M Change
Revenue
Passenger services* 11 636 -98.3%
Cargo services 2 14 -85.7%
Other services and recoveries* 7 211 -96.7%
Total revenue 20 861 -97.7%
Expenses
Staff (384) (575) -33.2%
Inflight service and passenger expenses (1) (10) -90.0%
Landing, parking and route expenses (33) (187) -82.4%
Fuel, including hedging losses (8) (285) -97.2%
Aircraft maintenance (279) (327) -14.7%
Aircraft depreciation and rentals (830) (908) -8.6%
Other depreciation, amortisation and rentals (27) (28) -3.6%
Others (264) (203) +30.0%
Operating expenses (1,826) (2,523) -27.6%
Net finance charges (328) (274) +19.7%
Total operating expenses (2,154) (2,797) -23.0%
Loss before impairment and related charges and taxation (2,134) (1,936) +10.2%
Impairment and related charges (41) – –
Taxation 197 213 -7.5%
Loss after taxation (1,978) (1,723) +14.8%
For the year ended
31st December 2021
For the year ended
31st December 2020 Change
Operating Statistics – HK Express
Available seat kilometres (“ASK”) Million 71 1,742 -95.9%
Passenger revenue per ASK HK cents 15.3 36.5 -58.1%
Revenue passenger kilometres (“RPK”) * Million 6 1,237 -99.5%
Revenue passengers carried ‘000 8 572 -98.6%
Passenger load factor* % 8.8 71.0 -62.2%pt
Passenger yield* HK cents 173.5 51.4 +237.5%
Cost per ASK (with fuel) HK cents 2,967.1 160.6 +1,747.5%
Fuel consumption per million ASK Barrels 145 151 -4.0%
Fuel consumption per million RPK* Barrels 1,644 213 +671.8%
Cost per ASK (without fuel) HK cents 2,956.4 144.2 +1,950.2%
ASK per HK$’000 staff cost Unit 184 3,030 -93.9%
ASK per staff ‘000 70 1,637 -95.7%
Aircraft utilisation Hours per day 0.1 1.5 -93.3%
On-time performance % 96.8 91.7 +5.1%pt
Average age of fleet Years 5.2 5.1 +0.1years
*
A portion of ancillary revenue used to calculate ancillary penetration for HK Express is captured under “Passenger services revenue” in alignment with
the Group’s presentation of revenue in accordance with HKFRS 15.
21
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Review of other subsidiaries and associates
AHK AIR HONG KONG LIMITED
(“AIR HONG KONG”)
• Air Hong Kong principally operates express cargo
services for DHL Express.
• At the end of 2021, Air Hong Kong operated nine dry-
leased Airbus A300-600F freighters, two dry-leased
Airbus A330-243F freighters and three dry-leased Airbus
A330-300P2F converted freighters.
• Air Hong Kong operates scheduled and charter flights to
major cities in Asia, including Bangkok, Beijing, Cebu (via
Manila), Chengdu, Hanoi, Ho Chi Minh City, Jakarta, Kuala
Lumpur, Nagoya, Osaka, Penang, Seoul, Shanghai,
Singapore, Taipei and Tokyo.
• In 2021, capacity (in terms of available cargo tonne
kilometres) increased by 2.8% to 948 million.
• On-time performance decreased by 1.0 percentage point
to 89.1% in 2021.
• Air Hong Kong recorded an increase in profit in 2021
compared with 2020.
PRINCIPAL AIRLINE SERVICES SUBSIDIARIES
CATHAY PACIFIC CATERING SERVICES (H.K.)
LIMITED (“CPCS”) AND KITCHENS OUTSIDE
HONG KONG
• CPCS, a wholly owned subsidiary, operates the principal
flight kitchen in Hong Kong.
• CPCS provides flight catering services to 48 international
airlines in Hong Kong. It produced 1.7 million airline meals
and handled 14,053 flights in 2021, representing a daily
average of 4,701 meals and 39 flights, a decrease of
63.8% and 16.7%, respectively, from 2020. The reduction
in business volumes is due to the continued impact of
COVID-19.
• Affected by the significant reduction in demand for flight
catering services, the focus of the business was to
develop its non-aviation catering services, while
minimising operating costs and capital expenditure.
• CPCS has been providing meal services at Penny’s Bay
and will be expanding this to include additional facilities.
• The financial results of CPCS in 2021 improved
comparedto 2020, mainly due to the impact of asset
impairments in the prior year, partially offset by the
reduction in COVID-19 financial relief measures received
from the Hong Kong SAR Government and the Airport
Authority Hong Kong in 2021. Excluding these one-off
items, the underlying results declined due to lower
business volumes.
• The financial results of flight kitchens outside Hong Kong
in 2021 declined compared with 2020, with the exception
of Canada, which reported a year-on-year improvement.
CATHAY PACIFIC SERVICES LIMITED (“CPSL”)
• CPSL, a wholly owned subsidiary, owns and operates the
Group’s cargo terminal at Hong Kong International
Airport. At the end of 2021, CPSL provided cargo-
handling services for the Cathay Pacific Group and 17
other airlines.
• CPSL handled 1.4 million tonnes of cargo in 2021 (an
increase of 4% compared with 2020), 46% of which were
trans-shipments. Export and import shipments
accounted for 35% and 19% respectively of the total.
• The financial results in 2021 improved compared
with2020.
HONG KONG AIRPORT SERVICES LIMITED (“HAS”)
• HAS, a wholly owned subsidiary, provides ramp and
passenger-handling services at Hong Kong International
Airport. At the end of 2021, it provided ground-handling
services to 29 airlines, including Cathay Pacific.
• In 2021, HAS had 37.9% and 4.1% market shares in ramp-
and passenger-handling businesses respectively at
HongKong International Airport. The number of flights
handled under both ramp- and passenger-handling
businesses shrank by 17.5% and 39.0% against last year.
The adverse impact of the COVID-19 pandemic on
aviation business continued in 2021. Customer airlines
have either maintained minimal passenger flights or
suspended operations.
22
Cathay Pacific Airways Limited Annual Report 2021
REVIEW OF OPERATIONS
Review of other subsidiaries and associates
• The financial results for 2021 were adversely affected.
The focus of the business was to capture new revenue
streams, reduce operating costs, defer or cancel capital
expenditure and to preserve cash. Various financial relief
measures or assistance programmes have lessened the
impact of the pandemic.
• In 2021, HAS continued to meet and exceed the Critical
Key Performance Indicators set by the Airport Authority
Hong Kong.
VOGUE LAUNDRY SERVICE LIMITED (“VLS”)
• VLS, a wholly owned subsidiary, provides a
comprehensive range of services in laundry and dry
cleaning of commercial linen, uniform and guest
garments.
• It operates a commercial laundry plant in Yuen Long
Industrial Park and runs nine valet shops in Hong Kong
serving retail customers.
• VLS processed 33 million items of laundry in 2021, a level
similar to 2020. The financial results of 2021 improved
compared with those of 2020 mainly due to there being
no asset impairments made in 2021, but also partly offset
by the absence of financial relief measures received from
the Hong Kong SAR Government in the form of
Employment Subsidy Schemes, which were available
in2020.
PRINCIPAL ASSOCIATES
AIR CHINA LIMITED (“AIR CHINA”)
• Air China, in which the Cathay Pacific Group had a 18.13%
interest at 31st December 2021, is the national flag carrier
and leading provider of passenger, cargo and other
airline-related services in the Chinese Mainland. We are
represented on the Board of Directors of Air China and
equity account for our share of Air China’s results.
• Our share of Air China’s results is based on its financial
statements drawn up three months in arrear.
Consequently, our 2021 results include Air China’s results
for the 12 months ended 30th September 2021, adjusted
for any significant events or transactions in the period
from 1st October 2021 to 31st December 2021.
• For the 12 months ended 30th September 2021, Air
China’s financial results declined compared to those for
the 12 months ended 30th September 2020.
AIR CHINA CARGO CO., LTD. (“AIR CHINA
CARGO”)
• As part of a mixed ownership reform for Air China Cargo,
the Cathay Pacific Group’s equity and economic interest
in Air China Cargo reduced from 34.78% to 24% in
September 2021. Air China Cargo is the leading provider
of air cargo services in the Chinese Mainland. It has its
headquarters in Beijing. Its main operating base is in
Shanghai Pudong.
• Starting from the second half of 2021, with the dilution of
our interest in Air China Cargo, our share of results are
taken three months in arrear. Our 2021 results include Air
China Cargo’s results for the nine months ended 30th
September 2021, adjusted for any significant events or
transactions in the period from 1st October 2021 to
31stDecember 2021.
ANTITRUST PROCEEDINGS
Cathay Pacific remains the subject of antitrust proceedings
in various jurisdictions.The outcomes are subject to
uncertainties.Cathay Pacific is not in a position to assess
the full potential liabilities, but makes provisions based on
relevant facts and circumstances in line with accounting
policy 22 set out on page 129.
23
Cathay Pacific Airways Limited Annual Report 2021
FINANCIAL REVIEW
0
20,000
40,000
60,000
80,000
100,000
120,000
0
5,000
15,000
10,000
20,000
0
300
600
900
1,200
2017 2018 2019 2020 2021
HK$ million
Revenue
Passengers in ‘000
Cargo in ‘000 tonnes
Cathay Pacic passengers and cargo carried
Cargo carried
Passengers carried
Other services and recoveries
Cargo services
Passenger services
1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21 2H21
Data in 2017-2020 included Cathay Dragon.
Data in 2017-2020 included Cathay Dragon.
The Cathay Pacific Group’s attributable loss was HK$5,527 million for 2021
(2020: loss of HK$21,648 million). Cathay Pacific reported a loss after tax of HK$1,728 million
for 2021 (2020: loss of HK$17,393 million), and the share of losses from subsidiaries and
associates was HK$3,799 million (2020: losses of HK$4,255 million).
REVENUE
Group Cathay Pacific
2021
HK$M
2020*
HK$M Change
2021
HK$M
2020*
HK$M Change
Passenger services 4,357 11,950 -63.5% 4,346 11,313 -61.6%
Cargo services 35,814 27,890 +28.4% 32,377 24,573 +31.8%
Other services and recoveries 5,416 7,094 -23.7% 5,461 6,842 -20.2%
Total revenue 45,587 46,934 -2.9% 42,184 42,728 -1.3%
*
Included Cathay Dragon
24
Cathay Pacific Airways Limited Annual Report 2021
FINANCIAL REVIEW
CATHAY PACIFIC
• Passenger revenue decreased by 61.6% to HK$4,346
million. The number of revenue passengers carried
decreased by 84.5% to 717 thousand. Revenue
passenger kilometres decreased by 79.5%.
• The passenger load factor decreased by 26.9 percentage
points to 31.1%. Available seat kilometres decreased
by61.8%.
• Passenger yield increased by 87.4% to HK105.5 cents.
• First and business class revenues decreased by 49.1%
and the load factor decreased from 38.7% to 25.8%.
• Premium economy and economy class revenues
decreased by 67.1% and the load factor decreased from
61.2% to 32.0%.
• Cargo revenue increased by 31.8% to HK$32,377 million
despite a 10.9% decrease in available freight tonne
kilometers.
• The cargo load factor increased by 8.1 percentage points
and cargo yield increased by 33.1% to HK$3.94.
• The overall revenue load factor increased by 0.7
percentage points to 68.4%.
• The annualised effect on revenue of changes in yield and
load factor is set out below:
HK$M
+ 1 percentage point in passenger load factor 140
+ 1 percentage point in cargo load factor 398
+ HK¢1 in passenger yield 41
+ HK¢1 in cargo yield 82
• The Group’s and Cathay Pacific’s total operating
expenses decreased by 20.9% and 22.1% respectively.
• The cost per ATK (with fuel) of Cathay Pacific decreased
from HK$4.14 to HK$3.88, a decrease of 6.3%.
• The cost per ATK (without fuel) of Cathay Pacific
decreased from HK$3.41 to HK$3.32, a decrease of 2.6%.
• The underlying cost per ATK (without fuel), which
excludes impairment and related charges and
restructuring costs, increased from HK$3.06 to HK$3.24,
an increase of 5.9%.
OPERATING EXPENSES*
Group Cathay Pacific
2021
HK$M
2020
HK$M Change
2021
HK$M
2020
HK$M Change
Staff 11,298 15,786 -28.4% 9,542 13,616 -29.9%
Inflight service and passenger expenses 366 1,102 -66.8% 365 1,093 -66.6%
Landing, parking and route expenses 5,743 6,868 -16.4% 5,315 6,268 -15.2%
Fuel, including hedging gains/losses 7,031 11,379 -38.2% 6,388 10,710 -40.4%
Aircraft maintenance 5,152 5,772 -10.7% 4,261 4,745 -10.2%
Aircraft depreciation and rentals 10,444 11,879 -12.1% 9,670 11,060 -12.6%
Other depreciation, amortisation and rentals 2,381 2,720 -12.5% 1,675 1,924 -12.9%
Others 3,622 3,133 +15.6% 3,956 3,669 +7.8%
Operating expenses 46,037 58,639 -21.5% 41,172 53,085 -22.4%
Net finance charges 2,629 2,895 -9.2% 1,972 2,313 -14.7%
Total operating expenses 48,666 61,534 -20.9% 43,144 55,398 -22.1%
*
Included Cathay Dragon
25
Cathay Pacific Airways Limited Annual Report 2021
FINANCIAL REVIEW
Net nance
charges
Others
Sta
11%
Aircraft
maintenance
Depreciation,
amortisation
and rentals
26%
5%
7%
23%
Fuel, including
hedging
gains/losses
Inight service and
passenger expenses
Landing,
parking
and route
expenses
Group total operating expenses
1%
12%
15%
0
20
40
80
100
0
10
20
40
50
60 30
2017 2018 2019 2020 2021
US$ per barrel
(jet fuel)
Barrels
in million
Group fuel price and consumption
Into wing price – before hedging
Into wing price – after hedging
Uplifted volume
Data in 2017-2020 included Cathay Dragon.
OPERATING RESULTS ANALYSIS*
1st half
2021
HK$M
2nd half
2021
HK$M
Full year
2021
HK$M
1st half
2020
HK$M
2nd half
2020
HK$M
Full year
2020
HK$M
Cathay Pacific’s (loss)/profit before impairment and
related charges, restructuring and taxation (4,545) 3,585 (960) (6,943) (5,727) (12,670)
Impairment and related charges (note 1) (460) (317) (777) (1,281) (1,534) (2,815)
Restructuring costs (note 2) (403) 18 (385) – (2,383) (2,383)
Non-recurring item (note 3) – 210 210 – – –
Taxation (note 4) 377 (193) 184 863 (388) 475
Cathay Pacific’s (loss)/profit after taxation (5,031) 3,303 (1,728) (7,361) (10,032) (17,393)
Share of losses from subsidiaries and
associates (note 5) (2,534) (1,265) (3,799) (2,504) (1,751) (4,255)
(Loss)/profit attributable to the shareholders of
the Cathay Pacific Group (7,565) 2,038 (5,527) (9,865) (11,783) (21,648)
Adjusted (loss)/profit attributable to the
shareholders of Cathay Pacific (note 6) (6,662) 2,142 (4,520) (7,400) (7,809) (15,209)
*
Included Cathay Dragon
Notes:
1) Impairment and related charges of HK$777 million under Cathay Pacific mainly in connection with nine aircraft that are unlikely to re-enter meaningful
economic service again before they retire or are returned to lessors (2020: Impairment and related charges of HK$2,815 million under Cathay Pacific
and Cathay Dragon mainly in connection with 34 aircraft that are unlikely to re-enter meaningful economic service again before they retire or are
returned to lessors).
2) Redundancy and related costs of HK$385 million (2020: HK$2,383 million in connection with the restructuring of the Group and the discontinuation of
Cathay Dragon operations).
3) The non-recurring item in 2021 reflects a gain on deemed partial disposal of an associate.
4) A write off of deferred tax assets on tax losses of HK$1,590 million for Cathay Dragon was recognised under Taxation in the second half of 2020.
5) Impairment and related charges of HK$41 million under HK Express in connection with three aircraft that are unlikely to re-enter meaningful economic
service again before they are returned to lessors (2020: Impairment and related charges of HK$658 million and HK$526 million were recognised for our
laundry and catering plants respectively).
6) The revised calculation of the adjusted loss attributable to the shareholders of Cathay Pacific was arrived at after excluding impairment and related
charges, restructuring costs and the non-recurring gain on deemed partial disposal of an associate. The previous calculation presented in the 2020
annual report was an adjusted loss of HK$13,855 million.
26
Cathay Pacific Airways Limited Annual Report 2021
FINANCIAL REVIEW
The movement in Cathay Pacific’s and Cathay Dragon’s loss before impairment and related charges, restructuring costs,
a gain on deemed disposal of an associate and taxation can be analysed as follows:
HK$M
2020 Cathay Pacific’s loss before taxation* (12,670)
Increase/(decrease) of revenue:
– Passenger and cargo revenue 837 – Passenger revenue decreased by 61.6% primarily
due to a 79.5% decrease in passenger traffic, partially
offset by a 87.4% increase in yield.
– Cargo revenue increased by 31.8% due to a 33.1%
increase in yield, offset partially by a 1.1% decrease in
cargo traffic.
– Other services and recoveries (1,381) – Reduction in COVID-19 related government grants,
ticket related recoveries, partly offset by an increase
in Asia Miles revenues.
Decrease/(increase) of costs:
– Staff 4,074 – Decreased due to the full year effect of restructuring
and reduction of headcount.
– Inflight service and passenger expenses 728 – Lower passenger traffic.
– Landing, parking and route expenses 953 – Reduced in line with lower activity.
– Fuel, including hedging gains/losses 4,322 – Lower fuel consumption, in line with reduced aircraft
flying hours. Increased fuel prices were offset by fuel
hedging gains.
– Aircraft maintenance 484 – Lower due to reduced aircraft flying hours.
– Owning the assets (includes aircraft and other
depreciation, rentals and net finance charges)
1,980 – Fewer leased assets, lower depreciation on owned
assets and lower interest rates on borrowings.
– Other items (including commissions) (287) – Higher due to increase in Asia Miles costs and
exchange losses, partly offset by fewer airline
activities.
2021 Cathay Pacific’s loss before taxation (960)
*
Included Cathay Dragon
FUEL EXPENDITURE AND HEDGING
A breakdown of the Group’s fuel cost is shown below:
2021
HK$M
2020*
HK$M
Gross fuel cost 9,367 8,362
Fuel hedging (gains)/losses (2,336) 3,017
Net fuel cost 7,031 11,379
*
Included Cathay Dragon
27
Cathay Pacific Airways Limited Annual Report 2021
FINANCIAL REVIEW
0
20
40
60
120
100
80
20
30
40
50
80
60
70
100.0%
46.6%
43.9%
40.9%
31.8%
24.7%
14.7%
6.0%
47.01
47.09
54.34
59.37
64.68
67.27
68.78
70.60
% US$
Projected fuel hedging cover
Hedge cover Average strike price
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23
Total assets
Properties
and other
equipment
Intangible
assets
Aircraft and
related
equipment
Current
assets
Long-term
receivables and
investment
57%
8%
6%
15%
14%
• Fuel consumption in 2021 was 15.0 million barrels (2020:
18.7 million barrels), a decrease of 19.8% compared with a
decrease in capacity of 22.3%.
• The Group’s fuel hedging cover at 31st December 2021 is
set out in the chart below.
• The Group’s policy is to reduce exposure to fuel price risk
by hedging a percentage of its expected fuel
consumption. The Group uses fuel derivatives which are
economically equivalent to forward contracts to achieve
its desired hedging position. The chart below indicates
the estimated percentage of projected consumption by
year covered by hedging transactions at various Brent
strike prices. The projected consumption in the first
quarter of 2022 is impacted by the capacity reductions
associated with COVID-19.
• The Group does not speculate on oil prices but uses
hedging to manage short to medium term volatility in
oilprices and therefore its fuel costs. Hedging is not
riskfree.
DIVIDENDS
• The semi-annual payment of preference share dividends
due on 14th February 2022 and 12th August 2021 were
deferred. Such dividends shall accumulate and constitute
arrears (and such arrears shall be entitled to dividends at
the prevailing dividend rate).
• The terms of the preference shares provide that, for as
long as such arrears are outstanding, the Company shall
not distribute any dividend on, nor buy-back any of, its
ordinary shares. Consequently no ordinary share
dividends were paid or proposed for 2021.
ASSETS
• Total assets at 31st December 2021 were HK$196,627
million.
• During the year, additions to property, plant and
equipment were HK$5,891 million, comprising HK$5,674
million in respect of aircraft and related equipment,
HK$141 million in respect of land and buildings and
HK$76 million in respect of other equipment.
BORROWINGS AND CAPITAL
• Borrowings decreased by 3.5% to HK$89,854 million.
Excluding lease liabilities previously classified as
operating leases, borrowings decreased by 1.0% to
HK$73,263 million, which are fully repayable by 2035, with
51% at fixed rates of interest.
• Available unrestricted liquidity at 31st December 2021
totalled HK$30,250 million, comprising liquid funds of
HK$19,284 million and committed undrawn facilities of
HK$11,105 million, less pledged funds of HK$139 million.
To secure further liquidity, we issued HK$6.7 billion in
convertible bonds, and Medium Term Notes in USD and
RMB totalling HK$5.3 billion.
• Net borrowings (after deducting liquid funds) decreased
by 4.4% to HK$70,570 million. Disregarding the effect of
adopting HKFRS 16, net borrowings decreased by 1.3% to
HK$53,979 million.
28
Cathay Pacific Airways Limited Annual Report 2021
FINANCIAL REVIEW
0
40,000
80,000
60,000
20,000
Borrowings in key currencies
HK$ million
HKD JPY USD Others
Others include RMB and SGD.
0
20,000
60,000
80,000
100,000
0.4
0.6
1.0
1.2
1.4
40,000 0.8
2017 2018 2019 2020 2021
HK$ million
Net debt and equity
Funds attributable to the shareholders of Cathay Pacic
Net borrowings
Net debt/equity ratio (see Borrowing and capital above)
Times
Data in 2017-2020 included Cathay Dragon.
%
0
20
40
60
80
100
2017 2018 2019 2020 2021
Interest rate prole: borrowings (after derivatives)
Fixed
Floating
Data in 2017-2020 included Cathay Dragon.
• Funds attributable to the shareholders of Cathay Pacific
decreased by 1.4% to HK$72,244 million. This was due to
the Group’s losses of HK$5.5 billion, partially offset by an
increase in other comprehensive income of HK$4.0 billion
and the equity component of guaranteed convertible
bonds issued on February 2021 amounting to
HK$0.5billion.
• Disregarding the effect of adopting HKFRS 16 on net
borrowings, the net debt/equity ratio remained at 0.75
times (against borrowing covenants of 2.0). Taking into
account the effect of adopting HKFRS 16 on net
borrowings, the net debt/equity ratio was 0.98 and 1.01
times at 31st December 2021 and 31st December 2020
respectively.
• Use of proceeds in relation to the issue of equity
securities (including securities convertible into equity
securities):
– The proceeds from equity securities have been used
for general corporate purposes in accordance with the
intentions stated in the Company’s announcements
dated 28th January 2021 and 8th February 2021.
– HK$31.1 billion rights issue and preference shares and
warrants issue in 2020. HK$11.9 billion unused
proceeds were brought forward on 1st January 2021,
and approximately HK$2.3 billion was applied towards
general corporate purposes during the year ended
31stDecember 2021. The Group intends to apply the
remainder of HK$9.6 billion for general corporate
purposes.
– HK$6.7 billion issuance of convertible bonds in 2021.
The proceeds have been fully utilised for general
corporate purposes during the year ended
31stDecember 2021.
29
Cathay Pacific Airways Limited Annual Report 2021
SUSTAINABLE DEVELOPMENT REVIEW
SUSTAINABLE DEVELOPMENT
We endeavor to operate in a sustainable manner,
embedding sustainable development principles and
practices into all aspects of our business. We map our
progress on sustainable development against six strategic
areas of focus – safety, carbon, sustainability in operations,
biodiversity, our people and community – that guide our
journey and shape our sustainable development progress.
While the impact of the global pandemic on our operations
may have disrupted momentum, the journey is continuous
and so are our efforts at improvement. We encourage our
staff to mitigate or reduce the environmental and social
impact of the decisions that they make.
We operate an environmental management system that is
based on ISO14001-2015 certification. The system is
audited once a year externally and internally. Opportunities
for improvement are identified during these audits.
We engage with the communities in which we operate and
involve our employees in doing so. We prioritise our
community activities but maintain flexibility in order to
respond to specific local needs. Our people are one of our
greatest assets – what they have been through during the
past two years and what they have achieved is unparalleled,
and the selfless endeavour and dedication shown by all of
them throughout this pandemic are qualities of which we
can all be immensely proud. We are committed to providing
them with the best possible working and career
environment. This enables us to attract, develop and retain
the best people.
Our sustainable development report for 2021 will be
published in May 2022. It will be available at https://www.
cathaypacific.com/cx/en_HK/about-us/environment/
overview/introduction.html
PERFORMANCE UPDATES – CATHAY PACIFIC
2021 2020* Change
Environment
GHG emissions
Million tonnes of CO
2
e
5.6 7.0 -20.0%
GHG emissions per ATK
Grammes of CO
2
e
491 480 +2.3%
Electricity consumption
MWh
28,078 29,907 -6.1%
Paper consumption (office)
Tonnes
26 36 -27.8%
Paper recycled (office and inflight)
Tonnes
86 250 -65.6%
Metal recycled (office and inflight)
Kg
1,685 5,922 -71.5%
Plastic recycled (office and inflight)
Kg
1,318 8,789 -85.0%
People
Total workforce
Number
16,721 19,452 -14.0%
By location
Hong Kong
%
76.7 75.5 +1.2%pt
Outport
%
23.3 24.5 -1.2%pt
By employment type
Flight crew
%
16.3 16.5 -0.2%pt
Cabin crew
%
39.9 40.8 -0.9%pt
Ground staff
%
43.8 42.7 +1.1%pt
Gender diversity
Workforce composition – female
%
54.4 56.5 -2.1%pt
Workforce composition – male
%
45.6 43.5 +2.1%pt
Female representation in senior positions
%
28.3 30.6 -2.3%pt
*
Included Cathay Dragon
Data for Cathay Pacific is presented.
Full indicator tables for the Cathay Pacific Group will be provided in Cathay Pacific’s Sustainable Development Report at
https://www.cathaypacific.com/cx/en_HK/about-us/environment/overview/introduction.html
30
Cathay Pacific Airways Limited Annual Report 2021
SUSTAINABLE DEVELOPMENT REVIEW
AWARDS AND RECOGNITIONS IN 2021
• Cathay Pacific has been a constituent of the FTSE4Good
Index, the Hang Seng Corporate Sustainability
Benchmark Index and Hang Seng ESG 50 Index. We
attained the “Achiever” ranking in the inaugural Greater
Bay Area Business Sustainability Index (GBABSI). In 2021,
we responded to the Carbon Disclosure Project climate
change questionnaire and received a B rating.
• Cathay Pacific has received the Caring Company status
from the Hong Kong Council of Social Service every
yearsince the programme was launched in 2003 in
recognition of its good corporate citizenship.
2021 HIGHLIGHTS
ENVIRONMENT
• In 2021, Cathay Pacific reaffirmed its commitment to
achieving net-zero carbon emissions by 2050 by setting a
mid-term target to use 10% Sustainable Aviation Fuel
(SAF) for the jet fuel consumption of all Cathay Pacific
operating flights by 2030. All member airlines of the
oneworld alliance, for which Cathay Pacific is a founding
member, have also made the same commitment.
• Subsequently in November, Cathay Pacific together with
other oneworld airlines signed a memorandum of
understanding (MOU) with Aemetis, a renewable fuel
supplier headquartered in Cupertino, California for the
joint purchase of more than 350 million gallons of blended
SAF to be supplied and delivered at San Francisco
International Airport from 2024 onwards.
• In 2021, Cathay Pacific announced its involvement as a
founding member in the Aviation Climate Taskforce (ACT),
a new non-profit organisation founded together with
Boston Consulting Group (BCG) and other airline leaders
to tackle the challenge of eliminating carbon emissions in
aviation through innovation and collaboration.
• The Cathay Pacific Group also supported Hong Kong
International Airport’s (HKIA) long-term carbon pledge to
achieve Net Zero Carbon by 2050, with a midpoint target
of 55% reduction of absolute ground emissions by 2035
from the 2018 baseline. This pledge would cover the
Group’s carbon emissions from its ground operations at
its home base.
• Cathay Pacific continues to take part in various industry
groups who share our view in support of the development
of a science-based climate change target and
corresponding sustainable decarbonisation actions for
the aviation industry. This includes the IATA Sustainability
and Environment Advisory Committee, the Clean Skies
for Tomorrow Coalition, the Sustainable Aviation Fuel
Users Group, the Roundtable on Sustainable Biomaterials,
and the Environmental Working Group of the Association
of Asia Pacific Airlines.
• We have completed all the applicable requirements,
including submission and verification of our emissions
data, in accordance with the Carbon Offsetting and
Reduction Scheme for International Aviation (CORSIA),
the European Union’s Emissions Trading Scheme (EU
ETS), and also the United Kingdom Emissions Trading
Scheme (UK ETS).
• In 2021, two of our brand new Airbus A350-1000 aircraft
used blended SAF (biofuel) on their delivery flights from
Toulouse to Hong Kong.
• In 2021, we offset 27,280 tonnes of CO
2
through our
voluntary offset programme Fly Greener. To date, we have
purchased over 300,000 tonnes of CO
2
offsets. To
promote the programme, we launched the “Green Friday”
campaign in a number of our markets. We offered to
double the carbon emissions offset for customers free of
charge for every ticket sold on cathaypacific.com during
the promotion period in November 2021. As a result of
this campaign, over 7,000 tonnes of carbon emissions
were offset.
• In 2019, Cathay Pacific announced its target to reduce its
single-use plastic footprint by half by the end of 2022
from the 2018 baseline, both in terms of absolute
consumption amount and on a per passenger level. So
far, 43 million single-use plastic items have been removed
from our operations annually according to the 2018
baseline. We are on track to meet the target in 2022.
• In March 2021, Cathay Pacific continued to participate in
WWF’s annual Earth Hour activity. We switched off all
nonessential lighting in our buildings and on billboards
outside Cathay City.
31
Cathay Pacific Airways Limited Annual Report 2021
SUSTAINABLE DEVELOPMENT REVIEW
CONTRIBUTION TO THE COMMUNITY
• Efforts in 2021 centered on helping communities to cope
with the impact of COVID-19.
• Cathay Pacific is proud to have flown the first shipment of
COVID-19 vaccines to Hong Kong from Beijing as the
airline continues to support the Hong Kong SAR
Government’s vaccination programme. Since the start of
COVID-19, our airlines have transported over 190 million
doses of COVID-19 vaccines around the world.
• In February, Cathay Pacific took part in UNICEF’s
Humanitarian Airfreight Initiative to support the delivery of
COVID-19 vaccines, essential medicines, medical devices
and other critical supplies to support developing countries
in responding to the pandemic. In total, we have helped
transport over 40 million doses of COVID-19 vaccines
under this initiative.
• The Cathay Pacific Group has been working with local
non-profit organisations Feeding Hong Kong, Food Angel
and Foodlink Foundation to help us channel surplus food
to people in need. More than 110 tonnes of surplus food
and over 300,000 pre-prepared meals were donated
in2021.
• COVID-19 has severely hit many disadvantaged and
low-income families. To meet their different needs, we
have worked with nearly 40 different non-profit
organisations, making in-kind donations of over four
million different items in 2021, including blankets,
sanitisers, infant kits, children kits, catering equipment,
and refurbished tablet computers to support online
learning needs.
• Our employees were also involved in various types of
volunteer work during COVID-19, including house repair
services for low income families and the elderly; packing
toys and online storytelling for underprivileged children;
and preparing and distributing emergency food parcels to
community members in need. This year, our people have
contributed nearly 600 hours of volunteer work to support
our NGO partners and to give back to the community
during this challenging time.
• Cathay Pacific supported the HKSAR Government’s “Life
Buddies Mentoring Program” by connecting our employee
volunteers with secondary-school student mentees to
inspire students towards a positive life trajectory through
advice-giving and coaching.
• Cathay Pacific supports UNICEF through its “Change for
Good” inflight fundraising programme. Since its
introduction in 1991, over HK$200 million has been raised
through the programme. In 2020, the latest audited year,
HK$1.56 million was raised. An average of one month’s
proceeds to the “Change for Good” programme are
passed to the Cathay Pacific Wheelchair Bank, which
raises funds to provide specially adapted wheelchairs for
children with neuromuscular diseases.
OUR PEOPLE
• At 31st December 2021, the Cathay Pacific Group
employed more than 21,600 people worldwide. Around
17,700 of these people are based in Hong Kong. Cathay
Pacific employed more than 16,700 permanent employees
worldwide. Around 76% of these people are based in
HongKong.
• We upgraded Work Your Way, Cathay Pacific’s flexible
working programme that enables our employees to take
part in remote work days or staggered working hours, so
that they can manage their work schedule with even
greater flexibility.
• We launched several policies that respond to employee
needs, such as vaccination leave and grievance policy
foremployees.
• We enhanced our Flexible Benefits offering for employees
with improved Travel Insurance and Medical Plan.
• We introduced ‘The Future Leader Series’, a new training
and development programme focused on preparing
leaders for tomorrow, today.
• We are committed to increasing female representation at
senior positions by 25% by 2025 from the 2021 baseline.
• As part of our efforts to rebuild our business, we are
committed to continuing to build an inclusive and
supportive work environment for all of our people,
regardless of gender, gender identity, religion, race,
nationality or ethnic origin, cultural background, social or
economic group, sexual orientation, marital or family
status, or physical or cognitive ability. We are very proud of
our diverse workforce at Cathay Pacific and believe it is
this diversity that makes us so unique in our ability to
deliver great service to our customers.
• We regularly review our human resources and
remuneration policies in the light of legislation, industry
practice, market conditions and the performance of
individuals and the Group.
32
Cathay Pacific Airways Limited Annual Report 2021
EXECUTIVE DIRECTORS
HEALY, Patrick
#
, aged 56, has been Chairman and a
Director of the Company since 6th November 2019. He is
also Chairman of Swire Coca-Cola Limited and a Director of
John Swire & Sons (H.K.) Limited, Swire Pacific Limited and
Air China Limited. He joined the Swire group in 1988 and has
worked with the group in Hong Kong SAR, Germany and the
Chinese Mainland.
HUGHES, Gregory Thomas Forrest
#
, aged 60, has been
Chief Operations and Service Delivery Officer and a
Director of the Company since 1st June 2017. He is also a
Director of Hong Kong Express Airways Limited with effect
from 19th July 2019 and Chairman of AHK Air Hong Kong
Limited with effect from 1st January 2019. He was
previously a Director and Group Director Components &
Engine Services of Hong Kong Aircraft Engineering
Company Limited. He joined the Swire group in 1987 and
has worked with the group in Hong Kong SAR, Korea,
Indonesia, Japan and Australia.
LAM, Siu Por Ronald
#
, aged 49, has been Chief Customer
and Commercial Officer and a Director of the Company
since 19th August 2019. He was Director and General
Manager, Hong Kong Operations of Hong Kong Aircraft
Engineering Company Limited from July 2013 to May 2017
and Director Commercial and Cargo of the Company from
June 2017 to July 2019. He is also Chairman of Hong Kong
Express Airways Limited with effect from 20th August 2019.
He joined the Swire group in 1996 and has worked with the
Company in Hong Kong SAR, Japan and Sri Lanka.
SHARPE, Rebecca Jane
#
(formerly known as WALLACE,
Rebecca Jane), aged 50, has been Chief Financial Officer
and a Director of the Company since 25th January 2021.
She is also a Director of Hong Kong Express Airways
Limited with effect from 15th March 2021 and AHK Air Hong
Kong Limited with effect from 25th January 2021. She was a
Director and Group Director Finance of Hong Kong Aircraft
Engineering Company Limited and, before that, Finance
Director of The China Navigation Company Pte. Limited. She
joined the Swire group in 2008 and has worked with the
group in Hong Kong SAR, the Chinese Mainland and
Singapore. She is a member of the Institute of Chartered
Accountants in England and Wales and the Hong Kong
Institute of Certified Public Accountants.
TANG, Kin Wing Augustus
#
, aged 63, has been Chief
Executive Officer and a Director of the Company since
19thAugust 2019. He was appointed Director Corporate
Development of the Company in January 2005 and was an
Executive Director of the Company from 1st January 2007
to 1st October 2008. He was a Director and Chief Executive
Officer of Hong Kong Aircraft Engineering Company Limited
from October 2008 and November 2008 respectively until
August 2019. He is also a Director of John Swire & Sons
(H.K.) Limited. He joined the Swire group in 1982 and has
worked with the group in Hong Kong SAR, Malaysia
andJapan.
NON-EXECUTIVE DIRECTORS
BRADLEY, Guy Martin Coutts
#
, aged 56, has been a
Director of the Company since 25th August 2021. He is also
Chairman of John Swire & Sons (H.K.) Limited, Swire Pacific
Limited and Swire Properties Limited. He joined the Swire
group in 1987 and has worked with the Swire group in Hong
Kong SAR, Papua New Guinea, Japan, the United States,
Vietnam, the Chinese Mainland, Taiwan region and the
Middle East. He is a chartered surveyor, a fellow of The
Royal Institution of Chartered Surveyors and a member of
The Hong Kong Institute of Surveyors. He is Vice-President
of the Real Estate Developers Association of Hong Kong.
MA, Chongxian, aged 56, has been a Director of the
Company since 11th June 2021. He is Director, General
Manager and Deputy Secretary of the Communist Party
Group of the China National Aviation Holding Corporation
Limited, and concurrently Vice Chairman and Deputy
Secretary of the Communist Party Committee of Air China
Limited.
SONG, Zhiyong, aged 56, has been a Director of the
Company since 14th March 2014 and Deputy Chairman
since 29th December 2020. He is Chairman and Secretary
of the Communist Party Committee of Air China Limited and
DIRECTORS AND OFFICERS
33
Cathay Pacific Airways Limited Annual Report 2021
DIRECTORS AND OFFICERS
Chairman and Secretary of the Communist Party Group of
China National Aviation Holding Corporation Limited.
SWIRE, Merlin Bingham
#
, aged 48, has been a Director of
the Company since 1st June 2010. He is also a Director of
Swire Pacific Limited and Swire Properties Limited. He is
also Deputy Chairman, Chief Executive and a shareholder of
John Swire & Sons Limited. He joined the Swire group in
1997 and has worked with the group in Hong Kong SAR,
Australia, the Chinese Mainland and London. He is brother
to Samuel Swire, a Non-Executive Director of the Company.
SWIRE, Samuel Compton
#+&
, aged 41, has been a Director
of the Company since 1st January 2015. He is also
Chairman of Swire Shipping Pte. Ltd. He is also a Director
and shareholder of John Swire & Sons Limited and a
Director of Swire Pacific Limited. He joined the Swire group
in 2003 and has worked with the group in Hong Kong SAR,
Singapore, the Chinese Mainland, Sri Lanka and London.
Heis brother to Merlin Swire, a Non-Executive Director of
the Company.
XIAO, Feng*
@
, aged 53, has been a Director of the Company
since 1st January 2017. He is Chief Financial Officer of Air
China Limited.
ZHANG, Zhuo Ping
#
, aged 50, has been a Director of the
Company since 14th April 2020. He is also a Director of
John Swire & Sons (H.K.) Limited and Swire Pacific Limited
and Chairman of John Swire & Sons (China) Limited. He
spent his early career in investment banking. He was with
the Swire group from 2002 to 2011, spending much of his
time in the Chinese Mainland, including as chief
representative of John Swire & Sons (China) Limited from
2005 to 2008. He ceased to be employed by the Swire
group in 2011, when he left to found a bioengineering
company in Beijing.
ZHAO, Xiaohang, aged 60, has been a Director of the
Company since 1st June 2011. He is Vice President of China
National Aviation Holding Corporation Limited and Air China
Limited.
INDEPENDENT NON-EXECUTIVE DIRECTORS
CHAN, Bernard Charnwut
+&
(formerly known as CHAN, Chi
Sze Bernard), aged 57, has been a Director of the Company
since 1st December 2018. He is President and an Executive
Director of Asia Financial Holdings Limited and Chairman of
its wholly owned subsidiary, Asia Insurance Company,
Limited and an advisor to Bangkok Bank (China) Company
Limited. He is also an Independent Non-Executive Director
of Chen Hsong Holdings Limited, China Resources Beer
(Holdings) Company Limited and Yau Lee Holdings Limited
and a Director of Bumrungrad Hospital Public Company
Limited. He is the Convenor of the Non-Official Members of
the Executive Council and a former member of the
Legislative Council of the Hong Kong Special Administrative
Region.
HARRISON, John Barrie*
@
, aged 65, has been a Director of
the Company since 20th May 2015. He is an Independent
Non-Executive Director of AIA Group Limited and
Grosvenor Asia Pacific Limited. He was Chairman and Chief
Executive Officer of KPMG, China and Hong Kong and
Chairman of KPMG Asia Pacific from 2003 to 2009 and was
Deputy Chairman of KPMG International from 2008 until his
retirement from KPMG in September 2010.
MILTON, Robert Aaron*
@
, aged 61, has been a Director of
the Company since 15th May 2019. He is Lead Independent
Director of Air Lease Corporation. He held the position of
President and Chief Executive Officer of Air Canada from
August 1999 until December 2004. He was Chairman and
Chief Executive Officer of ACE Aviation Holdings, Inc., a
holding company for Air Canada and other aviation interests
from 2004 until June 2012. He was formerly a Director of US
Airways, Inc., AirAsia Berhad and TAP Portugal. He was
Chairman of United Continental Holdings, Inc., holding
company of United Airlines, from April 2016 to April 2018.
TUNG, Lieh Cheung Andrew
+
*
&
, aged 57, has been a
Director of the Company since 20th May 2015. He is
Managing Partner and a Director of QBN Management
Limited and a Non-Executive Director of Orient Overseas
(International) Limited. He is also an Independent Non-
Executive Director of Standard Chartered Bank (Hong Kong)
Limited.
COMPANY SECRETARY
LAI, Joanna
#
, aged 37, has been Company Secretary of the
Company since 19th April 2021. She joined the Company as
Group General Counsel and Company Secretary on
19thApril 2021 and before then, she was Head of Legal of
Swire Properties Limited.
#
Employees of the John Swire & Sons Limited group
+
Member of the Remuneration Committee
*
Member of the Audit Committee
@
Member of the Board Risk Committee
&
Member of the Nomination Committee (w.e.f. 9th March 2022)
34
Cathay Pacific Airways Limited Annual Report 2021
We submit our report and the audited financial statements
for the year ended 31st December 2021 which are on pages
62 to 129.
PRINCIPAL ACTIVITIES
Cathay Pacific Airways Limited (the “Company” or “Cathay
Pacific”) is managed and controlled in Hong Kong. As well as
operating scheduled airline services, the Company and its
subsidiaries (collectively referred to as the “Group”) are
engaged in other related areas including airline catering,
aircraft handling, aircraft engineering and cargo terminal
operations. The airline operations are principally to and
from Hong Kong, which is where most of the Group’s other
activities are also carried out.
Details of principal subsidiaries, their main areas of
operation and particulars of their issued capital, and details
of principal associates are listed on pages 118 and 119.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements incorporate the
financial statements of the Group together with the Group’s
interests in associates. The financial performance of the
Group for the year ended 31st December 2021 and the
financial position of the Group and the Company at that
date are set out in the financial statements on pages 62 to
129. Details of the associates are provided under note 10 to
the financial statements.
DIVIDENDS
The Directors decided not to declare an interim dividend for
the year ended 31st December 2021.
The Company’s dividend policy is to distribute
approximately half of its consolidated profit after tax,
excluding non-cash exceptional items. The application of
this policy and final declarations are however subject to
consideration of other factors, such as the strength of the
DIRECTORS’ REPORT
Company’s own statement of financial position, the
Company’s own profits, trading conditions and the
prevailing and forecast economic environment.
CLOSURE OF REGISTER OF MEMBERS
To facilitate the processing of proxy voting for the annual
general meeting to be held on 11th May 2022, the register of
members will be closed from 5th May 2022 to 11th May
2022, both days inclusive, during which period no transfer
of shares will be effected. In order to be entitled to attend
and vote at the annual general meeting, all transfer forms
accompanied by the relevant share certificates must be
lodged with the Company’s share registrars,
Computershare Hong Kong Investor Services Limited, 17th
Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong,
for registration not later than 4:30 p.m. on Wednesday,
4thMay 2022.
BUSINESS REVIEW AND PERFORMANCE
A fair review of the Group’s business, a description of the
principal risks and uncertainties facing the Group,
particulars of important events affecting the Group that
have occurred since the end of the financial year and an
indication of the likely future development of the Group’s
business (including, in each case to the extent necessary
for an understanding of the development, performance or
position of the Group’s business, key performance
indicators) are provided in the sections of this annual report
headed Chairman’s Statement, Review of Operations and
Financial Review and in the notes to the financial
statements. To the extent necessary for an understanding
of the development, performance or position of the Group’s
business, a discussion of the Group’s environmental
policies and performance and an account of the Group’s
key relationships with its employees, customers and
suppliers and others that have a significant impact on the
Group and on which the Group’s success depends are
provided in the section of this annual report headed Review
35
Cathay Pacific Airways Limited Annual Report 2021
DIRECTORS’ REPORT
of Operations and Sustainable Development Review. To the
extent necessary for an understanding of the development,
performance or position of the Group’s business, a
discussion of the Group’s compliance with the relevant laws
and regulations that have a significant impact on the Group
is provided in the sections of this annual report headed
Review of Operations, Corporate Governance Report and
Directors’ Report.
RESERVES
Movements in the reserves of the Group and the Company
during the year are set out in the statement of changes in
equity on page 65 and in note 22 to the financial
statements, respectively.
ACCOUNTING POLICIES
The principal accounting policies are set out on pages 120
to 129.
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE
The Company has complied or will comply with all the
applicable provisions set out in the Environmental, Social
and Governance Reporting Guide contained in Appendix
27to the Listing Rules for the year covered by the
annualreport.
DONATIONS
During the year, the Company and its subsidiaries made
charitable donations amounting to HK$2.5 million in direct
payments and a further HK$0.2 million in the form of
discounts on airline travel.
PROPERTY, PLANT AND EQUIPMENT
Movements of property, plant and equipment are shown in
note 8 to the financial statements. Details of aircraft
acquisitions are set out on pages 16 and 17.
BANK AND OTHER BORROWINGS
The net bank loans and other borrowings, including lease
liabilities, of the Group are shown in note 12 to the financial
statements.
SHARE CAPITAL
There was no purchase, sale or redemption by the
Company, or any of its subsidiaries, of the Company’s
shares and no exercise of warrants during the year and the
Group has not adopted any share option scheme.
At 31st December 2021, 6,437,200,203 ordinary shares,
195,000,000 preference shares and 416,666,666 warrants
were in issue (31st December 2020: 6,437,200,203 ordinary
shares, 195,000,000 preference shares and 416,666,666
warrants). Details of the movement of share capital are set
out in note 20 to the financial statements.
ISSUE OF CONVERTIBLE BONDS
On 27th January 2021 (after trading hours), Cathay Pacific
Finance III Limited, a wholly-owned subsidiary of the
Company, as the Issuer, the Company as the Guarantor, and
BNP Paribas Securities (Asia) Limited, BOCI Asia Limited,
The Hongkong and Shanghai Banking Corporation Limited
and Morgan Stanley & Co. International plc as the Managers,
entered into the subscription agreement in relation to the
issuance of 2.75% guaranteed convertible bonds (the
“Bonds”) in a principal amount of HK$6,740,000,000.
Assuming full conversion of the Bonds at the initial
conversion price of HK$8.57 per ordinary share, the Bonds
will be convertible into 786,464,410 conversion shares,
representing approximately 12.22% of the total issued
share capital of the Company as at 28th January 2021 (the
date of the Company’s announcement), and approximately
10.89% of the enlarged total issued share capital of the
Company resulting from the full conversion of the Bonds
(assuming that there is no other change to the issued share
capital of the Company and prior to the exercise of any
detachable warrants that were issued in 2020 as part of the
recapitalisation plan). The gross proceeds from the
subscription of the Bonds amounted to HK$6,740,000,000.
For further details of the convertible bonds, please refer to
the Company’s announcements dated 28th January 2021
and 8th February 2021.
36
Cathay Pacific Airways Limited Annual Report 2021
DIRECTORS’ REPORT
CAPITAL COMMITMENTS AND
CONTINGENCIES
The details of capital commitments and contingent
liabilities of the Group at 31st December 2021 are set out
in note 28 to the financial statements.
AGREEMENT FOR SERVICES
The Company has an agreement for services with John
Swire & Sons (H.K.) Limited (“JS&SHK”), the particulars of
which are set out in the section on continuing connected
transactions.
As directors and/or employees of the John Swire & Sons
Limited (“Swire”) group, Patrick Healy, Guy Bradley, Gregory
Hughes, Ronald Lam, Rebecca Sharpe, Merlin Swire, Samuel
Swire, Augustus Tang and Zhang Zhuo Ping are interested in
the JS&SHK Services Agreement (as defined below).
Michelle Low was so interested as a director and an
employee of the Swire group until her resignation with
effect from 1st April 2021. Martin Murray was so interested
as a director and an employee of the Swire group until his
resignation with effect from 25th August 2021 (except for
the period from 25th January 2021 to 31st March 2021).
Merlin Swire and Samuel Swire are also so interested as
shareholders, directors and employees of the Swire group.
Particulars of the fees paid and the expenses reimbursed
for the year ended 31st December 2021 are set out below
and also given in note 27 to the financial statements.
SIGNIFICANT CONTRACTS
Contracts between the Group and Hong Kong Aircraft
Engineering Company Limited (“HAECO”) and its subsidiary,
Taikoo (Xiamen) Aircraft Engineering Company Limited
(“TAECO”), for the maintenance and overhaul of aircraft and
related equipment accounted for approximately 3.9% of the
Group’s operating expenses in 2021. HAECO is a subsidiary
of Swire Pacific Limited (“Swire Pacific”); all contracts have
been concluded on normal commercial terms in the
ordinary course of the business of both parties.
CONTINUING CONNECTED TRANSACTIONS
During the year ended 31st December 2021, the Group had
the following continuing connected transactions, details of
which are set out below:
(a) Pursuant to an agreement (“JS&SHK Services
Agreement”) dated 1st December 2004, as amended
and restated on 18th September 2008 and 9th August
2019, with JS&SHK, JS&SHK provides services to the
Company and its subsidiaries. The services comprise
advice and expertise of the directors and senior officers
of the Swire group including (but not limited to)
assistance in negotiating with regulatory and other
governmental or official bodies, certain staff services
(including full or part time services of members of the
staff of the Swire group), certain central services and
such other services as may be agreed from time to time,
and procuring for the Company and its subsidiary, joint
venture and associated companies the use of relevant
trademarks owned by the Swire group. No fee is payable
in consideration of such procuration obligation or
suchuse.
In return for these services, JS&SHK receives annual
service fees calculated as 2.5% of the Group’s
consolidated profit before taxation and non-controlling
interests after certain adjustments. The fees for each
year are payable in cash in two instalments, an interim
payment by the end of October and a final payment by
the end of April of the following year, adjusted to take
account of the interim payment. The Group also
reimburses the Swire group at cost for all the expenses
incurred in the provision of the services.
The current term of the JS&SHK Services Agreement is
from 1st January 2020 to 31st December 2022 and it is
renewable for successive periods of three years
thereafter unless either party to it gives to the other
notice of termination of not less than three months
expiring on any 31st December.
Swire is the holding company of Swire Pacific which
owns approximately 45% of the number of issued
shares of the Company, and JS&SHK, a wholly owned
37
Cathay Pacific Airways Limited Annual Report 2021
DIRECTORS’ REPORT
subsidiary of Swire, is therefore a connected person of
the Company under the Listing Rules. The transactions
under the JS&SHK Services Agreement are continuing
connected transactions in respect of which
announcements dated 1st December 2004, 1st October
2007, 1st October 2010, 14th November 2013, 19th
August 2016 and 9th August 2019 were published.
For the year ended 31st December 2021, no service fee
was payable by the Company to JS&SHK under the
JS&SHK Services Agreement and expenses of HK$173
million were reimbursed at cost.
(b) Pursuant to a framework agreement dated 13th
November 2013 (“HAECO Framework Agreement”) with
HAECO and HAECO ITM Limited (“HXITM”), services
(being maintenance and related services in respect of
aircraft, aircraft engines and aircraft parts and
components and including inventory technical
management services and the secondment of
personnel) are provided by HAECO and its subsidiaries
(“HAECO group”) to the Group and vice versa and by
HXITM to the HAECO group and vice versa. Payment is
made in cash within 30 days of receipt of invoices. The
term of the HAECO Framework Agreement is for 10
years ending on 31st December 2022.
HAECO and HXITM are connected persons of the
Company by virtue of them being subsidiaries of Swire
Pacific, one of the Company’s substantial shareholders.
The transactions under the HAECO Framework
Agreement are continuing connected transactions in
respect of which an announcement dated 13th
November 2013 was published, a circular dated 3rd
December 2013 was sent to shareholders and an
extraordinary general meeting of the Company was held
on 31st December 2013.
For the year ended 31st December 2021 and under the
HAECO Framework Agreement, the amounts payable by
the Group to the HAECO group totalled HK$1,816
million; and the amounts payable by the HAECO group
to the Group totalled HK$19 million.
(c) The Company entered into a framework agreement
dated 26th June 2008 (“Air China Framework
Agreement”) with Air China Limited (“Air China”) in
respect of transactions between the Group on the one
hand and Air China and its subsidiaries (“Air China
group”) on the other hand arising from joint venture
arrangements for the operation of passenger air
transportation, code sharing arrangements, interline
arrangements, aircraft leasing, frequent flyer
programmes, the provision of airline catering, ground
support and engineering services and other services
agreed to be provided and other transactions agreed to
be undertaken under the Air China Framework
Agreement.
The current term of the Air China Framework Agreement
is for three years ending on 31st December 2022 and it
is renewable for successive periods of three years
thereafter unless either party to it gives to the other
notice of termination of not less than three months
expiring on any 31st December.
Air China, by virtue of its 29.99% shareholding in Cathay
Pacific, is a substantial shareholder and therefore a
connected person of Cathay Pacific under the Listing
Rules. The transactions under the Air China Framework
Agreement are continuing connected transactions in
respect of which announcements dated 26th June
2008, 10th September 2010, 26th September 2013,
30th August 2016 and 28th August 2019 were
published.
For the year ended 31st December 2021 and under the
Air China Framework Agreement, the amounts payable
by the Group to the Air China group totalled HK$39
million; and the amounts payable by the Air China group
to the Group totalled HK$21 million.
The Independent Non-Executive Directors, who are not
interested in any connected transactions with the Group,
have reviewed and confirmed that the continuing
connected transactions as set out above have been
entered into by the Group:
(a) in the ordinary and usual course of business of
theGroup;
(b) on normal commercial terms or better; and
(c) according to the agreements governing them on terms
that are fair and reasonable and in the interests of the
shareholders of the Company as a whole.
38
Cathay Pacific Airways Limited Annual Report 2021
DIRECTORS’ REPORT
The Auditors of the Company were engaged to report on
the Group’s continuing connected transactions in
accordance with the Hong Kong Standard on Assurance
Engagements 3000 (Revised) “Assurance Engagements
Other Than Audits or Reviews of Historical Financial
Information” and with reference to Practice Note 740
“Auditor’s Letter on Continuing Connected Transactions
under the Hong Kong Listing Rules” issued by the Hong
Kong Institute of Certified Public Accountants. The Auditors
have issued their unqualified letter containing their findings
and conclusions in respect of the continuing connected
transactions disclosed by the Group in accordance with
Chapter 14A of the Listing Rules, which states that:
(a) nothing has come to their attention that causes them to
believe that the disclosed continuing connected
transactions have not been approved by the Board of
the Company;
(b) nothing has come to their attention that causes them to
believe that the transactions were not, in all material
respects, in accordance with the pricing policies of the
Group if the transactions involve provision of goods or
services by the Group;
(c) nothing has come to their attention that causes them to
believe that the transactions were not entered into, in all
material respects, in accordance with the relevant
agreements governing such transactions; and
(d) nothing has come to their attention that causes them to
believe that the disclosed continuing connected
transactions have exceeded the relevant annual caps.
A copy of the Auditors’ letter has been provided by the
Company to the Stock Exchange.
MAJOR CUSTOMERS AND SUPPLIERS
20% of sales and 31% of purchases during the year were
attributable to the Group’s five largest customers and
suppliers respectively. 9% of sales were made to the
Group’s largest customer and 11% of purchases were made
from the Group’s largest supplier, Petrochina International
(Hong Kong) Corporation Limited.
No Director, any of their close associates or any shareholder
who, to the knowledge of the Directors, owns more than 5%
of the number of issued shares of the Company has an
interest in the Group’s five largest suppliers.
DIRECTORS
Rebecca Sharpe was appointed as a Director with effect
from 25th January 2021. Ma Chongxian was appointed as a
Director with effect from 11th June 2021. Guy Bradley was
appointed as a Director with effect from 25th August 2021.
All the other present Directors of the Company whose
names are listed in the section of this annual report headed
Directors and Officers served throughout the year 2021.
Michelle Low resigned as a Director with effect from 1st
April 2021. Martin Murray served as an Executive Director
until his resignation with effect from 25th January 2021 and
was re-appointed as a Non-Executive Director with effect
from 1st April 2021 until his resignation with effect from
25th August 2021.
Carlson Tong and Rimsky Yuen have been designated by
the Government of HKSAR as observers to attend board
meetings and have access to management and information
of the Company as long as Aviation 2020 Limited remains a
holder of any of the preference shares of the Company or
any amount under the bridge loan provided by it remains
outstanding.
The Company has received from all of its Independent
Non-Executive Directors confirmation of their
independence pursuant to Listing Rule 3.13 and considers
all of them to be independent.
The Company has been granted by the Stock Exchange a
waiver from strict compliance with Rule 3.10A of the Listing
Rules, which requires that an issuer must appoint
Independent Non-Executive Directors representing at least
one-third of the Board.
Article 93 of the Company’s Articles of Association
provides for all Directors to retire at the third annual general
meeting following their election by ordinary resolution. In
accordance therewith, Bernard Chan, John Harrison and
Andrew Tung retire this year and, being eligible, offer
39
Cathay Pacific Airways Limited Annual Report 2021
DIRECTORS’ REPORT
themselves for re-election. Guy Bradley and Ma Chongxian
having been appointed as Directors of the Company under
Article 91 since the last annual general meeting, also retire
and, being eligible, offer themselves for election.
Each of the Directors has entered into a letter of
appointment, which constitutes a service contract, with the
Company for a term of up to three years until retirement
under Article 91 or Article 93 of the Articles of Association
of the Company, which will be renewed for a term of three
years upon each election or re-election. No Director has a
service contract with the Company which is not
determinable by the employer within one year without
payment of compensation (other than statutory
compensation).
Directors’ fees paid to the Independent Non-Executive
Directors during the year totalled HK$3.5 million. They
received no other emoluments from the Group.
DIRECTORS’ INTERESTS
At 31st December 2021, the register maintained under
Section 352 of the Securities and Futures Ordinance (“SFO”)
showed that no Director or chief executive of the Company
had any interest or short position, whether beneficial or
non-beneficial, in the shares or underlying shares (including
options) and debentures of the Company or any of its
associated corporations (within the meaning of Part XV of
the SFO).
Neither during nor prior to the year under review has any
right been granted to, or exercised by, any Director of the
Company, or to or by the spouse or minor child of any
Director, to subscribe for shares, warrants or debentures of
the Company.
Other than as stated in this report, no transaction,
arrangement or contract of significance to which the Group
was a party and in which a Director or an entity connected
with a Director is or was materially interested, either directly
or indirectly, subsisted during or at the end of the year.
At no time during the year was the Company, or any of its
associated corporations, a party to any arrangements to
enable the Directors of the Company to acquire benefits by
means of the acquisition of shares in or debentures of the
Company or any other body corporate.
DIRECTORS’ INTERESTS IN COMPETING
BUSINESS
Pursuant to Rule 8.10 of the Listing Rules, Patrick Healy,
Ma Chongxian and Song Zhiyong disclosed that they were
directors of Air China during the year. Air China 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.
DIRECTORS OF SUBSIDIARIES
The names of all directors who have served on the boards
of the subsidiaries of the Company during the year ended
31st December 2021 or during the period from 1st January
2022 to the date of this Report are kept at the Company’s
registered office and made available for inspection by the
members of the Company in accordance with Section
390(6) of the Companies Ordinance (Cap. 622 of the Laws
of Hong Kong).
PERMITTED INDEMNITY
Subject to the Companies Ordinance (Cap. 622 of the
Lawsof Hong Kong), every Director is entitled under the
Company’s Articles of Association to be indemnified out of
the assets of the Company against all costs, charges,
expenses, losses and liabilities which he or she may sustain
or incur in or about the execution or discharge of his or her
duties and/or the exercise of his or her powers and/or
otherwise in relation to or in connection with his or her
duties, powers or office. To the extent permitted by such
Ordinance, the Company has taken out insurance against
the liability and costs associated with defending any
proceedings which may be brought against directors of
companies in the Group.
SUBSTANTIAL SHAREHOLDERS
The register of interests in shares and short positions
maintained under Section 336 of the SFO shows that at
31stDecember 2021 the Company had been notified of the
following interests in the shares of the Company held by
substantial shareholders and other persons:
40
Cathay Pacific Airways Limited Annual Report 2021
DIRECTORS’ REPORT
No. of shares
Percentage of
voting shares (%) Type of interest (Note)
Long position
1. Air China Limited 4,827,269,423 74.99 Attributable interest (a)
2. China National Aviation Holding Corporation Limited 4,827,269,423 74.99 Attributable interest (b)
3. Swire Pacific Limited 4,827,269,423 74.99 Attributable interest (a)
4. John Swire & Sons Limited 4,827,269,423 74.99 Attributable interest (c)
5. Qatar Airways Group Q.C.S.C. 643,076,181 9.99 Beneficial interest (d)
6. The Financial Secretary Incorporated 416,666,666 6.47 Interest in controlled
corporation (e)
7. HSBC Holdings plc 310,535,838 4.82 Interest in controlled
corporation (f)
Short position
1. HSBC Holdings plc 142,683,936 2.21 Interest in controlled
corporation (f)
Note: At 31st December 2021:
(a) Under Section 317 of the SFO, each of Air China, China National Aviation Company Limited (“CNAC”) and Swire Pacific, being a party to the shareholders’
agreement in relation to the Company dated 8th June 2006, was deemed to be interested in a total of 4,827,269,423 shares of the Company,
comprising:
(i) 2,896,753,089 shares directly held by Swire Pacific;
(ii) 1,930,516,334 shares indirectly held by Air China and its subsidiaries CNAC, Super Supreme Company Limited and Total Transform Group Limited,
comprising the following shares held by their wholly owned subsidiaries: 472,248,545 shares held by Angel Paradise Ltd., 351,574,615 shares held
by Custain Limited, 314,054,626 shares held by Easerich Investments Inc., 310,870,873 shares held by Grand Link Investments Holdings Ltd.,
339,343,616 shares held by Motive Link Holdings Inc. and 142,424,059 shares held by Perfect Match Assets Holdings Ltd.
(b) China National Aviation Holding Corporation Limited was deemed to be interested in a total of 4,827,269,423 shares of the Company, in which its
subsidiary Air China was deemed interested.
(c) Swire and its wholly owned subsidiary JS&SHK were deemed to be interested in a total of 4,827,269,423 shares of the Company by virtue of the Swire
group being interested in 57.89% of the equity of Swire Pacific and controlling 66.24% of the voting rights attached to shares in Swire Pacific.
(d) Qatar Airways Group Q.C.S.C. held a total of 643,076,181 shares of the Company as beneficial owner.
(e) (i) Aviation 2020 Limited, a limited company wholly owned by the Financial Secretary Incorporated, did not hold any ordinary shares of the Company;
(ii)pursuant to a subscription agreement dated 9th June 2020 entered into between the Company and Aviation 2020 Limited in relation to the issue of
preference shares and warrants, the Company issued 416,666,666 warrants to Aviation 2020 Limited on 12th August 2020, which entitle Aviation 2020
Limited to subscribe for up to 416,666,666 ordinary shares of the Company; (iii) if Aviation 2020 Limited chooses to exercise all warrants, it would hold
approximately 6.08% of the ordinary shares of the Company as enlarged by the issue of such shares.
(f) These shares were held by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”), a corporation controlled by HSBC Holdings plc, as
borrower under the Global Master Securities Lending Agreement dated 27th January 2021 entered into between HSBC and Swire Pacific. The interests
were disclosed based on the disclosure of interest filing made by HSBC Holdings plc on 15th December 2021.
PUBLIC FLOAT
From information that is publicly available to the Company
and within the knowledge of its Directors at the date of this
report, at least 25% of the Company’s total number of
issued shares are held by the public.
AUDITORS
KPMG retire and, being eligible, 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
Patrick Healy
Chairman
Hong Kong, 9th March 2022
41
Cathay Pacific Airways Limited Annual Report 2021
GOVERNANCE CULTURE
Cathay Pacific is committed to ensuring that its affairs are
conducted in accordance with high ethical standards. This
reflects its belief that, in the achievement of its long-term
objectives, it is imperative to act with probity, transparency
and accountability. By so acting, Cathay Pacific believes
that shareholder wealth will be maximised in the long term
and that its employees, those with whom it does business
and the communities in which it operates will all benefit.
Corporate governance is the process by which the Board
instructs management of the Group to conduct its affairs
with a view to ensure that its objectives are met. The Board
is committed to maintaining and developing robust
corporate governance practices that are intended to
ensure:
• satisfactory and sustainable returns to shareholders
• that the interests of those who deal with the Company are
safeguarded
• that overall business risk is understood and managed
appropriately
• the delivery of high-quality products and services to the
satisfaction of customers and
• that high standards of ethics are maintained.
CORPORATE GOVERNANCE STATEMENT
The Corporate Governance Code (the “CG Code”) as
published by The Stock Exchange of Hong Kong Limited
sets out the principles of good corporate governance and
provides two levels of recommendation:
(a) code provisions: issuers are expected to comply with,
but may choose to deviate from, the code provisions
and any deviation must be provided with considered
reasons; and
CORPORATE GOVERNANCE REPORT
(b) recommended best practices: for guidance only and
issuers may also devise their own code on corporate
governance on the terms they consider appropriate.
Issuers are encouraged, but not required, to state
whether they have complied with the recommended
best practices and give considered reasons for any
deviation.
The Company supports the principles-based approach
ofthe CG Code and the flexibility this provides for the
adoption of corporate policies and procedures which
recognise the individuality of companies. Cathay Pacific has
adopted its own corporate governance code which is
available on its website www.cathaypacific.com. Corporate
governance does not stand still and it evolves with each
business and operating environment. The Company is
always ready to learn and adopt best practices.
The Company complied with all the code provisions set out
in the CG Code contained in Appendix 14 to the Rules
Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited (the “Listing Rules”) throughout the
year covered by the annual report with the following
exception which it believed does not benefit its
shareholders:
• Sections A.5.1 to A.5.4 of the CG Code in respect of the
establishment, terms of reference and resources of a
nomination committee. The Board considered the merits
of establishing a nomination committee but concluded
that it was in the best interests of the Company and
potential new appointees that the Board collectively
reviews and approves the appointment of any new
Director as this allowed a more informed and balanced
decision to be made by the Board as to suitability for
the role.
During 2021, The Stock Exchange of Hong Kong Limited
consulted on changes to the CG Code and related Listing
Rules. One of the outcomes of the consultation is that
nomination committees have become mandatory. The
Board has resolved to form a nomination committee. See
further under “Nomination Committee” below.
42
Cathay Pacific Airways Limited Annual Report 2021
CORPORATE GOVERNANCE REPORT
THE BOARD OF DIRECTORS
ROLE OF THE BOARD
The Company is governed by a Board of Directors, which
has responsibility for strategic leadership and control of the
Group designed to maximise shareholder value, while taking
due account of the interests of those with whom the Group
does business and others.
Responsibility for achieving the Company’s objectives and
running the business on a day-to-day basis is delegated to
management. The Board exercises a number of reserved
powers which include:
• maintaining and promoting the culture of the Company
• formulation of long-term strategy
• approving public announcements, including financial
statements
• committing to major acquisitions, divestments and
capital projects
• authorising significant changes to the capital structure
and material borrowings
• any issue, or buy-back, of equity securities under the
relevant general mandates
• approving treasury policy
• setting dividend policy
• approving appointments to the Board
• reviewing the board diversity policy with a view to the
Board having a balance of skills, experience and diversity
of perspectives appropriate to the Company’s
businesses
• ensuring that appropriate management development and
succession plans are in place
• setting the Group remuneration policy
• approving annual budgets and forecasts
• reviewing operational and financial performance
• reviewing the effectiveness of the Group’s risk
management and internal control systems
• ensuring the adequacy of the resources, staff
qualifications and experience, training programmes and
budget of the Company’s accounting, internal audit and
financial reporting functions
• overseeing sustainable development matters
To assist it in fulfilling its duties, the Board has established
the Board Safety Review Committee, the Executive
Committee, the Finance Committee, the Remuneration
Committee, the Audit Committee, the Board Risk
Committee and the Nomination Committee, the latter four
and the Board Safety Review Committee with the
participation of Independent Non-Executive Directors.
CHAIRMAN AND CHIEF EXECUTIVE
The CG Code requires that the roles of Chairman and Chief
Executive be separate and not performed by the same
individual to ensure there is a clear division of
responsibilities between the running of the Board and the
executives who run the business.
Patrick Healy, the Chairman, is responsible for:
• leadership of the Board
• setting its agenda and taking into account any matters
proposed by other Directors for inclusion in the agenda
• facilitating effective contributions from and dialogue with
all Directors and constructive relations between them
• ensuring that all Directors are properly briefed on issues
arising at Board meetings and that they receive accurate,
timely and clear information
• obtaining consensus amongst the Directors
• ensuring, through the Board, that good corporate
governance practices and procedures are followed.
Augustus Tang, the Chief Executive Officer, is responsible
for implementing the policies and strategies set by the
Board in order to ensure the successful day-to-day
management of the Group’s business.
Throughout the year, there was a clear division of
responsibilities between the Chairman and the Chief
Executive.
BOARD COMPOSITION
The Board is structured with a view to ensure it is of a high
calibre and has a balance of key skills and knowledge so
that it works effectively as a team and individuals or groups
do not dominate decision-making.
The Board comprises the Chairman, four other Executive
Directors, eight Non-Executive Directors and four
43
Cathay Pacific Airways Limited Annual Report 2021
CORPORATE GOVERNANCE REPORT
Independent Non-Executive Directors. Their biographical
details are set out in the section of this annual report
headed Directors and Officers and are posted on the
Company’s website.
Patrick Healy, Guy Bradley, Gregory Hughes, Ronald Lam,
Rebecca Sharpe, Augustus Tang and Zhang Zhuo Ping are
directors and/or employees of the Swire group. Merlin Swire
and Samuel Swire are shareholders, directors and
employees of the Swire group.
The Non-Executive Directors and Independent Non-
Executive Directors bring independent advice, judgement
and, through constructive challenge, scrutiny of executives
and review of performance and risks. The Audit, Board Risk,
Board Safety Review and Remuneration Committees of the
Board comprise Non-Executive Directors and Independent
Non-Executive Directors.
The Board considers that four Independent Non-Executive
Directors are independent in character and judgement
andfulfil the independence guidelines set out in Rule 3.13
ofthe Listing Rules. Confirmation has been received from
allIndependent Non-Executive Directors that they are
independent as set out in Rule 3.13 of the Listing Rules.
None of the Independent Non-Executive Directors holds
cross-directorships or has significant links with other
Directors through involvements in other companies
orbodies.
The Independent Non-Executive Directors:
• provide open and objective challenge to management
and other Board members
• raise intelligent questions and challenge constructively
and with vigour
• bring outside knowledge of the businesses and markets
in which the Group operates, providing informed insight
and responses to management.
The Company has been granted by the Stock Exchange a
waiver from strict compliance with Rule 3.10A of the Listing
Rules, which requires that an issuer must appoint
Independent Non-Executive Directors representing at least
one-third of the Board.
Taking into account all of the circumstances described in
this section, the Company considers all of the independent
Non-Executive Directors to be independent.
APPOINTMENT AND RE-ELECTION
Potential new Directors are identified and considered for
appointment by the Board. A Director appointed by the
Board is subject to election by shareholders at the first
annual general meeting after his or her appointment, and all
Directors are subject to re-election by shareholders every
three years.
Potential new Board members are identified on the basis of
skills and experience which, in the opinion of the Directors,
will enable them to make a positive contribution to the
performance of the Board.
On 9th March 2022, the Board, having reviewed the Board’s
composition, nominated Guy Bradley, Ma Chongxian,
Bernard Chan, John Harrison and Andrew Tung for
recommendation to shareholders for election/re-election at
the 2022 Annual General Meeting. The nominations were
made in accordance with objective criteria (including
gender, age, cultural and educational background, ethnicity,
professional experience, skills, knowledge, length of
service, number of directorships of listed companies and
the legitimate interests of the Company’s principal
shareholders), with due regard for the benefits of diversity,
as set out in the board diversity policy. The Board also took
into account the respective contributions of Guy Bradley,
Ma Chongxian, Bernard Chan, John Harrison and Andrew
Tung to the Board and their firm commitment to their roles.
The Board is satisfied with the independence of Bernard
Chan, John Harrison and Andrew Tung having regard to the
criteria laid down in the Listing Rules. The particulars of the
Directors standing for re-election are set out in the section
of this annual report headed Directors and Officers and will
also be set out in the circular to shareholders to be
distributed with this annual report and posted on the
Company’s website.
Full details of changes in the Board during the year and to
the date of this report are provided in the section of this
annual report headed Directors’ Report.
BOARD DIVERSITY
The Board has adopted a board diversity policy, which is
available on the Company’s website. The Board’s
composition reflects an appropriate mix of skills,
experience and diversity among its members that are
relevant to the Company’s strategy, governance and
business and contribute to the Board’s effectiveness.
A summary is set out in the table below:
44
Cathay Pacific Airways Limited Annual Report 2021
CORPORATE GOVERNANCE REPORT
Age 39-47 years (6%)
|
48-56 years (53%)
|
57-65 years (41%)
Gender Male (94%)
|
Female (6%)
Ethnicity American (6%)
|
Australian (6%)
|
British (41%)
|
Chinese (47%)
Years of service as Director 1-5 years (65%)
|
6-10 years (23%)
|
over 10 years (12%)
Skills, expertise and experience company executive (82%)
|
accounting, banking and finance (18%)
In order to achieve a diversity of perspectives among
members of the Board, it is the policy of the Company to
consider a number of factors when deciding on
appointments to the Board and the continuation of those
appointments. Such factors include gender, age, cultural
and educational background, ethnicity, professional
experience, skills, knowledge, length of service and the
legitimate interests of the Company’s principal
shareholders.
RESPONSIBILITIES OF DIRECTORS
On appointment, the Directors receive information about
the Group including:
• the role of the Board and the matters reserved for
itsattention
• the role and terms of reference of Board Committees
• the Group’s corporate governance practices and
procedures
• the powers delegated to management and
• the latest financial information.
Directors update their skills, knowledge and familiarity with
the Group through their participation at meetings of the
Board and its committees and through regular meetings
with management. Directors are regularly updated by the
Company Secretary on their legal and other duties as
Directors of a listed company.
Through the Company Secretary, Directors are able to
obtain appropriate professional training and advice.
Each Director ensures that he/she can give sufficient time
and attention to the affairs of the Group. All Directors
disclose to the Board on their first appointment their
interests as a Director or otherwise in other companies or
organisations and such declarations of interests are
updated regularly. No Director was a director of more than
six listed companies (including the Company) at 31st
December 2021.
Details of Directors’ other appointments are shown in their
biographies in the section of this annual report headed
Directors and Officers.
BOARD PROCESSES
All committees of the Board follow the same processes as
the full Board.
The dates of the 2021 Board meetings were determined in
2020 and any amendments to this schedule were notified to
Directors at least 14 days before regular meetings. Suitable
arrangements are in place to allow Directors to include
items in the agenda for regular Board meetings.
The Board met five times in 2021. The attendance of
individual Directors at meetings of the Board and its
committees is set out in the table on page 45. Average
attendance at Board meetings was 98%. All Directors
attended Board meetings in person or through electronic
means of communication during the year.
Agendas and accompanying Board papers are circulated
with sufficient time to allow the Directors to prepare
beforemeetings.
The Chairman takes the lead to ensure that the Board acts
in the best interests of the Company, that there is effective
communication with the shareholders and that their views
are communicated to the Board as a whole.
Board decisions are made by vote at Board meetings and
supplemented by the circulation of written resolutions
between Board meetings.
Minutes of Board meetings are taken by the Company
Secretary and, together with any supporting papers, are
made available to all Directors. The minutes record the
matters considered by the Board, the decisions reached,
and any concerns raised or dissenting views expressed by
Directors. Draft and final versions of the minutes are sent to
all Directors for their comment and records respectively.
Board meetings are structured so as to encourage open
discussion, frank debate and active participation by
Directors in meetings.
45
Cathay Pacific Airways Limited Annual Report 2021
CORPORATE GOVERNANCE REPORT
A typical Board meeting would consist of:
• review of a report by the Chief Executive Officer on the
results since the last meeting and an explanation of
changes in the business environment and their impact on
budgets and the longer-term plan
• the raising of new initiatives and ideas
• the presentation of papers to support decisions requiring
Board approval
• an update of legal and compliance matters for the Board’s
consideration
• any declarations of interest.
The executive management provides the Board with such
information and explanations as are necessary to enable
Directors to make an informed assessment of the financial
and other information put before the Board. Queries raised
by Directors are answered fully and promptly.
When necessary, the Independent Non-Executive Directors
meet privately to discuss matters which are their specific
responsibility.
The Chairman meets at least annually with the Independent
Non-Executive Directors without the presence of other
Directors.
Meetings Attended /Held
Board
Audit
Committee
Board Risk
Committee
Remuneration
Committee
Finance
Committee
Board Safety
Review
Committee
2021
Annual
General
Meeting
Executive Directors
Patrick Healy – Chairman 5/5 4/4 4/4 11/12 4/4 √
Gregory Hughes 5/5 12/12 4/4 √
Ronald Lam 5/5 12/12 3/4 √
Martin Murray (resigned with effect
from 25th January 2021)
1/1 2/2 1/1 N/A
Rebecca Sharpe (appointed with
effect from 25th January 2021)
4/4 4/4 4/4 11/11 4/4 √
Augustus Tang 5/5 4/4 4/4 12/12 4/4 √
Non-Executive Directors
Guy Bradley (appointed with effect
from 25th August 2021)
1/1 1/1 N/A
Ma Chongxian (appointed with effect
from 11th June 2021)
2/2 0/2 N/A
Michelle Low (resigned with effect
from 1st April 2021)
2/2 1/1 1/1 3/3 1/1 N/A
Martin Murray (appointed with effect
from 1st April 2021 and resigned
with effect from 25th August 2021)
2/2 2/2 5/5 2/2 √
Song Zhiyong 5/5 1/4 X
Merlin Swire 4/5 3/4 √
Samuel Swire 5/5 3/3 3/4 √
Xiao Feng 4/5 2/4 3/4 10/12 1/4 X
Zhang Zhuo Ping 5/5 4/4 √
Zhao Xiaohang 5/5 2/4 12/12 1/4 X
Independent Non-Executive Directors
Bernard Chan 5/5 3/3 4/4 √
John Harrison 5/5 4/4 4/4 4/4 √
Robert Milton 5/5 4/4 4/4 3/4 √
Andrew Tung 5/5 4/4 3/3 3/4 X
Average attendance 98% 89% 96% 100% 97% 76% 75%
46
Cathay Pacific Airways Limited Annual Report 2021
CORPORATE GOVERNANCE REPORT
CONTINUOUS PROFESSIONAL DEVELOPMENT
Throughout the year, continuous professional development
for directors was conducted through the following:
(a) directors attended training from the Company’s external
legal advisers about external updates on various
applicable laws and regulations and topics pertinent to
the business of the Company;
(b) directors were provided with training materials about
matters relevant to their duties as directors; and
(c) directors were invited to attend seminars and
conferences about financial, commercial, economic,
legal, regulatory and/or business affairs.
The Company makes available continuous professional
development for all Directors at the expense of the
Company so as to develop and refresh their knowledge
andskills.
DIRECTORS’ AND OFFICERS’ INSURANCE
The Company has arranged appropriate insurance cover
inrespect of potential legal actions against its Directors
andOfficers.
CONFLICTS OF INTEREST
If a Director has a material conflict of interest in relation to a
transaction or proposal to be considered by the Board, the
individual is required to declare such interest and abstains
from voting. The matter is considered at a Board meeting
and voted on by Directors who have no material interest in
the transaction.
DELEGATION BY THE BOARD
Responsibility for delivering the Company’s strategies and
objectives, as established by the Board, and responsibility
for day-to-day management is delegated to the Chief
Executive Officer. The Chief Executive Officer has been
given clear guidelines and directions as to his powers and,
in particular, the circumstances under which he should
report back to, and obtain prior approval from, the Board
before making commitments on behalf of the Company.
The Board monitors management’s performance against
the achievement of financial and non-financial measures,
the principal items monitored being:
• detailed monthly management accounts consisting of
statements of profit or loss, financial position and cash
flows compared to budget, together with forecasts
• internal and external audit reports
• feedback from external parties such as customers,
others with whom the Group does business, trade
associations and service providers.
SECURITIES TRANSACTIONS
The Company has adopted a code of conduct (the
“Securities Code”) regarding securities transactions by
Directors on terms no less exacting than the required
standard set out in the Model Code for Securities
Transactions by Directors of Listed Issuers contained in
Appendix 10 to the Listing Rules. These rules are available
on the Company’s website.
A copy of the Securities Code has been sent to each
Director of the Company and will be sent to each Director
twice annually, immediately before the two financial period
ends, with a reminder that the Director cannot deal in the
securities and derivatives of the Company during the
blackout period before the Group’s interim and annual
results have been published, and that all their dealings must
be conducted in accordance with the Securities Code.
Under the Securities Code, Directors of the Company are
required to notify the Chairman and receive a dated written
acknowledgement before dealing in the securities and
derivatives of the Company and, in the case of the Chairman
himself, he must notify the Chairman of the Audit
Committee and receive a dated written acknowledgement
before any dealing.
On specific enquiries made, all the Directors of the
Company have confirmed that they have complied with the
required standard set out in the Securities Code.
Directors’ interests at 31st December 2021 in the shares of
the Company and its associated corporations (within the
meaning of Part XV of the Securities and Futures Ordinance)
are set out in the section of this annual report headed
Directors’ Report.
The following committees have been established to assist
the Board in discharging its responsibilities:
47
Cathay Pacific Airways Limited Annual Report 2021
CORPORATE GOVERNANCE REPORT
BOARD SAFETY REVIEW COMMITTEE
The Board Safety Review Committee reviews and reports to
the Board on safety issues. It met quarterly during the year
and comprises its Chairman (Captain Timothy Jenkins), one
Executive Director (Augustus Tang, the Chief Executive
Officer), two Independent Non-Executive Directors (Robert
Milton, Chairman of the Board Risk Committee and Andrew
Tung), and two Non-Executive Directors (Ma Chongxian and
Samuel Swire). Regular attendees at the meetings included
the Chairman of the Board, the Chief Customer and
Commercial Officer, the Chief Financial Officer, the Chief
Operations and Service Delivery Officer, other Non-
Executive Directors and Independent Non-Executive
Directors, the Director Service Delivery and the General
Manager for Group Safety and Operational Risk Management
of the Company, the Chief Executive Officer of Hong Kong
Express Airways Limited and the Chief Executive Officer of
AHK Air Hong Kong Limited.
EXECUTIVE COMMITTEE
The Executive Committee comprises the Chief Executive
Officer (Augustus Tang) (Committee Chairman), three other
Executive Directors (Gregory Hughes, Ronald Lam and
Rebecca Sharpe) and five Non-Executive Directors (Ma
Chongxian, Song Zhiyong, Xiao Feng, Zhao Xiaohang and
Zhang Zhuoping).
FINANCE COMMITTEE
The Finance Committee meets monthly to review the
financial position of the Company and is responsible for
establishing the financial risk management policies. It is
chaired by the Chief Executive Officer (Augustus Tang) and
comprises three other Executive Directors (Gregory Hughes,
Ronald Lam and Rebecca Sharpe), two Non-Executive
Directors (Xiao Feng and Zhao Xiaohang), General Manager
Financial Services (Della Ng), the Head of Treasury (Priscilla
Li) and an independent representative from the financial
community.
REMUNERATION COMMITTEE
The Remuneration Committee comprises one Non-Executive
Director (Samuel Swire) and two Independent Non-Executive
Directors (Andrew Tung (Committee Chairman) and Bernard
Chan). All the members served for the whole of 2021.
The Remuneration Committee reviews and approves the
management’s remuneration proposals with reference to the
Board’s corporate goals and objectives.
The Remuneration Committee exercises the powers of the
Board to determine the remuneration packages of individual
Executive Directors (including salaries, bonuses, benefits in
kind and the terms on which they participate in any
provident fund or other retirement benefit scheme), taking
into consideration salaries paid by comparable companies,
time commitments and responsibilities and employment
conditions elsewhere in the group. Full details of the
remuneration of the Directors are provided in note 25 to the
financial statements.
The terms of reference of the Remuneration Committee
have been reviewed with reference to the CG Code and are
posted on the Company’s website.
A services agreement exists between the Company and
JS&SHK, a wholly-owned subsidiary of John Swire & Sons
Limited, which is the parent company of the Swire group.
This agreement has been considered in detail and approved
by the Independent Non-Executive Directors of the
Company. Under the terms of the agreement, staff at
various levels, including Executive Directors, are seconded
to the Company. These staff report to and take instructions
from the Board of the Company but remain employees of
the Swire group.
In order to be able to attract and retain staff of suitable
calibre, the Swire group provides a competitive
remuneration package. This typically comprises salary,
housing, retirement benefits, leave passage and education
allowances and, after three years’ service, a bonus related
to the overall profit of the Swire Pacific group. The provision
of housing facilitates relocation either within Hong Kong or
elsewhere in accordance with the needs of the business
and as part of the training process whereby managers gain
practical experience in various businesses within the Swire
group, and payment of bonuses on a group-wide basis
enables postings to be made to group companies with very
different profitability profiles. Whilst bonuses are calculated
by reference to the profits of Swire Pacific overall, those
profits are influenced to a significant extent by the results of
the Company.
Although the remuneration of these executives is not
entirely linked to the profits of the Company, it is considered
that, given the volatility of the aviation business, this has
contributed considerably to the maintenance of a stable,
motivated and high-calibre management team in the
Company. Furthermore, given its substantial equity interest
in 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.
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A number of Directors and senior staff with specialist skills
are employed directly by the Company on terms similar to
those applicable to the staff referred to above.
The Remuneration Committee reviewed the structure and
levels of remuneration paid to Executive Directors at its
meetings in October and December 2021. At the meeting
held in October 2021, the Committee considered a report
prepared for it by Mercer Limited, an independent firm of
consultants, which confirmed that the remuneration of the
Company’s Executive Directors, as disclosed in note 25 to
the financial statements, was comparable with that paid to
equivalent executives in peer group companies.
No Director takes part in any discussion about his or her
own remuneration.
The following fee levels have been approved by the Board:
Fee
2021
HK$
2022
HK$
Director’s Fee 575,000 575,000
Fee for Audit
Committee Chairman 268,000 268,000
Fee for Audit
Committee Member 186,000 186,000
Fee for Board Risk
Committee Chairman 268,000 268,000
Fee for Board Risk
Committee Member 186,000 186,000
Fee for Remuneration
Committee Chairman 83,000 83,000
Fee for Remuneration
Committee Member 60,000 60,000
BOARD RISK COMMITTEE – see pages 49 to 51
AUDIT COMMITTEE – see pages 53 and 54
ACCOUNTABILITY AND AUDIT
(1) FINANCIAL REPORTING
The Board acknowledges its responsibility for:
• the proper stewardship of the Company’s affairs, to
ensure the integrity of financial information
• preparing annual and interim financial statements and
other related information that give a true and fair view
of the Group’s affairs and of its results and cash flows
for the relevant periods, in accordance with Hong
Kong Financial Reporting Standards and the Hong
Kong Companies Ordinance
• selecting appropriate accounting policies and
ensuring that these are consistently applied
• making judgements and estimates that are prudent
and reasonable; and
• ensuring that the application of the going concern
assumption is appropriate.
(2) RISK MANAGEMENT
Governance
The Cathay Pacific Group’s commitment to Operational
Safety has been implemented through systematic and
thorough processes supported by focussed risk
management governance infrastructure including:
• A Board Safety Review Committee chaired by an
independent industry advisor has the responsibility to
review all matters concerned with the safe operations,
both in the air and on the ground, and considers
reports on incidents to ensure appropriate remedial
action is being taken and recommendations are
implemented.
• A Management Safety Committee chaired by the
Chief Executive Officer ensures that appropriate
company-wide safety, health and security related risk
management strategies, systems, policies and
processes, reporting protocols and internal controls
that are designed to ensure compliance with
applicable laws and regulations globally, are
implemented, managed, monitored and maintained at
all times.
• A Group Safety & Operational Risk Management
Department headed by the General Manager Group
Safety and Operational Risk Management manages
the airlines’ Safety Management System (SMS), itself
providing oversight of the airlines’ safety, security and
assessment of and mitigations of risks associated
with operations.
Parallel to Operational Safety, a similar governance
infrastructure managing all other corporate risks in the
Group has been established:
• Board Risk Committee (BRC) – a Board level
committee whose membership is exclusively Non-
Executive Directors. The Committee’s role is to advise
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the Board and oversee implementation of all Board
decisions on all matters relating to risk. This includes
the setting and monitoring of risk appetite, the
effectiveness of the risk management framework
“RMF” and the soundness of the Group’s risk culture.
• Risk Management Committee (RMC) – an executive
committee chaired by the Chief Executive Officer
responsible for the design, delivery and direct
oversight of the RMF and, through it, the management
of all corporate risks within the Company.
• Group Corporate Risk Department – headed by a
Chief Risk Officer reporting to the Chief Executive
Officer. This department has specific responsibility
for developing, maintaining and ensuring the
effectiveness of the RMF.
Board Risk Committee
The Board Risk Committee, consisting of three Non-
Executive Directors (John Harrison, Robert Milton and
Xiao Feng), was established on 1st July 2019 and is
charged with supporting the Board in its responsibility
for all risk management within the Group, focusing on
risks not related to safety and security arising from the
Company’s flight operations (which are overseen by the
Board Safety Review Committee). In particular, the Board
Risk Committee is charged with overseeing the ongoing
implementation and development of the Company’s
RMF, and for ensuring its effectiveness. Two of the
Committee members are Independent Non-Executive
Directors, one of whom, Robert Milton, is Chairman.
The Board Risk Committee met quarterly in 2021.
Regular attendees at the meetings are the Chief
Executive Officer, the Chief Financial Officer, the Chief
Risk Officer, the Group General Counsel, and the
General Manager, Group Internal Audit.
The Cathay RMF is founded on the principle of ‘three
lines of defence’, a commonly used model, and one that
is designed to avoid conflicts of interest whereby
managers review or oversee their own activities. The
three lines divide as follows:
• Business or specialist functions that are directly
involved in business management activities or
executive decision making are classified as First Line.
• Functions that oversee, advise and support the First
Line in managing the risks associated with those
activities are considered Second Line.
• Group Internal Audit, which provides overall
assurance to the Board as to the effectiveness of the
Company’s risk management processes and controls,
is classified as Third Line.
The application of the three lines of defence model
within Cathay’s risk governance framework is shown
inFig. 1.
Note: It is recognised that Legal and Compliance sits between first and second lines; for practical purposes they are included in the first line.
FIG. 1 RISK GOVERNANCE OVERVIEW
FIRST LINE ”Management” SECOND LINE ”Oversight” THIRD LINE ”Assurance”
Group Internal Audit
Board Risk
Committee
Audit Committee
Risk
Management
Committee
Group
Corporate Risk
Group Safety &
Operational Risk
Airline Safety
Review
Committee
Board Safety
Review
Committee
Executive & Management
Committees
Business Units
Functions including People,
Legal and Compliance, Finance,
IT Security, Procurement, etc.
Control Functions
Board
Level
Executive
Level
Operational
Level
Board of Directors
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Core Principles
The first core principle of the RMF is that the Board has
overall responsibility for the systems, processes and
conduct of risk management. The Board’s
responsibilities in this regard have been defined as
ensuring that:
• Material risks have been identified, defined and
prioritised according to their potential impacts on all
stakeholders.
• Reasonable steps have been taken or are in place to
mitigate these risks and their impacts.
• Plans are in place to deal with any risk event that
occurs to ensure that the safety, wellbeing and
financial condition of all stakeholders is protected or
restored to the greatest extent reasonably possible.
• A sound risk culture is in place. This is defined as an
operating environment in which the principle that the
pursuit of results must be achieved within the risk
parameters set by the Board is promoted and
practised by all staff.
The second core principle of the RMF is that the
Business is responsible for managing risk. The risk
management function is expected to engage fully to
support them, providing ideas, expertise and advice. In
particular, Group Corporate Risk’s role is to ensure that
the First Line takes decisions objectively and in full
possession of all relevant information.
The latter principle is embedded into the Group’s
businesses through the appointment of First Line ‘risk
owners’ who have responsibility for identifying and
monitoring emerging and developing risks across one
or more business areas. Risk owners are responsible for
escalating any breaches or potential incidents to Group
Corporate Risk.
Risk Management Process
The management of risk is conducted in three stages:
identification, assessment and mitigation.
Identification
Cathay Pacific and its major subsidiaries retain risk
registers, under the supervision of Group Corporate
Risk, that are used by management to prioritise risk
management activities. These risk registers are updated
annually and feed into the Group register.
In addition to this bottom-up assessment, the risk
registers have been enhanced via the medium of annual
workshops conducted with senior managers from
across the Group. These annual workshops have sought
to identify evolved or emerged risks across the
organisation including macro, strategic and operational
issues. The output from these workshops are updated
to the ‘Top 30’ corporate risk list, which forms the focus
of senior management attention.
Furthermore, an environmental, social and governance
(ESG) risk assessment framework and taxonomy have
been developed. The framework provides a structured
approach for the identification, assessment and
mitigation of ESG risks across the business. All material
ESG risks identified are reported to the Risk
Management Committee and the Board Risk Committee
and incorporated into the existing registers.
Assessment
Each of the Top corporate risks is then ‘dimensioned’ by
subject matter experts within the business supported
by the Group Corporate Risk function. The dimensioning
process considers and identifies the:
• potential impact of the risk across a number of
dimensions; safety, reputation, financial, strategic,
regulatory and disruption
• vulnerability of the organisation to risk events arising
from it
• speed with which a risk event might develop
• linkages of the risk with other risks i.e. the potential for
risk events to compound
• specific scenarios in which a risk event might occur or
to which the organisation may be vulnerable; and
• areas of the Company that are most susceptible to
that risk.
An internal risk scoring system is then used to
summarise the overall magnitude of the risk which is
then placed onto a risk heatmap together with the rest
of the Top corporate risk list.
Impact and vulnerability assessments are subject to
dynamic updates by the Group Corporate Risk function
working with the business and risk owners.
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Mitigation
As part of the dimensioning exercise, mitigation
measures are also considered that might reduce either
impact and/or vulnerability. A programme of mitigation
measures are agreed and packaged into a
recommended action plan which is put to management
for approval. The action plan is monitored as part of the
risk management process with progress reported to the
Risk Management Committee. Through this approach
the Board and management can see tangible
improvements in systems and processes resulting from
this process. Improvements are also reflected in risk
scores as action plans are delivered.
Areas of the business particularly susceptible to Top
corporate risks, and controls which are considered
critical to the mitigation of these major risks, are also
prioritised for review as part of the internal audit plan
which is prepared in conjunction with risk management.
Oversight and Reporting of the RMF
The structure, conduct and conclusions of the Group’s
risk management activities including mitigation
measures and action plans are subject to review by both
the Risk Management and Board Risk Committees. The
Chairman of the Board Risk Committee reports on these
activities to the Board as a standing agenda item.
Provision is made in the Terms of Reference for the
Board Risk Committee to conduct an annual ‘assurance
review’ of the Company’s Risk Management Framework
whose conclusions will be presented to the Board.
The review will solicit both internal stakeholder and
independent opinions as to the effectiveness of the
RMF, and may also include a review of notable risk
events that have occurred during the year, focussing
particularly on the effectiveness with which they were
managed according to the principles described above.
The Company’s success in identifying and anticipating
emerging risks may also be considered as part of
thisreview.
Areas of Focus in 2021
Key focus in 2021 included monitoring and assessment
of the extended COVID-19 pandemic, deep dives of Top
30 corporate risks, and monitoring of risk mitigation
actions. The Group Corporate Risk Department has also
been working closely with key stakeholders in
understanding and mitigating risks related to Cathay’s
key areas of strategic focus.
Identification and management of risks related to the
COVID-19 pandemic started in 2020 and has continued
through 2021, given the situation Cathay faced evolved
as the waves of the pandemic affects various parts of
the world at different times. In addition, deep dives were
conducted into risks related to operational restart and
maintenance efficacy, to ensure Cathay can reopen
ports and ramp up operations safely and quickly when
demand picks up.
Top corporate risks and the progress of related
mitigations were closely tracked, and in 2021 focus was
on risks related to organisation culture, customer
insights and workforce planning, all of which are crucial
as Cathay emerges from the pandemic. A scenario
planning exercise was performed on climate change,
which feeds into the Group’s strategy on sustainability
leadership and commitment to achieve net-zero carbon
emissions by 2050. Deep dive workshops were also
performed to identify risks and mitigations pertaining to
the new premium travel lifestyle strategy that was
unveiled in mid-2021, and the cargo business strategy
to support the continued growth of the cargo business
which has been Cathay’s major source of revenue in
2021. A section dedicated to risk culture was built into
the annual employee engagement survey in November
2021, which allows a wider audience across Cathay to
provide feedback on risk culture.
Risk identification workshops were conducted for
identification of emerging risks facing the Group, and
insights from these workshops were incorporated into
the Top corporate risk list.
(3) INTERNAL CONTROL
The Board acknowledges its responsibility to establish,
maintain and review the effectiveness of the Group’s
internal control systems. This responsibility is primarily
fulfilled on its behalf by the Audit Committee as
discussed on pages 53 and 54.
The foundation of internal control systems is dependent
on the ethics and culture of the organisation, the quality
and competence of its personnel, the direction provided
by the Board, and the effectiveness of management.
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The key components of the Group’s internal control
structure are as follows:
Culture: The Board believes that good governance
reflects the culture of an organisation. This is more
significant than any written procedures.
The Group aims at all times to act ethically and with
integrity, and to instil this behaviour in all its employees
by example from the Board down. The Group has a Code
of Conduct, which is posted on its internal intranet site.
The Group is committed to developing and maintaining
high professional and ethical standards. These are
reflected in the rigorous selection process and career
development plans for all employees. The organisation
prides itself on being a long-term employer which instils
in individuals, as they progress through the Group, a
thorough understanding of the Group’s ways of thinking
and acting.
Channels of communication are clearly established,
allowing employees a means of communicating their
views upwards with a willingness on the part of more
senior personnel to listen. Employees are aware that,
whenever the unexpected occurs, attention should be
given not only to the event itself, but also to determining
the cause.
Through the Group’s Code of Conduct, employees are
encouraged (and instructed as to how) to report control
deficiencies or suspicions of impropriety to those who
are in a position to take necessary action.
Controls and review: A control self-assessment
process requires management to assess, through the
use of detailed questionnaires, the adequacy and
effectiveness of risk management and internal controls
over the reliability of financial reporting. This process
and its results are reviewed by the Group internal
auditors and form part of the Audit Committee’s annual
assessment of control effectiveness.
The control environment comprises policies and
procedures intended to ensure that relevant
management directives are carried out and actions that
may be needed to address risks are taken. These may
include approvals and verifications, reviews,
safeguarding of assets and segregation of duties.
Control activities can be divided into operations,
financial reporting and compliance, although there may,
on occasion, be some overlap between them. The
typical control activities include:
• analytical reviews: for example, conducting reviews of
actual performance versus budgets, forecasts, prior
periods and competitors
• direct functional or activity management: reviews of
performance reports, conducted by managers in
charge of functions or activities
• information-processing: performing controls
intended to check the authorisation of transactions
and the accuracy and completeness of their
reporting, for example, exception reports
• physical controls: ensuring equipment, inventories,
securities and other assets are safeguarded and
subjected to periodic checks
• performance indicators: carrying out analyses of
different sets of data, operational and financial,
examining the relationships between them, and taking
corrective action where necessary
• segregation of duties: dividing and segregating duties
among different people, with a view to strengthening
checks and minimising the risk of errors and abuse.
The Group has in place effective processes and
systems for the identification, capture and reporting of
operational, financial and compliance-related
information in a form and time-frame intended to ensure
that staff carry out their designated responsibilities.
Detailed control guidelines have been set and made
available to all relevant employees of the Company
about the handling of corporate data which may be
pricesensitive.
Systems and procedures are in place to identify, control
and report on major risks, including business, safety,
legal, financial, environmental and reputational risks.
Exposures to these risks are monitored by the Board
with the assistance of various committees and senior
management.
Group Internal Audit Department
The Group Internal Audit Department assists the Audit
Committee in carrying out the analysis and independent
appraisal of the adequacy and effectiveness of the
Group’s risk management and internal control systems.
It performs regular reviews of key risk areas and
monitors compliance with Group financial, operational
and compliance procedures. The audit plan, which is
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prepared based on risk assessment methodology, is
discussed and agreed every year with the Audit
Committee, together with the required resources. In
addition to its agreed annual schedule of work, the
Department conducts other special reviews as required.
The General Manager, Group Internal Audit has direct
access to the Audit Committee. Audit reports are sent
to the Chief Executive Officer, the Chief Financial
Officer, external auditors and the relevant management
of audited departments. A summary of major audit
findings and recommendations aimed at resolving
material internal control defects is reported regularly to
the Audit Committee, and the Chair of the Audit
Committee will regularly report any such material audit
findings to the Board. As a key criterion of assessing the
adequacy and effectiveness of the Group’s risk
management and internal control systems, the Board
and the Audit Committee actively monitor the number
and seriousness of findings raised by the Group Internal
Audit Department and also the corrective actions taken
by relevant departments.
Audit Committee
The Audit Committee, consisting of one Non-Executive
Director (Xiao Feng) and three Independent Non-
Executive Directors (John Harrison (Committee Chair),
Robert Milton and Andrew Tung), assists the Board in
discharging its responsibilities for internal control and
other matters. All the members served throughout 2021.
The terms of reference of the Audit Committee follow
the guidelines set out by the Hong Kong Institute of
Certified Public Accountants and comply with the CG
Code. They are available on the Company’s website.
The Audit Committee met four times in 2021. Regular
attendees at the meetings are the Chief Executive
Officer, Chief Financial Officer, Group General Counsel
and Company Secretary, General Manager, Group
Internal Audit and representatives of the external
auditor. The Audit Committee meets at least twice a year
with the external auditors without the presence of
management. Each meeting receives written reports
from the external auditors and Group Internal Audit.
The work of the Committee during 2021 included
reviews of the following matters:
• the completeness, accuracy and integrity of formal
announcements relating to the Group’s performance
including the 2020 annual and 2021 interim reports
and announcements, with recommendations to the
Board for approval
• the plans, cash flows and liquidity, going concern and
2022 Budget of the Group
• the Group’s compliance with certain regulatory and
statutory requirements
• the Group’s internal control systems
• the approval of the 2021 annual Internal Audit
programme and review of progress on the 2021
programme
• periodic reports from Group Internal Audit and
progress in resolving any matters identified in them
• significant accounting and audit issues
• the Company’s policy regarding connected
transactions and the nature of such transactions
• the relationship with the external auditors as
discussed on page 54
• the Company’s compliance with the CG Code
• the Company’s fuel hedging policy, data governance
monitoring plan, data incident escalation matrix, and
competition law compliance policy.
In 2022, the Committee has reviewed, and
recommended to the Board for approval, the 2021
financial statements.
Assessing the Effectiveness of Risk Management
and Internal Control Systems
On behalf of the Board, the Audit Committee and the
Board Risk Committee (in relation to risk management)
review annually the continued effectiveness of the
Group’s risk management and internal control systems
dealing with risk and financial accounting and reporting,
the effectiveness and efficiency of operations,
compliance with laws and regulations, and risk
management functions.
This assessment considers:
• the scope and quality of management’s ongoing
monitoring of risks and of the risk management and
internal control systems, the work and effectiveness
of Group Internal Audit and the assurances provided
by the Chief Risk Officer
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• the changes in the nature and extent of significant
risks since the previous review and the Group’s ability
to respond to changes in its business and the external
environment
• the extent and frequency with which the results of
monitoring are communicated, enabling the
Committee to build up a cumulative assessment of
the state of control in the Group and the effectiveness
with which risk is being managed
• the incidence of any significant control failings or
weaknesses that have been identified at any time
during the period and the extent to which they have
resulted in unforeseen outcomes or contingencies
that have had, could have had, or may in the future
have, a material impact on the Company’s financial
performance or condition
• the effectiveness of the Group’s processes in
relationto financial reporting and statutory and
regulatory compliance
• areas of risk identified by management
• significant risks reported by Group Internal Audit
• work programmes proposed by both Group Internal
Audit and the external auditors
• significant issues arising from internal and external
audit reports
• the results of management’s control self assessment
exercise.
As a result of the above review, the Board confirms, and
management has also confirmed to the Board, that the
Group’s risk management and internal control systems
are effective and adequate and have complied with the
CG Code provisions on risk management and internal
control throughout the year and up to the date of this
annual report.
External Auditors
The Audit Committee acts as a point of contact,
independent from management, with the external
auditors (the “auditors”). The auditors have direct access
to the Chairman of the Audit Committee, who meets
with them periodically without management present.
The Audit Committee’s duties in relation to the
auditorsinclude:
• recommending to the Board, for approval by
shareholders, the auditors’ appointment
• approval of the auditors’ terms of engagement
• consideration of the letters of representation to be
provided to the auditors in respect of the interim and
annual financial statements
• review of reports and other ad-hoc papers from the
auditors
• annual appraisal of the quality and effectiveness of
the auditors
• assessment of the auditors’ independence and
objectivity, including the monitoring of non-audit
services provided, with a view to ensuring that their
independence and objectivity are not, and are not
seen to be, compromised
• approval of audit and non-audit fees.
Auditors’ Independence
Independence of the auditors is of critical importance
tothe Audit Committee, the Board and shareholders.
The auditors write annually to the members of the
AuditCommittee confirming that they are independent
accountants within the meaning of Section 290 of the
Code of Ethics for Professional Accountants of the
Hong Kong Institute of Certified Public Accountants
andthat they are not aware of any matters which may
reasonably be thought to bear on their independence.
The Audit Committee assesses the independence of
the auditors by considering and discussing each such
letter (and having regard to the fees payable to the
auditors for audit and non-audit work and the nature
ofthe non-audit work) at a meeting of the
AuditCommittee.
Provision of Non-audit Services
In deciding whether the auditors should provide non-
audit services the following key principles are
considered:
• the auditors should not audit their own firm’s work
• the auditors should not make management decisions
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• the auditors’ independence should not be impaired
• quality of service.
In addition, any services which may be considered to be
in conflict with the role of the auditors must be
submitted to the Audit Committee for approval prior to
engagement, regardless of the amounts involved.
In 2021 the total remuneration paid to the external
auditors was HK$21 million, being HK$15 million for
audit, HK$2 million for tax advice and HK$4 million for
other professional services.
(4) MANAGEMENT COMMITTEE
The Management Committee meets monthly and is
responsible for overseeing the day-to-day operation of
the Company. It comprises the Chief Executive Officer
(Augustus Tang) (Committee Chairman), Chief
Operations and Service Delivery Officer (Gregory
Hughes), Chief Customer and Commercial Officer
(Ronald Lam), Chief Financial Officer (Rebecca Sharpe),
Director Digital and IT (Lawrence Fong), Director
Engineering (Neil Glenn), Director People (Patricia
Hwang), Director Flight Operations (Captain Chris
Kempis), Chief Risk Officer (Karan Kumar), Director
Customer Travel (Lavinia Lau), Director Service Delivery
(Alex McGowan), Director Cargo (Tom Owen), Director
Customer Lifestyle (Paul Smitton) and Group General
Counsel and Company Secretary (Joanna Lai).
In addition, a number of other committees consisting of
members of management have been established to
assist and report to the Management Committee from
time to time. These committees are typically
established to cover specialist areas such as safety
operations, sustainable development and data
governance.
(5) NOMINATION COMMITTEE
The Nomination Committee consists of three Non-
Executive Directors, Bernard Chan, Samuel Swire and
Andrew Tung. Two of the Committee members are
Independent Non-Executive Directors, one of whom,
Andrew Tung, is the Chair. The Nomination Committee
was formed with effect from 9th March 2022. Its terms
of reference comply with the CG Code and are posted
on the Company’s website.
OTHER MATTERS
COMPANY SECRETARY
The Company Secretary is an employee of the Company
and is appointed by the Board. The Company Secretary is
responsible for facilitating the Board’s processes and
communications among Board members, with shareholders
and with management. The Company Secretary undertakes
at least 15 hours of relevant professional training annually to
update her skills and knowledge.
INSIDE INFORMATION
With respect to procedures and internal controls for the
handling and dissemination of inside information, the
Company:
• is required to disclose inside information as soon as
reasonably practicable in accordance with the Securities
and Futures Ordinance and the Listing Rules
• conducts its affairs with close regard to the “Guidelines
on Disclosure of Inside Information” issued by the
Securities and Futures Commission
• has included in its Corporate Code of Conduct a strict
prohibition on the unauthorised use of confidential or
inside information
• ensures, through its own internal reporting processes
and the consideration of their outcome by senior
management, the appropriate handling and dissemination
of inside information
• has adopted an inside information policy which provides a
framework for escalating inside information matters to
the Board.
SHAREHOLDERS
COMMUNICATION WITH SHAREHOLDERS AND
INVESTORS
The Board and senior management recognise their
responsibility to represent the interests of all shareholders
and to maximise shareholder value. Communication with
shareholders and accountability to shareholders is a high
priority of the Company.
56
Cathay Pacific Airways Limited Annual Report 2021
CORPORATE GOVERNANCE REPORT
The methods used to communicate with shareholders
include the following:
• the Chief Financial Officer makes herself available for
meetings with major shareholders and conducts
investors and analysts briefings immediately after the
announcement of the interim and annual results. In
addition, the Chief Financial Officer attended regular
meetings with analysts and investors during the year.
• through the Group’s website. This includes electronic
copies of financial reports, audio webcasts of analyst
presentations, slides of presentations given at investor
conferences, latest news, public announcements and
general information about the Group’s businesses
• through publication of interim and annual reports
• through the Annual General Meeting as discussed below.
Shareholders may send their enquiries and concerns to the
Board by post or email at ir@cathaypacific.com. The
relevant contact details are set out in the section of this
annual report headed Corporate and Shareholder
Information.
THE ANNUAL GENERAL MEETING
The Annual General Meeting is an important forum in which
to engage with shareholders. The most recent Annual
General Meeting was held on 12th May 2021. The meeting
was open to all shareholders. The Directors who attended
the meeting are shown in the table on page 45.
At the Annual General Meeting, separate resolutions were
proposed for each issue and were voted on by poll. The
procedures for conducting a poll were explained at the
meeting prior to the polls being taken. The agenda
itemswere:
• receiving the report of the Directors and the audited
financial statements for the year ended 31st December
2020
• electing/re-electing Directors
• re-appointing the auditors and authorising the Directors
to set their remuneration
• a general mandate authorising the Directors to make
on-market share buy-backs
• a general mandate authorising the Directors to allot and
issue shares up to 20% of the number of shares then
inissue.
Minutes of the meeting together with voting results are
available on the Group’s website.
DIVIDEND POLICY
Cathay Pacific has a policy on the payment of dividends,
which is set out in the section of this annual report headed
Directors’ Report.
SHAREHOLDER ENGAGEMENT
Pursuant to Article 95 of the Company’s Articles of
Association, if a shareholder wishes to propose a person
other than a retiring Director for election as a Director at a
general meeting, he or she should deposit a written notice
of nomination at the registered office of the Company within
the 7-day period commencing on and including the day
after the despatch of the notice of the meeting. The
procedures for nominating candidates to stand for election
as Directors at general meetings are set out in the
Corporate Governance Section of the Company’s website.
If they wish to propose a resolution relating to other matters
to be considered at a general meeting, shareholders are
requested to follow the requirements and procedures set
out in the Corporate Governance Section of the
Company’swebsite.
Shareholder(s) representing at least 5% of the total voting
rights of all members may request the Board to convene a
general meeting. The objects of the meeting must be stated
in the related requisition deposited at the Company’s
registered office. Detailed requirements and procedures
are set out in the Corporate Governance Section of the
Company’s website.
OTHER INFORMATION FOR SHAREHOLDERS
Key shareholder dates for 2022 are set out in the section of
this annual report headed Corporate and Shareholder
Information.
57
Cathay Pacific Airways Limited Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
To the members of
Cathay Pacific Airways Limited
(Incorporated in Hong Kong with
limited liability)
REPORT ON THE AUDIT OF THE
CONSOLIDATED FINANCIAL STATEMENTS
OPINION
We have audited the consolidated financial statements of
Cathay Pacific Airways Limited and its subsidiaries
(together “the Group”) set out on pages 62 to 129, which
comprise the consolidated statement of financial position
as at 31st December 2021, the consolidated statement of
profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then
ended and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the consolidated financial statements give a
true and fair view of the consolidated financial position of
the Group as at 31st December 2021 and of its consolidated
financial performance and its consolidated cash flows for
the year then ended in accordance with Hong Kong
Financial Reporting Standards (“HKFRSs”) issued by the
Hong Kong Institute of Certified Public Accountants
(“HKICPA”) and have been properly prepared in compliance
with the Hong Kong Companies Ordinance.
BASIS OF OPINION
We conducted our audit in accordance with Hong Kong
Standards on Auditing (“HKSAs”) issued by the HKICPA.
Ourresponsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the consolidated financial statements section of our
report. We are independent of the Group in accordance with
the HKICPA’s Code of Ethics for Professional Accountants
(“the Code”) and we have fulfilled our other ethical
responsibilities in accordance with the Code. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements for the current period.
These matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a
separate opinion on these matters.
58
Cathay Pacific Airways Limited Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
ASSESSING IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Refer to accounting policies 2, 5, 6 and 7 and notes 8, 9 and 32 to the consolidated financial statements
The Key Audit Matter How the matter was addressed in our audit
The carrying values of the Group’s property, plant and equipment
and intangible assets were HK$123,990 million and HK$15,035
million respectively as at 31st December 2021.
At the end of each reporting period, management identifies
assets which are unlikely to be deployed in economic service in
the future, and impairment losses are recorded based on the
assets’ estimated fair value less costs of disposal. The remaining
items of property, plant and equipment and intangible assets are
allocated to cash-generating units (“CGUs”). Where indicators of
impairment of a CGU are identified, management performs an
impairment assessment of the CGU by comparing its carrying
value with its recoverable amount, which is the higher of fair value
less costs of disposal and value in use based on discounted
cash flow forecasts. In addition, for CGUs containing goodwill, an
impairment assessment is performed at least annually even if
there is no indicator of impairment.
Passenger travel demands remain low as a result of the
COVID-19 pandemic, and the Group has reassessed its
operating plans including the expected timing of retirement of
aircraft. As a result of management’s reassessment, impairment
losses of HK$1,010 million were recognised on property, plant
and equipment for the year ended 31st December 2021
primarily related to aircraft and related equipment.
We identified the assessment of impairment of property, plant
and equipment and intangible assets as a key audit matter
because of the significance of the carrying value of such assets
to the consolidated financial statements and because the
preparation of discounted cash flow forecasts for the purpose of
impairment assessments involves identifying assets which are
unlikely to be deployed in economic service in the future, and
estimating future cash flows, growth rates and discount rates,
which are subject to a significant degree of judgement and could
be subject to management bias.
Our audit procedures to assess the impairment of property,
plant and equipment and intangible assets included the
following:
• meeting with management and reviewing board minutes and
other papers to understand the impact of COVID-19 on the
Group, the mitigation strategies adopted by the Group, and
how these are reflected in the Group’s restructuring plan;
• assessing management’s identification of assets which are
unlikely to be deployed in economic service in the future by
obtaining the Group’s asset utilisation plan, and evaluating
their recoverable amount;
• assessing management’s identification of the CGUs and the
allocation of assets to the CGUs for the purpose of
impairment assessment;
• discussing indicators of impairment of property, plant and
equipment and intangible assets with management, and for
CGUs where such indicators were identified and CGUs with
goodwill, assessing whether management had performed
impairment testing in accordance with the requirements of the
prevailing accounting standards;
• involving our internal valuation specialists to assess the
methodology and significant assumptions including discount
rates adopted by management in its impairment assessments;
• evaluating the assumptions adopted in the preparation of the
discounted cash flow forecasts, including projected future
growth rates for income and expenses and discount rates
with reference to our understanding of the business, historical
trends and available industry information and market data;
• performing sensitivity analyses on the key assumptions,
including projected profitability, expected growth rates and
discount rates adopted in the discounted cash flow forecasts
and assessing whether there were any indicators of
management bias in the selection of these assumptions.
59
Cathay Pacific Airways Limited Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
REVENUE RECOGNITION
Refer to accounting policies 18 and 19 and notes 1 and 19 to the consolidated financial statements
The Key Audit Matter How the matter was addressed in our audit
Passenger and cargo sales are recognised as revenue when the
related transportation service is provided. The value of the sales
for which the related transportation service has not yet been
provided at the end of the reporting period, adjusted for
breakage, is recorded as a contract liability.
The value attributed to programme awards under the Group’s
customer loyalty programme, Asia Miles, is recognised as a
contract liability. This arises as members of the programme
accumulate Asia Miles by travelling on the Group’s flights or
when the Group sells Asia Miles to participating partners in the
programme. The amount is subsequently recognised as income
when the related goods or services are provided subsequent to
the redemption of the Asia Miles. Management allocates the
amount received in relation to mileage earning flights, based on
stand-alone selling price, between the flight and Asia Miles
earned by members of the programme.
The Group maintains sophisticated information technology (“IT”)
systems in order to track the point of service provision for each
sale and also to track the issuance and subsequent redemption
and utilisation of Asia Miles.
We identified revenue recognition as a key audit matter because
revenue is one of the Group’s key performance indicators and it
involves complicated IT systems and allocation of revenue
between flights and Asia Miles, all of which give rise to an
inherent risk that revenue could be recorded in the incorrect
period or could be subject to manipulation to meet targets or
expectations.
Our audit procedures to assess revenue recognition included
the following:
• assessing the design, implementation and operating
effectiveness of management’s general IT controls and key
application controls over the Group’s IT systems which
govern revenue recognition, including access controls,
controls over programme changes, interfaces between
different systems and key manual internal controls over
revenue recognition;
• performing analytical procedures on passenger and cargo
revenue by developing an expectation using independent
inputs and information generated from the Group’s IT systems
and comparing such expectations with recorded revenue;
• inspecting underlying documentation for journal entries which
met specified risk-based criteria;
• assessing management’s allocation of the amount received in
relation to mileage earning flights between the flight and Asia
Miles earned by members of the programme, with reference
to the prices for third party Asia Miles sales and assessing
whether or not there was an indication of management bias;
• inspecting the key terms and conditions of contracts with
major partners of the Asia Miles programme to assess if there
were any terms and conditions that may have affected the
accounting treatment of the related Asia Miles.
HEDGE ACCOUNTING
Refer to accounting policy 10 and notes 11, 13, 16, 18, 22 and 29 to the consolidated financial statements
The Key Audit Matter How the matter was addressed in our audit
The Group enters into derivative financial instrument contracts in
order to manage its exposure to fuel price risk, foreign currency
risk and interest rate risk, which arise during the normal course of
its business. Hedge accounting under HKFRS 9 is applied to a
majority of these arrangements, and related contracts gave rise
to derivative financial assets of HK$1,712 million and derivative
financial liabilities of HK$312 million as at 31st December 2021.
Reduced flying activity and fuel consumption due to the
COVID-19 pandemic has resulted in a discontinuation of certain
hedging relationships as the hedged items are no longer
considered to be highly probable. The related amounts
accumulated in other comprehensive income have been
transferred to profit or loss upon discontinuation if the hedged
items are no longer expected to occur.
We identified hedge accounting (including the valuation of
hedging instruments) as a key audit matter because hedge
accounting can be complex and the Group has entered into a
large number of derivative contracts and designated them as
hedging instruments, necessitating a sophisticated system to
record and track each hedging relationship. In addition, the
valuation of hedging instruments can involve a significant degree
of both complexity and management judgement, and hence is
subject to an inherent risk of error. Furthermore, economic
uncertainties caused by the COVID-19 pandemic have resulted
in increased judgement being required for forecasting travel
demand and fuel consumption for the purpose of hedge
designation and evaluating whether a hedging relationship
continues to meet the qualifying criteria.
Our audit procedures to assess hedge accounting included the
following:
• assessing the design, implementation and operating
effectiveness of management’s key internal controls over
derivative financial instruments and the application of hedge
accounting;
• obtaining written confirmations from contract counterparties
for derivative financial instruments that existed at the
reporting date on a sample basis;
• inspecting management’s hedge documentation and
contracts, on a sample basis, for the purpose of assessing
whether the designation of hedging relationships was in
accordance with the requirements of HKFRS 9;
• discussing with management the assumptions used in
forecasting flying activity and fuel consumption, and
challenging and performing sensitivity analysis on these
estimates based on different possible COVID-19 recovery
scenarios;
• assessing hedge effectiveness and re-performing
calculations of hedge ineffectiveness on a sample basis and
testing the discontinuation of hedging relationships where the
hedging instrument is terminated or the hedged forecast
transaction is no longer considered to be highly probable;
• engaging our financial instruments valuation specialists to
re-perform year end valuations of derivative financial
instruments on a sample basis and compare these valuations
with those recorded by the Group.
60
Cathay Pacific Airways Limited Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
ASSESSMENT OF PROVISIONS FOR TAXATION, LITIGATION AND CLAIMS
Refer to accounting policy 22 and notes 5, 18 and 28 to the consolidated financial statements
The Key Audit Matter How the matter was addressed in our audit
The Group operates in various jurisdictions and, during the
normal course of its business, has received queries from and has
disputes with various taxation authorities. The Group is also the
subject of legal actions and regulatory enquiries in certain
jurisdictions as outlined in note 28(d) to the consolidated
financial statements.
Provisions for taxation, litigation and claims represent
management’s best estimates of the amounts likely to be
required to settle these matters. The amount recorded at 31st
December 2021 totalled HK$3,467 million, of which HK$2,765
million was recorded as taxation in the consolidated statement
of financial position, and the remaining HK$702 million was
included within the balance of other payables in note 18 to the
consolidated financial statements.
We identified the assessment of provisions for taxation, litigation
and claims as a key audit matter because the estimates on which
these provisions are based involve a significant degree of
management judgement in interpreting the various relevant
rules, regulations and practices and in considering precedents in
the various jurisdictions and because determining the level of
provisions may be subject to a degree of management bias.
Our audit procedures to assess the provisions for taxation,
litigation and claims included the following:
• engaging our internal tax specialists to assess the Group’s
provisions for potential exposure to each material tax dispute
by discussing with management to understand the dispute
and reviewing correspondence with the relevant tax
authorities to understand the relevant associated risks;
• discussing the status and potential exposures in respect of
significant litigation, claims and regulatory enquiries with the
Group’s internal legal counsel and obtaining letters regarding
the progress of litigation and claims from the Group’s external
legal counsel, including their views on the likely outcome of
each litigation or claim and the magnitude of potential
exposure;
• challenging the assumptions and critical judgements made by
management which impacted their estimations of the
provisions required, considering judgements previously made
by the taxation authorities in the relevant jurisdictions and any
relevant opinions given by third party advisors and assessing
whether there was an indication of management bias;
• performing a retrospective review of provisions for taxation,
litigation and claims to evaluate whether the judgement and
decisions made by management in estimating provisions in
the prior year indicated possible management bias.
INFORMATION OTHER THAN THE CONSOLIDATED
FINANCIAL STATEMENTS AND AUDITOR’S REPORT
THEREON
The Directors are responsible for the other information. The
other information comprises all the information included in
the annual report other than the consolidated financial
statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does
not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that
there is a material misstatement of this other information,
we are required to report that fact. We have nothing to
report in this regard.
RESPONSIBILITIES OF THE DIRECTORS FOR
THE CONSOLIDATED FINANCIAL STATEMENTS
The Directors are responsible for the preparation of the
consolidated financial statements that give a true and fair
view in accordance with HKFRSs issued by the HKICPA and
the Hong Kong Companies Ordinance and for such internal
control as the Directors determine is necessary to enable
the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, the
Directors are responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
concern basis of accounting unless the Directors either
intend to liquidate the Group or to cease operations, or have
no realistic alternative but to do so.
The Directors are assisted by the Audit Committee in
discharging their responsibilities for overseeing the Group’s
financial reporting process.
61
Cathay Pacific Airways Limited Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our
opinion. This report is made solely to you, as a body, in
accordance with section 405 of the Hong Kong Companies
Ordinance, and for no other purpose. We do not assume
responsibility towards or accept liability to any other person
for the contents of this report.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with
HKSAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with HKSAs, we exercise
professional judgement and maintain professional
scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of
the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures
responsive to those risks and obtain audit evidence that
is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations or the override of internal
control.
• Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are
appropriate in the circumstances but not for the purpose
of expressing an opinion on the effectiveness of the
Group’s internal control.
• Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and
related disclosures made by the Directors.
• Conclude on the appropriateness of the Directors’ use of
the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated
financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going
concern.
• Evaluate the overall presentation, structure and content
ofthe consolidated financial statements, including the
disclosures, and whether the consolidated financial
statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding
thefinancial information of the entities or business
activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for
the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding,
among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our
audit.
We also provide the Audit Committee with a statement that
we have complied with relevant ethical requirements
regarding independence and communicate with them all
relationships and other matters that may reasonably be
thought to bear on our independence and, where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Audit Committee,
we determine those matters that were of most significance
in the audit of the consolidated financial statements of the
current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because
the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such
communication.
The engagement partner on the audit resulting in this
independent auditor’s report is Leung Sze Kit Roy.
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
9th March 2022
62
Cathay Pacific Airways Limited Annual Report 2021
Note
2021
HK$M
2020
HK$M
2021
US$M
2020
US$M
Revenue
Passenger services 4,357 11,950 558 1,532
Cargo services 35,814 27,890 4,592 3,576
Other services and recoveries 5,416 7,094 694 909
Total revenue 45,587 46,934 5,844 6,017
Expenses
Staff (11,298) (15,786) (1,449) (2,024)
Inflight service and passenger expenses (366) (1,102) (47) (141)
Landing, parking and route expenses (5,743) (6,868) (736) (880)
Fuel, including hedging gains/losses (7,031) (11,379) (901) (1,459)
Aircraft maintenance (5,152) (5,772) (661) (740)
Aircraft depreciation and rentals (10,444) (11,879) (1,339) (1,523)
Other depreciation, amortisation and rentals (2,381) (2,720) (305) (349)
Others (3,622) (3,133) (464) (402)
Operating expenses (46,037) (58,639) (5,902) (7,518)
Operating loss before non-recurring items (450) (11,705) (58) (1,501)
Restructuring costs 32 (385) (2,383) (49) (305)
Impairment and related charges 32 (818) (4,056) (105) (520)
Gain on deemed partial disposal of an associate 2 210 – 27 –
Operating loss 3 (1,443) (18,144) (185) (2,326)
Finance charges (2,704) (3,044) (347) (390)
Finance income 75 149 10 19
Net finance charges 4 (2,629) (2,895) (337) (371)
Share of losses of associates (1,985) (1,282) (254) (164)
Loss before taxation (6,057) (22,321) (776) (2,861)
Taxation 5 531 674 68 86
Loss for the year (5,526) (21,647) (708) (2,775)
Attributable to
Ordinary shareholders of Cathay Pacific (6,123) (21,876) (785) (2,804)
Preference shareholder of Cathay Pacific 21 596 228 77 29
Non-controlling interests 1 1 – –
Loss for the year (5,526) (21,647) (708) (2,775)
Loss per ordinary share
Basic and diluted 6 (95.1)¢ (424.3)¢ (12.2)¢ (54.4)¢
Loss for the year (5,526) (21,647) (708) (2,775)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges 2,581 (1,041) 331 (134)
Share of other comprehensive income of associates 211 (203) 27 (26)
Exchange differences on translation of foreign operations 691 1,638 89 210
Items that may not be reclassified subsequently to profit or loss:
Defined benefit plans 510 599 65 77
Revaluation of equity investments designated at fair value
through other comprehensive income (non-recycling) (5) – (1) –
Other comprehensive income for the year, net of taxation 7 3,988 993 511 127
Total comprehensive income for the year (1,538) (20,654) (197) (2,648)
Total comprehensive income attributable to
Ordinary shareholders of Cathay Pacific (2,135) (20,883) (274) (2,677)
Preference shareholder of Cathay Pacific 21 596 228 77 29
Non-controlling interests 1 1 – –
(1,538) (20,654) (197) (2,648)
The financial statements are prepared and presented in HK$, the functional currency of Cathay Pacific. The US$ figures are shown only as
supplementary information and are translated at US$1:HK$7.8.
The notes on pages 66 to 119 and the principal accounting policies on pages 120 to 129 form part of these financial statements.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the year ended 31st December 2021
63
Cathay Pacific Airways Limited Annual Report 2021
Note
2021
HK$M
2020
HK$M
2021
US$M
2020
US$M
ASSETS AND LIABILITIES
Non-current assets and liabilities
Property, plant and equipment 8 123,990 131,925 15,896 16,914
Intangible assets 9 15,035 15,061 1,928 1,931
Investments in associates 10 24,532 26,489 3,145 3,396
Other long-term receivables and investments 11 3,327 2,905 427 372
Deferred tax assets 15 846 627 108 80
167,730 177,007 21,504 22,693
Interest-bearing liabilities 12 (67,504) (68,880) (8,655) (8,831)
Other long-term payables 13 (3,441) (4,210) (441) (540)
Other long-term contract liabilities 19 (478) – (61) –
Deferred tax liabilities 15 (9,820) (11,499) (1,259) (1,474)
(81,243) (84,589) (10,416) (10,845)
Net non-current assets 86,487 92,418 11,088 11,848
Current assets and liabilities
Stock 1,269 1,719 163 220
Trade and other receivables 16 8,296 6,469 1,064 829
Assets held for sale 48 38 6 5
Liquid funds 17 19,284 19,341 2,472 2,480
28,897 27,567 3,705 3,534
Interest-bearing liabilities 12 (22,350) (24,249) (2,865) (3,109)
Trade and other payables 18 (10,095) (12,376) (1,294) (1,587)
Contract liabilities 19 (7,925) (8,122) (1,016) (1,041)
Taxation (2,765) (1,977) (355) (253)
(43,135) (46,724) (5,530) (5,990)
Net current liabilities (14,238) (19,157) (1,825) (2,456)
Total assets less current liabilities 153,492 157,850 19,679 20,237
Net assets 72,249 73,261 9,263 9,392
CAPITAL AND RESERVES
Share capital 20 48,322 48,322 6,195 6,195
Reserves 22 23,922 24,935 3,067 3,197
Funds attributable to the shareholders of Cathay Pacific 72,244 73,257 9,262 9,392
Non-controlling interests 5 4 1 –
Total equity 72,249 73,261 9,263 9,392
The financial statements are prepared and presented in HK$, the functional currency of Cathay Pacific. The US$ figures are shown only as
supplementary information and are translated at US$1:HK$7.8.
The notes on pages 66 to 119 and the principal accounting policies on pages 120 to 129 form part of these financial statements.
Patrick Healy John Harrison
Director Director
Hong Kong, 9th March 2022
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
at 31st December 2021
64
Cathay Pacific Airways Limited Annual Report 2021
Note
2021
HK$M
2020
HK$M
2021
US$M
2020
US$M
Operating activities
Cash generated from/(used in) operations 23 11,705 (11,237) 1,500 (1,441)
Interest received 67 92 9 12
Interest paid (1,946) (2,223) (249) (285)
Tax paid (991) (923) (127) (118)
Net cash inflow/(outflow) from operating activities 8,835 (14,291) 1,133 (1,832)
Investing activities
Net decrease/(increase) in liquid funds other than cash and
cash equivalents 2,464 (7,150) 316 (917)
Proceeds from sales of property, plant and equipment 112 153 14 20
Net increase in other long-term receivables and
investments (17) (2) (2) –
Payments for property, plant and equipment and
intangible assets (2,276) (5,418) (292) (695)
Dividends received from associates – 675 – 87
Repayments from/(loan to) an associate 210 (16) 27 (2)
Net cash inflow/(outflow) from investing activities 493 (11,758) 63 (1,507)
Financing activities
New financing 12 13,906 22,304 1,783 2,859
Loan and lease repayments 12 (20,838) (30,134) (2,672) (3,863)
Proceeds from issue of rights shares 20 – 11,716 – 1,502
Proceeds from issue of preference shares 20 – 19,500 – 2,500
Payments of transaction costs on issue of rights shares and
preference shares – (77) – (10)
Net cash (outflow)/inflow from financing activities (6,932) 23,309 (889) 2,988
Net increase/(decrease) in cash and cash equivalents 2,396 (2,740) 307 (351)
Cash and cash equivalents at 1st January 6,166 8,881 791 1,138
Effect of exchange differences 11 25 1 4
Cash and cash equivalents at 31st December 17 8,573 6,166 1,099 791
The financial statements are prepared and presented in HK$, the functional currency of Cathay Pacific. The US$ figures are shown only as
supplementary information and are translated at US$1:HK$7.8.
The notes on pages 66 to 119 and the principal accounting policies on pages 120 to 129 form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31st December 2021
65
Cathay Pacific Airways Limited Annual Report 2021
Attributable to the shareholders of Cathay Pacific
Share
capital
HK$M
Convertible
bond
reserve
HK$M
Retained
profit
HK$M
Investment
revaluation
reserve
(non-
recycling)
HK$M
Cash flow
hedge
reserve
HK$M
Others
HK$M
Tot al
HK$M
Non-
controlling
interests
HK$M
Tot al
equity
HK$M
At 1st January 2021 48,322 – 24,741 (148) (407) 749 73,257 4 73,261
Loss for the year – – (5,527) – – – (5,527) 1 (5,526)
Other comprehensive
income – – 510 (5) 2,581 902 3,988 – 3,988
Total comprehensive
income for the year – – (5,017) (5) 2,581 902 (1,539) 1 (1,538)
Equity component of
convertible bonds issued – 526 – – – – 526 – 526
At 31st December 2021 48,322 526 19,724 (153) 2,174 1,651 72,244 5 72,249
At 1st January 2020 17,106 – 45,867 (148) 634 (686) 62,773 3 62,776
Loss for the year – – (21,648) – – – (21,648) 1 (21,647)
Other comprehensive
income – – 599 – (1,041) 1,435 993 – 993
Total comprehensive
income for the year – – (21,049) – (1,041) 1,435 (20,655) 1 (20,654)
Issue of rights shares 11,716 – – – – – 11,716 – 11,716
Issue of preference shares 19,500 – – – – – 19,500 – 19,500
Transaction costs on issue
of rights shares and
preference shares – – (77) – – – (77) – (77)
At 31st December 2020 48,322 – 24,741 (148) (407) 749 73,257 4 73,261
The notes on pages 66 to 119 and the principal accounting policies on pages 120 to 129 form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31st December 2021
66
Cathay Pacific Airways Limited Annual Report 2021
1. SEGMENT INFORMATION
(a) Segment results
2021
Cathay Pacific
HK$M
HK Express
HK$M
Air Hong
Kong
HK$M
Airline
services
HK$M
Associates
HK$M
Total
HK$M
Profit or loss
Sales to external customers 41,829 20 3,106 632 45,587
Inter-segment sales 355 – 57 1,718 2,130
Segment revenue 42,184 20 3,163 2,350 47,717
Segment profit/(loss), before
restructuring costs, impairment and
related charges 1,222 (1,806) 898 (554) – (240)
Restructuring costs (385) – – – – (385)
Impairment and related charges (777) (41) – – – (818)
Segment profit/(loss) 60 (1,847) 898 (554) – (1,443)
Net finance charges (1,972) (328) (1) (328) – (2,629)
(1,912) (2,175) 897 (882) – (4,072)
Share of losses of associates – – – – (1,985) (1,985)
(Loss)/profit before taxation (1,912) (2,175) 897 (882) (1,985) (6,057)
Taxation 184 197 (149) 24 275 531
(Loss)/profit for the year (1,728) (1,978) 748 (858) (1,710) (5,526)
Non-controlling interests – – – (1) – (1)
(Loss)/profit attributable to the
shareholders of Cathay Pacific (1,728) (1,978) 748 (859) (1,710) (5,527)
Other segment information
Depreciation and amortisation 11,219 869 5 693 12,786
Purchase of property, plant and
equipment and intangible assets 2,162 56 – 58 2,276
NOTES TO THE FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
67
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
1. SEGMENT INFORMATION (continued)
2020
Cathay Pacific*
HK$M
HK Express
HK$M
Air Hong
Kong
HK$M
Airline
services
HK$M
Associates
HK$M
Tot al
HK$M
Profit or loss
Sales to external customers 42,432 861 2,866 775 46,934
Inter-segment sales 296 – 90 1,877 2,263
Segment revenue 42,728 861 2,956 2,652 49,197
Segment (loss)/profit, before
restructuring costs, impairment
and related charges (10,357) (1,661) 852 (539) – (11,705)
Restructuring costs (2,383) – – – – (2,383)
Impairment and related charges (2,815) (1) – (1,184) (56) (4,056)
Segment (loss)/profit (15,555) (1,662) 852 (1,723) (56) (18,144)
Net finance charges (2,313) (274) – (308) – (2,895)
(17,868) (1,936) 852 (2,031) (56) (21,039)
Share of losses of associates – – – – (1,282) (1,282)
(Loss)/profit before taxation (17,868) (1,936) 852 (2,031) (1,338) (22,321)
Taxation 475 213 (137) (3) 126 674
(Loss)/profit for the year (17,393) (1,723) 715 (2,034) (1,212) (21,647)
Non-controlling interests – – – (1) – (1)
(Loss)/profit attributable to the
shareholders of Cathay Pacific (17,393) (1,723) 715 (2,035) (1,212) (21,648)
Other segment information
Depreciation and amortisation 12,756 901 6 758 14,421
Purchase of property, plant and
equipment and intangible assets 5,004 329 1 84 5,418
* Included Cathay Dragon
(i) Cathay Pacific and Cathay Dragon (until 21st October 2020) provide full service international passenger and
cargo air transportation. Management considers that there is no suitable basis for allocating operating results
between passenger and cargo operations. Accordingly these are not disclosed as separate business
segments.
(ii) HK Express is a low cost passenger carrier offering scheduled services within Asia.
(iii) Air Hong Kong provides express cargo air transportation offering scheduled services within Asia.
(iv) Airline services represents our supporting airline operations including catering, cargo terminal operations,
ground handling services and commercial laundry operations.
The composition of reportable segments of the Group is determined according to the nature of the business, and is
aligned with financial information provided regularly to the Group’s executive management.
Inter-segment sales are based on prices set on an arm’s length basis.
The Group has applied the practical expedient in paragraph 121 of HKFRS 15 “Revenue from Contracts with
Customers” to its sales contracts such that the Group does not disclose the amount of the transaction price
allocated to the remaining performance obligations when the performance obligation is part of a contract that has
an original expected duration of one year or less.
68
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
1. SEGMENT INFORMATION (continued)
(b) Geographical information
2021
HK$M
2020
HK$M
Revenue by origin of sale:
North Asia
– Hong Kong and the Chinese Mainland 30,721 29,567
– Japan, Korea and Taiwan 3,508 3,168
Americas 3,171 3,944
Europe 1,405 2,649
Southeast Asia 4,478 3,686
Southwest Pacific 812 1,531
South Asia, Middle East and Africa 1,492 2,389
45,587 46,934
Analysis of net assets by geographical segment:
The major revenue earning asset is the aircraft fleet, which is registered in Hong Kong and is employed across the
Group’s worldwide route network. Management considers that there is no suitable basis for allocating such assets
and related liabilities to geographical segments. Accordingly, analysis of the Group’s assets by geographical
regions is not disclosed.
2. GAIN ON DEEMED PARTIAL DISPOSAL OF AN ASSOCIATE
In September 2021, the Cathay Pacific Group’s equity and economic interest in Air China Cargo of 34.78% was reduced
to 24.00%. A gain of HK$210 million was recorded during the year ended 31st December 2021 on this deemed partial
disposal.
3. OPERATING LOSS
2021
HK$M
2020
HK$M
Operating loss has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment
– right-of-use assets 5,284 6,069
– owned 6,941 7,779
Amortisation of intangible assets 561 573
Impairment
– property, plant and equipment 1,010 3,973
– intangible assets – 39
– investment in an associate – 56
– stock 110 –
Expenses relating to short-term leases and leases of low-value assets 27 25
COVID-19-related rent concessions recognised (301) (316)
Gain on disposal of property, plant and equipment, net (51) (34)
Loss on disposal of intangible assets 5 –
Cost of stock expensed 711 845
Exchange differences, net 69 (295)
Auditors’ remuneration 15 16
Dividend income from unlisted equity investments (29) (49)
69
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
4. NET FINANCE CHARGES
2021
HK$M
2020
HK$M
Net interest charges comprise:
– lease liabilities stated at amortised cost 905 1,058
– bank loans and overdrafts
– wholly repayable within five years 411 718
– not wholly repayable within five years 283 543
– other borrowings
– wholly repayable within five years 546 125
– not wholly repayable within five years 341 255
2,486 2,699
Income from liquid funds:
– funds with investment managers and other liquid investments at
fair value through profit or loss (9) (63)
– bank deposits and others (66) (86)
(75) (149)
Fair value change:
– gain on financial liabilities designated at fair value through profit or loss – (73)
– loss on financial derivatives 218 418
218 345
2,629 2,895
Finance income and charges relating to defeasance arrangements have been netted off in the above figures.
Included in fair value change in respect of financial derivatives is net gain from derivatives that are classified as fair value
through profit or loss of HK$25 million (2020: net loss of HK$210 million).
5. TAXATION
2021
HK$M
2020
HK$M
Current tax expenses
– Hong Kong profits tax 141 137
– overseas tax 142 124
– under provisions for prior years 17 42
Deferred tax
– origination and reversal of temporary differences (note 15) (831) (977)
(531) (674)
Hong Kong profits tax is calculated at 16.5% (2020: 16.5%) on the estimated assessable profits for the year. Overseas
tax is calculated at rates of tax applicable in countries in which the Group is assessable for tax. Tax provisions are
reviewed regularly to take into account changes in legislation, practice and the status of negotiations (see note 28(c) to
the financial statements).
70
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
5. TAXATION (continued)
A reconciliation between tax (charge)/credit and accounting loss at applicable tax rates is as follows:
2021
HK$M
2020
HK$M
Loss before taxation (6,057) (22,321)
Notional tax calculated at Hong Kong profits tax rate of 16.5% (2020: 16.5%) 999 3,683
Expenses not deductible for tax purposes (247) (435)
Income not subject to tax 197 136
Effect of changes in effective tax rate and jurisdictional differences (148) (445)
Tax under provisions arising from prior years (17) (42)
Tax losses not recognised (253) (1,286)
Reversal of tax losses recognised in prior years – (937)
Tax credit 531 674
Upon restructuring of the Group, deferred tax assets on tax losses of HK$1,590 million for Cathay Dragon were written
off during the year ended 31st December 2020, of which HK$878 million was recognised in prior years.
Further information on deferred taxation is shown in note 15 to the financial statements.
6. LOSS PER ORDINARY SHARE
2021 2020
Loss
(a)
HK$M
Weighted average
number of ordinary
shares
Per share
amount
HK cents
Loss
(a)
HK$M
Weighted average
number of ordinary
shares
Per share
amount
HK cents
Basic and diluted loss per
ordinary share (6,123) 6,437,200,203 (95.1) (21,876) 5,156,000,217 (424.3)
(a) The amounts represent the loss attributable to the ordinary shareholders of Cathay Pacific, which is the loss for the
period after non-controlling interests and dividends attributable to the holder of the cumulative preference shares
classified as equity.
(b) On 10th August 2020, the Company issued 2,503,355,631 new ordinary shares at HK$4.68 each by way of rights
issue to qualifying ordinary shareholders. As required by HKAS 33 “Earnings per Share”, an adjustment of
391,107,005 shares representing the bonus element in the rights issue was applied to the calculation of the
weighted average number of ordinary shares for the year ended 31st December 2020.
(c) On 12th August 2020, the Company issued warrants which entitle the holder to subscribe for up to 416,666,666
ordinary shares. On 5th February 2021, the Company issued convertible bonds which entitle the holder to convert
up to 786,464,410 ordinary shares. The Company’s warrants and convertible bonds as at 31st December 2021 have
an anti-dilutive effect to the loss per ordinary share and there are no other dilutive potential ordinary shares in
existence during the years ended 31st December 2021 and 2020, and hence diluted loss per ordinary share is the
same as the basic loss per ordinary share.
71
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
7. OTHER COMPREHENSIVE INCOME
2021
HK$M
2020
HK$M
Cash flow hedges
– gain/(loss) recognised during the year 4,684 (4,261)
– (gain)/loss transferred to profit or loss (note 22) (1,836) 3,105
– deferred taxation (note 15) (267) 115
Share of other comprehensive income of associates
– recognised during the year 211 (203)
Exchange differences on translation of foreign operations
– gain recognised during the year 724 1,638
– reclassified to profit or loss upon deemed partial disposal (33) –
Defined benefit plans
– remeasurement gain recognised during the year (note 14) 561 653
– deferred taxation (note 15) (51) (54)
Revaluation of equity investments designated at fair value through other
comprehensive income (non-recycling)
– loss recognised during the year (5) –
Other comprehensive income for the year 3,988 993
72
Cathay Pacific Airways Limited Annual Report 2021
8. PROPERTY, PLANT AND EQUIPMENT
Aircraft and related
equipment Other equipment Land and buildings
Owned
HK$M
Right-of-
use
assets
HK$M
Owned
HK$M
Right-of-
use
assets
HK$M
Owned
HK$M
Right-of-
use
assets
HK$M
Under
construction
HK$M
Tot al
HK$M
Cost
At 1st January 2021 135,383 63,236 5,474 312 15,404 8,119 20 227,948
Additions 1,429 4,245 72 4 38 103 – 5,891
Disposals (2,076) (1,820) (153) (3) (251) (1,188) – (5,491)
Reclassification to assets
held for sale – – (34) – – – – (34)
Transfers 5,086 (5,086) – – – – – –
Other right-of-use asset
adjustments – (32) – 2 – 429 – 399
At 31st December 2021 139,822 60,543 5,359 315 15,191 7,463 20 228,713
At 1st January 2020 132,364 61,228 5,616 217 15,333 7,566 20 222,344
Additions 4,499 3,822 115 44 88 159 2 8,729
Disposals (3,662) (246) (193) (6) (15) (110) – (4,232)
Reclassification to assets
held for sale – – (64) – (4) – – (68)
Transfers 2,182 (2,182) – – 2 – (2) –
Other right-of-use asset
adjustments – 614 – 57 – 504 – 1,175
At 31st December 2020 135,383 63,236 5,474 312 15,404 8,119 20 227,948
Accumulated depreciation
and impairment
At 1st January 2021 59,657 21,316 4,058 86 7,948 2,958 – 96,023
Charge for the year 6,034 4,303 212 60 695 921 – 12,225
Impairment 698 263 – – 49 – – 1,010
Disposals (1,669) (1,820) (151) (3) (251) (617) – (4,511)
Reclassification to assets
held for sale – – (24) – – – – (24)
Transfers 2,968 (2,968) – – – – – –
At 31st December 2021 67,688 21,094 4,095 143 8,441 3,262 – 104,723
At 1st January 2020 52,527 17,753 3,625 38 6,474 1,813 – 82,230
Charge for the year 6,747 4,921 294 50 738 1,098 – 13,848
Impairment 2,355 409 313 – 751 145 – 3,973
Disposals (3,493) (246) (148) (2) (11) (98) – (3,998)
Reclassification to assets
held for sale – – (26) – (4) – – (30)
Transfers 1,521 (1,521) – – – – – –
At 31st December 2020 59,657 21,316 4,058 86 7,948 2,958 – 96,023
Net book value
At 31st December 2021 72,134 39,449 1,264 172 6,750 4,201 20 123,990
At 31st December 2020 75,726 41,920 1,416 226 7,456 5,161 20 131,925
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
73
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
8. PROPERTY, PLANT AND EQUIPMENT (continued)
(a) Right-of-use assets
The Group is the lessee in respect of a number of aircraft and related equipment, other equipment and land and
buildings held under leases. Future lease payments are recognised as right-of-use assets and lease liabilities in
theconsolidated statement of financial position in accordance with accounting policies 6 and 9 respectively.
During the year, additions to right-of-use assets were HK$4,352 million (2020: HK$4,025 million), a significant
proportion of which is related to the delivery of leased aircraft.
Details of cash outflows and significant non-cash transactions for leases, and the maturity analysis of lease
liabilities are set out in notes 24 and 12 to the financial statements, respectively.
The Group previously applied the practical expedient in HKFRS 16 such that as lessee it was not required to assess
whether rent concessions occurring as a direct consequence of the COVID-19 pandemic were lease modifications,
if the eligibility conditions were met. One of these conditions requires that the reduction in lease payments affect
only payments originally due on or before a specified time limit. The 2021 amendment extends this time limit from
30th June 2021 to 30th June 2022. The eligible rent concessions are accounted for as negative variable lease
payments, and are recognised in profit or loss in the period in which the event or condition that triggers those
payments occurred.
(i) Aircraft and related equipment
The Group has obtained the right to use aircraft and related equipment through lease arrangements.
The Group held 38 aircraft at 31st December 2021 (2020: 41) under lease arrangements which transfer
ownership of the underlying asset to the Group by the end of the lease term or which contain a purchase option
that the Group is reasonably certain to exercise. The remaining lease terms ranged from 1 month to 12 years.
The Group held 58 aircraft at 31st December 2021 (2020: 68) under lease arrangements which either do not
transfer ownership of the underlying asset to the Group by the end of the lease term or which do not contain a
purchase option that the Group is reasonably certain to exercise. The remaining lease terms ranged from
1month to 12 years.
Some of the lease payments are partially fixed and partially floating that are generally linked to market rates of
interest. The amounts of fixed and floating lease payments are included in the measurement of lease liabilities.
There are no other variable lease payments that do not depend on an index or a rate.
Some leases include an option to renew the lease for an additional period after the end of the contract term.
Where practicable, the Group seeks to include such extension options exercisable by the Group to provide
operational flexibility. The Group assesses whether it is reasonably certain to exercise the extension options.
Ifthe Group is not reasonably certain to exercise the extension options, the future lease payments during the
extension periods are not included in the measurement of lease liabilities. The potential exposure to these
future lease payments is summarised below:
Lease liabilities recognised
(discounted)
Potential future lease payments
under extension options not
included in lease liabilities
(undiscounted)
2021
HK$M
2020
HK$M
2021
HK$M
2020
HK$M
Aircraft and related equipment 30,887 32,782 5,719 7,925
74
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
8. PROPERTY, PLANT AND EQUIPMENT (continued)
(ii) Other equipment
The Group leases other equipment under leases expiring from 1 to 5 years. Some leases include an option to
renew the lease and none of the leases includes variable lease payments.
(iii) Ownership interests in leasehold land held for own use
The Group holds several leasehold land for its airline and related businesses, where its airline-related facilities
are primarily located. The Group is the registered owner of these property interests, including the whole or part
of an undivided share in the underlying land. Lump sum payments were made upfront to acquire these land
interests from their previous registered owners, and there are no ongoing payments to be made under the
terms of the land lease, other than payments based on rateable values set by the relevant government
authorities. These payments vary from time to time and are payable to the relevant government authorities.
Theleases will expire within 26 years.
(iv) Properties leased for own use
The Group leases other properties under leases expiring from 1 to 12 years. Some leases include an option to
renew the lease and some of the leases include insignificant amounts of variable lease payments.
(b) Advance payments are made to manufacturers for aircraft and related equipment to be delivered in future years.
At31st December 2021, advance payments included in owned aircraft and related equipment amounted to
HK$2,799 million (2020: HK$2,930 million). No depreciation is provided on these advance payments.
(c) Security, including charges over the assets concerned and relevant insurance policies, is provided to the leasing
companies or other parties that provide the underlying finance. Further information is provided in note 12 to the
financial statements.
(d) The carrying amounts of certain property, plant and equipment were written down by HK$1,010 million (2020:
HK$3,973 million) to their recoverable amounts as follows (the recoverable amounts were estimated using the
higher of fair value less costs of disposal and value in use):
(i) As a result of reduced flying associated with the impacts of the pandemic, management has assessed as part
of its base case for Cathay Pacific and HK Express (see note 9 to the financial statements) that there are 12
(2020: 34) owned and leased aircraft, that are unlikely to re-enter meaningful economic service again before
their retirement or return to lessors by the end of the year. Consequently an impairment charge of HK$865
million (2020: HK$2,764 million) was recognised during the year to write off these aircraft assets in full.
(ii) An impairment charge of HK$145 million (2020: HK$1,209 million), which comprises HK$96 million (2020: nil) of
aircraft related equipment and HK$49 million (2020: HK$896 million) of land and building was recognised to
reduce the carrying values to their recoverable amounts. No impairment charge (2020: HK$313 million) was
recognised to reduce the carrying values of other equipment.
Further details surrounding the impact of COVID-19 on the Group are disclosed in note 32 to the financial
statements.
75
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
9. INTANGIBLE ASSETS
Goodwill
HK$M
Computer
software
HK$M
Others
HK$M
Total -
Intangible
assets
HK$M
Prepayments
HK$M
Total -
Intangible
assets and
related
prepayments
HK$M
Cost
At 1st January 2021 11,654 7,898 39 19,591 – 19,591
Additions – 532 – 532 8 540
Disposals – (5) – (5) – (5)
At 31st December 2021 11,654 8,425 39 20,118 8 20,126
At 1st January 2020 11,654 7,376 39 19,069 – 19,069
Additions – 522 – 522 – 522
At 31st December 2020 11,654 7,898 39 19,591 – 19,591
Accumulated amortisation and
impairment
At 1st January 2021 39 4,467 24 4,530 – 4,530
Charge for the year – 557 4 561 – 561
At 31st December 2021 39 5,024 28 5,091 – 5,091
At 1st January 2020 – 3,898 20 3,918 – 3,918
Charge for the year – 569 4 573 – 573
Impairment 39 – – 39 – 39
At 31st December 2020 39 4,467 24 4,530 – 4,530
Net book value
At 31st December 2021 11,615 3,401 11 15,027 8 15,035
At 31st December 2020 11,615 3,431 15 15,061 – 15,061
Goodwill is allocated to the Group’s Cash Generating Units (CGUs) as follows:
2021
HK$M
2020
HK$M
Cathay Pacific 7,884 7,884
HK Express 3,616 3,616
Others 115 115
11,615 11,615
Goodwill attributable to Cathay Pacific relates primarily to the acquisition of Cathay Dragon, with a portion representing
synergy benefits to the Cathay Pacific CGU resulting from the acquisition of HK Express. Despite the closure of Cathay
Dragon in October 2020, the Group expects to preserve the value of its network (and therefore its goodwill) within the
Cathay Pacific CGU through the continuation of the majority of its routes.
Goodwill attributable to HK Express relates to the acquisition of HK Express and arose from the synergies expected to
be derived from resource optimisation, cost savings and improved services.
76
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
9. INTANGIBLE ASSETS (continued)
The recoverable amount of each of the Group’s CGUs was based on the higher of its fair value less costs of disposal
(FVLCD) and its value in use (VIU). Due to the increase in the level of estimation uncertainty and wider range of possible
cash flow projections as a result of the COVID-19 pandemic, the VIUs of the Group’s two principal operating CGUs
(Cathay Pacific and HK Express) were estimated using a discounted cash flow (DCF) analysis applied to two scenarios,
abase case and a downside case, taking into consideration different future events and/or scenarios instead of a single
cash flow scenario. While many scenarios may exist, management ultimately believes that the two scenarios detailed
below are representative of possible outcomes.
The calculations use cash flow projections that are based on business plans prepared by management and approved
bythe Board of Directors. The business plans reflect the most recent developments as at the reporting date.
Management’s expectations reflect performance to date and are based on its experience in times of recession and
areconsistent with the assumptions that it considers a market participant would make.
For the Cathay Pacific CGU the base case assumes that, due to adverse impact brought by COVID-19 and the resulted
measures of the Government of the Hong Kong Special Administrative Region, passenger traffic will not return to pre-
crisis levels until 2025. Revenue efficiency during the recovery period is assumed to remain weaker than historical levels
as demand is stimulated. A ten-year forecast is considered appropriate for the airline operations to take into account
this recovery period and thereafter a phased opening of slot availability associated with the new Three Runway System
at Hong Kong International Airport. Consequently during the period 2025-2031 it is assumed that growth will be slightly
elevated with revenue efficiency marginally weaker than historical averages. The downside scenario reflects a slower
recovery until mid-2025 with lower demand across the network and thus capacity is reduced to preserve revenue
efficiency. Cash flows beyond the ten-year period are extrapolated with an estimated general annual growth rate of
2.25% (2020: 2.25%) which does not exceed the long-term average growth rate for the industry (IATA’s most recent 20
year global forecast is 3.3%). Cash outflows include capital and maintenance expenditure including the purchase of
aircraft and other property, plant and equipment. The discount rate used of 7.3% (2020: 7.4%) is pre-tax and reflects the
specific risks related to the relevant segment. Both the base case and downside case result in headroom over the
carrying values of the CGU as at 31st December 2021 and consequently no impairment has been made.
For the HK Express CGU, the base case scenario reflects a faster recovery than Cathay Pacific due to an expected
earlier resumption in demand for short haul and regional leisure travel, together with steady growth in the low cost
carrier demand model, particularly with the opening of the Three Runway System. Due to the pursuit of growth, the
downside scenario reflects a drop in revenue efficiency, rather than capacity. Like Cathay Pacific, a ten-year forecast
isconsidered appropriate. Similarly cash flows beyond the ten-year period are extrapolated with an estimated general
annual growth rate of 2.25% (2020: 2.25%). The discount rate used of 11.0% (2020: 11.1%) is pre-tax and reflects the
specific risks related to the HK Express segment. Both the base case and downside case result in headroom over the
carrying values of the CGU as at 31st December 2021 and consequently no impairment has been made.
For both Cathay Pacific and HK Express CGUs the terminal year in the impairment test has the most material impact on
the determination of the recoverable amount and thus the surplus over carrying value. As such the pandemic recovery
period, while impacting the measurement, does not materially impact the surplus over carrying value identified. DCF
modelling for 2021 sits within the range of IATA’s latest pessimistic to optimistic 2021 traffic estimates.
Impairment testing of our Airline service CGUs adopts, to the extent relevant, consistent recovery assumptions as the
Cathay Pacific CGU. Both the base case and downside case result in headroom over the carrying values of the CGU as at
31st December 2021 and consequently no impairment has been made.
Management believes that any reasonably foreseeable change in any of the above key assumptions would not
causethe carrying amounts of the CGUs including related goodwill to exceed the recoverable amounts of the
respective CGUs.
77
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
10. INVESTMENTS IN ASSOCIATES
2021
HK$M
2020
HK$M
Share of net assets
– listed in Hong Kong 16,178 18,410
– unlisted 4,721 4,342
Goodwill 3,588 3,483
24,487 26,235
Less: impairment loss (56) (56)
24,431 26,179
Loans due from associates 101 310
24,532 26,489
Principal associates are listed on page 119.
(a) Air China
At 31st December 2021, the market value of the shares in an associate, Air China, listed in Hong Kong is HK$14,327
million (2020: HK$16,066 million).
Due to the H-share market price for Air China having been below the value per share of the Group’s carrying
investment for a sustained period of more than six months, an impairment test was performed as at 31st December
2021 and no impairment loss was considered necessary as the recoverable amount exceeds the carrying value.
Air China is considered material to the Group and the share of assets and liabilities and results are summarised as
below:
2021
HK$M
2020
HK$M
Gross amounts of the associate’s
– current assets 27,510 28,931
– non-current assets 324,443 314,595
– current liabilities (100,513) (103,672)
– non-current liabilities (161,862) (137,193)
Revenue 101,042 101,750
Loss from continuing operations (18,245) (15,564)
Other comprehensive income 1,492 (1,637)
Total comprehensive income (16,753) (17,201)
Dividend received from the associate – 128
Reconciled to the Group’s interests in the associate
– gross amounts of net assets of the associate 89,578 102,661
– Group’s share of net assets of the associate at effective interest
(2021: 18.13%; 2020: 18.13%) 16,240 18,612
– effect of cross shareholding and others (62) (202)
– goodwill 3,588 3,483
19,766 21,893
Air China is a strategic partner for the Group and the national flag carrier and a leading provider of passenger, cargo
and other airline-related services in the Chinese Mainland.
78
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
10. INVESTMENTS IN ASSOCIATES (continued)
Cathay Pacific had a 18.13% interest at 31st December 2021 (2020: 18.13%) and had significant influence through
its representation on the Board of Directors of Air China and therefore equity accounted for its share of Air China’s
results.
The Group’s 2021 results include Air China’s results for the 12 months ended 30th September 2021 and any
significant events or transactions for the period from 1st October 2021 to 31st December 2021. Air China’s most
recently available accounts were drawn up to 30th September 2021 (2020: 30th September 2020).
(b) Air China Cargo
Following the dilution of economic interest in Air China Cargo from 34.78% to 24.00% during the year (note 2 to the
financial statements) it is impractical to recognise the share of results of Air China Cargo for the same twelve month
period as the Group. Therefore, for the year ended 31st December 2021, the Group has recognised the share of
results of Air China Cargo three months in arrear, which represents the nine months ended 30th September 2021,
adjusted for any significant events or transactions in the period from 1st October 2021 to 31st December 2021.
Theshare of results of Air China Cargo for the year ended 31st December 2020 covered the same twelve month
period as the Group’s.
(c) Other associates
Aggregate information of associates that are not individually material, which includes Air China Cargo, is
summarised as below:
2021
HK$M
2020
HK$M
Aggregate carrying amount of individually immaterial associates 4,766 4,596
Aggregate amounts of the Group’s share of those associates
– profit from continuing operations 940 1,217
– other comprehensive income 136 268
– total comprehensive income 1,076 1,485
11. OTHER LONG-TERM RECEIVABLES AND INVESTMENTS
2021
HK$M
2020
HK$M
Unlisted equity investments
– designated at fair value through other comprehensive income (non-recycling) 51 56
– measured at fair value through profit or loss 705 759
Other long-term receivables measured at amortised cost 906 852
Derivative financial assets – long-term portion 243 243
Retirement benefit assets (note 14) 1,422 995
3,327 2,905
79
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
12. INTEREST-BEARING LIABILITIES
2021 2020
Note
Current
HK$M
Non-current
HK$M
Current
HK$M
Non-current
HK$M
Loans and other borrowings (a) 16,061 39,061 17,513 37,982
Lease liabilities (b) 6,289 28,443 6,736 30,898
22,350 67,504 24,249 68,880
The Group’s net debt/equity ratio and adjusted net debt/equity ratio at the end of the current and previous reporting
periods are summarised below:
2021
HK$M
2020
HK$M
Non-current liabilities:
Loans and other borrowings 39,061 37,982
Lease liabilities 28,443 30,898
67,504 68,880
Current liabilities:
Loans and other borrowings 16,061 17,513
Lease liabilities 6,289 6,736
22,350 24,249
Total borrowings 89,854 93,129
Liquid funds (19,284) (19,341)
Net borrowings 70,570 73,788
Funds attributable to the shareholders of Cathay Pacific 72,244 73,257
Net debt/equity ratio 0.98 1.01
To allow for comparability of gearing ratios against group borrowing covenants, the Group has chosen to present a
subset of net borrowings and the net debt/equity ratio which exclude leases without asset transfer components. Only
lease liabilities which transfer ownership of the underlying asset to the Group by the end of the lease term or contain a
purchase option that the Group is reasonably certain to exercise are included.
2021
HK$M
2020
HK$M
Net borrowings 70,570 73,788
Less: lease liabilities without asset transfer components (16,591) (19,090)
Adjusted net borrowings, excluding leases without asset transfer components 53,979 54,698
Adjusted net debt/equity ratio, excluding leases without asset transfer components 0.75 0.75
80
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
12. INTEREST-BEARING LIABILITIES (continued)
(a) Loans and other borrowings
2021
HK$M
2020
HK$M
Bank loans
– secured 27,052 31,740
– unsecured 8,043 14,889
Other borrowings
– secured 5,205 5,318
– unsecured 14,822 3,548
55,122 55,495
Amount due within one year included in current liabilities (16,061) (17,513)
39,061 37,982
Repayable as follows:
Bank loans
– within one year 13,772 16,724
– after one year but within two years 4,815 8,763
– after two years but within five years 11,480 13,010
– after five years 5,028 8,132
35,095 46,629
Other borrowings
– within one year 2,289 789
– after one year but within two years 2,188 2,246
– after two years but within five years 13,553 2,685
– after five years 1,997 3,146
20,027 8,866
Amount due within one year included in current liabilities (16,061) (17,513)
39,061 37,982
At 31st December 2021, aircraft and related equipment of HK$53,495 million (2020: HK$57,612 million) are pledged
as security for the secured loans and other borrowings.
Loans and other borrowings are repayable up to 2035 (2020: 2035).
Loans and other borrowings of the Group not wholly repayable within five years amounted to HK$22,278 million
(2020: HK$29,295 million).
At 31st December 2021, the Group had loans totalling HK$32,235 million (2020: HK$38,618 million) which were
defeased by funds and other investments. Accordingly, these loans and the related funds, as well as related
expenses and income, have been defeased in the financial statements.
On 5th February 2021, the Group completed the issuance of HK$6,740 million guaranteed convertible bonds at a
rate of 2.75%, with maturity in 2026. The bonds are convertible at a conversion price of HK$8.57 per share and
entitle the holder to convert up to 786,464,410 ordinary shares of Cathay Pacific Airways Limited. The conversion
shares had a market value of approximately HK$5,183 million, based on the closing price of HK$6.59 per share as
quoted on the Stock Exchange of Hong Kong Limited on 27th January 2021. The net price of each conversion share
to the Company resulting from the conversion of the bonds was estimated to be approximately HK$8.49. The bonds
are listed on The Stock Exchange of Hong Kong Limited for purchase by professional investors only.
81
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
12. INTEREST-BEARING LIABILITIES (continued)
The Board considers the issuance of the convertible bonds to be an opportunity to further strengthen the
Company’s liquidity and working capital position and which allows the Company to better navigate the challenges
posed by the COVID-19 pandemic.
The net proceeds from the bond issuance were approximately HK$6,680 million after deducting expenses
associated with the issuance. The Group intends to apply the net proceeds towards general corporate purposes.
The bonds are accounted for as compound financial instruments, with both a liability component and an equity
component. As at 31st December 2021, the liability component has a carrying value of HK$6,256 million included in
“Loans and other borrowings”; the equity component has a carrying value of HK$526 million included in “Convertible
bond reserve”. The accounting policy on convertible bonds is disclosed in accounting policy 25 on page 129.
(b) Lease liabilities
The Group has commitments under lease agreements in respect of aircraft and related equipment, other equipment
and buildings. Lease liabilities are repayable on various dates up to 2033. The reconciliation of future lease
payments and their carrying values at the end of the current and previous reporting periods is as follows:
2021
HK$M
2020
HK$M
Future payments 38,156 41,213
Interest charges relating to future periods (3,424) (3,579)
Present value of future payments 34,732 37,634
Amount due within one year included in current liabilities (6,289) (6,736)
28,443 30,898
The present value of future payments is repayable as follows:
2021
HK$M
2020
HK$M
Within one year 6,289 6,736
After one year but within two years 6,011 6,280
After two years but within five years 10,572 13,232
After five years 11,860 11,386
34,732 37,634
The undiscounted future payments are repayable as follows:
2021
HK$M
2020
HK$M
Within one year 7,038 7,519
After one year but within two years 6,635 6,942
After two years but within five years 11,717 14,445
After five years 12,766 12,307
38,156 41,213
82
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
12. INTEREST-BEARING LIABILITIES (continued)
(c) Reconciliation of interest-bearing liabilities
Loans and other
borrowings
HK$M
Lease
liabilities
HK$M
Tot al
HK$M
At 1st January 2021 55,495 37,634 93,129
Changes from financing cash flows
– new financing 13,291 615 13,906
– repayments (13,842) (6,996) (20,838)
Other changes
– exchange loss/(gain) 155 (274) (119)
– changes resulting from new leases – 4,157 4,157
– changes resulting from lease modification – 399 399
– changes resulting from lease termination – (609) (609)
– COVID-19-related rent concessions received – (301) (301)
– equity component of convertible bonds issued (526) – (526)
– others 549 107 656
At 31st December 2021 55,122 34,732 89,854
At 1st January 2020 56,768 40,492 97,260
Changes from financing cash flows
– new financing 21,591 713 22,304
– repayments (23,123) (7,011) (30,134)
Other changes
– exchange gain (218) (90) (308)
– changes resulting from new leases – 3,828 3,828
– changes resulting from lease modification – 1,175 1,175
– changes resulting from lease termination – (16) (16)
– COVID-19-related rent concessions received – (316) (316)
– net settlement with lease embedded derivative instruments – (1,342) (1,342)
– others 477 201 678
At 31st December 2020 55,495 37,634 93,129
83
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
13. OTHER LONG-TERM PAYABLES
2021
HK$M
2020
HK$M
Deferred liabilities 3,257 3,711
Derivative financial liabilities - long-term portion 184 499
3,441 4,210
The Group had a maintenance provision of HK$4,187 million (2020: HK$5,718 million) for returning the aircraft to lessors
to certain maintenance conditions. The movements during the year are as follows:
2021
HK$M
2020
HK$M
At 1st January 5,718 5,031
Additional provision made 259 902
Provision utilised (1,790) (215)
At 31st December 4,187 5,718
Amount expected to be utilised within one year included in trade and other payables (1,653) (2,397)
Included in deferred liabilities above 2,534 3,321
At 31st December 2021, total derivative financial liabilities of the Group which did not qualify for hedge accounting
amounted to HK$58 million (2020: HK$423 million). The balance is included in above, except for HK$29 million
(2020:HK$340 million) which was included in trade and other payables.
14. RETIREMENT BENEFITS
The Group operates various defined benefit and defined contribution retirement schemes for its employees in Hong
Kong and in certain overseas locations. The assets of these schemes are held in separate trustee-administered funds.
The retirement schemes in Hong Kong are registered under and comply with the Occupational Retirement Schemes
Ordinance and the Mandatory Provident Fund Schemes Ordinance (“MPFSO”). Most of the employees engaged outside
Hong Kong are covered by appropriate local arrangements.
The Group operates the following principal schemes:
(a) Defined benefit retirement schemes
A defined benefit scheme is a retirement plan that defines the benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service and compensation. The Group has an
obligation to provide participating employees with these benefits.
The Swire Group Retirement Benefits Scheme (“SGRBS”) in Hong Kong, in which the Company, Cathay Pacific
Catering Services (H.K.) Limited (“CPCS”) and Vogue Laundry Service Limited (“VLS”) are participating employers,
and the Cathay Pacific Airways Group Retirement Benefits Scheme (“CPAGRBS”) in which Hong Kong Airport
Services Limited (“HAS”) is a participating employer, provide resignation and retirement benefits to its members,
which include the Company’s cabin attendants who joined before September 1996 and other locally engaged
employees who joined before June 1997, upon their cessation of service. The Company, CPCS, VLS and HAS meet
the full cost of all benefits due by SGRBS or CPAGRBS 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 (“CPALRS”). Both members and the Company
contribute to CPALRS.
The majority of the Group’s schemes are final salary guarantee lump sum defined benefit plans.
84
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
14. RETIREMENT BENEFITS (continued)
Contributions to the defined benefit retirement schemes are made in accordance with the funding rates
recommended by independent qualified actuaries to ensure that the plans will be able to meet their liabilities as they
become due.The funding rates are subject to annual review and are determined by taking into consideration the
difference between the market value of plan assets and the present value of accrued past service liabilities, on an
on-going basis, as computed by reference to actuarial valuations. The principal schemes in Hong Kong are valued
annually by qualified actuaries for funding purposes.
The disclosures for schemes in Hong Kong are based on actuarial valuations prepared by an independent firm of
actuaries, Mercer (Hong Kong) Limited (“Mercer”), every three years and as needed in accordance with Hong Kong’s
Occupational Retirement Schemes Ordinance. The disclosures and valuations are updated annually in the
intervening years by Cannon Trustees Limited, the main administration manager of the Group’s defined benefit
schemes. The most recent valuations prepared by Mercer for all schemes were for the period ended 31st December
2021.
Through its defined benefit retirement schemes the Group is exposed to a number of risks, the most significant of
which is market risk.
Market risk embodies the potential for losses and gains and includes price risk, interest rate risk and currency risk
as well as factors specific to an individual investment or its issuer or risk specific to a certain market. Market risk is
managed principally through diversification of the investments by the investment managers appointed. Investment
managers are governed by agreements that stipulate the performance objective of the investments, which is
referenced to a recognised benchmark and the predicated tracking error around this benchmark. An investment
committee monitors the overall market risk position on a quarterly basis.
The Group’s obligations are 135.5% (2020: 119.9%) covered by the plan assets held by the trustees at
31stDecember 2021.
2021
HK$M
2020
HK$M
Net expenses recognised in the profit or loss:
Current service cost 155 228
Net interest income (14) (26)
Gain on settlements – (63)
Total included in staff costs 141 139
Actual return on plan assets 341 542
2021
HK$M
2020
HK$M
Net assets recognised in the statement of financial position:
Present value of funded obligations 4,002 4,991
Fair value of plan assets (5,424) (5,986)
Retirement benefit assets (note 11) (1,422) (995)
85
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
14. RETIREMENT BENEFITS (continued)
2021
HK$M
2020
HK$M
Movements in present value of funded obligations comprise:
At 1st January 4,991 6,890
Remeasurements
– actuarial (gains)/losses arising from changes in financial assumptions (146) 323
– experience gains (163) (635)
Movements for the year
– current service cost 155 228
– interest expense 75 175
– gain on settlements – (63)
– employee contributions 3 1
– benefits paid (954) (887)
– settlements paid – (935)
– transfer 41 (106)
At 31st December 4,002 4,991
The weighted average duration of the defined benefit obligations is five years (2020: six years).
2021
HK$M
2020
HK$M
Movements in fair value of plan assets comprise:
At 1st January 5,986 7,360
Movements for the year
– return on plan assets excluding interest income 252 341
– interest income 89 201
– employee contributions 3 1
– employer contributions 7 11
– benefits paid (954) (887)
– settlements paid – (935)
– transfer 41 (106)
At 31st December 5,424 5,986
No curtailment gain/loss was incurred in the year ended 31st December 2021. In connection with restructuring of
the Group in 2020, a curtailment gain of HK$63 million was incurred and settlements paid to impacted plan
members in the year ended 31st December 2020.
There were no plan amendments during the year.
86
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
14. RETIREMENT BENEFITS (continued)
2021
HK$M %
2020
HK$M %
Fair value of plan assets comprises:
Equities
– Asia Pacific 252 5 240 4
– Europe 249 5 306 5
– Americas 764 14 483 8
– Emerging markets 750 14 935 16
Bonds
– Global 893 16 954 16
– Emerging markets 128 2 128 2
Absolute return funds 1,073 20 1,592 27
Cash 1,315 24 1,348 22
5,424 100 5,986 100
At 31st December 2021, the prices of 96% of equities and 21% of bonds were quoted on active markets
(31stDecember 2020: 95% and 13% respectively). The remainder of the prices were not quoted on active markets.
The plan assets are invested in the Swire Group Unitised Trust (“the Trust”). The Trust has three sub-funds in which
the assets are invested in accordance with separate and distinct investment policies and objectives. The Trust and
sub-funds are overseen by an investment committee, which meets four times a year.
The make-up of the Trust is the result of the asset allocation of each plan. The asset allocation of each plan targets
a mix of equities, bonds and absolute return funds.
The management of the assets within the sub-funds is delegated by the investment committee to a number of
reputable investment managers.
The contributions are calculated based upon funding recommendations arising from actuarial valuations. The
Group expects to make contributions of HK$3 million to the schemes in 2022.
2021 2020
SGRBS CPALRS SGRBS CPALRS
The significant actuarial assumptions are:
Discount rate 2.08% 2.08% 1.64% 1.64%
Expected rate of future salary increases 2.50% 2.50% 3.00% 3.04%
The sensitivity of the defined benefit obligations to changes in the significant actuarial assumptions are set out
below. This shows how the defined benefit obligations at 31st December 2021 would have (increased)/decreased
as a result of 0.5% change in the actuarial assumptions:
Increase by 0.5% Decrease by 0.5%
2021
HK$M
2020
HK$M
2021
HK$M
2020
HK$M
Discount rate 83 129 (86) (135)
Expected rate of future salary increases (74) (131) 71 127
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant.
In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating
the sensitivity of the defined benefit obligations to changes in the significant actuarial assumptions, the same
method has been applied as when calculating the retirement benefit liabilities recognised in the statement of
financial position.
87
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
14. RETIREMENT BENEFITS (continued)
(b) Defined contribution retirement schemes
A defined contribution scheme is a retirement plan under which the Group pays fixed contributions into a separate
entity. The Group has no legal or constructive obligations to pay further contributions.
Staff employed by the Company in Hong Kong on expatriate terms are eligible to join a defined contribution
retirement scheme, the CPA Provident Fund 1993. All staff employed in Hong Kong are eligible to join the CPA
Provident Fund.
Under the terms of these schemes, other than the Company’s contributions, staff may elect to contribute from
0%to 10% of their monthly salaries. During the year, the benefits forfeited in accordance with the schemes’ rules
amounted to HK$32 million (2020: HK$50 million) which have been applied towards the contributions payable by
theCompany.
A Mandatory Provident Fund (“MPF”) scheme was established under the MPFSO in December 2000. Where staff
elect to join the MPF scheme, both the Company and staff are required to contribute 5% of the employees’ relevant
income (capped at HK$30,000). Staff may elect to contribute more than the minimum as a voluntary contribution.
Contributions to defined contribution retirement schemes charged to profit or loss were HK$569 million
(2020:HK$950 million).
15. DEFERRED TAXATION
2021
HK$M
2020
HK$M
Deferred tax assets:
– provisions (53) (74)
– tax losses (4,738) (3,952)
– cash flow hedges – (44)
– right-of-use assets (140) (186)
Deferred tax liabilities:
– accelerated tax depreciation 4,725 4,472
– investments in associates 566 928
– cash flow hedges 223 –
– retirement benefits 142 94
Provision in respect of certain lease arrangements 8,249 9,634
8,974 10,872
The following amounts, determined after appropriate offsetting, are shown separately on the statement of financial
position:
2021
HK$M
2020
HK$M
Net deferred tax asset recognised in the statement of financial position (846) (627)
Net deferred tax liability recognised in the statement of financial position 9,820 11,499
8,974 10,872
88
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
15. DEFERRED TAXATION (continued)
2021
HK$M
2020
HK$M
Movements in deferred taxation comprise:
At 1st January 10,872 12,475
Movements for the year
– (credited)/charged to profit or loss
– deferred tax credit (note 5) (831) (977)
– operating expenses 94 95
– charged/(credited) to other comprehensive income
– transferred to cash flow hedge reserve (note 7) 267 (115)
– transferred to retained profit (note 7) 51 54
Current portion of provision in respect of certain lease arrangements
included in current liabilities – taxation (1,479) (660)
At 31st December 8,974 10,872
Deferred tax assets are recognised in respect of tax losses carried forward to the extent that realisation of the related
tax benefits through future taxable profits is probable. The Group has unrecognised tax losses of HK$31,363 million
(2020: HK$29,698 million) to carry forward against future taxable profits. These amounts are analysed as follows:
2021
HK$M
2020
HK$M
No expiry date 21,624 19,592
Expiring within 2022 to 2037 (2020: 2021 to 2037) 9,739 10,106
31,363 29,698
The provision in respect of certain lease arrangements equates to payments which are expected to be made during the
years 2022 to 2030 (2020: 2021 to 2030) as follows:
2021
HK$M
2020
HK$M
After one year but within five years 4,333 5,578
After five years but within 10 years 3,916 4,056
8,249 9,634
16. TRADE AND OTHER RECEIVABLES
2021
HK$M
2020
HK$M
Trade debtors, net of loss allowances 3,919 3,381
Derivative financial assets – current portion 1,759 90
Other receivables and prepayments 2,615 2,994
Due from associates and other related companies 3 4
8,296 6,469
At 31st December 2021, derivative financial assets – current portion which did not qualify for hedge accounting
amounted to HK$290 million (2020: insignificant).
89
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
16. TRADE AND OTHER RECEIVABLES (continued)
2021
HK$M
2020
HK$M
Analysis of trade debtors (net of loss allowances) by invoice date:
Within one month 3,441 2,608
One to three months 420 505
More than three months 58 268
3,919 3,381
2021
HK$M
2020
HK$M
Analysis of trade debtors (net of loss allowances) by age:
Current 3,754 2,916
Within three months overdue 135 221
More than three months overdue 30 244
3,919 3,381
The movements in the expected credit loss allowance in respect of trade debtors during the year are as follows:
2021
HK$M
2020
HK$M
At 1st January 78 81
Expected credit loss recognised 22 –
Amounts written off – (3)
At 31st December 100 78
17. LIQUID FUNDS
2021
HK$M
2020
HK$M
Cash and cash equivalents
Short-term deposits and bank balances 8,573 6,166
Other liquid funds
Short-term deposits maturing beyond three months when placed 1 195
Funds with investment managers
– debt securities listed outside Hong Kong 10,470 12,648
– bank deposits 101 188
Other liquid investments
– debt securities listed outside Hong Kong 5 6
– bank deposits 134 138
Liquid funds 19,284 19,341
Included in other liquid investments are bank deposits of HK$134 million (2020: HK$138 million) and debt securities of
HK$5 million (2020: HK$6 million) which are pledged as part of long-term financing arrangements. The arrangements
provide that these deposits and debt securities must be maintained at specified levels for the duration of the financing.
90
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
17. LIQUID FUNDS (continued)
Available unrestricted funds to the Group are as follows:
2021
HK$M
2020
HK$M
Liquid funds 19,284 19,341
Less: amounts pledged as part of long-term financing
– debt securities listed outside Hong Kong (5) (6)
– bank deposits (134) (138)
Committed undrawn facilities 11,105 9,396
Available unrestricted liquidity to the Group 30,250 28,593
Committed undrawn facilities may be drawn at any time in either Hong Kong dollar or United States dollar.
18. TRADE AND OTHER PAYABLES
2021
HK$M
2020
HK$M
Trade creditors 4,327 3,284
Derivative financial liabilities – current portion 186 1,311
Other payables 5,311 7,278
Due to associates 55 218
Due to other related companies 216 285
10,095 12,376
2021
HK$M
2020
HK$M
Analysis of trade creditors by invoice date:
Within one month 3,706 2,570
One to three months 328 262
More than three months 293 452
4,327 3,284
The Group’s general payment terms are one to two months from the invoice date.
Included in other payables above, the Group had a provision of HK$702 million (2020: HK$1,056 million) for possible or
actual taxation (other than income tax), litigation and claims. The movements during the year are as follows:
2021
HK$M
2020
HK$M
At 1st January 1,056 794
Additional provision made, net 83 284
Provision utilised (437) (22)
At 31st December 702 1,056
19. CONTRACT LIABILITIES
2021
HK$M
2020
HK$M
Non-current 478 –
Current 7,925 8,122
8,403 8,122
91
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
19. CONTRACT LIABILITIES (continued)
The Group had the following contract liabilities recognised in the consolidated statement of financial position:
2021
HK$M
2020
HK$M
Passenger revenue, fuel and insurance surcharge (a) 2,624 2,649
Loyalty programme (b) 5,779 5,473
8,403 8,122
The following table summarises the Group’s revenue recognised during the year that was included in the contract
liabilities at the beginning of the year:
2021
HK$M
2020
HK$M
Passenger revenue, fuel and insurance surcharge (a) 207 5,623
(a) The Group typically receives ticket fares from passengers in advance of carriage. The value of unflown passenger
sales is recognised as a contract liability until the transportation service is provided.
(b) The value attributable to the award of programme miles as a part of an initial sales transaction is deferred until such
time as the members redeem their programme miles or when they expire. Programme miles can be redeemed at
any point prior to expiry. If miles are classified as activity based expiry (those issued from 1st January 2020), they
donot expire as long as the member has any type of qualifying activity within any 18 month period. If miles are
classified as time based expiry (those issued on or before 31st December 2019), they expire after three years of
being issued. Programme miles are combined in one homogenous pool and are not separately identifiable. As such,
the revenue is comprised of programme miles that were part of the loyalty programme deferred revenue balance at
the beginning of the period, as well as miles that were issued during the period.
Changes in loyalty programme contract liabilities are as follows:
2021
HK$M
2020
HK$M
At 1st January 5,473 5,182
Deferral of revenue – mileage credits issued through travel or sold
to co-branded credit card and other partners 2,086 1,862
Recognition of revenue – mileage credits redeemed or expired (1,780) (1,571)
At 31st December 5,779 5,473
20. SHARE CAPITAL
2021 2020
Number of shares HK$M Number of shares HK$M
Issued and fully paid
Ordinary shares
At 1st January 6,437,200,203 28,822 3,933,844,572 17,106
Shares issued on 10th August 2020
pursuant to rights issue – – 2,503,355,631 11,716
At 31st December 6,437,200,203 28,822 6,437,200,203 28,822
Preference shares
At 1st January 195,000,000 19,500 – –
Shares issued on 12th August 2020 – – 195,000,000 19,500
At 31st December 195,000,000 19,500 195,000,000 19,500
48,322 48,322
92
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
20. SHARE CAPITAL (continued)
There was no purchase, sale or redemption by the Company, or any of its subsidiaries, of the Company’s shares and no
exercise of warrants during the year ended 2021 and 2020. At 31st December 2021, 6,437,200,203 ordinary shares and
195,000,000 preference shares were in issue (31st December 2020: 6,437,200,203 ordinary shares and 195,000,000
preference shares).
During the year ended 31st December 2020, the Company announced a recapitalisation proposal which involved,
among other things:
(a) the preference shares and warrants issue, being the issuance by the Company to Aviation 2020 Limited, a limited
company wholly owned by the Financial Secretary Incorporated, of (a) 195,000,000 preference shares at the
subscription price of HK$100 per preference share and (b) 416,666,666 warrants which will entitle Aviation 2020
Limited to subscribe for up to 416,666,666 fully paid ordinary shares at the warrant exercise price of HK$4.68 per
share (subject to adjustment); and
(b) the rights issue, being the issuance of 2,503,355,631 rights shares on the basis of seven rights shares for every
11existing ordinary shares held by shareholders on 21st July 2020 at the subscription price of HK$4.68 per share.
The net proceeds of the rights issue and preference shares and warrants issue were used for general corporate
purposes.
The preference shares and warrants issue were completed on 12th August 2020 (the “Issue Date”). The expiry date of
the warrant is five years from the warrants issue date.
The Preference Shares are not redeemable at the option of Aviation 2020 Limited. The Company may redeem all or
some of the Preference Shares, in an aggregate amount equal to the issue price of the preference share of HK$100 each
plus any unpaid dividends (including any Arrears of Dividend or any Additional Dividend Amount). The holder of the
preference shares is not entitled to convene, attend or vote at any general meeting, except where the business of a
general meeting is the consideration of resolutions for amendments to the articles that directly and adversely modify
orabrogate any of the special rights and privileges attached to the preference shares.
The preference shares and warrants upon exercise are recorded as additional share capital.
For further details of the preference shares and warrants issue, please refer to the Company’s announcement dated
9thJune 2020, the circular to shareholders dated 19th June 2020 and the announcement dated 12th August 2020.
Following approval by shareholders of the Company at the 2020 EGM, the Company issued 2,503,355,631 new ordinary
shares at HK$4.68 each on 10th August 2020, and 195,000,000 preference shares at HK$100 each and 416,666,666
warrants on 12th August 2020.
21. DIVIDENDS
(a) Dividends on cumulative preference shares issued by the Company
The preference shares will accrue dividends at the rate of:
(i) 3% per annum from and including the Issue Date (12th August 2020) to but excluding the date falling three
years from the Issue Date (the “First Step-up Date”);
(ii) 5% per annum from and including the First Step-up Date to but excluding the date falling four years from the
Issue Date (the “Second Step-up Date”);
(iii) 7% per annum from and including the Second Step-up Date to but excluding the date falling five years from the
Issue Date (the “Third Step-up Date”); and
(iv) 9% per annum from and including the Third Step-up Date
Dividends on cumulative preference shares are paid semi-annually in arrears at the current rate of 3% per annum,
compounding, and can be deferred in whole or in part at the Company’s discretion.
The dividend attributable to the preference shareholder for the period ended 31st December 2021 was HK$596
million (31st December 2020: HK$228 million).
93
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
21. DIVIDENDS (continued)
Any deferred or unpaid dividends on cumulative preference shares shall accumulate and constitute “Arrears of
Dividend”. The accumulated Arrears of Dividend at 31st December 2021 was HK$824 million (31st December 2020:
HK$228 million).
The dividends payable on 14th February 2022 have been deferred. The cumulative amount deferred of HK$897
million was in respect of dividends for the 18-month period from the Issue Date 12th August 2020 and the
compounding effect of unpaid dividends.
(b) Dividends payable to ordinary shareholders
The Articles of Association of the Company require that any deferred or unpaid dividends on cumulative preference
shares shall accumulate and constitute “Arrears of Dividend” and that the Company shall not make any
discretionary distribution or dividend in cash or otherwise on any ordinary shares until all outstanding Arrears of
Dividend have been paid in full.
There remain Arrears of Dividend as at 31st December 2021 and 2020 and accordingly no dividends to ordinary
equity shareholders were proposed.
No dividends to ordinary equity shareholders attributable to the year and previous financial year were declared,
approved nor paid during 2021 and 2020.
Note 21(a) details the cumulative Arrears of Dividend as at 31st December 2021.
22. RESERVES
2021
HK$M
2020
HK$M
Retained profit 19,724 24,741
Investment revaluation reserve (non-recycling) (153) (148)
Cash flow hedge reserve 2,174 (407)
Equity component of convertible bonds issued (note 12(a)) 526 –
Others 1,651 749
23,922 24,935
Investment revaluation reserve (non-recycling) of the Group comprises the cumulative net change in the fair values of
equity investments designated at fair value through other comprehensive income that are held at the end of the
reporting period.
Cash flow hedge reserve of the Group relates to the effective portion of the cumulative net change in the fair values of
hedging instruments. Refer to note 29 to the financial statements for details of the Group’s hedging instruments.
Other reserves of the Group comprise exchange gains arising from revaluation of foreign investments which amounted
to HK$1,902 million (2020: exchange gains of HK$1,211 million) and share of associates’ other negative reserves of
HK$251 million (2020: negative reserves of HK$462 million).
The gain/(loss) transferred from cash flow hedge reserve of the Group to profit or loss items was as follows:
2021
HK$M
2020
HK$M
Revenue 50 239
Fuel 1,914 (3,030)
Net finance charges (243) (314)
Other expenses 115 –
Net gain/(loss) transferred to profit or loss (note 7) 1,836 (3,105)
94
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Statement of Financial Position
22. RESERVES (continued)
The cash flow hedge reserve of the Group is expected to be charged/(credited) to profit or loss or transferred to relevant
assets as noted below when the hedged transactions affect profit or loss or the relevant assets are recognised.
Total
HK$M
2022 (1,701)
2023 (370)
2024 (66)
2025 14
2026 5
Beyond 2026 (56)
(2,174)
The actual amount ultimately recognised in profit or loss or transferred to relevant assets will depend upon the fair
values of the hedging instruments at the time that the hedged transactions affect profit or loss or the relevant assets
are recognised.
Retained
profit
HK$M
Convertible
bond
reserve
HK$M
Investment
revaluation
reserve
(non-recycling)
HK$M
Cash flow
hedge
reserve
HK$M
Tot al
HK$M
Company
At 1st January 2021 15,969 – (109) (394) 15,466
Loss for the year (1,775) – – – (1,775)
Other comprehensive income 454 – – 2,575 3,029
Total comprehensive income for
the year (1,321) – – 2,575 1,254
Equity component of convertible
bonds issued – 526 – – 526
At 31st December 2021 14,648 526 (109) 2,181 17,246
At 1st January 2020 36,548 – (109) 646 37,085
Loss for the year (21,105) – – – (21,105)
Other comprehensive income 603 – – (1,040) (437)
Total comprehensive income for
the year (20,502) – – (1,040) (21,542)
Transaction costs on issue of rights
shares and preference shares (77) – – – (77)
At 31st December 2020 15,969 – (109) (394) 15,466
Distributable reserves of the Company at 31st December 2021 amounted to HK$14,648 million (2020: HK$15,969
million), as calculated under the provisions of Part 6 of the Hong Kong Companies Ordinance (Cap. 622).
95
Cathay Pacific Airways Limited Annual Report 2021
23. RECONCILIATION OF OPERATING LOSS TO CASH GENERATED FROM/(USED IN)
OPERATIONS
2021
HK$M
2020
HK$M
Operating loss (1,443) (18,144)
Depreciation of property, plant and equipment 12,225 13,848
Amortisation of intangible assets 561 573
Impairment of property, plant and equipment 1,010 3,973
Impairment of stock 110 –
Impairment of intangible assets – 39
Gain on disposal of property, plant and equipment, net (51) (34)
Loss on disposal of intangible assets 5 –
Impairment of investment in an associate – 56
Gain on deemed partial disposal of an associate (210) –
Fair value losses on equity investments measured at fair value through profit or loss 54 79
COVID-19-related rent concessions received (301) (316)
Gain from financial derivatives, cash flow hedge reserve and other items not involving
cash flows (96) (41)
Decrease in stock 340 93
(Increase)/decrease in trade debtors and other receivables (159) 3,751
(Decrease)/increase in net amounts due to associates and other related companies (232) 271
Decrease in trade creditors, other payables and deferred liabilities (1,376) (7,555)
Increase/(decrease) in contract liabilities 281 (7,819)
Non-operating movements in debtors and creditors 987 (11)
Cash generated from/(used in) from operations 11,705 (11,237)
24. TOTAL CASH OUTFLOW FOR LEASES
Cash outflows for leases included in the consolidated statement of cash flows comprise the following:
2021
HK$M
2020
HK$M
Within operating cash flows 637 708
Within investing cash flows 198 192
Within financing cash flows 6,381 6,298
7,216 7,198
Significant non-cash transactions for leases:
During the year ended 31st December 2021, the Group entered into new lease arrangements in respect of property,
plant and equipment with a total capitalised value at the inception of HK$4,141 million (2020: HK$3,797 million), a
significant proportion of which is related to the delivery of leased aircraft.
NOTES TO THE FINANCIAL STATEMENTS
Statement of Cash Flows
96
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Directors and Employees
25. DIRECTORS’ REMUNERATION
(a) Directors’ remuneration disclosed pursuant to section 383(1) of the Hong Kong Companies Ordinance and part 2 of
the Companies (Disclosure of Information about Benefit of Directors) Regulation are:
Cash Non-cash
Basic
salary/
Fees
(note ii)
HK$’000
Bonus (in
respect
of 2020)
HK$’000
Allowances
& benefits
HK$’000
Contributions
to retirement
schemes
HK$’000
Bonus
paid into
retirement
schemes
HK$’000
Other
benefits
HK$’000
Housing
benefits
HK$’000
2021
Total
HK$’000
2020
Tot al
HK$’000
Executive Directors
Healy, Patrick 918 – 1,237 578 – 228 – 2,961 3,386
Hogg, Rupert (up to
August 2019) – – – – – – – – 2,545
Hughes, Gregory 2,075 – 998 609 – 355 3,051 7,088 10,296
Lam, Ronald 1,811 – 2,570 790 – 96 – 5,267 5,445
Loo, Paul (up to
August 2019) – – – – – – – – 1,177
Murray, Martin (up to
January 2021) 146 – 139 32 – 91 – 408 9,085
Sharpe, Rebecca
(from January 2021) 1,923 – 2,184 536 – 150 – 4,793 –
Tang, Augustus 3,105 – 2,160 1,232 – – – 6,497 8,127
Non-Executive Directors
Bradley, Guy
(from August 2021) – – – – – – – – –
Cai, Jianjiang (up to
December 2020) – – – – – – – – 575
Chu, Ivan (up to
April 2020) – – – – – – – – –
Low, Michelle (up to
March 2021) – – – – – – – – –
Ma, Chongxian
(from June 2021) 321 – – – – – – 321 –
Murray, Martin (April
2021-August 2021) – – – – – – – – –
Song, Zhiyong 575 – – – – – – 575 575
Swire, Merlin – – – – – – – – –
Swire, Samuel – – – – – – – – –
Xiao, Feng 947 – – – – – – 947 947
Zhang, Zhuo Ping
(from April 2020) – – – – – – – – –
Zhao, Xiaohang 575 – – – – – – 575 575
Independent Non-
Executive Directors
Chan, Bernard 635 – – – – – – 635 599
Harrison, John 1,029 – – – – – – 1,029 970
Milton, Robert 1,029 – – – – – – 1,029 970
Tung, Andrew 844 – – – – – – 844 796
2021 Total 15,933 – 9,288 3,777 – 920 3,051 32,969
2020 Total 17,101 10,362 7,924 3,606 1,900 1,158 4,017 46,068
(i) Patrick Healy, Augustus Tang, Gregory Hughes, Ronald Lam, Martin Murray (up to January 2021) and
RebeccaSharpe (from January 2021) took voluntary basic salary reductions during 2021.
97
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Directors and Employees
25. DIRECTORS’ REMUNERATION (continued)
(ii) Independent Non-Executive Directors receive fees as members of the Board and its committees. Executive
Directors receive salaries. For Directors employed by the Swire group, the remuneration disclosed represents
the amount charged to the Company.
(iii) The total emoluments of Executive Directors are charged to the Group in accordance with the amount of time
spent on its affairs.
(b) The five individuals whose emoluments were the highest in the Group for the year ended 31st December 2021 and
2020 are as follows:
2021 2020
Number of individuals:
Executive Directors 2 3
Senior managers 3 2
5 5
Details of their emoluments are as follows:
Cash Non-cash
Basic
salary
HK$’000
Bonus
HK$’000
Allowances
& benefits
HK$’000
Contributions
to retirement
schemes
HK$’000
Bonus
paid into
retirement
schemes
HK$’000
Other
benefits
HK$’000
Housing
benefits
HK$’000
2021
Total
HK$’000
2020
Tot al
HK$’000
2021 Total 9,586 2,880 10,415 6,266 672 1,518 3,051 34,388
2020 Total 11,504 8,286 10,613 3,356 3,375 1,319 3,240 41,693
The bonuses disclosed above are related to services for the previous year.
The number of the above executive directors and senior managers whose emoluments fell within the following
bands:
HK$ 2021 2020
6,000,001 – 6,500,000 2 –
6,500,001 – 7,000,000 1 1
7,000,001 – 7,500,000 1 –
7,500,001 – 8,000,000 1 1
8,000,001 – 8,500,000 – 1
9,000,001 – 9,500,000 – 1
10,000,001 – 10,500,000 – 1
5 5
98
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Directors and Employees
26. EMPLOYEE INFORMATION – CATHAY PACIFIC
The table below sets out the number of individuals, including those who have retired or resigned during the year, in each
employment category whose total remuneration for the year fell into the following ranges:
2021 2020*
HK$ Director Flight staff Other staff Director Flight staff Other staff
0 – 1,000,000 12 9,044 8,295 13 14,125 9,496
1,000,001 – 1,500,000 2 967 248 1 1,066 327
1,500,001 – 2,000,000 – 481 88 – 663 99
2,000,001 – 2,500,000 – 400 59 – 440 67
2,500,001 – 3,000,000 1 214 10 1 455 19
3,000,001 – 3,500,000 – 73 6 1 280 9
3,500,001 – 4,000,000 – 32 3 – 187 7
4,000,001 – 4,500,000 – 11 1 – 79 5
4,500,001 – 5,000,000 1 2 1 – 26 –
5,000,001 – 5,500,000 1 1 – 1 2 1
5,500,001 – 6,000,000 – – – – 2 1
6,000,001 – 6,500,000 1 – 1 – – 2
6,500,001 – 7,000,000 – – 1 – – 1
7,000,001 – 7,500,000 1 – – – – –
7,500,001 – 8,000,000 – – 1 – – 1
8,000,001 – 8,500,000 – – – 1 – –
9,000,001 – 9,500,000 – – – 1 – –
10,000,001 – 10,500,000 – – – 1 – –
19 11,225 8,714 20 17,325 10,035
* Included Cathay Dragon
99
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Related Party Transactions
27. RELATED PARTY TRANSACTIONS
(a) Material transactions between the Group and associates and other related parties which were carried out in the
normal course of business on commercial terms are summarised below:
2021 2020
Associates
HK$M
Other related
parties
HK$M
Associates
HK$M
Other related
parties
HK$M
Revenue 37 14 78 12
Aircraft maintenance 736 1,081 906 1,830
Other operating expenses 111 234 230 259
Dividend income 874 28 675 48
Finance income 4 – 7 –
Property, plant and equipment purchase – – – 4
Lease payments 1 55 – 94
Other related parties are companies under control of a company which has significant influence on the Group.
(i) The Group entered into three leases expiring from one to eight years in respect of certain leasehold properties
from a related party of the Group for storage of engines and inventories. Monthly rental is HK$4 million as at
31st December 2021, which was determined with reference to amounts charged by the related party to third
parties. For the year ended 31st December 2021, lease payments of HK$55 million (2020: HK$86 million) were
paid. The balances of right-of-use assets and lease liabilities as at 31st December 2021 were HK$158 million
and HK$169 million respectively (2020: HK$509 million and HK$541 million respectively).
The lease payments are included in continuing connected transactions in note 27(a)(ii) below.
(ii) Under the HAECO Framework Agreement with HAECO and HXITM, the Group paid fees to, and received fees
from, the HAECO group in respect of aircraft maintenance and related services. The amounts payable to the
HAECO group for the year ended 31st December 2021 totalled HK$1,816 million (2020: HK$2,762 million). The
amounts receivable from the HAECO group for the year ended 31st December 2021 totalled HK$19 million
(2020: HK$38 million).
As a director of HAECO, Guy Bradley is interested in the HAECO Framework Agreement. Michelle Low was
interested as a director of HAECO until her resignation with effect from 1st April 2021. Martin Murray was
interested as a director of HAECO until his resignation with effect from 25th August 2021. Merlin Swire was
interested as a director of HAECO until his resignation as a director of HAECO with effect from 25th August
2021.
Transactions under the HAECO Framework Agreement are continuing connected transactions, in respect of
which the Company has complied with the disclosure and shareholders’ approval requirements in accordance
with Chapter 14A of the Listing Rules. For a definition of terms, please refer to the section of this annual report
headed Directors’ Report.
100
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Related Party Transactions
27. RELATED PARTY TRANSACTIONS (continued)
(iii) Under the Air China Framework Agreement with Air China dated 26th June 2008, the Group paid fees to, and
received fees from, the Air China group in respect of transactions between the Group on the one hand and
theAir China group on the other hand arising from joint venture arrangements for the operation of passenger
air transportation, code sharing arrangements, interline arrangements, aircraft leasing, frequent flyer
programmes, the provision of airline catering, ground support and engineering services and other services
agreed to be provided and other transactions agreed to be undertaken under the Air China Framework
Agreement. The amounts payable to the Air China group for the year ended 31st December 2021 totalled
HK$39 million (2020: HK$70 million). The amounts receivable from the Air China group for the year ended
31stDecember 2021 totalled HK$21 million (2020: HK$50 million).
As directors or employees of Air China, Patrick Healy, Ma Chongxian, Song Zhiyong, Xiao Feng and Zhao
Xiaohang are interested in the Air China Framework Agreement.
Transactions under the Air China Framework Agreement are continuing connected transactions, in respect of
which the Company has complied with the disclosure requirements in accordance with Chapter 14A of the
Listing Rules. For a definition of terms, please refer to the section of this annual report headed Directors’
Report.
(iv) The Company has an agreement for services with JS&SHK (“JS&SHK Services Agreement”). Under the JS&SHK
Services Agreement, the Group paid fees and reimbursed costs to JS&SHK in exchange for services provided.
Service fees calculated at 2.5% of the Group’s profit before taxation, results of associates, non-controlling
interests, and any profits or losses on disposal of property, plant and equipment are paid annually. For the
yearended 31st December 2021, no service fee was payable (2020: nil) and expenses of HK$173 million
(2020:HK$197 million) were reimbursed at cost.
As directors and/or employees of the Swire group, Patrick Healy, Guy Bradley, Gregory Hughes, Ronald Lam,
Merlin Swire, Samuel Swire, Rebecca Sharpe, Augustus Tang and Zhang Zhuo Ping are interested in the
JS&SHK Services Agreement. Merlin Swire and Samuel Swire are also so interested as shareholders, directors
and employees of the Swire group. Michelle Low was interested as a director and an employee of the Swire
group until her resignation with effect from 1st April 2021. Martin Murray was interested as a director and an
employee of the Swire group during the periods from 1st January 2021 to 25th January 2021 and from 1st April
2021 to 25th August 2021.
Transactions under the JS&SHK Services Agreement are continuing connected transactions, in respect of
which the Company has complied with the disclosure requirements in accordance with Chapter 14A of the
Listing Rules. For a definition of terms, please refer to the section of this annual report headed Directors’
Report.
(b) Amounts due from and due to associates and other related companies at 31st December 2021 are disclosed
innotes 16 and 18 to the financial statements. These balances arising in the normal course of business are
non-interest bearing and have no fixed repayment terms.
(c) Guarantees given by the Company in respect of bank loan facilities of an associate at 31st December 2021 are
disclosed in note 28(b) to the financial statements.
(d) There were no material transactions with Directors except for those relating to shareholdings (as disclosed in the
Directors’ Report and the Corporate Governance Report). Remuneration of Directors is disclosed in note 25 to the
financial statements.
101
Cathay Pacific Airways Limited Annual Report 2021
28. CAPITAL COMMITMENTS AND CONTINGENCIES
(a) Outstanding capital commitments authorised at the year end but not provided for in the financial statements:
2021
HK$M
2020
HK$M
Authorised and contracted for 52,242 58,416
Authorised but not contracted for 3,469 5,951
55,711 64,367
(b) Guarantees in respect of lease obligations, bank loans and other liabilities outstanding at the year end:
2021
HK$M
2020
HK$M
Associates 1,164 1,320
(c) The Company operates in many jurisdictions and in certain of these there are disputes with the tax authorities.
Provisions have been made to cover the expected outcome of the disputes to the extent that outcomes are likely
and reliable estimates can be made. However, the final outcomes are subject to uncertainties and resulting liabilities
may exceed provisions.
(d) The Company remains the subject of antitrust proceedings in various jurisdictions. The proceedings are focused on
issues relating to pricing and competition. The Company is represented by legal counsel in connection with these
matters.
The proceedings and civil actions are ongoing and the outcomes are subject to uncertainties. The Company is not
in a position to assess the full potential liabilities but makes provisions based on facts and circumstances in line with
accounting policy 22 on page 129.
In November 2010, the European Commission issued a decision in its airfreight investigation finding that, amongst
other things, the Company and a number of other international cargo carriers agreed cargo surcharge levels
andthat such agreements infringed European competition law. The European Commission imposed a fine of
Euros57.12 million on the Company. However, the European Commission’s finding against the Company and the
imposition of this fine was annulled by the General Court in December 2015 and the fine of Euros 57.12 million was
refunded to the Company in February 2016. The European Commission issued a new decision against the Company
and the other airlines involved in the case in March 2017. A fine of Euros 57.12 million was imposed on the Company,
which was paid by the Company in June 2017. The Company filed an appeal against this latest decision, to which the
European Commission filed a defence. In December 2017, the Company filed a Reply to this Defence. On 9th March
2018, the European Commission filed a rejoinder to the Company’s Reply. The appeal hearing in the General Court
took place on 5th July 2019. The General Court is expected to issue its decision in the first half of 2022.
The Company is a defendant in a number of civil claims, including class litigation and third party contribution claims,
in a number of countries including Germany, the Netherlands and Norway alleging violations of applicable
competition laws arising from the Company’s alleged conduct relating to its air cargo operations. The Company is
represented by legal counsel and is defending these actions.
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
102
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT
In the normal course of business, the Group is exposed to credit, liquidity, currency, interest rate and fuel price volatility
risks. These exposures are managed, sometimes with the use of derivative financial instruments, by the Group treasury
function in accordance with the policies approved by the Board.
Derivative financial instruments are used solely for financial risk management purposes and the Group does not use
derivative financial instruments for proprietary trading purposes. Derivative financial instruments which constitute an
effective hedge do not expose the Group to market risk since any change in their market value will be offset by a
compensating change in the market value of the hedged items. Exposure to foreign exchange rates, interest rates and
jet fuel prices movements are regularly reviewed and positions are amended in compliance with internal guidelines and
limits.
(a) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss
to the Group. Credit risk for the Group arises from activities with treasury counterparties and trade debtors.
The Group’s exposure to credit risk arising from treasury activities is limited. To manage credit risk in respect of
treasury activities, derivative financial transactions, deposit placements and fund transactions are only carried out
with financial institutions which have high credit ratings and all counterparties are subject to prescribed trading
limits which are regularly reviewed. Risk exposures are monitored regularly by reference to market values.
The credit risk with regard to trade debtors is relatively low. Trade debtors mainly represent passenger and freight
sales due from agents and amounts due from airlines for interline services provided. The majority of the agents are
connected to the settlement systems operated by the International Air Transport Association (“IATA”) which is
responsible for assessing the credit worthiness of such agents and collecting bank guarantees or other monetary
collateral according to local industry practice. In most cases amounts due from airlines are settled on net basis via
an IATA clearing house.
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The
Group normally grants a credit term of 30 days to customers or follows the local industry standard with the debt in
certain circumstances being partially protected by bank guarantees or other monetary collateral.
The Group measures loss allowances for trade debtors at an amount equal to lifetime expected credit losses, which
is calculated using a provision matrix based on the Group’s historical credit loss experience. As the Group’s
historical credit loss experience does not indicate significantly different loss patterns for different customer bases,
the loss allowance based on past due status is assessed on a collective basis.
Expected loss rates are based on historical credit loss experience, adjusted for factors that are specific to the
debtors and an assessment of both the current and forecast general economic conditions at the reporting date.
At the reporting date there was no significant concentration of credit risk. The maximum exposure to credit risk is
represented by the carrying amount of each financial asset, including derivative financial instruments, in the
statement of financial position and the amount of guarantees granted as disclosed in note 28(b) to the financial
statements. Collateral and guarantees received in respect of credit terms granted at 31st December 2021 totalled
HK$579 million (2020: HK$636 million).
The movement in the expected credit loss allowance in respect of trade debtors during the year is set out in note 16
to the financial statements.
103
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
(b) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient liquid funds and the availability of an adequate
amount of committed undrawn credit facilities to meet obligations when due.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprising liquid funds and the undrawn
credit facilities below) on the basis of expected cash flows. In addition, the Group’s liquidity management policy
includes monitoring balance sheet liquidity ratios against internal and external benchmarks and maintaining debt
financing plans.
At the end of the reporting period, the Group held liquid funds (note 17 to the financial statements) of HK$19,284
million (2020: HK$19,341 million) that is available for managing liquidity risk.
(i) Financial arrangements
The Group had access to the following liquid funds and undrawn facilities at the end of the reporting period:
2021
HK$M
2020
HK$M
Liquid funds (note 17) 19,284 19,341
Less: amounts pledged as part of long-term financing
– debt securities listed outside Hong Kong (5) (6)
– bank deposits (134) (138)
Committed undrawn facilities 11,105 9,396
Available unrestricted liquidity to the Group 30,250 28,593
2021
HK$M
2020
HK$M
Uncommitted bank overdraft facilities 461 343
Other uncommitted bank facilities – 775
461 1,118
Due to the dynamic nature of the underlying businesses, the Group treasury function also maintains funding
flexibility through available committed and uncommitted credit facilities. Committed undrawn facilities may be
drawn at any time in either Hong Kong dollar or United States dollar. Uncommitted bank overdraft facilities and
other uncommitted bank facilities may be drawn at any time and may be terminated by the bank without notice.
(ii) Payment profile of financial liabilities
The undiscounted payment profile of financial liabilities is outlined as follows:
2021
Within
one year
HK$M
After one
year but
within two
years
HK$M
After two
years but
within five
years
HK$M
After five
years
HK$M
Total
HK$M
Group
Loans and other borrowings (17,206) (8,098) (27,522) (8,314) (61,140)
Lease liabilities (7,038) (6,635) (11,717) (12,766) (38,156)
Other long-term payables – (1,142) (1,536) (579) (3,257)
Trade and other payables (9,909) – – – (9,909)
Derivative financial liabilities, net (205) (152) (137) (5) (499)
Total (34,358) (16,027) (40,912) (21,664) (112,961)
104
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
2020
Within one
year
HK$M
After one
year but
within two
years
HK$M
After two
years but
within five
years
HK$M
After five
years
HK$M
Tot al
HK$M
Group
Loans and other borrowings (18,527) (11,808) (17,132) (12,891) (60,358)
Lease liabilities (7,519) (6,942) (14,445) (12,307) (41,213)
Other long-term payables – (1,072) (1,804) (835) (3,711)
Trade and other payables (11,065) – – – (11,065)
Derivative financial liabilities, net (1,283) (227) (281) (35) (1,826)
Total (38,394) (20,049) (33,662) (26,068) (118,173)
(c) Market risk
(i) Foreign currency risk
The Group’s revenue streams are denominated in a number of foreign currencies resulting in exposure to
foreign exchange rate fluctuations. The Group’s policy is to reduce foreign currency exposure on currencies
other than United States dollars. To manage this exposure, assets are, where possible, financed in those foreign
currencies in which sales transactions are anticipated, thus establishing a natural hedge. In addition, the Group
uses currency derivatives to reduce foreign currency exposure from highly probable forecast sales
transactions in foreign currencies. The use of foreign currency borrowings and currency derivatives to hedge
highly probable forecast sales transactions in foreign currencies is a key component of the financial risk
management process, as the change in value of the highly probable forecast sales transactions in foreign
currencies is effectively mitigated by the exchange differences realised on the repayment of foreign currency
borrowings and the settlement of currency derivatives.
Hedges of foreign currency risk
The following table details the carrying amount of foreign currency borrowings and the notional amount of
currency derivative contracts that have been designated as cash flow hedges of the Group’s highly probable
forecast sales transactions at the end of the reporting period:
2021
HK$M
2020
HK$M
Currency derivative contracts – outgoing currencies
Renminbi 668 1,236
Euros – 360
Australian dollars 51 308
New Taiwan dollars 75 413
Japanese yen – 208
Pound sterling – 290
Others – 547
Foreign currency borrowings
Japanese yen 3,719 4,575
105
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
2021
HK$M
2020
HK$M
Carrying amount of currency derivative contracts
Asset 2 –
Liability (10) (216)
Currency derivative assets are included in the “Other long-term receivables and investments” (note 11) and
“Trade and other receivables” (note 16), and currency derivative liabilities are included in the “Other long-term
payables” (note 13) and “Trade and other payables” (note 18) line items in the consolidated statement of
financial position respectively.
The foreign currency borrowings designated as hedging instruments to hedge forecast sales transactions will
mature over the next eight years (2020: nine years).
The Group considers the risk of movement in exchange rates between the Group’s functional currency,
which is Hong Kong dollars and the United States dollars to be insignificant under the existing currency peg.
Correspondingly, the Group uses currency forward contracts to manage the fluctuation in exchange rates
between foreign currencies and United States dollars. The currency forward contracts have a maturity of less
than two years (2020: one year) from the reporting date and have a weighted average forward exchange rate
between the respective foreign currencies and United States dollars as follows:
2021
USD to
2020
USD to
Renminbi 6.54 7.12
Euros – 0.87
Australian dollars 1.35 1.44
New Taiwan dollars 27.59 29.61
Japanese yen – 104.97
Pound sterling – 0.77
The Group designates currency forward contracts as hedging instruments in cash flow hedges and does not
separate the forward and spot element of a currency forward contract but instead designates the currency
forward contract in its entirety in a hedging relationship.
The Group applies a hedge ratio of 1:1 and determines the existence of an economic relationship between
theforeign currency borrowings and currency derivative contracts, and the highly probable forecast sales
transactions based on their currency types, currency amounts and the timing of their respective cash flows.
The main sources of ineffectiveness in these hedging relationships are:
– the effect of the counterparty’s and the Group’s own credit risk on the fair value of the currency forward
contracts which is not reflected in the fair value of the hedged cash flows attributable to the change in
forward rates; and
– changes in the timing of the hedged transactions.
106
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
The following table provides a reconciliation of the hedging reserve in respect of foreign currency risk and
shows the effectiveness of the hedging relationships:
2021
HK$M
2020
HK$M
Balance at 1st January 418 1,004
Effective portion of the cash flow hedge recognised in other
comprehensive income 436 (416)
Amounts reclassified to profit or loss* (165) (239)
Related tax (24) 69
Balance at 31st December** 665 418
Change in fair value of the derivative instruments during the year 436 (416)
Hedge ineffectiveness recognised in profit or loss – –
Effective portion of the cash flow hedge recognised in other
comprehensive income 436 (416)
* Amount reclassified to profit or loss are recognised in “Passenger services revenue” and “Cargo services revenue” in the
consolidated statement of profit or loss. HK$115 million is recognised in “Other expenses” in the consolidated statement of profit
or loss as a result of discontinued hedge accounting relating to forecast sales transaction no longer expected to occur (2020:
insignificant).
** At 31st December 2021, the Group had HK$260 million (net of deferred tax) in the hedging reserve from discontinued hedges
(2020: HK$417 million, net of deferred tax).
Exposure to currency risk
The currencies giving rise to a risk of translation in the Group’s financial statements in 2021 are primarily United
States dollars, Euros, Australian dollars, Singapore dollars, Renminbi and Japanese yen (2020: United States
dollars, Euros, Australian dollars, Singapore dollars, Renminbi and Japanese yen).
At the reporting date, the exposure to these currencies in relation to recognised assets and liabilities was
asfollows:
2021
USD
HK$M
EUR
HK$M
AUD
HK$M
SGD
HK$M
RMB
HK$M
JPY
HK$M
Group
Loans due from an associate 81 – – – – –
Trade debtors and other receivables 4,348 217 73 19 1,721 201
Liquid funds 16,253 134 29 14 243 127
Loans and other borrowings (39,323) – – (1,008) (279) (755)
Lease liabilities (26,698) (28) (48) (16) (113) (3,928)
Trade creditors and other payables (3,351) (93) (62) (41) (306) (73)
Net exposure (48,690) 230 (8) (1,032) 1,266 (4,428)
2020
USD
HK$M
EUR
HK$M
AUD
HK$M
SGD
HK$M
RMB
HK$M
JPY
HK$M
Group
Loans due from an associate 290 – – – – –
Trade debtors and other receivables 2,556 207 90 16 731 187
Liquid funds 15,820 40 33 13 475 42
Loans and other borrowings (42,780) – – (1,021) – (1,044)
Lease liabilities (28,070) (46) (58) (11) (76) (4,405)
Trade creditors and other payables (3,307) (118) (39) (45) (200) (139)
Net exposure (55,491) 83 26 (1,048) 930 (5,359)
107
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
Sensitivity analysis for foreign currency exposure
A five percent appreciation of the Hong Kong dollar against the following currencies at the reporting date would
have resulted in a change in profit or loss and other equity components by the amounts shown below. It
represents the translation of financial assets and liabilities and the change in fair value of currency derivatives
at the reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant.
It has been performed on the same basis as for 2020.
2021
Net increase/(decrease)
in profit or loss
HK$M
Net increase/(decrease)
in other equity components
HK$M
United States dollars* 2,533 (109)
Euros (11) –
Australian dollars (2) 2
Singapore dollars 52 –
Renminbi (56) 29
Japanese yen 36 186
Net increase 2,552 108
2020
Net increase/(decrease)
in profit or loss
HK$M
Net increase/(decrease)
in other equity components
HK$M
United States dollars* 2,702 (128)
Euros 2 16
Australian dollars 2 14
Singapore dollars 54 4
Renminbi (38) 41
Japanese yen 47 238
Net increase 2,769 185
* Hong Kong dollars is pegged with United States dollars between the range of 7.75 to 7.85 (US$: HK$). The above analysis on five
percent appreciation of Hong Kong dollars against United States dollars is for illustrative purpose only.
(ii) Interest rate risk
The Group’s exposure to interest rate risk arises primarily from long-term borrowings. Interest rate swaps are
used to achieve an appropriate mix of fixed rate and floating rate exposure consistent with the Group’s policy.
Interest rate risk is measured by using sensitivity analysis on variable rate financial instruments.
Managing interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the
replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as “IBOR
reform”). The Group has financial instruments referenced to USD London Interbank Offered Rate (USD LIBOR),
Hong Kong Interbank Offered Rate (HIBOR) and JPY Tokyo Interbank Offered Rate (Tokyo TIBOR).
108
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
In March 2021, the UK Financial Conduct Authority formally announced the future cessation or non-
representativeness of the following LIBOR benchmark settings:
– all sterling, euro, Swiss Franc, Japanese yen LIBOR after 31st December 2021;
– 1-week and 2-month USD LIBOR after 31st December 2021 and;
– overnight, 1-month, 3-month, 6-month and 12-month USD LIBOR after 30th June 2023.
In Hong Kong, the Hong Kong Monetary Authority still recognises HIBOR as a credible and reliable benchmark
and confirms that there is no plan to discontinue HIBOR although an alternative, the Hong Kong Dollar
Overnight Index Average (HONIA) has already been identified.
In Japan, the JPY TIBOR which has been reformed since 2017 continues to retain its importance as an
alternative benchmark for JPY LIBOR, particularly in the loan market.
The Group does not hold any financial instruments referenced to 1-week and 2-month USD LIBOR and as such
there are no contracts required to be replaced by 31st December 2021. The Group’s financial instruments
referenced to HIBOR and JPY TIBOR are not expected to be impacted by the IBOR reform.
The Finance Committee monitors the Group’s transition to alternative benchmark rates. The Group’s treasury
function is closely monitoring the market development on IBOR reform and have commenced discussion with
counterparties on contracts that need to be amended as a result of the reform, but specific changes have yet
to be agreed.
Derivatives
The Group holds interest rate swaps for risk management purposes which are designated in cash flow hedging
relationships. The interest rate swaps have variable rate cash flows that are referenced to either USD LIBOR or
HIBOR. The Group’s derivative instruments are governed by contracts based on the International Swaps and
Derivatives Association’s (ISDA) master agreements. The Group and all its contracted derivatives
counterparties have adhered to the ISDA 2020 IBOR Fallbacks Protocol.
As of 31st December 2021, the Group has not moved any existing contracts to alternative benchmark rates.
The Group’s USD LIBOR-linked financial instruments that need to be but have yet to transitioned to alternative
benchmark rates as at 31st December 2021 are as below:
– a carrying amount of US$5,476 million of variable rate interest-bearing liabilities referenced to 1-month,
3-month and 6-month USD LIBOR;
– a nominal amount of US$905 million of interest rate swaps designated as hedging instruments and a
nominal amount of US$180 million of interest rate swaps not designated as hedging instruments. These
interest rate swaps are referenced to 1-month, 3-month and 6-month USD LIBOR.
Hedge accounting
The Group’s evaluation of the extent to which its hedging relationships are subject to uncertainty as a result of
IBOR reform is outlined below.
The Group has USD LIBOR cash flow hedging relationships which are referenced to 1-month, 3-month and
6-month LIBOR with maturities over the next six years, hence beyond the cessation date of 30th June 2023.
The preferred alternative benchmark rate for USD LIBOR is the Secured Overnight Financing Rate (SOFR).
However, there is uncertainty about the timing and precise nature of changes with respect to the relevant
hedged items and hedging instruments which hinges on the market developments and the response of the
contracted counterparties.
109
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
As uncertainty on USD LIBOR transition is still present, the Group continues to apply the phase 1 amendments
to HKFRS 9 which provide accounting reliefs to hedging relationships directly affected by uncertainties arising
from IBOR reform. The accounting reliefs applied are outlined below:
– When considering the highly probable requirement, the Group has assumed that the USD LIBOR interest
rates on which the Group’s hedged items are based do not change as a result of IBOR reform.
– In assessing whether the hedging relationship is effective on a forward-looking basis the Group has
assumed that the USD LIBOR interest rates on which the cash flows of the hedged items and the
associated interest rate swaps are based are not altered by IBOR reform.
Hedges of interest rate risk
The following table details the interest rate swaps that have been designated as cash flow hedges of the
interest rate risk inherent in the Group’s variable rate financing liabilities at the end of the reporting period:
2021
HK$M
2020
HK$M
Notional amount
United States dollars 7,062 11,100
Hong Kong dollars 657 752
2021
HK$M
2020
HK$M
Carrying amount
Asset – –
Liability (268) (605)
Interest rate swap assets are included in the “Other long-term receivables and investments” (note 11) and
“Trade and other receivables” (note 16), and interest rate swap liabilities are included in the “Other long-term
payables” (note 13) and “Trade and other payables” (note 18) line items in the consolidated statement of
financial position respectively.
The swaps will mature over the next six years matching the maturity of the related financing liabilities and have
fixed swap rates ranging from 2.68% to 4.29% (2020: 2.68% to 4.29%).
The Group seeks to hedge the benchmark interest rate component only and applies a hedge ratio of 1:1. The
existence of an economic relationship between the interest rate swaps and the variable rate borrowings is
determined by matching their critical contract terms, including the reference interest rates, tenors, interest
repricing dates, maturity dates, interest payment dates, the notional amounts of the swaps and the outstanding
principal amounts of the financing liabilities.
The main source of ineffectiveness in these hedging relationships is the effect of the counterparty’s and the
Group’s own credit risk on the fair value of the swaps which is not reflected in the fair value of the hedged cash
flows attributable to the change in interest rates.
110
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
The following table provides a reconciliation of the hedging reserve in respect of interest rate risk and shows
the effectiveness of the hedging relationships:
2021
HK$M
2020
HK$M
Balance at 1st January (613) (319)
Effective portion of the cash flow hedge recognised in other
comprehensive income 114 (638)
Amounts reclassified to profit or loss* 243 314
Related tax (36) 30
Balance at 31st December** (292) (613)
Change in fair value of the derivative instruments during the year 114 (638)
Hedge ineffectiveness recognised in profit or loss – –
Effective portion of the cash flow hedge recognised in other
comprehensive income 114 (638)
* Amounts reclassified to profit or loss are recognised in “Finance charges” in the consolidated statement of profit or loss. No
amount was reclassified to profit or loss from discontinued hedge accounting relating to early termination of financing liabilities
(2020: HK$105 million).
** The entire balance in the hedging reserve relates to continuing hedges.
Interest rate profile
At the reporting date, the interest rate profile of the interest-bearing financial instruments was as follows:
2021
HK$M
2020
HK$M
Fixed rate instruments
Loan due from an associate 16 16
Loans and other borrowings (19,574) (8,367)
Lease liabilities (19,245) (21,191)
Interest rate and cross currency interest rate swaps (9,152) (13,664)
Net exposure (47,955) (43,206)
2021
HK$M
2020
HK$M
Variable rate instruments
Loan due from an associate 81 290
Liquid funds 19,284 19,341
Loans and other borrowings (35,548) (47,128)
Lease liabilities (15,487) (16,443)
Interest rate and cross currency interest rate swaps 9,124 13,583
Net exposure (22,546) (30,357)
111
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
Sensitivity analysis for interest rate exposure
An increase of 25 basis points in interest rates at the reporting date would have decreased profit or loss and
increased other equity components by the amounts shown below. It represents the change in fair value of
interest rate swaps and financial liabilities designated at fair value through profit or loss at the reporting date
and the increase in net finance charges on variable rate financial instruments. The analysis assumes that all
other variables, in particular foreign currency rates, remain constant. It has been performed on the same basis
as for 2020.
2021 2020
Net decrease
in profit
or loss
HK$M
Net increase in
other equity
components
HK$M
Net decrease
in profit
or loss
HK$M
Net increase in
other equity
components
HK$M
Variable rate instruments (65) 31 (88) 54
(iii) Fuel price risk
Jet fuel is a major component of the Group’s operating expenses and the Group’s results are significantly
affected by the volatility in the price of jet fuel. The Group’s policy is to reduce fuel price risk by hedging a
percentage of its expected fuel consumption. Crude oil swaps which are economically equivalent to forward
contracts are used to achieve the Group’s desired hedging position.
Hedges of fuel price risk
The following table details the crude oil forward contracts that have been designated as cash flow hedges of
the Group’s highly probable forecast fuel purchase transactions at the end of the reporting period:
2021 2020
Notional amount Barrel (million) 15.2 21.2
Carrying amount
Asset HK$M 1,710 333
Liability HK$M (35) (566)
Crude oil forward contract assets are included in the “Other long–term receivables and investments” (note 11)
and “Trade and other receivables” (note 16), and crude oil forward contract liabilities are included in the “Other
long-term payables” (note 13) and “Trade and other payables” (note 18) line items in the consolidated statement
of financial position respectively.
The crude oil forward contracts have a maturity of less than two years (2020: two years) from the reporting date
and have a weighted average strike price (Brent, US$/barrel) as follows:
2021
US$/barrel
2020
US$/barrel
Within one year 52.82 56.29
After one year but within two years 66.76 47.18
The price risk of jet fuel purchases includes a crude oil price risk component, even though crude oil is not
specified in any contractual arrangement. The Group considers the crude oil component to be a separately
identifiable and reliably measureable component of jet fuel price. As such, crude oil forward contracts are
designated as a hedge of the crude oil risk component of highly probable forecast fuel purchase transactions.
The Group seeks to hedge the crude oil price risk component only and applies a hedge ratio of 1:1. The main
source of ineffectiveness in these hedging relationships is the effect of the counterparty’s and the Group’s own
credit risk on the fair value of the crude oil forward contracts which is not reflected in the fair value of the
hedged cash flows attributable to the change in crude oil price.
112
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
The following table provides a reconciliation of the hedging reserve in respect of fuel price risk and shows the
effectiveness of the hedging relationships:
2021
HK$M
2020
HK$M
Balance at 1st January (212) (51)
Effective portion of the cash flow hedge recognised in other
comprehensive income 4,134 (3,207)
Amounts reclassified to profit or loss* (1,914) 3,030
Related tax (207) 16
Balance at 31st December** 1,801 (212)
Change in fair value of the derivative instruments during the year 4,134 (3,207)
Hedge ineffectiveness recognised in profit or loss – –
Effective portion of the cash flow hedge recognised in other
comprehensive income 4,134 (3,207)
* Amounts reclassified to profit or loss are recognised in “Fuel, including hedging losses” in the consolidated statement of profit or
loss. HK$537 million of the total amount are the result of discontinued hedge accounting relating to forecast fuel consumptions no
longer expected to occur (2020: loss of HK$315 million).
** As at 31st December 2021, the Group had HK$282 million (net of deferred tax) in the hedging reserve from discontinued hedges
(2020: nil, net of deferred tax).
Sensitivity analysis for fuel price exposures
An increase/(decrease) of five percent in the crude oil price at the reporting date would have resulted in a
change in profit or loss and other equity components by the amounts shown below. It represents the change in
fair value of crude oil forward contracts at the reporting date. The analysis assumes that all other variables
remain constant and it has been performed on the same basis as for 2020.
2021 2020
Net
increase
in profit or
loss
HK$M
Net increase/
(decrease) in
other equity
components
HK$M
Net
increase
in profit or
loss
HK$M
Net increase/
(decrease) in
other equity
components
HK$M
Increase in crude oil price by 5% 32 392 71 376
Decrease in crude oil price by 5% (32) (392) (71) (376)
(d) Fair values of financial assets and liabilities carried at other than fair value
The carrying amounts of the Group’s financial instruments carried at cost or amortised cost were not materially
different from their fair values at 31st December 2021 and 2020 except for the following financial instruments, for
which their carrying amounts and fair values are shown below:
2021 2020
Carrying
amount
HK$M
Fair value
HK$M
Carrying
amount
HK$M
Fair value
HK$M
Loans and other borrowings (55,122) (59,730) (55,495) (57,692)
The fair value of these financial instruments are measured using valuation techniques in which all significant inputs
are based on observable market data. The most significant inputs are market interest rates.
113
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
(e) Financial instruments carried at fair value
The following table presents the carrying value of financial instruments measured at fair value at 31st December
2021 across three levels of the fair value hierarchy defined in HKFRS 13 “Fair Value Measurement” with the fair value
of each financial instrument categorised in its entirety based on the lowest level of input that is significant to that
fair value measurement. Level 1 includes financial instruments with fair values measured using only unadjusted
quoted prices in active markets for identical assets or liabilities. Level 2 includes financial instruments with fair
values measured using inputs other than quoted prices within Level 1 that are observable for the asset or liability,
either directly or indirectly. The fair value has been determined based on quotes from market makers or discounted
cash flow valuation techniques in which all significant inputs are based on observable market data. The most
significant inputs are market interest rates, exchange rates and fuel price. Level 3 includes financial instruments
with fair values measured using discounted cash flow valuation techniques in which any significant input is not
based on observable market data.
2021 2020
Level 1
HK$M
Level 2
HK$M
Level 3
HK$M
Total
HK$M
Level 1
HK$M
Level 2
HK$M
Level 3
HK$M
Tot al
HK$M
Recurring fair value measurement
Assets
Unlisted equity investments at fair value – – 756 756 – – 815 815
Liquid funds
– funds with investment managers – 10,470 – 10,470 – 12,648 – 12,648
– other liquid investments – 5 – 5 – 6 – 6
Derivative financial assets – 2,002 – 2,002 – 333 – 333
– 12,477 756 13,233 – 12,987 815 13,802
Liabilities
Derivative financial liabilities – (370) – (370) – (1,810) – (1,810)
– (370) – (370) – (1,810) – (1,810)
There were no transfers between Level 1 and Level 2 or transfers into or out of Level 3 fair value hierarchy
classifications.
The fair value of the unlisted equity investments in Level 3 is determined using discounted cash flow valuation
techniques. The significant unobservable input used in the fair value measurement is the discount rate. At
31stDecember 2021 and 2020, information about fair value measurements using significant unobservable inputs
(Level 3) is as follows:
Significant
unobservable inputs
Range of
unobservable inputs
Relationship of unobservable
inputs to fair value
Possible reasonable
change
(Negative)/positive
impact on fair value
(HK$M)
Unlisted equity
investments
Discount rate 2021: 7.9-10.0%
(2020: 7.0-9.5%)
The higher the discount rate,
the lower the fair value
2021: +/- 0.5%
(2020: +/- 0.5%)
2021: (26)/29
(2020: (50)/5)
The movement during the year in the balance of Level 3 fair value measurements is as follows:
2021
HK$M
2020
HK$M
Unlisted equity investments at fair value
At 1st January 815 886
Additions – 8
Unrealised losses recognised in other comprehensive income during the year (5) –
Fair value losses recognised in profit or loss during the year (54) (79)
At 31st December 756 815
114
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
Any gain or loss arising from the remeasurement of the Group’s equity investments held for strategic purposes are
recognised in the investment revaluation reserve (non-recycling) in other comprehensive income. Upon disposal
ofthe equity investments, the amount accumulated in other comprehensive income is transferred directly to
retained earnings.
Any gain or loss arising from the remeasurement of the Group’s equity investments held for trading purposes are
recognised in profit or loss as “Others”.
(f) Offsetting financial assets and financial liabilities
The Group enters into derivative transactions under ISDA master agreements, providing offsetting in the event of
default. The ISDA agreements do not meet the criteria for offsetting in the statement of financial position. This is
because the Group does not currently have any legally enforceable right to offset recognised amounts, as the
rightto offset is enforceable only on the occurrence of future events such as default on the bank loans or other
credit events.
The table below illustrates the net amounts of financial instruments with the same counterparty:
2021
Amount of financial
assets/(liabilities)
presented in the statement of
financial position
HK$M
Financial instruments
not offset in the
statement of financial
position
HK$M
Net amount
HK$M
Group
Derivative financial assets 2,002 (106) 1,896
Derivative financial liabilities (370) 106 (264)
1,632 – 1,632
2020
Amount of financial
assets/(liabilities)
presented in the statement of
financial position
HK$M
Financial instruments
not offset in the
statement of financial
position
HK$M
Net amount
HK$M
Group
Derivative financial assets 333 (125) 208
Derivative financial liabilities (1,810) 125 (1,685)
(1,477) – (1,477)
30. CAPITAL RISK MANAGEMENT
The Group’s objectives when managing capital are to maintain an efficient mix of debt and equity in order to achieve
alow cost of capital, whilst taking into account the desirability of retaining financial flexibility to pursue business
opportunities and adequate access to liquidity to mitigate the effect of unforeseen events, such as the COVID-19
pandemic, on cash flows.
The Group regards the net debt/equity ratio and adjusted net debt/equity ratio (excluding leases without assets transfer
components) as the key measurements of capital risk management. The components and calculation of the net debt/
equity ratio and adjusted net debt/equity ratio are shown in note 12 to the financial statements and a ten year history of
net debt/equity ratio is included on pages 130 and 131 of the annual report. The Group’s strategy is to maintain the
adjusted net debt/equity ratio within its debt covenants of 2.
The Group is not subject to externally imposed capital requirements.
During the year ended 31st December 2021, no significant changes were made in the objectives, policies or processes
relating to the management of the Group’s capital risk management.
115
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
31. COMPANY-LEVEL STATEMENT OF FINANCIAL POSITION
Note
2021
HK$M
2020
HK$M
2021
US$M
2020
US$M
ASSETS AND LIABILITIES
Non-current assets and liabilities
Property, plant and equipment 104,904 109,527 13,449 14,042
Intangible assets 10,856 10,898 1,392 1,397
Investments in subsidiaries 32,303 32,483 4,141 4,164
Investments in associates 10,587 10,796 1,357 1,384
Other long-term receivables and investments 2,573 2,206 330 283
161,223 165,910 20,669 21,270
Interest-bearing liabilities (60,565) (61,118) (7,765) (7,836)
Other long-term payables (2,245) (2,358) (288) (302)
Other long-term contract liabilities (478) – (61) –
Deferred tax liabilities (9,026) (10,352) (1,157) (1,327)
(72,314) (73,828) (9,271) (9,465)
Net non-current assets 88,909 92,082 11,398 11,805
Current assets and liabilities
Stock 1,220 1,522 156 195
Trade and other receivables 6,673 5,377 856 690
Liquid funds 7,418 6,070 951 778
15,311 12,969 1,963 1,663
Interest-bearing liabilities (21,469) (23,150) (2,752) (2,968)
Trade and other payables (7,411) (8,743) (950) (1,121)
Contract liabilities (7,688) (7,892) (986) (1,012)
Taxation (2,084) (1,478) (267) (189)
(38,652) (41,263) (4,955) (5,290)
Net current liabilities (23,341) (28,294) (2,992) (3,627)
Total assets less current liabilities 137,882 137,616 17,677 17,643
Net assets 65,568 63,788 8,406 8,178
CAPITAL AND RESERVES
Share capital 20 48,322 48,322 6,195 6,195
Reserves 22 17,246 15,466 2,211 1,983
Total equity 65,568 63,788 8,406 8,178
The financial statements are prepared and presented in HK$, the functional currency. The US$ figures are shown only as
supplementary information and are translated at US$1:HK$7.8.
Patrick Healy John Harrison
Director Director
Hong Kong, 9th March 2022
116
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
32. IMPACTS OF COVID-19
The outbreak of COVID-19 in 2020 has continued to pose significant challenges for the Group and has impacted the
Group’s operations and financial position in 2021.
(a) Liquidity and going concern
The Group’s cost base and cash outflows were reduced through several measures. Capacity was cut in response to
COVID-19. Executive pay was cut for 2021 and a third unpaid leave scheme was introduced in the first half of 2021
with an 80% voluntary uptake. A range of employee furlough, leave without pay, voluntary separation and early
retirement schemes were implemented globally for a broad range of employee groups. Redundancy initiatives
wereimplemented in several regions. One off redundancy costs amounted to HK$385 million during 2021
(2020:HK$2,383 million).
Cost containment measures, along with strong cargo performance during the year resulted in net cash inflows from
operating activities of HK$8.8 billion (2020: outflows of HK$14.3 billion).
The Group raised new financing in excess of HK$13 billion during the year. Available unrestricted liquidity for the
Group was HK$30,250 million (2020: HK$28,593 million).
Management have assessed cash flow forecasts under various scenarios, including downside assumptions of
route restrictions, tight aircrew quarantine requirements and heavily subdued passenger demand across the
Group’s network through the forecast period. The Group will continue to benefit from costs savings resulting from
restructuring and remains focused on maintaining our passenger and cargo networks as far as possible and will try
to increase our cargo capacity as much as practical. Management are of the opinion that the Group has sufficient
unrestricted liquidity for at least the next 12 months from the date of approval of the consolidated financial
statements. Accordingly management concludes that it is appropriate to prepare the financial statements on a
going concern basis.
(b) Asset carrying values
Following significant changes in the operating environment for the Group, management has reviewed the
recoverable amounts of its cash generating units, non-financial assets and investments.
Impairment and related charges of HK$818 million (2020: HK$4,056 million) was recognised for the reduction in
asset values (HK$865 million, note 8 to the financial statements) mainly on a further 12 aircraft that are unlikely to
re-enter meaningful economic service again before their retirement or return to lessors, an offsetting adjustment to
the provision for fulfilling lease return conditions of leased aircraft included therein (HK$302 million net credit). In
addition, impairments on certain aircraft related equipment of HK$96 million, engineering and inflight services stock
of HK$110 million and HK$49 million on building related assets arose resulting from COVID-19 conditions.
No other impairment was identified for the Group’s cash generating units, non-financial assets and investments.
(c) Over-hedging
With reduced actual and forecast flying activity, the Group’s fuel hedging contract volumes exceeded probable fuel
consumption forecasts. A HK$537 million gain was released from the cash flow hedge reserve to the profit and loss
in respect of fuel over-hedging (2020: HK$315 million loss).
Similarly, with the reduction in expected revenues, a HK$115 million gain (2020: insignificant) on over-hedged
foreign currency revenues, mostly in relation to foreign currency borrowings designated as hedging instruments,
was released from the cash flow hedge reserve to the profit and loss.
(d) Government grants and other assistance
The Group recognised HK$1,460 million (2020: HK$2,689 million) of government grants globally, mostly as a result
of COVID-19.
HK$241 million (2020: HK$1,503 million) in respect of income grants, net of penalties paid, are presented as revenue
from other services and recoveries. HK$1,219 million (2020: HK$1,186 million) in relation to cost reductions and
waivers are presented net of the respective cost categories. Key sources of both income grants and cost
reductions and waivers are presented below. There were no unfulfilled conditions or contingencies attached to the
grants at the year end.
117
Cathay Pacific Airways Limited Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Supplementary Information
32. IMPACTS OF COVID-19 (continued)
(i) Hong Kong
Cost reductions were predominantly from the Hong Kong Airport Authority, representing HK$1,109 million
(2020: HK$1,080 million) discounts and waivers on airport facility costs.
(ii) Outport
A total of HK$248 million (2020: HK$368 million) was recognised from outport governments, the majority of
which relates to employment support schemes and is presented as revenue from other services and
recoveries.
(e) COVID-19 related rent concessions
In 2021, the Group received rent concessions in the form of a discount on fixed payments as a direct consequence
of the COVID-19 pandemic.
Rent concessions of HK$301 million (2020: HK$316 million) received have been accounted for as negative variable
lease payments recognised in profit or loss. This is allowable under the Amendment to HKFRS 16, applying the
practical expedient under COVID-19-Related Rent Concessions which has been extended to concessions up to
30th June 2022. This amount includes concessions of HK$261 million (2020: HK$266 million) received from
government vendors during the year and included as government grants and other assistance as disclosed in Note
32(d) above.
118
Cathay Pacific Airways Limited Annual Report 2021
SUBSIDIARIES
Place of
incorporation/
establishment
and operation Principal activities
Percentage of
issued capital
owned
Issued and paid up share
capital and
debt securities
AHK Air Hong Kong Limited Hong Kong Cargo airline 100 1,000,000 shares
Airline Property Limited Hong Kong Property investment 100 2 shares
Airline Stores Property Limited Hong Kong Property investment 100 2 shares
Airline Training Property Limited Hong Kong Property investment 100 2 shares
Asia Miles Limited Hong Kong Travel reward programme 100 2 shares
Cathay Holidays Limited Hong Kong Travel tour operator 100 40,000 shares
Cathay Pacific Aero Limited Hong Kong Financial services 100 1 share
Cathay Pacific Aircraft Leasing
(H.K.) Limited
Hong Kong Aircraft leasing facilitator 100 1 share
Cathay Pacific Aircraft Services
Limited
Isle of Man Aircraft acquisition
facilitator
100 10,000 shares of US$1 each
Cathay Pacific Catering Services
(H.K.) Limited
Hong Kong Airline catering 100 600 shares
Cathay Pacific Finance III Limited Cayman
Islands
Financial services 100 1 share of US$1
Cathay Pacific MTN Financing
Limited
Cayman
Islands
Financial services 100 1 share of US$1
Cathay Pacific MTN Financing (HK)
Limited
Hong Kong Financial services 100 1 share
Cathay Pacific Services Limited Hong Kong Cargo terminal 100 1 share
Deli Fresh Limited Hong Kong Catering 100 20 shares
Global Logistics System (HK)
Company Limited
Hong Kong Computer network for
interchange of air cargo
related information
95 100 shares
Guangzhou Guo Tai Information
Processing Company Limited
People’s
Republic of
China
Information processing 100* Registered capital of
HK$8,000,000 (wholly
foreign owned enterprise)
Hong Kong Airport Services
Limited
Hong Kong Aircraft ramp handling 100 100 shares
Hong Kong Aviation and Airport
Services Limited
Hong Kong Property investment 100* 2 shares
Hong Kong Express Airways
Limited
Hong Kong Operation of scheduled
airline services
100 1,000,000 shares
Troon Limited Bermuda Financial services 100 12,000 shares of US$1 each
Vogue Laundry Service Limited Hong Kong Laundry and dry cleaning 100 3,700 shares
Principal subsidiaries and associates are those which materially affect the results or assets of the Group.
All shares are ordinary shares unless otherwise stated.
* Shareholding held through subsidiaries.
PRINCIPAL SUBSIDIARIES AND ASSOCIATES
at 31st December 2021
119
Cathay Pacific Airways Limited Annual Report 2021
PRINCIPAL SUBSIDIARIES AND ASSOCIATES
ASSOCIATES
Place of
incorporation/
establishment and
operation Principal activities
Percentage
of issued
capital owned
Air China Cargo Co., Ltd. People’s Republic
of China
Cargo carriage service 12.24**
Air China Limited People’s Republic
of China
Airline 18.13
Cebu Pacific Catering Services Inc. Philippines Airline catering 40*
Ground Support Engineering Limited Hong Kong Airport ground engineering
support and equipment
maintenance
50*
HAECO ITM Limited Hong Kong Inventory technical
management services
30
LSG Lufthansa Service Hong Kong Limited Hong Kong Airline catering 31.94*
Shanghai International Airport Services Co., Limited People’s Republic
of China
Ground handling 25*
Vehicle Engineering Services Limited Hong Kong Repair and maintenance
services for transportation
companies
50*
* Shareholding held through subsidiaries.
** Shareholding held through a subsidiary at 12.24%, another 11.75% held through an economic interest with total holding at 24%.
120
Cathay Pacific Airways Limited Annual Report 2021
1. BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting
Standards (“HKFRSs”) (which include all applicable Hong Kong Accounting Standards (“HKAS”), Hong Kong Financial
Reporting Standards and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”),
accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance.
These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of
Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).
The measurement basis used is historical cost modified by the use of fair value for certain financial assets and liabilities
as explained in accounting policies 8, 9, 10, 11 and 14 below.
The preparation of the financial statements in conformity with HKFRSs requires management to make certain estimates
and assumptions which affect the amounts of property, plant and equipment, intangible assets, long-term investments,
retirement benefit obligations and taxation included in the financial statements. These estimates and assumptions are
continually re-evaluated and are based on management’s expectations of future events which are considered to be
reasonable. Further details on these estimates and assumptions are disclosed in notes 8, 9, 29(e), 14 and 15 to the
financial statements, respectively.
The HKICPA has issued the following amendments to Hong Kong Financial Reporting Standards (“HKFRSs”) for the
current accounting period of the Group.
• Amendment to HKFRS 16 “COVID-19-related rent concessions beyond 30th June 2021”
• Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 “Interest Rate Benchmark Reform – Phase 2”
The Group has early adopted the amendment to HKFRS 16. The Group has not early adopted any other new standards or
interpretations that are not yet effective for the current accounting period.
Amendment to HKFRS 16 “COVID-19-Related Rent Concessions beyond 30th June 2021”
The Group previously applied the practical expedient in HKFRS 16 such that as lessee it was not required to assess
whether rent concessions occurring as a direct consequence of the COVID-19 pandemic were lease modifications,
ifthe eligibility conditions are met. One of these conditions requires that the reduction in lease payments affect only
payments originally due on or before a specified time limit. The 2021 amendment extends this time limit from 30th June
2021 to 30th June 2022.
The eligible rent concessions are accounted for as negative variable lease payments, and are recognised in profit or loss
in the period in which the event or condition that triggers those payments occurred.
There is no impact on the opening balance of equity at 1st January 2021.
Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 “Interest Rate Benchmark Reform –
Phase 2”
The amendments provide targeted reliefs from accounting for changes in the basis for determining contractual cash
flows of financial assets, financial liabilities and lease liabilities as modifications, and discontinuing hedge accounting
when an interest rate benchmark is replaced by an alternative benchmark rate as a result of the reform of interbank
offered rates (“IBOR reform”). The amendments do not have an impact on these financial statements as the Group has
not moved any existing contracts to alternative benchmark rates.
2. BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made
up to 31st December together with the Group’s share of the results and net assets of its associates. Subsidiaries are
entities controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
PRINCIPAL ACCOUNTING POLICIES
121
Cathay Pacific Airways Limited Annual Report 2021
PRINCIPAL ACCOUNTING POLICIES
2. BASIS OF CONSOLIDATION (continued)
The results of subsidiaries are included in the consolidated statement of profit or loss and other comprehensive income.
Where interests have been bought or sold during the year, only those results relating to the period of control are
included in the financial statements.
Goodwill represents the excess of the cost of subsidiaries and associates over the fair value of the Group’s share of
thenet assets at the date of acquisition. Goodwill is recognised at cost less accumulated impairment losses. Goodwill
arising from the acquisition of subsidiaries is allocated to cash-generating units and is tested annually for impairment.
On disposal of a subsidiary or an associate, goodwill is included in the calculation of any gain or loss.
Non-controlling interests in the consolidated statement of financial position comprise the outside shareholders’
proportion of the net assets of subsidiaries and are treated as a part of equity. In the consolidated statement of profit or
loss and other comprehensive income, non-controlling interests are disclosed as an allocation of the profit or loss and
total comprehensive income for the year. Loans from holders of non-controlling interests are presented as financial
liabilities in the consolidated statement of financial position in accordance with accounting policy 9.
In the Company’s statement of financial position, investments in subsidiaries are stated at cost less any impairment loss
recognised and intra-Group balances with those companies. The results of subsidiaries are accounted for by the
Company on the basis of dividends received and receivable.
3. ASSOCIATES
Associates are those companies, not being subsidiaries, in which the Group holds a substantial long-term interest in the
equity share capital and over which the Group is in a position to exercise significant influence.
The consolidated statement of profit or loss and other comprehensive income includes the Group’s share of results of
associates as reported in their financial statements made up to dates not earlier than three months prior to 31st
December. In the consolidated statement of financial position, investments in associates represent the Group’s share of
net assets, goodwill arising on acquisition of the associates (less any impairment) and loans to those companies.
In the Company’s statement of financial position, investments in associates are stated at cost less any impairment loss
recognised and loans to those companies. The results of associates are accounted for by the Company on the basis of
dividends received and receivable.
4. FOREIGN CURRENCIES
Foreign currency transactions entered into during the year are translated into Hong Kong dollars at the market rates
ruling at the relevant transaction dates whilst the following items are translated at the rates ruling at the reporting date:
(a) foreign currency denominated financial assets and liabilities.
(b) assets and liabilities of foreign subsidiaries and associates.
Exchange differences arising on the translation of foreign currencies into Hong Kong dollars are reflected in profit or
loss except that:
(a) unrealised exchange differences on foreign currency denominated financial assets and liabilities, as described in
accounting policies 8, 9 and 10 below, that qualify as effective cash flow hedge instruments under HKFRS 9
“Financial Instruments” are recognised in other comprehensive income and accumulated separately in equity via
the statement of changes in equity. These exchange differences are included in profit or loss as an adjustment to
the hedged item in the same period or periods during which the hedged item affects profit or loss.
(b) unrealised exchange differences on net investments in foreign subsidiaries and associates (including intra-Group
balances of an equity nature) and related long-term liabilities are recognised in other comprehensive income and
accumulated separately in equity via the statement of changes in equity.
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Cathay Pacific Airways Limited Annual Report 2021
PRINCIPAL ACCOUNTING POLICIES
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated depreciation and impairment.
The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of
bringing the asset to working condition for its intended use. The cost relating toan acquired (owned or leased) aircraft
reflects all components in its full service potential excluding the maintenance condition of its landing gear, airframe and
engines. The cost relating to the maintenance element is identified on acquisition as a separate component and
depreciated till its next major maintenance event. Expenditure for heavy maintenance visits on aircraft, engine overhauls
and landing gear overhauls, is capitalised at cost and depreciated over the average expected life between major
overhauls, estimated to be 4 to 10 years.Expenditure for engine overhaul costs covered by power-by-hour (fixed rate
charged per hour) maintenance agreements is expensed by hours flown. Expenditure for other maintenance and repairs
is charged to profit or loss.
Depreciation of owned property, plant and equipment is calculated on a straight line basis to write down cost over their
anticipated useful lives to their estimated residual values as follows:
Aircraft over 20-23 years to residual value of the lower of 1% of cost or expected realisable value
Aircraft product over 5-10 years to nil residual value
Other equipment over 3-25 years to nil residual value
Buildings over the lease term of the leasehold land to nil residual value
Depreciation of right-of-use assets is calculated on a straight line basis to write down cost over the underlying lease
term to nil residual value. However, if the lease transfers ownership of the underlying asset to the Group by the end of the
lease term or if the cost of the right-of-use asset reflects that the Group will exercise a purchase option, depreciation is
calculated on a straight line basis to write down cost over the anticipated useful life of the underlying asset to its
estimated residual value in a similar manner as for an item of owned property, plant and equipment.
Major modifications to aircraft and reconfiguration costs are capitalised as part of aircraft cost and are depreciated over
periods of up to 10 years.
The depreciation policy and the carrying amount of property, plant and equipment are reviewed annually taking into
consideration factors such as changes in fleet composition, current and forecast market values and technical factors
which affect the life expectancy of the assets. Any impairment in value is recognised by writing down the carrying
amount to estimated recoverable amount which is the higher of the value in use (the present value of future cash flows)
and the fair value less costs of disposal.
6. LEASED ASSETS
The Group leases various aircraft, property facilities and offices and other equipment. Lease contracts are typically
made for fixed periods of one to 50 years but may have extension and early termination options. Lease terms are
negotiated on an individual basis and contain a wide range of different terms and conditions.
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains
alease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. Control is conveyed where the customer has both the right to direct the use of the identified asset and to
obtain substantially all of the economic benefits from that use.
(a) As a lessee
Where the contract contains lease component(s) and non-lease component(s), the Group has elected not to
separate non-lease components and accounts for each lease component and any associated non-lease
components as a single lease component for all leases.
The initial fair value of refundable rental deposits is accounted for separately from the right-of-use assets in
accordance with the accounting policy applicable to investments in debt securities carried at amortised cost. Any
difference between the initial fair value and the nominal value of the deposits is accounted for as additional lease
payments made and is included in the cost of right-of-use assets.
At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except for short-
term leases with a lease term of 12 months or less and leases of low-value assets. Payments associated with short-
term leases and leases of low-value assets are recognised as an expense on a systematic basis over the lease term.
123
Cathay Pacific Airways Limited Annual Report 2021
PRINCIPAL ACCOUNTING POLICIES
6. LEASED ASSETS (continued)
Where the lease is capitalised, the lease liability is initially recognised at the present value of the following lease
payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined,
the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of a similar value in a similar economic environment with similar terms and conditions.
After initial recognition, the lease liability is measured at amortised cost and interest expense is calculated using the
effective interest method. Variable lease payments that do not depend on an index or a rate are not included in the
measurement of the lease liability and hence are charged to profit or loss in the accounting period in which they are
incurred.
With respect to lease agreements, where the Group is required to return the aircraft with adherence to certain
maintenance conditions, a provision is made during the lease term.The provision is based on the present value of
the expected future cost of meeting the maintenance and non-maintenance return condition, having regard to the
current fleet plan and long-term maintenance schedules.
Where the lease is capitalised, the right-of-use asset recognised is initially measured at cost comprising the
following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses
outlined in accounting policy 5.
The lease liability is remeasured under the following circumstances:
• a change in future lease payments arising from a change in an index or a rate;
• a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee;
• a change arising from the reassessment of whether the Group will be reasonably certain to exercise a purchase,
extension or termination option; or
• a change in the scope of a lease or the consideration for a lease that is not originally provided for in the lease
contract (“lease modification”).
When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-
use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The only exceptions are any rent concessions which arose as a direct consequence of the COVID-19 pandemic
andwhich satisfied the conditions set out in paragraph 46B of HKFRS 16 “Leases”. In such cases, the Group took
advantage of the practical expedient set out in paragraph 46A of HKFRS 16 and recognised the change in
consideration as if it were not a lease modification. Consequently, rent concessions received have been accounted
for as negative variable lease payments recognised in profit or loss in the period in which the event or condition that
triggers those payments occurred.
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6. LEASED ASSETS (continued)
(b) As a lessor
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an
operating lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental
to the ownership of an underlying asset to the lessee. If this is not the case, the lease is classified as an operating
lease.
When a contract contains lease and non-lease components, the Group allocates the consideration in the contract
to each component on a relative stand-alone selling price basis. The rental income from operating leases is
credited to profit or loss on a straight line basis over the life of the related lease.
When the Group is an intermediate lessor, the sub-leases are classified as a finance lease or as an operating lease
with reference to the right-of-use asset arising from the head lease. If the head lease is a short-term lease to which
the Group applies the exemption described in accounting policy 6(a), then the Group classifies the sub-lease as an
operating lease.
7. INTANGIBLE ASSETS
Intangible assets comprise mainly goodwill arising on consolidation and computer software licences. The accounting
policy for goodwill is outlined in accounting policy 2.
Expenditure on computer software licences and others which gives rise to economic benefits is capitalised as part of
intangible assets and is amortised on a straight line basis. The useful life of expenditure on computer software licences
and others is four to twenty years.
8. FINANCIAL ASSETS
Other long-term receivables, bank and security deposits, trade and other short-term receivables are stated at
amortised cost less allowance for credit losses.
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial
institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and
whichare subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.
Cash and cash equivalents are assessed for expected credit losses in accordance with the policy set out below.
The accounting policy for derivative financial assets is outlined in accounting policy 10.
Investments are recognised or derecognised by the Group on the date when the purchase or sale of the assets occurs.
The investments are initially stated at fair value plus directly attributable transaction costs, except for those investments
measured at fair value through profit or loss, for which transaction costs are recognised directly in profit or loss. These
investments are subsequently accounted for as follows:
Non-equity investments held by the Group are classified into one of the following measurement categories:
(a) amortised cost, if the investment is held for the collection of contractual cash flows which represent solely
payments of principal and interest. Interest income from the investment is calculated using the effective interest
method;
(b) fair value through other comprehensive income – recycling, if the contractual cash flows of the investment
comprise solely payments of principal and interest and the investment is held within a business model whose
objective is achieved by both the collection of contractual cash flows and sale. Changes in fair value are recognised
in other comprehensive income, except for the recognition in profit or loss of expected credit losses, interest
income (calculated using the effective interest method) and foreign exchange gains and losses. When the
investment is derecognised, the amount accumulated in other comprehensive income is recycled from equity to
profit or loss; or
(c) fair value through profit or loss, if the investment does not meet the criteria for being measured at amortised cost or
fair value through other comprehensive income (recycling). Changes in the fair value of the investment (including
interest) are recognised in profit or loss.
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8. FINANCIAL ASSETS (continued)
Equity investments are classified as fair value through profit or loss unless the equity investments are not held for
trading purposes and on initial recognition of the investment the Group makes an election to designate the investment
at fair value through other comprehensive income (non-recycling) such that subsequent changes in fair value are
recognised in other comprehensive income. Such elections are made on an instrument-by-instrument basis, but may
only be made if the investment meets the definition of equity from the issuer’s perspective. Where such an election is
made, the amount accumulated in other comprehensive income remains in the investment revaluation reserve (non-
recycling) until the investment is disposed of. At the time of disposal, the amount accumulated in the investment
revaluation reserve (non-recycling) is transferred to retained profit. It is not recycled through profit or loss. Dividends
from equity investments, irrespective of whether classified at fair value through profit or loss or fair value through other
comprehensive income (non-recycling), are recognised in profit or loss as other income.
Funds with investment managers and other liquid investments which are managed and evaluated on a fair value basis
are designated at fair value through profit or loss.
Expected credit losses
The Group applies the expected credit loss model to the financial assets measured at amortised cost (including cash
and cash equivalents, trade and other receivables and loans to associates).
Financial assets measured at fair value, including equity investments measured at fair value through profit or loss, equity
investments designated at fair value through other comprehensive income (non-recycling) and derivative financial
assets, are not subject to the expected credit loss assessment.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present
value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the
contract and the cash flows that the Group expects to receive).
In measuring expected credit losses, the Group takes into account reasonable and supportable information that is
available without undue cost or effort. This includes information about past events, current conditions and forecasts of
future economic conditions.
Expected credit losses are measured on either of the following bases:
(i) 12-month expected credit losses: these are losses that are expected to result from possible default events within
12 months after the reporting date; or
(ii) lifetime expected credit losses: these are losses that are expected to result from all possible default events over the
expected lives of the items to which the expected credit loss model applies.
Loss allowances for trade debtors are always measured at an amount equal to lifetime expected credit losses. Expected
credit losses on trade debtors are estimated using a provision matrix based on the Group’s historical credit loss
experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast
general economic conditions at the reporting date. For all other financial instruments, the Group recognises a loss
allowance equal to 12-month expected credit losses unless there has been a significant increase in credit risk of the
financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime
expected credit losses.
In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the
Group compares the risk of default occurring on the financial instrument assessed at the reporting date with that
assessed at the date of initial recognition. In making this reassessment, the Group considers that a default event occurs
when the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions
such as realising security (if any is held). The Group considers both quantitative and qualitative information that is
reasonable and supportable, including historical experience and forward-looking information that is available without
undue cost or effort.
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8. FINANCIAL ASSETS (continued)
In particular, the following information is taken into account when assessing whether credit risk has increased
significantly since initial recognition:
(i) failure to make payments of principal or interest on their contractually due dates;
(ii) an actual or expected significant deterioration in a financial instrument’s external or internal credit rating
(ifavailable);
(iii) an actual or expected significant deterioration in the operating results of the debtor; and
(iv) existing or forecast changes in the technological, market, economic or legal environment that have a significant
adverse effect on the debtor’s ability to meet its obligation to the Group.
Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed
on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial
instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings.
Expected credit losses are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk
since initial recognition. Any change in the expected credit losses amount is recognised as an impairment gain or loss in
profit or loss. The Group recognises an impairment gain or loss for the financial instrument with a corresponding
adjustment to its carrying amount through a loss allowance account.
Write-off policy
The gross carrying amount of a financial instrument is written off (either partially or in full) to the extent that there is no
realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have
assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.
Subsequent recoveries of the financial instrument that was previously written off are recognised as a reversal of
impairment in profit or loss in the periods in which the recoveries occur.
9. FINANCIAL LIABILITIES
Loans and other borrowings, lease liabilities and trade and other payables are stated at amortised cost or designated at
fair value through profit or loss.
Where long-term loans have been defeased by funds and other investments, those loans and deposits (and income and
charge arising therefrom) are netted off, in order to reflect the overall commercial effect of the arrangements. Such
netting off occurs where there is a current legally enforceable right to set off the loan and the deposit and the Group
intends either to settle on a net basis or to realise the deposit and settle the loans simultaneously.
The accounting policy for derivative financial liabilities is outlined in accounting policy 10.
Financial liabilities are recognised or derecognised when the contracted obligations are incurred or extinguished.
Interest expenses incurred under financial liabilities are calculated and recognised using the effective interest method.
10. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are used solely to manage exposures to fluctuations in foreign currency rates, interest
rates and jet fuel prices in accordance with the Group’s risk management policies. The Group does not hold or issue
derivative financial instruments for proprietary trading purposes.
All derivative financial instruments are recognised at fair value in the statement of financial position. Where derivative
financial instruments are designated as hedging instruments in a cash flow hedge and hedge exposure to fluctuations in
foreign currency rates, interest rates or jet fuel prices, any fair value change is accounted for as follows:
(a) the effective portion of the fair value change is recognised in other comprehensive income and accumulated
separately in equity and is included in profit or loss as an adjustment to revenue, net finance charges or fuel
expense in the same period or periods during which the hedged transaction affects profit or loss.
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10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
(b) the ineffective portion of the fair value change is recognised in profit or loss immediately.
Derivative financial instruments which do not qualify as hedging instruments are accounted for as fair value through
profit or loss and any fair value change is recognised in profit or loss immediately.
11. FAIR VALUE MEASUREMENT
Fair value of financial assets and financial liabilities is determined either by reference to quoted market values or by
using discounted cash flow valuation techniques in which the significant inputs are based on observable market data
where available.
12. PREFERENCE SHARE CAPITAL
Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Company’s option, and
any dividends are discretionary. Dividends on preference share capital classified as equity are recognised as
distributions within equity.
13. WARRANTS
Warrants in issue fulfill a fixed-for-fixed criterion and are accounted for as equity instruments with no value attached.
The financial impact of warrants granted is not recorded in the consolidated financial statements until such time as the
warrants are exercised, and no charge is recognised in profit or loss in respect of the value of warrants granted. Upon
the exercise of the warrants, the resulting ordinary shares issued are recorded as additional share capital. Warrants
which lapse or are cancelled prior to their exercise date are deleted from the register of outstanding warrants.
14. RETIREMENT BENEFITS
For defined benefit schemes, retirement benefit costs are assessed using the projected unit credit method. Under this
method, the cost of providing retirement benefits is charged to the statement of profit or loss and other comprehensive
income so as to spread the regular cost over the service lives of employees.
The asset or liability recognised in the statement of financial position is the present value of the cost of providing these
benefits (the defined benefit obligations) less the fair value of the plan assets at the end of the reporting period. The
defined benefit obligations are calculated every three years by independent actuaries and are determined by
discounting the estimated future cash flows using interest rates of high quality corporate bonds. The plan assets are
valued on a bid price basis.
When the benefits of a plan are changed, or when a plan is curtailed, current service cost for the portion of the changed
benefit related to past service by employees, or the gain or loss on curtailment, is recognised as an expense in profit or
loss at the earlier of when the plan amendment or curtailment occurs and when related restructuring costs or
termination benefits are recognised.
Actuarial gains and losses arising from experience adjustments, changes in financial assumptions and return on plan
assets excluding interest income are charged or credited to other comprehensive income in the period in which they
arise. Past service costs are recognised in profit or loss immediately.
For defined contribution schemes, the Group’s contributions are charged to profit or loss immediately in the period to
which the contributions relate.
15. DEFERRED TAXATION
Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. However, if the deferred tax arises from
initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the
recognition, has no impact on taxable nor accounting profit or loss, it is not recognised.
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15. DEFERRED TAXATION (continued)
Deferred tax assets relating to unused tax losses and deductible temporary differences are recognised to the extent
that it is probable that future taxable profits will be available against which these unused tax losses and deductible
temporary differences can be utilised.
In addition, where initial cash benefits have been received in respect of certain lease arrangements, provision is made
for the future obligation to make tax payments.
16. STOCK
Stock held for consumption is valued either at cost or weighted average cost less any applicable allowance for
obsolescence. Stock held for sales is stated at the lower of cost and net realisable value. Net realisable value represents
estimated resale price less any estimated costs necessary to make the sale.
17. ASSETS HELD FOR SALE
Non-current assets are classified as assets held for sale when their carrying amounts are to be recovered principally
through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and
fair value less costs to sell.
18. REVENUE RECOGNITION
Passenger and cargo sales are recognised as revenue when the transportation service is provided. Revenue is allocated
between passenger services revenue and loyalty programme revenue based on their relative stand-alone selling prices.
Revenue from catering and other services is recognised when the services are rendered. Interest income is recognised
as it accrues while dividend income is recognised when the right to receive payment is established.
The Group takes advantage of the practical expedient in paragraph 63 of HKFRS 15 and does not adjust the
consideration for any effects of a significant financing component as it is expected at contract inception that the period
between the transfer of goods and services and customer payments will be one year or less.
Breakage on passenger revenue is recognised in proportion to the pattern of rights exercised by the customer as
reflected by the point of flown to match the timing of revenue recognition with the underlying ticket performance
obligations. This is based on historical experience. This estimation is made such that the revenue recognised from
passenger ticket breakage is not expected to result in a significant reversal of cumulative revenue in the future.
The value of unflown passenger sales is recognised as a contract liability in the statement of financial position.
It is expected to be recognised as passenger services revenue within 12 months when the transportation service
is provided.
Contract costs
Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer
that it would not have incurred if the contract had not been obtained e.g. an incremental sales commission.
The Group recognises the incremental costs of obtaining contracts as an expense when incurred as the amortisation
period of the asset that the Group otherwise would have recognised is one year or less from the initial recognition of
theasset.
19. LOYALTY PROGRAMME
The Company operates a customer loyalty programme called Asia Miles (the “programme”). As members accumulate
miles by travelling on Cathay Pacific flights, or when the Company sells miles to participating partners in the programme,
revenue from the initial sales transaction equal to the programme awards at their stand-alone selling price is deferred
asa contract liability until the miles are redeemed or the passenger is uplifted in the case of the Group’s flight
redemptions. Breakage, the proportion of points that are expected to expire, is recognised to reduce stand-alone
sellingprice, and is determined by a number of assumptions including historical experience, future redemption pattern
and programme design.
Marketing revenue, associated with the sales of miles to participating partners is measured as the difference between
the consideration received and the revenue deferred, and is recognised when the service is performed.
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20. GOVERNMENT GRANTS
Government grants are recognised when there is reasonable assurance that they will be received and that the Group will
comply with the conditions attaching to them.
Income grants are presented as revenue from other services and recoveries.
Cost waivers or cost reductions are disclosed net of respective cost categories and recognised in profit or loss over the
period necessary to match them with the costs that they are intended to compensate.
Grants that compensate for the cost of an asset are deducted from the carrying amount of the asset and consequently
are effectively recognised in profit or loss over the useful life of the asset by way of reduced depreciation expense.
21. MAINTENANCE AND OVERHAUL COSTS
Replacement spares and labour costs for maintenance and overhaul of aircraft are charged to profit or loss on
consumption and as incurred respectively unless they are capitalised according to the accounting policy 5.
22. PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognised when the Group has a legal or constructive obligation arising as a result of a past event,
it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can
bemade. Where it is not probable that an outflow of economic benefits is required, or the amount cannot be estimated
reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits
isremote.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, a
separate asset is recognised for any expected reimbursement that would be virtually certain. The amount recognised
for the reimbursement is limited to the carrying amount of the provision.
23. ONEROUS CONTRACTS
An onerous contract exists when the Group has a contract under which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be received from the contract. Provisions for
onerous contracts are measured at the present value of the lower of the expected cost of terminating the contract and
the net cost of continuing with the contract.
24. RELATED PARTIES
Related parties are individuals and companies, including subsidiary, fellow subsidiary, jointly controlled and associated
companies and key management (including close members of their families), where the individual, Company or Group
has the ability, directly or indirectly, to control the other party or exercise significant influence or joint control over the
other party in making financial and operating decisions.
25. CONVERTIBLE BONDS
Convertible bonds that can be converted into ordinary shares at the option of the holder, where a fixed number of shares
are issued for a fixed amount of financial assets, are accounted for as compound financial instruments, i.e. they contain
both a liability component and an equity component.
At initial recognition the liability component of the convertible bonds is measured at the fair value based on the future
interest and principal payments, discounted at the prevailing market rate of interest for similar non-convertible
instruments. The equity component is the difference between the initial fair value of the convertible bonds as a whole
and the initial fair value of the liability component. Transaction costs that relate to the issue of a compound financial
instrument are allocated to the liability and equity components in proportion to the allocation of proceeds.
The liability component is subsequently carried at amortised cost. Interest expense recognised in profit or loss on the
liability component is calculated using the effective interest method. The equity component is not remeasured and is
recognised in the convertible bond reserve until the bonds are converted.
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STATISTICS
* On adoption of HKFRS 16 with effect from 1st January 2019, the Group recognised lease liabilities in relation to leases without asset transfer
components. This resulted in a significant increase in the Group’s total and net borrowings, and hence the Group’s net debt/equity ratio. To allow
for comparability of gearing ratios over time and against group borrowing covenants, the Group has chosen to present the adjusted net debt/
equity ratio which excludes leases without asset transfer components.
** Funds attributable to the ordinary shareholders are arrived at after deducting preference share capital and unpaid cumulative dividends
attributable to the preference shareholder as at 31st December of the respective reporting period.
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Consolidated profit or loss summary HK$M
Passenger services 4,357 11,950 73,985 73,119 66,408 66,926 73,047 75,734 71,826 70,133
Cargo services 35,814 27,890 23,810 28,316 23,903 20,063 23,122 25,400 23,663 24,555
Other services and recoveries 5,416 7,094 9,178 9,625 6,973 5,762 6,173 4,857 4,995 4,688
Revenue 45,587 46,934 106,973 111,060 97,284 92,751 102,342 105,991 100,484 99,376
Operating expenses (46,037) (58,639) (103,646) (107,465) (99,563) (93,276) (95,678) (101,556) (96,724) (97,763)
Operating (loss)/profit before non-recurring items (450) (11,705) 3,327 3,595 (2,279) (525) 6,664 4,435 3,760 1,613
Profit on disposal of investments – – – – 586 – – – – –
Gain on deemed partial disposal of associates 210 – 114 – 244 – – – – –
Restructuring costs (385) (2,383) – – – – – – – –
Impairment and related charges (818) (4,056) – – – – – – – –
Net finance charges (2,629) (2,895) (2,939) (2,114) (1,761) (1,301) (1,164) (1,158) (1,019) (884)
Share of (losses)/profits of associates (1,985) (1,282) 1,643 1,762 2,630 2,049 1,965 772 838 754
(Loss)/profit before taxation (6,057) (22,321) 2,145 3,243 (580) 223 7,465 4,049 3,579 1,483
Taxation 531 674 (454) (466) (308) (497) (1,157) (599) (675) (409)
(Loss)/profit for the year (5,526) (21,647) 1,691 2,777 (888) (274) 6,308 3,450 2,904 1,074
Attributable to
Ordinary shareholders of Cathay Pacific (6,123) (21,876) 1,691 2,345 (1,259) (575) 6,000 3,150 2,620 862
Preference shareholder of Cathay Pacific 596 228 – – – – – – – –
Non-controlling interests 1 1 – 432 371 301 308 300 284 212
(Loss)/profit for the year (5,526) (21,647) 1,691 2,777 (888) (274) 6,308 3,450 2,904 1,074
Dividends paid to ordinary shareholders – – (1,495) (590) – (1,259) (2,046) (1,022) (551) (1,338)
Consolidated statement of financial position summary HK$M
Property, plant and equipment and intangible assets 139,025 146,986 155,265 128,298 122,403 117,390 111,158 108,789 104,737 93,703
Long-term receivables and investments 27,859 29,394 30,878 31,585 32,212 27,902 27,947 29,290 27,449 24,776
Borrowings (89,854) (93,129) (97,260)* (73,877) (78,394) (70,169) (63,105) (65,096) (67,052) (59,546)
Liquid funds less bank overdrafts 19,284 19,341 14,864 15,296 19,094 20,290 20,647 21,098 27,736 24,182
Net borrowings (70,570) (73,788) (82,396)* (58,581) (59,300) (49,879) (42,458) (43,998) (39,316) (35,364)
Net current liabilities (excluding liquid funds, bank overdrafts and
current portion of borrowings) (11,172) (14,249) (23,690) (20,329) (18,649) (21,727) (23,961) (22,478) (19,110) (15,711)
Other long-term payables and long-term contract liabilities (3,919) (4,210) (4,806) (4,649) (3,502) (7,517) (15,838) (10,487) (1,318) (3,205)
Deferred taxation (8,974) (10,872) (12,475) (12,385) (11,892) (10,643) (8,781) (9,263) (9,429) (8,061)
Net assets 72,249 73,261 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138
Financed by:
Funds attributable to the ordinary shareholders of Cathay Pacific** 51,920 53,529 62,773 63,936 61,101 55,365 47,927 51,722 62,888 56,021
Funds attributable to the preference shareholder of Cathay Pacific 20,324 19,728 – – – – – – – –
Funds attributable to the shareholders of Cathay Pacific 72,244 73,257 62,773 63,936 61,101 55,365 47,927 51,722 62,888 56,021
Non-controlling interests 5 4 3 3 171 161 140 131 125 117
Total equity 72,249 73,261 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138
Per ordinary share
Ordinary shareholders’ funds HK$ 8.07 8.32 15.96 16.25 15.53 14.07 12.18 13.15 15.99 14.24
EBITDA HK$ 1.45 (0.97) 4.91 3.85 2.68 2.56 4.45 3.44 3.04 2.31
(Loss)/earnings – basic and diluted HK cents (95.1) (424.3) 39.1 54.2 (29.1) (13.3) 138.7 72.8 60.6 19.9
Dividend HK$ – – 0.18 0.30 0.05 0.05 0.53 0.36 0.22 0.08
Ratios
(Loss)/profit margin % (12.1) (46.1) 1.6 2.1 (1.3) (0.6) 5.9 3.0 2.6 0.9
Return on capital employed % (2.0) (12.8) 3.5 4.0 0.8 1.0 8.0 4.7 4.0 2.3
Dividend cover Times – – 2.4 2.0 (6.4) (2.9) 2.9 2.2 3.0 2.7
Cash interest cover Times 6.2 (5.3) 6.5 10.4 4.9 9.1 25.5 20.7 23.8 20.9
Gross debt/equity ratio Times 1.24 1.27 1.55 1.16 1.28 1.27 1.32 1.26 1.07 1.06
Net debt/equity ratio Times 0.98 1.01 1.31* 0.92 0.97 0.90 0.89 0.85 0.63 0.63
Adjusted net debt/equity ratio (excludes leases without asset
transfer components)* Times 0.75 0.75 0.99 0.92 0.97 0.90 0.89 0.85 0.63 0.63
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STATISTICS
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Consolidated profit or loss summary HK$M
Passenger services 4,357 11,950 73,985 73,119 66,408 66,926 73,047 75,734 71,826 70,133
Cargo services 35,814 27,890 23,810 28,316 23,903 20,063 23,122 25,400 23,663 24,555
Other services and recoveries 5,416 7,094 9,178 9,625 6,973 5,762 6,173 4,857 4,995 4,688
Revenue 45,587 46,934 106,973 111,060 97,284 92,751 102,342 105,991 100,484 99,376
Operating expenses (46,037) (58,639) (103,646) (107,465) (99,563) (93,276) (95,678) (101,556) (96,724) (97,763)
Operating (loss)/profit before non-recurring items (450) (11,705) 3,327 3,595 (2,279) (525) 6,664 4,435 3,760 1,613
Profit on disposal of investments – – – – 586 – – – – –
Gain on deemed partial disposal of associates 210 – 114 – 244 – – – – –
Restructuring costs (385) (2,383) – – – – – – – –
Impairment and related charges (818) (4,056) – – – – – – – –
Net finance charges (2,629) (2,895) (2,939) (2,114) (1,761) (1,301) (1,164) (1,158) (1,019) (884)
Share of (losses)/profits of associates (1,985) (1,282) 1,643 1,762 2,630 2,049 1,965 772 838 754
(Loss)/profit before taxation (6,057) (22,321) 2,145 3,243 (580) 223 7,465 4,049 3,579 1,483
Taxation 531 674 (454) (466) (308) (497) (1,157) (599) (675) (409)
(Loss)/profit for the year (5,526) (21,647) 1,691 2,777 (888) (274) 6,308 3,450 2,904 1,074
Attributable to
Ordinary shareholders of Cathay Pacific (6,123) (21,876) 1,691 2,345 (1,259) (575) 6,000 3,150 2,620 862
Preference shareholder of Cathay Pacific 596 228 – – – – – – – –
Non-controlling interests 1 1 – 432 371 301 308 300 284 212
(Loss)/profit for the year (5,526) (21,647) 1,691 2,777 (888) (274) 6,308 3,450 2,904 1,074
Dividends paid to ordinary shareholders – – (1,495) (590) – (1,259) (2,046) (1,022) (551) (1,338)
Consolidated statement of financial position summary HK$M
Property, plant and equipment and intangible assets 139,025 146,986 155,265 128,298 122,403 117,390 111,158 108,789 104,737 93,703
Long-term receivables and investments 27,859 29,394 30,878 31,585 32,212 27,902 27,947 29,290 27,449 24,776
Borrowings (89,854) (93,129) (97,260)* (73,877) (78,394) (70,169) (63,105) (65,096) (67,052) (59,546)
Liquid funds less bank overdrafts 19,284 19,341 14,864 15,296 19,094 20,290 20,647 21,098 27,736 24,182
Net borrowings (70,570) (73,788) (82,396)* (58,581) (59,300) (49,879) (42,458) (43,998) (39,316) (35,364)
Net current liabilities (excluding liquid funds, bank overdrafts and
current portion of borrowings) (11,172) (14,249) (23,690) (20,329) (18,649) (21,727) (23,961) (22,478) (19,110) (15,711)
Other long-term payables and long-term contract liabilities (3,919) (4,210) (4,806) (4,649) (3,502) (7,517) (15,838) (10,487) (1,318) (3,205)
Deferred taxation (8,974) (10,872) (12,475) (12,385) (11,892) (10,643) (8,781) (9,263) (9,429) (8,061)
Net assets 72,249 73,261 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138
Financed by:
Funds attributable to the ordinary shareholders of Cathay Pacific** 51,920 53,529 62,773 63,936 61,101 55,365 47,927 51,722 62,888 56,021
Funds attributable to the preference shareholder of Cathay Pacific 20,324 19,728 – – – – – – – –
Funds attributable to the shareholders of Cathay Pacific 72,244 73,257 62,773 63,936 61,101 55,365 47,927 51,722 62,888 56,021
Non-controlling interests 5 4 3 3 171 161 140 131 125 117
Total equity 72,249 73,261 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138
Per ordinary share
Ordinary shareholders’ funds HK$ 8.07 8.32 15.96 16.25 15.53 14.07 12.18 13.15 15.99 14.24
EBITDA HK$ 1.45 (0.97) 4.91 3.85 2.68 2.56 4.45 3.44 3.04 2.31
(Loss)/earnings – basic and diluted HK cents (95.1) (424.3) 39.1 54.2 (29.1) (13.3) 138.7 72.8 60.6 19.9
Dividend HK$ – – 0.18 0.30 0.05 0.05 0.53 0.36 0.22 0.08
Ratios
(Loss)/profit margin % (12.1) (46.1) 1.6 2.1 (1.3) (0.6) 5.9 3.0 2.6 0.9
Return on capital employed % (2.0) (12.8) 3.5 4.0 0.8 1.0 8.0 4.7 4.0 2.3
Dividend cover Times – – 2.4 2.0 (6.4) (2.9) 2.9 2.2 3.0 2.7
Cash interest cover Times 6.2 (5.3) 6.5 10.4 4.9 9.1 25.5 20.7 23.8 20.9
Gross debt/equity ratio Times 1.24 1.27 1.55 1.16 1.28 1.27 1.32 1.26 1.07 1.06
Net debt/equity ratio Times 0.98 1.01 1.31* 0.92 0.97 0.90 0.89 0.85 0.63 0.63
Adjusted net debt/equity ratio (excludes leases without asset
transfer components)* Times 0.75 0.75 0.99 0.92 0.97 0.90 0.89 0.85 0.63 0.63
Note:
(1) The Group adopted HKFRS 16 with effect from 1st January 2019, and has changed its accounting policies in relation to lessee accounting. Under
the transition methods chosen, the Group recognised the cumulative effect of the initial application of HKFRS 16 as an adjustment to the opening
balance of equity at 1st January 2019. Comparative information in years earlier than 2019 is not restated and in accordance with the policies
applicable in those years.
(2) The Group adopted HKFRS 9 and HKFRS 15 with effect from 1st January 2018, and has changed its accounting policies in relation to financial
instruments and revenue recognition. Under the transition methods chosen, the Group recognised the cumulative effect of the initial application of
HKFRS 9 and HKFRS 15 as an adjustment to the opening balance of equity at 1st January 2018. Comparative information in years earlier than 2018
is not restated and in accordance with the policies applicable in those years.
132
Cathay Pacific Airways Limited Annual Report 2021
STATISTICS
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Cathay Pacific operating summary
(and Cathay Dragon as at 31st December 2020 and previous years)
Available tonne kilometres Million 11,354 14,620 33,077 32,387 31,439 30,462 30,048 28,440 26,259 26,250
Revenue tonne kilometres Million 8,615 10,220 24,090 24,543 23,679 22,418 22,220 20,722 18,696 18,819
Available seat kilometres Million 13,228 34,609 163,244 155,362 150,138 146,086 142,680 134,711 127,215 129,595
Revenue passengers carried ‘000 717 4,631 35,233 35,468 34,820 34,323 34,065 31,570 29,920 28,961
Revenue passenger kilometres Million 4,120 20,079 134,397 130,630 126,663 123,478 122,330 112,257 104,571 103,837
Revenue load factor % 68.4 67.7 77.4 79.6 79.7 79.5 79.9 78.1 76.6 75.7
Passenger load factor % 31.1 58.0 82.3 84.1 84.4 84.5 85.7 83.3 82.2 80.1
Cargo carried ‘000 tonnes 1,333 1,332 2,022 2,152 2,056 1,854 1,798 1,723 1,539 1,563
Cargo revenue tonne kilometres Million 8,220 8,309 11,311 12,122 11,633 10,675 10,586 10,044 8,750 8,942
Cargo load factor % 81.4 73.3 64.4 68.8 67.8 64.4 64.2 64.3 61.8 64.2
Excess baggage carried Tonnes 607 563 2,179 2,329 2,449 2,471 2,596 2,699 2,599 2,711
Kilometres flown Million 175 226 618 611 596 579 576 550 512 502
Block hours ‘000 hours 237 304 880 877 857 826 823 789 735 715
Aircraft departures ‘000 42 55 175 177 175 172 173 167 160 154
Length of scheduled routes network ‘000 kilometres 504 622 670 715 653 636 620 586 576 602
Number of destinations at year end Destinations 255 255 255 232 200 182 179 210 190 179
Staff number at year end Number 16,721 19,452 27,342 26,623 26,029 26,674 26,833 25,755 24,572 23,844
ATK per staff ‘000 679 752 1,256 1,217 1,208 1,142 1,120 1,104 1,069 1,101
On-time performance
Departure (within 15 minutes) % 86.2 86.7 76.3 72.7 71.2 72.1 64.7 70.1 75.5 77.4
Average aircraft utilisation Hours per day
A320-200 – 1.2 8.9 8.8 9.3 9.3 9.4 9.2 9.1 8.8
A321-200 – 1.1 9.1 10.1 9.4 9.4 9.8 9.9 8.8 8.9
A330-300 1.1 2.3 9.8 10.4 10.7 11.4 12.1 12.4 12.0 12.3
A340-300 – – – – 3.8 8.3 8.5 11.6 13.3 12.7
A350-900 4.0 3.9 14.6 15.0 14.1 12.7 – – – –
A350-1000 10.3 10.2 14.6 12.6 – – – – – –
747-400 – – – – – 5.2 5.7 8.2 10.9 12.7
747-400F/BCF/ERF/8F 12.3 13.1 12.4 12.8 12.5 11.7 11.9 11.8 10.9 11.4
777-200/300 0.1 1.3 8.0 8.6 8.8 9.4 8.6 8.8 8.3 8.4
777-300ER 2.1 3.7 14.9 15.6 16.0 16.0 15.9 16.1 15.8 15.7
Fleet average 3.4 4.3 11.9 12.3 12.3 12.2 12.2 12.2 11.8 12.0
Fleet profile
Cathay Pacific (and Cathay Dragon as at 31st December 2020)
A320-200 7 11 – – – – – – – –
A321-200 5 7 – – – – – – – –
A321-200neo 5 2 – – – – – – – –
A330-300 51 51 29 33 37 41 42 40 35 37
A340-300 – – – – – 4 7 11 11 11
A350-900 28 27 24 22 22 10 – – – –
A350-1000 15 13 12 8 – – – – – –
747-400 – – – – – – 3 7 13 18
747-400F – – – – – – 4 5 6 6
747-400BCF – – 1 1 – 1 1 1 1 6
747-400ERF 6 6 6 6 6 6 6 6 6 6
747-8F 14 14 14 14 14 14 13 13 13 8
777-200 – – 1 4 5 5 5 5 5 5
777-300 17 17 17 14 12 12 12 12 12 12
777-300ER 45 51 51 52 53 53 53 47 38 29
Total 193 199 155 154 149 146 146 147 140 138
Aircraft operated by Cathay Dragon (note 1):
A320-200 – – 15 15 15 15 15 15 15 15
A321-200 – – 8 8 8 8 8 8 6 6
A330-300 – – 25 25 24 20 19 18 20 17
Total – – 48 48 47 43 42 41 41 38
Note:
(1) Cathay Dragon’s remaining aircraft will be transferred to Cathay Pacific and HK Express.
(2) The Group adopted HKFRS 16 with effect from 1st January 2019, and has changed its accounting policies in relation to lessee accounting. Under
the transition methods chosen, the Group recognised the cumulative effect of the initial application of HKFRS 16 as an adjustment to the opening
balance of equity at 1st January 2019. Comparative information in years earlier than 2019 is not restated and in accordance with the policies
applicable in those years.
133
Cathay Pacific Airways Limited Annual Report 2021
STATISTICS
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Cathay Pacific operating summary
(and Cathay Dragon as at 31st December 2020 and previous years)
Available tonne kilometres Million 11,354 14,620 33,077 32,387 31,439 30,462 30,048 28,440 26,259 26,250
Revenue tonne kilometres Million 8,615 10,220 24,090 24,543 23,679 22,418 22,220 20,722 18,696 18,819
Available seat kilometres Million 13,228 34,609 163,244 155,362 150,138 146,086 142,680 134,711 127,215 129,595
Revenue passengers carried ‘000 717 4,631 35,233 35,468 34,820 34,323 34,065 31,570 29,920 28,961
Revenue passenger kilometres Million 4,120 20,079 134,397 130,630 126,663 123,478 122,330 112,257 104,571 103,837
Revenue load factor % 68.4 67.7 77.4 79.6 79.7 79.5 79.9 78.1 76.6 75.7
Passenger load factor % 31.1 58.0 82.3 84.1 84.4 84.5 85.7 83.3 82.2 80.1
Cargo carried ‘000 tonnes 1,333 1,332 2,022 2,152 2,056 1,854 1,798 1,723 1,539 1,563
Cargo revenue tonne kilometres Million 8,220 8,309 11,311 12,122 11,633 10,675 10,586 10,044 8,750 8,942
Cargo load factor % 81.4 73.3 64.4 68.8 67.8 64.4 64.2 64.3 61.8 64.2
Excess baggage carried Tonnes 607 563 2,179 2,329 2,449 2,471 2,596 2,699 2,599 2,711
Kilometres flown Million 175 226 618 611 596 579 576 550 512 502
Block hours ‘000 hours 237 304 880 877 857 826 823 789 735 715
Aircraft departures ‘000 42 55 175 177 175 172 173 167 160 154
Length of scheduled routes network ‘000 kilometres 504 622 670 715 653 636 620 586 576 602
Number of destinations at year end Destinations 255 255 255 232 200 182 179 210 190 179
Staff number at year end Number 16,721 19,452 27,342 26,623 26,029 26,674 26,833 25,755 24,572 23,844
ATK per staff ‘000 679 752 1,256 1,217 1,208 1,142 1,120 1,104 1,069 1,101
On-time performance
Departure (within 15 minutes) % 86.2 86.7 76.3 72.7 71.2 72.1 64.7 70.1 75.5 77.4
Average aircraft utilisation Hours per day
A320-200 – 1.2 8.9 8.8 9.3 9.3 9.4 9.2 9.1 8.8
A321-200 – 1.1 9.1 10.1 9.4 9.4 9.8 9.9 8.8 8.9
A330-300 1.1 2.3 9.8 10.4 10.7 11.4 12.1 12.4 12.0 12.3
A340-300 – – – – 3.8 8.3 8.5 11.6 13.3 12.7
A350-900 4.0 3.9 14.6 15.0 14.1 12.7 – – – –
A350-1000 10.3 10.2 14.6 12.6 – – – – – –
747-400 – – – – – 5.2 5.7 8.2 10.9 12.7
747-400F/BCF/ERF/8F 12.3 13.1 12.4 12.8 12.5 11.7 11.9 11.8 10.9 11.4
777-200/300 0.1 1.3 8.0 8.6 8.8 9.4 8.6 8.8 8.3 8.4
777-300ER 2.1 3.7 14.9 15.6 16.0 16.0 15.9 16.1 15.8 15.7
Fleet average 3.4 4.3 11.9 12.3 12.3 12.2 12.2 12.2 11.8 12.0
Fleet profile
Cathay Pacific (and Cathay Dragon as at 31st December 2020)
A320-200 7 11 – – – – – – – –
A321-200 5 7 – – – – – – – –
A321-200neo 5 2 – – – – – – – –
A330-300 51 51 29 33 37 41 42 40 35 37
A340-300 – – – – – 4 7 11 11 11
A350-900 28 27 24 22 22 10 – – – –
A350-1000 15 13 12 8 – – – – – –
747-400 – – – – – – 3 7 13 18
747-400F – – – – – – 4 5 6 6
747-400BCF – – 1 1 – 1 1 1 1 6
747-400ERF 6 6 6 6 6 6 6 6 6 6
747-8F 14 14 14 14 14 14 13 13 13 8
777-200 – – 1 4 5 5 5 5 5 5
777-300 17 17 17 14 12 12 12 12 12 12
777-300ER 45 51 51 52 53 53 53 47 38 29
Total 193 199 155 154 149 146 146 147 140 138
Aircraft operated by Cathay Dragon (note 1):
A320-200 – – 15 15 15 15 15 15 15 15
A321-200 – – 8 8 8 8 8 8 6 6
A330-300 – – 25 25 24 20 19 18 20 17
Total – – 48 48 47 43 42 41 41 38
Note:
(3) The Group adopted HKFRS 9 and HKFRS 15 with effect from 1st January 2018, and has changed its accounting policies in relation to financial
instruments and revenue recognition. Under the transition methods chosen, the Group recognised the cumulative effect of the initial application of
HKFRS 9 and HKFRS 15 as an adjustment to the opening balance of equity at 1st January 2018. Comparative information in years earlier than 2018
is not restated and in accordance with the policies applicable in those years.
134
Cathay Pacific Airways Limited Annual Report 2021
STATISTICS
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Productivity
Cost per ATK
(with fuel) HK$ 3.88 4.14 3.06 3.27 3.12 3.02 3.14 3.50 3.58 3.65
ATK per HK$’000
staff cost Unit 1,174 1,074 1,879 1,801 1,775 1,730 1,764 1,750 1,720 1,785
Aircraft utilisation Hours per day 3.4 4.3 11.9 12.3 12.3 12.2 12.2 12.2 11.8 12.0
Share prices HK$
High 7.9 10.0 13.9 14.7 13.4 14.0 20.6 17.7 16.8 15.9
Low 6.0 5.1 9.5 9.9 10.4 10.1 12.7 13.7 12.2 11.9
Year-end 6.4 7.2 11.5 11.1 12.1 10.2 13.4 16.9 16.4 14.2
Price ratios (Note) Times
Price/earnings (6.7) (1.7) 26.8 18.6 (37.8) (69.8) 8.8 21.1 24.6 64.9
Market capitalisation/
funds attributable
to the ordinary
shareholders of
Cathay Pacific 0.8 0.9 0.7 0.7 0.8 0.7 1.1 1.3 1.0 1.0
Price/cash flows 3.5 (3.3) 2.5 2.5 7.4 5.2 3.1 5.4 4.6 6.1
Note: Based on year end share price, where applicable.
20212012 2014 2019 202020182017201620152013
600
1,600
1,400
1,200
1,800
2,000
2,200
800
1,000
20212012 2014 2019 202020182017201620152013
20212012 2014 2019 202020182017201620152013
0
8
6
4
2
10
12
14
2.5
1.5
1.0
0.5
3.5
4.5
4.0
3.0
2.0
0
20212012 2014 2019 202020182017201620152013
0
8
4
32
28
24
12
20
16
0
8,000
4,000
12,000
32,000
28,000
24,000
20,000
16,000
ATK per HK$’000 sta cost
Cost per ATK (with fuel)
HK$
Aircraft utilisation
Hours per day
Share price
Average share price in HK$ Average HSI
Hang Seng Index (HSI)Cathay Pacic share price
135
Cathay Pacific Airways Limited Annual Report 2021
GLOSSARY
TERMS
Borrowings Total borrowings (loans, other borrowings and
lease liabilities) less security deposits, notes and zero
coupon bonds.
Net borrowings Borrowings and bank overdrafts less liquid
funds.
Available tonne kilometres (“ATK”) Overall capacity,
measured in tonnes available for the carriage of
passengers, excess baggage, cargo on each sector
multiplied by the sector distance.
Available cargo tonne kilometres (“AFTK”) Cargo
capacity, measured in tonnes available for the carriage of
freight on each sector multiplied by the sector distance.
Available seat kilometres (“ASK”) Passenger seat
capacity, measured in seats available for the carriage of
passengers on each sector multiplied by the sector
distance.
Revenue passenger kilometres (“RPK”) Number of
passengers carried on each sector multiplied by the sector
distance.
Cargo revenue tonne kilometres (“RFTK”) Amount of
cargo, measured in tonnes, carried on each sector
multiplied by the sector distance.
Revenue tonne kilometres (“RTK”) Traffic volume,
measured in tonnes from the carriage of passengers,
excess baggage, cargo on each sector multiplied by the
sector distance.
On-time performance Departure within 15 minutes of
scheduled departure time.
EBITDA Earnings before interest, tax, depreciation and
amortisation.
Recoveries Cost recoveries from incidental activities.
RATIOS
Earnings/(loss)
per ordinary share
=
Profit/(loss) attributable to
the ordinary shareholders of
CathayPacific
Weighted average number of
ordinary shares (by days) in issue
for the year
Profit/(loss) margin =
Profit/(loss) attributable to the
shareholders of Cathay Pacific
Revenue
Shareholders’ funds
per ordinary share
=
Funds attributable to the
shareholders of Cathay Pacific
Total issued and fully paid ordinary
shares at end of the year
Ordinary
shareholders’
funds per
ordinary share
=
Funds attributable to the ordinary
shareholders of Cathay Pacific
Total issued and fully paid ordinary
shares at end of the year
Return on capital
employed
=
Operating profit and share of
profits of associates less taxation
Average of total equity and
net borrowings
Dividend cover =
Profit/(loss) attributable to
the ordinary shareholders of
CathayPacific
Dividends payable to ordinary
shareholders
Cash interest cover =
Cash generated from operations
Net interest paid
Gross debt/
equity ratio
=
Borrowings
Funds attributable to the
shareholders of Cathay Pacific
Net debt/
equity ratio
=
Net borrowings
Funds attributable to the
shareholders of Cathay Pacific
Adjusted net debt/
equity ratio excluding
leases without asset
transfer components
=
Net borrowings less lease liabilities
without asset transfer components
Funds attributable to the shareholders
of Cathay Pacific
Passenger/Cargo
load factor
=
Revenue passenger kilometres/
Cargo revenue tonne kilometres
Available seat kilometres/Available
cargo tonne kilometres
Revenue load factor
=
Total passenger, cargo traffic
revenue
Maximum possible revenue at current
yields and capacity
Breakeven load
factor
=
A theoretical revenue load factor
at which the traffic revenue equates
to the net operating expenses.
Passenger/Cargo
yield
=
Passenger revenue/Cargo revenue
Revenue passenger kilometres/
Cargo revenue tonne kilometres
Cost per ATK
=
Total operating expenses of
CathayPacific and Cathay Dragon
ATK of Cathay Pacific and
CathayDragon
136
Cathay Pacific Airways Limited Annual Report 2021
Cathay Pacific Airways Limited is incorporated in Hong Kong with limited liability.
INVESTOR RELATIONS
For further information about Cathay Pacific Airways Limited, please contact:
Corporate Affairs Department
Cathay Pacific Airways Limited
9th Floor, Central Tower
Cathay Pacific City
Hong Kong International Airport
Hong Kong
Email: [email protected]
Cathay Pacific’s main Internet address is www.cathaypacific.com
REGISTERED OFFICE REGISTRARS
33rd Floor, One Pacific Place Computershare Hong Kong Investor Services Limited
88 Queensway Rooms 1806-1807
Hong Kong 18th Floor, Hopewell Centre
183 Queen’s Road East
DEPOSITARY Hong Kong
The Bank of New York Mellon
BNY Mellon Shareowner Services AUDITORS
P.O. Box 505000 KPMG
Louisville, KY 40233-5000 Public Interest Entity Auditor registered in accordance
U.S.A. with the Financial Reporting Council Ordinance
8th Floor, Prince’s Building
Domestic toll free hotline: 10 Chater Road, Central
1(888) BNY ADRS Hong Kong
International hotline:
1(201) 680 6825 FINANCIAL CALENDAR
Email: shrrelations@cpushareownerservices.com Year ended 31st December 2021
Website: www.mybnymdr.com Annual report available to shareholders 6th April 2022
Annual General Meeting 11th May 2022
STOCK CODES
Hong Kong Stock Exchange 00293 Six months ending 30th June 2022
ADR CPCAY Interim results announcement August 2022
Interim dividend payable October 2022
DISCLAIMER
This document may contain certain forward-looking statements that reflect the Company’s beliefs, plans or expectations
about the future or future events. These forward‐looking statements are based on a number of assumptions, current
estimates and projections, and are therefore subject to inherent risks, uncertainties and other factors beyond the
Company’s control. The actual results or outcomes of events may differ materially and/or adversely due to a number of
factors, including the effects of COVID-19, changes in the economies and industries in which the Group operates (in
particular in Hong Kong and the Chinese Mainland), macro-economic and geopolitical uncertainties, changes in the
competitive environment, foreign exchange rates, interest rates and commodity prices, and the Group’s ability to identify
and manage risks to which it is subject. Nothing contained in these forward-looking statements is, or shall be, relied upon as
any assurance or representation as to the future or as a representation or warranty otherwise. Neither the Company nor its
directors, officers, employees, agents, affiliates, advisers or representatives assume any responsibility to update these
forward‐looking statements or to adapt them to future events or developments or to provide supplemental information in
relation thereto or to correct any inaccuracies.
References in this document to Hong Kong are to Hong Kong SAR, to Macau are to Macao SAR and to Taiwan are to the
Taiwan region.
CORPORATE AND SHAREHOLDER INFORMATION
© Cathay Pacific Airways Limited
國泰航空有限公司
DESIGN: FORMAT LIMITED
www.format.com.hk
Printed in Hong Kong
