ANNUAL REPORT 2020
Cathay Pacic Airways Limited
Stock Code: 293
CONTENTS
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。
MANAGEMENT DISCUSSION
AND ANALYSIS
3 Financial and Operational Highlights
5 Chairman’s Statement
9 Review of Operations
23 Financial Review
31 Sustainable Development Review
CORPORATE GOVERNANCE
34 Directors and Officers
36 Directors’ Report
43 Corporate Governance Report
FINANCIAL STATEMENTS
59 Independent Auditor’s Report
65 Consolidated Statement of Profit or
Loss and Other Comprehensive Income
66 Consolidated Statement of
Financial Position
67 Consolidated Statement of
Cash Flows
68 Consolidated Statement of
Changes in Equity
69 Notes to the Financial Statements
121 Principal Subsidiaries and
Associates
123 Principal Accounting Policies
134 Statistics
139 Glossary
140 Corporate and Shareholder Information
140 Disclaimer
Cathay Pacific Airways Limited
2
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 239
aircraft at the end of 2020 of which 92 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. According to IATA’s 2019 World Air
Transport Statistics, the Cathay Pacific Group was the world’s eighth-largest carrier of
international passengers, and the third-largest carrier of international air cargo.
Cathay Pacific was founded in Hong Kong in 1946. It has been deeply committed to its home
base over the past seven decades and remains so, making substantial investments to develop
Hong Kong as one of the world’s leading international aviation centres.
Cathay Pacific itself had 199 passenger and cargo aircraft at the end of 2020. 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 28 aircraft at the end of 2020. Air Hong
Kong, an express all-cargo carrier offering scheduled services in Asia, is a wholly owned
subsidiary of Cathay Pacific operating 12 aircraft at the end of 2020. Hong Kong Dragon
Airlines (“Cathay Dragon”), a regional full-service airline that was formerly a wholly owned
subsidiary of Cathay Pacific, ceased operations on 21st October 2020.
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. The Group continues to invest in its home city albeit, as a result of the pandemic, at
the end of 2020, it had or was in negotiations to defer 60 new aircraft deliveries.
At the end of 2020, Cathay Pacific and its subsidiaries employed more than 25,600 people
worldwide, of whom around 20,800 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.
3
Annual Report 2020
FINANCIAL AND
OPERATIONAL HIGHLIGHTS
GROUP FINANCIAL STATISTICS
2020 2019 Change
Results
Revenue HK$ million 46,934 106,973 -56.1%
(Loss)/profit attributable to the shareholders of Cathay Pacific
HK$ million (21,648) 1,691 -23,339
(Loss)/earnings per ordinary share
HK cents (424.3) 39.1 -463.4
Dividend per ordinary share
HK$ – 0.18 -100.0%
(Loss)/profit margin
% (46.1) 1.6 -47.7%pt
Financial position
Funds attributable to the shareholders of Cathay Pacific
HK$ million 73,257 62,773 +16.7%
Net borrowings*
HK$ million 73,788 82,396 -10.4%
Shareholders’ funds per ordinary share
HK$ 11.4 16.0 -28.8%
Ordinary shareholders’ funds per ordinary share ***
HK$ 8.3 16.0 -48.1%
Net debt/equity ratio*
Times 1.01 1.31 -0.3 times
OPERATING STATISTICS – CATHAY PACIFIC AND CATHAY DRAGON
2020 2019 Change
Available tonne kilometres (“ATK”) Million 14,620 33,077 -55.8%
Available seat kilometres (“ASK”)
Million 34,609 163,244 -78.8%
Available cargo tonne kilometres (“AFTK”)
Million 11,329 17,558 -35.5%
Revenue tonne kilometres (“RTK”)
Million 10,220 24,090 -57.6%
Passenger revenue per ASK
HK cents 32.7 44.2 -26.0%
Revenue passenger kilometres (“RPK”)
Million 20,079 134,397 -85.1%
Revenue passengers carried
‘000 4,631 35,233 -86.9%
Passenger load factor
% 58.0 82.3 -24.3%pt
Passenger yield
HK cents 56.3 53.7 +4.8%
Cargo revenue per AFTK
HK$ 2.17 1.20 +80.8%
Cargo revenue tonne kilometres (“RFTK”)
Million 8,309 11,311 -26.5%
Cargo carried
‘000 tonnes 1,332 2,022 -34.1%
Cargo load factor
% 73.3 64.4 +8.9%pt
Cargo yield
HK$ 2.96 1.87 +58.3%
Cost per ATK (with fuel)
HK$ 4.14 3.06 +35.3%
Fuel consumption per million RTK
Barrels 1,708 1,867 -8.5%
Fuel consumption per million ATK
Barrels 1,195 1,360 -12.1%
Cost per ATK (without fuel)
HK$ 3.41 2.19 +55.7%
Underlying** cost per ATK (without fuel)
HK$ 3.09 2.19 +41.1%
ATK per HK$’000 staff cost
Unit 1,074 1,879 -42.8%
ATK per staff
‘000 752 1,256 -40.1%
Aircraft utilisation (including parked aircraft)
Hours per day 4.3 11.9 -63.9%
On-time performance
% 86.7 76.3 +10.4%pt
Average age of fleet
Years 10.1 10.3 -0.2 years
GHG emissions
Million tonnes of CO
2
e 7.0 18.0 -61.1%
GHG emissions per ATK
Grammes of CO
2
e 480 545 -11.9%
Lost time injury rate
Number of injuries per 100
full-time equivalent employees
2.28 5.33 -57.2%
*
Net borrowings and the net debt/equity ratio excluding leases without asset transfer components are HK$54,698 million and 0.75 respectively. Further
details can be found in note 11 to the financial statements.
**
Underlying costs exclude exceptional items, restructuring, impairment and related charges and are adjusted for the effect of foreign currency
movements.
***
Ordinary shareholders’ funds 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.
We treat every customer’s
journey as their most important,
continually enhancing
their experiences both
on the ground and in the air.
CUSTOMER
CENTRIC
5
Annual Report 2020
CHAIRMAN’S STATEMENT
The Cathay Pacific Group experienced the most challenging
12 months of its more than 70-year history in 2020.
COVID-19, and the resultant travel restrictions and
quarantine requirements in place around the world, brought
about an unprecedented disruption of the global air travel
market and the repercussions have been huge. The
International Air Transport Association (IATA) estimates that
global passenger traffic will not return to pre-COVID-19
levels until 2024.
The Cathay Pacific Group’s attributable loss was HK$21,648
million in 2020 (2019: profit of HK$1,691 million). The loss
per ordinary share in 2020 was HK424.3 cents (2019:
earnings per ordinary share of HK39.1 cents). The Group’s
attributable loss was HK$11,783 million in the second half of
2020 (2020 first half: loss of HK$9,865 million; 2019 second
half: profit of HK$344 million). Cathay Pacific and Cathay
Dragon reported an attributable loss of HK$10,032 million in
the second half of 2020 (2020 first half: loss of HK$7,361
million; 2019 second half: loss of HK$434 million).
The loss for 2020 is net of the receipt of HK$2,689 million of
COVID-19-related government grants globally and includes
impairment and related charges of HK$4,056 million relating
to 34 aircraft that are unlikely to re-enter meaningful
economic service again before they retire or are returned to
lessors and to certain airline service subsidiaries’ assets
and HK$3,973 million of restructuring costs inclusive of a
HK$1,590 million write off of a deferred tax asset at
CathayDragon.
In June 2020, we announced a HK$39.0 billion
recapitalisation. We are very appreciative of the Hong Kong
SAR Government’s and our shareholders’ support for the
recapitalisation at a critical time.
In October 2020 we announced an extremely difficult but
necessary restructuring which sadly meant the loss of
approximately 8,500 positions and the discontinuation of
Cathay Dragon operations by the end of 2020. Additionally,
we asked our Hong Kong-based pilots and cabin crew to
transition onto new competitive conditions of service. We
sincerely thank the 98.5% of pilots and 91.6% of cabin crew
who accepted the new contracts.
The cost of the restructuring was about HK$2.4 billion. It is
saving about HK$500 million per month. This reduced
monthly cash burn from HK$1.5-2.0 billion to HK$1.0-
1.5billion.
BUSINESS PERFORMANCE OF CATHAY
PACIFIC AND CATHAY DRAGON
Since the onset of the pandemic, our passenger revenues
in 2020 declined to only 2-3% of 2019 levels. With demand
at an all-time low, we drastically reduced our passenger
schedule to just a bare skeleton and our operating capacity
remained below 10% for much of 2020. We saw occasional
pockets of demand, notably in the summer season with
student travel from Hong Kong and the Chinese mainland to
the UK and other destinations in Europe. Nonetheless, the
2020 summer season, which is usually our peak period of
the year, was incredibly difficult.
Passenger revenue in 2020 was HK$11,313 million, a
decrease of 84.3% compared to 2019. Revenue passenger
kilometre (RPK) traffic decreased by 85.1%, while available
seat kilometre (ASK) capacity decreased by 78.8%.
Consequently the load factor decreased by 24.3
percentage points to 58.0% and reached a low of 18.2% in
October. Yield increased by 4.8% to HK56.3 cents. 86.9%
fewer passengers were carried in 2020 than in 2019.
Our cargo business was by far the better performer, though
it too was affected by the substantial contraction in
capacity usually provided by the bellies of our passenger
aircraft. Yields increased and revenue improved due to the
imbalance in the market between available capacity and
Cathay Pacific Airways Limited
6
CHAIRMAN’S STATEMENT
demand. We increased cargo capacity by chartering
services from our all-cargo subsidiary, Air Hong Kong,
operating cargo-only passenger flights and carrying select
cargo in the passenger cabins of some of our aircraft, and
removing some seats in the Economy Class cabins of four
Boeing 777-300ERs to provide further cargo space.
Cargo revenue in 2020 was HK$24,573 million, an increase
of 16.2% compared to 2019, reflecting the imbalance in the
market between demand and available capacity. Revenue
freight tonne kilometre (RFTK) traffic decreased by 26.5%,
whilst available freight tonne kilometre (AFTK) capacity
decreased by 35.5%. Load factor increased by 8.9
percentage points, to 73.3%. Yield increased by 58.3% to
HK$2.96.
To reduce cash expenditure, we reduced capacity, deferred
capital expenditure, suspended non-critical expenditure,
froze hiring, cut executive pay and asked employees to
participate in two voluntary special leave schemes, which
received about 80% and 90% uptake, respectively, for
which we are very grateful.
Total fuel costs (before the effect of fuel hedging)
decreased by HK$20,881 million (or 72.8%) compared with
2019. Hedging losses were incurred because of the steep
decline in fuel usage and in fuel prices. After taking hedging
losses into account, fuel costs decreased by HK$18,068
million or 62.8% compared to 2019. Non-fuel costs per
available tonne kilometre increased.
We transferred 82 passenger aircraft (46% of the airlines’
passenger fleet) which had been parked at Hong Kong
International Airport, to locations outside of Hong Kong,
including Alice Springs in Australia and Ciudad Real in Spain.
These locations provide better environmental conditions
than those to which the aircraft were exposed in Hong Kong.
We reached agreement with Airbus to defer delivery of our
A350-900 and A350-1000 aircraft from 2020-21 to 2020-
23, and to defer delivery of A321neo aircraft from 2020-23
to 2020-25. Advanced negotiations are taking place with
Boeing for the deferral of the delivery of our 777-9 aircraft.
10 aircraft were delivered in 2020 (including our first
A321neo, in November). These aircraft will modernise our
fleets and improve efficiency.
BUSINESS PERFORMANCE OF OTHER
SUBSIDIARIES AND ASSOCIATES
HK Express reported a loss of HK$1,723 million for 2020.
The sudden contraction in passenger demand caused by
the pandemic and travel restrictions imposed by
governments around Asia led to the airline suspending all
flight operations between 23rd March and 1st August. 10
aircraft have been transferred to Alice Springs for parking.
Air Hong Kong’s financial results improved compared with
those of 2019 due to the strong air cargo demand amid
COVID-19.
Our airline services subsidiaries generally performed worse
than in 2019 due to the collapse in passenger and cargo
traffic volumes. Consequently, impairments totaling
HK$1,184 million were recognised in respect of the assets
of Vogue Laundry Service and Cathay Pacific Catering
Services. Air China (accounted for three months in arrears),
was adversely affected by COVID-19, with results lower than
those of 2019.
PROSPECTS
Market conditions remain challenging and dynamic. It is by
no means clear how the pandemic and its impact will
develop over the coming months.
From 20th February 2021, the Hong Kong SAR Government
has implemented stricter quarantine requirements for our
Hong Kong-based pilots and cabin crew. The new measures
have resulted in a reduction to our passenger capacity of
about 60% and a reduction to our cargo capacity of about
25% compared to January 2021 levels, and an increase in
cash burn of approximately HK$300-400 million per month
over the previous HK$1.0-1.5 billion range.
7
Annual Report 2020
All our cash preservation measures will continue unabated.
Executive pay cuts will remain in place throughout 2021. We
have asked all of our Hong Kong ground employees and
many overseas to participate in a third special leave
scheme during the first half of 2021 and we are very grateful
for the more than 80% uptake that this has received.
Our available unrestricted liquidity at 31st December 2020
totalled HK$28.6 billion. To secure further liquidity in this
difficult environment, earlier this year we issued HK$6.74
billion in convertible bonds, which will become due in 2026.
We stated at the end of last year that we expected to
operate at well below a quarter of pre-pandemic passenger
flight capacity in the first half of 2021 with improvement in
the second half of the year. This assumed that vaccines
would prove to be effective and would be widely adopted in
our key markets by summer 2021. Consequently we
expected to operate at well below 50% passenger capacity
overall in 2021. These statements are still largely valid. The
correlation between the roll-out of vaccination programmes
in our key markets and the potential future relaxation of
travel restrictions remains highly uncertain and difficult to
predict. We will remain agile and will respond according to
the situation as it develops.
Cathay Pacific Cargo is already handling shipments of
COVID-19 vaccines using an expert, next-generation air
cargo vaccine solution that addresses specific customer
needs for speed, control and special handling for the fast
and effective distribution of vaccines across the globe.
Our short-term outlook continues to be challenging.
However, we remain absolutely confident in the long-term
future and competitive position of our airlines. Our
important role at the centre of the Hong Kong aviation hub,
and the critical role that Hong Kong will play in the Greater
Bay Area and beyond, will continue to place us in good
stead as we recover and rebuild from the impact of
COVID-19.
Once again I would like to express my sincere gratitude
to all Cathay Pacific Group staff for their outstanding
professionalism and resilience throughout this
unprecedented period for the global aviation industry.
Patrick Healy
Chairman
Hong Kong, 10th March 2021
Safe, efficient,
on-time and consistent.
Our customers trust us
to make their journeys
easy and enjoyable.
OPERATIONAL
EXCELLENCE
9
Annual Report 2020
REVIEW OF OPERATIONS
In 2020, the Cathay Pacific Group was significantly impacted by the global COVID-19 pandemic,
which together with associated travel restrictions and border closures caused an unprecedented
paralysis of the global air travel market. Cathay Pacific’s passenger revenues dropped to 2-3% of
pre-crisis levels, while HK Express, the Group’s wholly owned low-cost carrier, temporarily
suspended its operations from 23rd March to 1st August. As a result, our 2020 performance was
well below that of previous years.
Our passenger business was by far the most affected by the
pandemic. Passenger volumes had already reduced since
August 2019 due to the social unrest in Hong Kong, and
were heavily impacted from March 2020 as the pandemic
intensified. Demand dropped substantially due to low travel
sentiment and the associated restrictions placed on travel
worldwide, notably the temporary ban on transit traffic via
Hong Kong International Airport (HKIA). We introduced a
skeleton passenger schedule and for much of the year our
monthly passenger capacity was less than 10% of pre-
COVID-19 levels. As a result, a number of our passenger
aircraft were parked, with about 46% of our passenger fleet
being transferred to locations outside of Hong Kong in
keeping with prudent operational and asset management
considerations. Though we saw a slight increase in demand
during the summer months – traditionally our peak season
– this was still well below usual levels. Overall in 2020, we
flew just 13.1% of the passengers that we carried in 2019.
Our cargo business was by far the better performer despite
experiencing a significant drop in capacity due to the lack of
available space usually provided by the bellies of our
passenger aircraft. Demand for medical supplies,
particularly in the first half of the year, replaced weaker
traditional flows. The imbalance in the market between
available capacity and demand helped push up revenues, as
yields increased due to restricted belly capacity. We
introduced a number of measures to provide additional
capacity where possible, notably operating more than 5,648
cargo-only passenger flights, chartering 680 services from
our all-cargo subsidiary Air Hong Kong, carrying cargo in
the cabins of our passenger aircraft, and converting four of
our Boeing 777-300ERs by removing some of the Economy
Class seats.
In order to preserve as much cash as possible, we
introduced a raft of cost-cutting measures. These included
executive pay cuts, suspension of all non-critical spend,
deferral of aircraft deliveries, negotiating cash deferrals,
discounts and mitigations with priority relationship vendors,
freezing recruitment, and asking our employees to
participate in two rounds of a special leave scheme, which
we are very grateful to have had about an 80% and 90%
uptake for, respectively. In 2020, the Group also received
approximately HK$2,689 million in government grants
globally, mostly in relation to COVID-19.
RECAPITALISATION
In response to the significant decline in passenger
revenues arising as a result of the pandemic, on 12th
August Cathay Pacific completed a HK$39 billion
recapitalisation of the Company, comprising a HK$19.5
billion preference share issue (with attached warrants) and a
HK$11.7 billion rights issue, supplementing a HK$7.8 billion
bridging loan facility made available in June 2020. We are
very grateful to the Hong Kong SAR Government and our
shareholders for their support during this critical time. The
recapitalisation has strengthened the balance sheet,
improved gearing and provided significant liquidity.
Cathay Pacific Airways Limited
10
REVIEW OF OPERATIONS
Passenger services • Loyalty and reward programmes
RESTRUCTURING
While the recapitalisation enabled us to continue, our
monthly cash burn was approximately HK$1.5-2.0 billion per
month, which was unsustainable. A comprehensive
restructuring of the Company was therefore necessary in
order to reduce our cash burn and secure the long-term
sustainability of Cathay Pacific. The key elements of the
restructuring were announced on 21st October.
First was the reduction of 8,500 (or 24%) of our Group
establishment headcount of 35,000. Owing to a recruitment
freeze and the prior closure of certain overseas crew bases,
2,600 of these roles were already vacant. This translated to
approximately 5,900 jobs – or 17% of our Group
establishment headcount – being impacted, including 5,300
redundancies in Hong Kong and a further 600 people
affected outside Hong Kong.
Second was the discontinuation of Cathay Dragon
operations and retiring the brand, which accounted for a
large proportion of these job losses. This allows us to focus
on two clearly segmented brands, enabling us to invest in
Cathay Pacific’s strengths and unparalleled customer
experience, while leveraging the potential of our low-cost
carrier, HK Express. It is intended that most of the
destinations formerly served by Cathay Dragon will be
served by Cathay Pacific or HK Express in future, and we are
pleased that a number of these destinations are already
being served by Cathay Pacific. Additionally, certain aircraft
previously operated by Cathay Dragon will be progressively
transferred to Cathay Pacific and HK Express.
Third, we asked our Hong Kong-based pilots and cabin crew
to transition to new, competitive conditions of service. Of
those asked, 98.5% of pilots and 91.6% of cabin crew
agreed to the new contracts, for which we are very grateful.
The restructuring enables the Group to be more focused,
efficient and competitive. The one-off cost of the
restructuring was approximately HK$2.4 billion. The cash
savings that these three initiatives provide are in the region
of HK$500 million per month. As a result, Cathay Pacific’s
monthly cash burn was brought down to about HK$1.0-1.5
billion. In connection with the restructuring, a Cathay
Dragon deferred tax asset of HK$1,590 million was also
written off.
CATHAY PACIFIC AND CATHAY DRAGON
PASSENGER SERVICES
Cathay Pacific and Cathay Dragon carried 4.6 million
passengers in 2020, a decrease of 86.9% compared to
2019. Revenue decreased by 84.3% to HK$11,313 million.
RPK traffic decreased by 85.1%, while ASK capacity
decreased by 78.8% and load factor decreased by 24.3
percentage points, to 58.0%, with flights supported by
cargo flows. Yield increased by 4.8% to HK56.3 cents.
Inbound and outbound traffic were both down significantly
due to the introduction of travel restrictions and border
closures both in Hong Kong and worldwide. Meanwhile,
transit traffic was particularly impacted by the temporary
ban on transit traffic through HKIA from mid-March to early
June, and for ex-Chinese mainland transit traffic until
mid-August. The lifting of these restrictions brought a
gradual increase in demand for transit travel via HKIA over
the summer months, particularly from the Chinese
mainland. Summer is traditionally our peak passenger
season, but in 2020 it was very challenging and student
travel from both Hong Kong and the Chinese mainland to
the UK and other European destinations formed a
significant portion of passengers carrier.
Overall, recovery remained slow in 2020 and we did not see
solid signs of immediate improvement. Having carefully
studied numerous scenarios facing the industry and our
airlines, we expect to operate at well below 50% passenger
capacity overall in 2021.
11
Annual Report 2020
5,000
10,000
15,000
25,000
20,000
30,000
35,000
40,000
0 50.0
52.0
54.0
56.0
58.0
60.0
62.0
64.0
66.0
0
20,000
40,000
100,000
80,000
60,000
0.0
10.0
20.0
30.0
50.0
40.0
HK$ million
Passenger capacity, load factor and eciency
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
Passenger revenue per ASK
1H17 2H171H16 2H16 1H18 2H18 1H19 2H19 1H20 2H20 1H172H161H16 2H17 1H18 2H18 1H19 2H19 1H20 2H20
AVAILABLE SEAT KILOMETRES (“ASK”), LOAD FACTOR AND YIELD CHANGE BY REGION
FOR2020 WERE AS FOLLOWS:
ASK (million) Load factor (%) Yield
2020 2019 Change 2020 2019 Change Change
Americas 10,762 43,555 -75.3% 54.3 82.9 -28.6%pt +11.2%
Europe 7,276 34,677 -79.0% 58.5 86.0 -27.5%pt +5.4%
Southwest Pacific 5,341 18,799 -71.6% 60.7 85.4 -24.7%pt +8.8%
North Asia 4,693 31,914 -85.3% 61.0 76.6 -15.6%pt +5.5%
Southeast Asia 4,258 21,483 -80.2% 57.1 81.3 -24.2%pt +11.4%
South Asia, Middle East and Africa 2,279 12,816 -82.2% 63.6 82.2 -18.6%pt -1.5%
Overall 34,609 163,244 -78.8% 58.0 82.3 -24.3%pt +4.8%
INNOVATION
• To provide customers with greater reassurance when
planning their travel, we introduced a number of new
flexible booking arrangements. This includes Cathay
Credits, a system for trading in tickets for credits of equal
value that can be redeemed for future bookings. We also
introduced unlimited free rebookings, reroutings or
refunds for passengers depending on their booking and
travel dates (subject to applicable terms and conditions).
• We launched the WhatsApp enquiry channel in select
markets that allows customers to receive quick and
effective solutions to their queries in a single chat.
• We launched Cathay Care, our series of enhanced
measures across every stage of the journey from check-
in to the cabin so that customers can take off with
confidence. This includes: temperature checks;
contactless check-in and boarding; antimicrobial coating
on check-in counters, kiosks and other common areas;
Cathay Pacific Airways Limited
12
mandatory wearing of face coverings by passengers and
crew throughout the flight; enhanced cleaning and
sanitisation of all surfaces; increased awareness of HEPA
filters that remove 99.999% of airborne contaminants
onboard aircraft; and others.
• We partnered with AXA General Insurance Hong Kong
Limited to provide free coverage for medical expenses
related to a COVID-19 diagnosis incurred while overseas
beginning in December 2020. This coverage is
automatically applied to flights.
AWARDS
• In January 2020, Cathay Pacific and Cathay Dragon
service teams and individual staff members won
honoursat the Hong Kong Customer Service Excellence
Awards 2019.
• In July 2020, Cathay Pacific was ranked 4th overall in
Japanese travel magazine ABROAD’s Airline
Rankings2020.
• In September 2020, Cathay Pacific was named Best
Airline for Business Travelers to Asia and Middle East in
the Italian Mission Awards organised by Italian business
travel sector magazine, Mission.
• In October 2020, Cathay Pacific’s Asia Miles rewards
programme was ranked 3rd in the Best Frequent Flyer
Program (2020) category of USA Today’s 10 Best
Readers’ Choice 2020 awards.
• In October 2020, Cathay Pacific Cargo was named Best
Cargo Airline – Asia at the 2020 Air Cargo News Awards.
• In December 2020, Cathay Pacific was named Best
Airlinein Asia and Best Airline for Transpacific Service at
the 2020 Best in Business Travel Awards by Business
TravelerUSA.
HOME MARKET – HONG KONG AND
GREATER BAY AREA
• In the first three weeks of January 2020, we saw a small
amount of growth in outbound Hong Kong passengers,
largely due to the early start of the Chinese New Year
holiday. Outbound travel dropped significantly after the
holiday period due to COVID-19.
• On 17th February 2020, we temporarily closed The
Bridge, The Deck and The Pier First Class Lounges at
Hong Kong International Airport until further notice. On
26th March 2020, The Pier Business Class Lounge was
also temporarily closed until further notice.
• From late February 2020, a modified service was
introduced in our lounges to have food individually served
or portioned as a precautionary health and safety
measure.
• As of 1st April 2020, all lounges across our network have
been temporarily closed until further notice, with the
exception of The Wing at Hong Kong International Airport
and the Cathay Pacific Lounge at Shanghai Pudong
International Airport.
• A modified inflight service was introduced on all flights to
strengthen health and safety protocols.
• As of 10th April 2020, the In-Town Check-in service at
Hong Kong and Kowloon Airport Express Stations has
been suspended.
• On 21st October 2020, we announced a corporate
restructuring that included the ceasing of operations of
Cathay Dragon and the Dragon brand. It is intended that
most of the routes formerly operated by Cathay Dragon
will be operated by Cathay Pacific or HK Express.
REVIEW OF OPERATIONS
Passenger services • Loyalty and reward programmes
13
Annual Report 2020
AMERICAS
• To cater to a temporary increase in demand, we added
capacity on flights to Hong Kong from the United States,
and reinstated two flights to Hong Kong from New York
(JFK) and Boston during March 2020.
• In April 2020, Cathay Pacific began operating a skeleton
passenger flight schedule that included the temporary
suspension of flight services to many of its destinations
in the Americas. Some destinations were progressively
resumed over the following months.
• At 31st December 2020, Cathay Pacific was operating
flights to the following destinations in the Americas: Los
Angeles, New York (JFK), San Francisco, Toronto and
Vancouver.
• Cathay Pacific’s 2021 schedule includes the suspension
of services to Newark New York, Seattle and Washington
D.C. It is hoped that these routes can be served again in
future as we recover.
EUROPE
• To cater to a temporary increase in demand from the UK,
we reinstated nine flights to London Heathrow and two to
Manchester between 17th and 21stMarch 2020.
• In April 2020, Cathay Pacific began operating a skeleton
passenger flight schedule that included the temporary
suspension of flight services to many of its destinations
in Europe. Some destinations were progressively
resumed over the following months.
• Cathay Pacific operated two charter services – in August
and September 2020, respectively – from Hong Kong to
Tel Aviv to cater primarily for transit passengers
fromShanghai.
• In September 2020, Cathay Pacific launched three
charter services from Hong Kong to London Heathrow to
cater to an increase in demand from transit passengers
from the Chinese mainland.
• Demand for flights to the UK and Continental Europe,
which had increased during the summer months due to
student travel, dropped rapidly following a resurgence of
COVID-19 cases in many European countries.
• At 31st December 2020, Cathay Pacific was operating
flights to the following destinations in Europe:
Amsterdam, Frankfurt, London Heathrow and Tel Aviv.
• Cathay Pacific’s 2021 schedule includes the suspension
of services to London Gatwick, Brussels and Dublin. It is
hoped that these routes can be served again in future as
we recover.
SOUTHWEST PACIFIC
• In April 2020, Cathay Pacific began operating a skeleton
passenger flight schedule that included the temporary
suspension of flight services to many of its destinations
in the Southwest Pacific. Some destinations were
progressively resumed over the following months.
• At 31st December 2020, Cathay Pacific was operating
flights to the following destinations in the Southwest
Pacific: Melbourne, Perth, Sydney and Auckland.
NORTH ASIA
• Throughout February and March, Cathay Pacific and
Cathay Dragon progressively reduced passenger
capacity on flights to and from the Chinese mainland by
about 85%.
• When travel restrictions were put in place around the
world, Cathay Pacific supported the Hong Kong SAR
Government in operating charter flights to bring affected
Hong Kong residents home. These included three flights
from Tokyo and eight flights from Wuhan and the wider
Hubei Province.
• In April 2020, Cathay Pacific and Cathay Dragon began
operating a skeleton passenger flight schedule that
included the temporary suspension of flight services to
many of their destinations in North Asia. Some
destinations were progressively resumed over the
following months.
Cathay Pacific Airways Limited
14
• In August 2020, the Hong Kong SAR Government lifted
the ban on ex-Chinese mainland transit via Hong Kong
International Airport, which led to a gradual increase in
demand, in particular student travel.
• In November 2020, Cathay Pacific resumed passenger
and cargo services to Kaohsiung, and cargo services to
Fukuoka, which had been previously operated by
CathayDragon.
• At 31st December 2020, Cathay Pacific was operating
flights to the following destinations in North Asia: Beijing,
Shanghai (Pudong), Kaohsiung, Taipei, Osaka, Tokyo
andSeoul.
SOUTHEAST ASIA
• In April 2020, Cathay Pacific and Cathay Dragon began
operating a skeleton passenger flight schedule that
included the temporary suspension of flight services to
many of their destinations in Southeast Asia. Some
destinations were progressively resumed over the
following months.
• We saw a slight increase in demand for flights serving
Indonesia in October, driven by sales from Hong Kong,
Indonesia, the Chinese mainland and Taiwan.
• In November 2020, Cathay Pacific resumed passenger
and cargo services to Kuala Lumpur, and cargo services
to Hanoi, which had been previously operated by
CathayDragon.
• At 31st December 2020, Cathay Pacific was operating
flights to the following destinations in Southeast Asia:
Jakarta, Surabaya, Kuala Lumpur, Cebu, Manila,
Singapore, Bangkok and Ho Chi Minh City.
SOUTH ASIA, MIDDLE EAST AND AFRICA
• From April 2020, all flights serving South Asia, Middle East
and Africa have been temporarily suspended until
furthernotice.
• Cathay Pacific’s 2021 schedule includes the suspension
of services to Cape Town, Bahrain and Male. It is hoped
that these routes can be served again in future as
werecover.
LOYALTY AND REWARD PROGRAMMES
MARCO POLO CLUB
• The Marco Polo Club loyalty programme provides
benefits and services to the frequent flyers of Cathay
Pacific and Cathay Dragon.
• Marco Polo Club members contribute to about a quarter
of the revenues of Cathay Pacific and Cathay Dragon.
• 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 or Cathay Dragon.
All members are entitled to priority boarding and check-in.
• In light of COVID-19, in February 2020 we launched the
Club Points Relief Scheme and credited club points every
month from February to April 2020 to each member
based on tier to assist them in maintaining their status.
We also re-issued all mid-tier benefits that expired
between February to April 2020 – valid for another
6months.
• In April 2020, we launched the automatic tier renewal
scheme and renewed the status for members whose
membership expired in 2020 for another 12 months. We
also re-issued all mid-tier benefits that expired during the
same period for another 12 months. This has since been
extended to cover membership status and mid-tier
benefits that expired up to the end of 2021.
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 25 airlines,
more than 150 hotel brands and over 400 dining partners
and shops.
• There was a 81% decrease in redemptions by Asia Miles
members on Cathay Pacific and Cathay Dragon flights
compared to last year, but redemptions on non-flight
related channels increased by 85%.
• Marco Polo Club members are also members of
AsiaMiles.
REVIEW OF OPERATIONS
Passenger services • Loyalty and reward programmes
15
Annual Report 2020
REVIEW OF OPERATIONS
Cargo services • Fleet
CATHAY PACIFIC AND CATHAY DRAGON
CARGO SERVICES
Cargo revenue in 2020 was HK$24,573 million, an increase
of 16.2% compared to 2019, reflecting the imbalance in the
market between demand and available capacity. RFTK
0
4,000
2,000
6,000
8,000
10,000
12,000
0.4
1.2
0.8
1.6
2.0
2.4
2.8
1.4
2.2
1.8
2.6
3.0
3.4
0
3,000
6,000
9,000
15,000
12,000
Cargo capacity, load factor and eciency
Million
Cargo revenue and yield trend
HK$ million HK$HK$
Cargo revenue
Cargo yield
Available cargo tonne kilometres (AFTK)
Load factor
Cargo revenue per AFTK
1H17 2H171H16 2H16 1H18 2H18 1H19 2H19 1H20 2H20 1H17 2H171H16 2H16 1H18 2H18 1H19 2H19 1H20 2H20
AVAILABLE CARGO TONNE KILOMETRES (“AFTK”), LOAD FACTOR AND YIELD CHANGE FOR
2020 WERE AS FOLLOWS:
AFTK (million) Load factor (%) Yield
2020 2019 Change 2020 2019 Change Change
Cathay Pacific and Cathay Dragon 11,329 17,558 -35.5% 73.3 64.4 +8.9%pt +58.3%
traffic decreased by 26.5%, whilst AFTK capacity
decreased by 35.5%. Load factor remained high, increasing
8.9 percentage points to 73.3%, and reached its highest
point in 2020 – 80.3% – in December. Yield increased by
58.3% to HK$2.96 and this improvement compensated for
volume being constrained by available capacity.
Cathay Pacific Airways Limited
16
• Cargo was the better performer in 2020 despite the
significant drop in available capacity usually provided by
the bellies of passenger aircraft. The freighter fleet was
operating at full capacity for much of the year,
supplemented by additional capacity in the form of 5,648
cargo-only passenger flights, 680 charter flights
operated by the Group’s all-cargo subsidiary Air Hong
Kong, and 143 flights with select cargo loaded in the
passenger cabins.
• Demand for medical supplies replaced weaker
traditionalflows.
• In July 2020 we introduced the first of our reconfigured
Boeing 777-300ER aircraft, which have had some of the
Economy Class seats removed to provide additional
cargo space and enabling us to load shipments such as
personal protective equipment (PPE). These aircraft were
predominantly used for long-haul shipments.
• We saw greater movements of pharmaceutical products
and live animal shipments across the network in August
2020, while our time-sensitive product – Priority LIFT
– was in good demand.
• In September 2020, we began uplifting mail for Hongkong
Post in our passenger cabins using our reconfigured
Boeing 777-300ER “freighters”. These aircraft were also
deployed to run a new, temporary service to Pittsburgh
serving the seasonal upsurge in demand.
• Following the National Day Holidays at the beginning of
October 2020, demand from our home market, Hong
Kong, and the Chinese mainland rebounded quickly,
driven by new electronic products.
• We continued to add to our specialised products
capability with the introduction of a Skid-Size Fire
Containment Bag solution, enabling the safe transport of
lithium-ion batteries packed on skids. This solution is
being progressively rolled out across our network.
• Demand on the US-China trade lane is back to pre-
COVID-19 levels as a result of robust e-commerce.
• In November 2020, we expanded our network
commencing a freighter charter series into Riyadh, Saudi
Arabia, which was underpinned by inbound e-commerce
demand. In December 2020 we further launched a
seasonal service into Hobart, Australia to support
exportsof fresh produce from Tasmania into different
parts ofAsia.
• Cathay Pacific began preparing customised vaccine
solutions for certain customers as part of efforts to gear
up to assist in the distribution of vaccines in the first and
second quarters of 2021.
FLEET DEVELOPMENT
• The loss for 2020 includes impairment and related
charges of HK$2.8 billion relating to 34 aircraft that are
unlikely to re-enter meaningful economic service again
before they retire or are returned to lessors.
• As at 31st December 2020 the Group had transferred 92
passenger aircraft – 44% of its passenger fleet – that
were parked at Hong Kong International Airport to Alice
Springs in Australia and Ciudad Real in Spain in keeping
with prudent operational and asset-management
considerations. These locations provide better
environmental conditions than the aircraft would have
been exposed to in Hong Kong.
• We reached an agreement with Airbus to defer the
delivery of our A350-900s and A350-1000s from
2020-21 to 2020-23, and our A321neos from 2020-23 to
2020-25. On 27th January 2021, Boeing announced a
delay of the 777X programme with delivery of the first
aircraft expected in late 2023. Cathay Pacific is in
advanced negotiations with regard to the deferral of its
777-9 deliveries.
• We took delivery of 10 new aircraft in 2020, including our
first A321neo aircraft. These deliveries were all firm
commitments made earlier that will help our efforts to
modernise our fleets and improve efficiency.
• We partially converted four of our Boeing 777-300ER
passenger aircraft, by removing some of the seats in the
Economy Class cabin, to provide additional cargo-
carrying capacity.
• The Group is in the process of transferring certain aircraft
from Cathay Dragon to Cathay Pacific and HK Express.
REVIEW OF OPERATIONS
Cargo services • Fleet
17
Annual Report 2020
FLEET PROFILE*
Number at
31st December 2020
Leased** Orders Expiry of operating leases**
Aircraft
type Owned Finance Operating Total
Average
age ‘21 ‘22
‘23 and
beyond Total ‘21 ‘22 ‘23 ‘24 ‘25
‘26 and
beyond
Cathay Pacific and Cathay Dragon:
A320-200 5 6 11 15.1 3
(a)
3
A321-200 2 5 7 17.3 2 2 1
A321-200neo 2 2 0.1 4
(b)
6 4 14 2
A330-300 37 10 4 51 14.2 2 2
A350-900 19 6 2 27 3.3 1 2 3 2
A350-1000 10 3 13 1.9 2
(c)
3 5
747-400ERF 2 4 6 12.0
747-8F 3 11 14 7.9
777-300 17 17 19.2
777-300ER 23 7 21 51 8.8 6 4 2 3 2 4
777-9 21 21
Total 118 41 40 199 10.4 7 9 27 43 11 9 3 3 4 10
HK Express:
A320-200 8 8 11.2 3 1 4
A320-200neo 9 9 2.1 1
(b)
1 9
A321-200 11 11 3.2 1 10
A321-200neo 1 15 16
Total 28 28 5.1 1 1 15 17 3 1 4 1 19
Air Hong Kong***:
A300-600F 9 9 16.7 5 3 1
A330-243F 1 1 7.6 1
A330-300P2F 2 2 14.3 2
Total 12 12 15.5 5 3 4
Grand total 118 41 80 239 10.1 8 10 42 60 14 14 7 7 5 33
*
The table does not reflect aircraft movements after 31st December 2020.
**
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, one Airbus A330-243F and two 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 lease of one Airbus A320-200 aircraft expired in February 2021. The aircraft was returned to its lessor.
(b) Three Airbus A321neo aircraft and one A320neo aircraft are on operating leases.
(c) One aircraft was delivered in March 2021.
Cathay Pacific Airways Limited
18
REVIEW OF OTHER SUBSIDIARIES AND
ASSOCIATES
The share of results from other subsidiaries and associates
in 2020 was HK$4,255 million of losses compared to a share
of profits of HK$1,450 million in 2019. 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 2020, HK Express had an all Airbus narrow-
body fleet of 28 aircraft, including eight Airbus A320-200
aircraft, 11 Airbus A321-200 aircraft and nine Airbus
A320-200neo aircraft. The young fleet had an average
age of 5.1 years. It is expected to take delivery of one
more Airbus A320-200neo aircraft by early 2021.
• HK Express will receive an order previously allocated to
Cathay Dragon for the delivery of 16 Airbus A321-200neo
aircraft from 2022, 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.
• From 23rd March to 1st August 2020, HK Express
temporarily suspended flight operations, in response to
significantly reduced travel demand and travel
restrictions imposed by governments around Asia Pacific
due to the COVID-19 pandemic.
• At 31st December 2020, HK Express was operating flights
to Bangkok and Taichung.
• For 2020, capacity amounted to 1,742 million available
seat kilometres, reflecting the airline’s temporary
suspension of flight operations. The average flown load
factor was 71.0% during the year, a decrease of 16.8
percentage points as compared to the comparative
period.
• HK Express recorded a significant after-tax loss of
HK$1,723 million in 2020, compared with a loss of HK$246
million in the period from acquisition on 20th July 2019 to
31st December 2019.
• Ancillary revenue penetration as a percentage of total
revenue was 18.8% during the year. This included non-
flight scheduled revenue which arises from the sale of
baggage, priority boarding, allocated seats and
administration fees, all directly attributable to the low-fare
business of HK Express.
REVIEW OF OPERATIONS
Review of other subsidiaries and associates
19
Annual Report 2020
For the year ended
31st December 2020
HK$M
Period from 20th July to
31st December 2019
HK$M
Revenue
Passenger services* 636 1,817
Cargo services 14 23
Other services and recoveries* 211 53
Total revenue 861 1,893
Expenses
Staff (575) (307)
Inflight service and passenger expenses (10) (23)
Landing, parking and route expenses (187) (476)
Fuel, including hedging losses (285) (459)
Aircraft maintenance (327) (244)
Aircraft depreciation and rentals (908) (386)
Other depreciation, amortisation and rentals (28) (17)
Commissions (1) (7)
Others (202) (170)
Operating expenses (2,523) (2,089)
Net finance charges (274) (112)
Total expenses (2,797) (2,201)
Loss before taxation (1,936) (308)
Taxation 213 62
Loss after taxation (1,723) (246)
*
A portion of ancillary revenue used to calculate ancillary penetration for HK Express is captured under “Passenger services revenue” in alignment with
the Group’s treatment of revenue in accordance with HKFRS 15.
For the year ended
31st December 2020
Period from 20th July to
31st December 2019
Operating Statistics
Available seat kilometres (“ASK”)
Million 1,742 4,583
Passenger revenue per ASK
HK cents 36.5 39.6
Revenue passenger kilometres (“RPK”)
Million 1,237 4,023
Revenue passengers carried
‘000 572 1,888
Passenger load factor
% 71.0 87.8
Passenger yield
HK cents 51.4 45.2
Cost per ASK (with fuel)
HK cents 160.6 48.0
Fuel consumption per million ASK
Barrels 151 150
Fuel consumption per million RPK
Barrels 213 171
Cost per ASK (without fuel)
HK cents 144.2 38.0
ASK per HK$’000 staff cost
Unit 3,030 14,928
ASK per staff
‘000 1,637 4,287
Aircraft utilisation
Hours per day 1.5 8.9
On-time performance
% 91.7 90.4
Average age of fleet
Years 5.1 4.9
Cathay Pacific Airways Limited
20
AHK AIR HONG KONG LIMITED
(“AIR HONG KONG”)
• Air Hong Kong principally operates express cargo
services for DHL Express.
• At the end of 2020, Air Hong Kong operated nine dry
leased Airbus A300-600F freighters, one dry leased
Airbus A330-243F freighter and two 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.
• There was an imbalance between capacity and demand
inthe cargo market. Compared with 2019, capacity (in
terms of available tonne kilometers) increased by 31% to
922million.
• On-time performance rose by 3.1 percentage points
to90.1%.
• In 2020, Air Hong Kong’s financial results improved
compared with those of 2019 due to additional COVID-19
related air cargo demand with 680 extra sectors flown for
Cathay Pacific.
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 50 international
airlines in Hong Kong. It produced 4.7 million meals and
handled 16,871 flights in 2020 (representing a daily
average of 12,806 meals and 46 flights, a decrease of
84% and 76% respectively from 2019, due to the impact
of COVID-19).
• CPCS’s losses in 2020 were materially worse than 2019
due to significantly lower meal volumes and asset
impairments of HK$526 million, despite the financial relief
measures received from the government or Hong Kong
Airport Authority in the form of Employment Support
Schemes and various airport charge reductions.
• The profits of the flight kitchens outside Hong Kong
decreased significantly compared to the previous year,
due to the impact of COVID-19.
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 2020, CPSL provided cargo
handling services for the Cathay Pacific Group and 15
other airlines.
• CPSL handled 1.4 million tonnes of cargo in 2020 (a
decrease of 26% compared with 2019), 48% of which
were trans-shipments. Export and import shipments
accounted for 33% and 19% respectively of the total.
• The financial results in 2020 declined compared with
those of 2019. This was mainly due to lower tonnage
handled, as a result of reduced capacity in passenger
flights affected by the pandemic, despite the financial
relief measures received from the government or Hong
Kong Airport Authority in the form of Employment
Support Schemes and various airport charge reductions.
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 2020, it provided ground handling
services to 29 airlines, including Cathay Pacific.
• In 2020, HAS had 36% and 4% market shares in ramp and
passenger handling businesses respectively at Hong
Kong International Airport. Due to the impact of COVID-19
on international travel, the number of flights handled
under its ramp handling business dropped significantly by
67% in 2020. The number of flights handled under its
passenger handling business decreased by 73% against
last year.
• The financial results in 2020 were adversely affected by
the pandemic despite the financial relief measures
received from the government or Hong Kong Airport
Authority in the form of Employment Support Schemes
and various airport charge reductions.
REVIEW OF OPERATIONS
Review of other subsidiaries and associates
21
Annual Report 2020
VOGUE LAUNDRY SERVICE LIMITED
(“ V L S ”)
• 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 12 valet shops in Hong Kong
serving retail customers.
• VLS processed 33 million items of laundry in 2020
compared to 102 million items in 2019. The financial
results of 2020 declined compared with those of 2019
mainly due to the lower volume of laundry items due to
being adversely affected by the pandemic and asset
impairments of HK$658 million, despite the financial relief
measures received from the government in the form of
Employment Support Schemes.
PRINCIPAL ASSOCIATES
AIR CHINA LIMITED (“AIR CHINA”)
• Air China, in which Cathay Pacific had a 18.13% interest at
31st December 2020, 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 2020 results include Air China’s results
for the 12 months ended 30th September 2020, adjusted
for any significant events or transactions in the period
from 1st October 2020 to 31st December 2020. The
cross shareholding impact of the Cathay Pacific Group
restructuring and impairment costs in the last quarter of
the year qualifies as an adjusting entry; accordingly a
charge of HK$264 million was incorporated in the
Group’sresults.
• For the 12 months ended 30th September 2020, Air
China’s financial results declined compared to those for
the 12 months ended 30th September 2019.
AIR CHINA CARGO CO., LTD. (“AIR CHINA
CARGO”)
• Air China Cargo, in which Cathay Pacific owns an equity
and an economic interest totalling 34.78% as at 31st
December 2020, 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.
• At 31st December 2020, Air China Cargo operated 15
freighters. It flies to 11 cities in the Chinese mainland and
14 cities outside the Chinese mainland. Taking into
account its rights to carry cargo in the bellies of Air
China’s passenger aircraft, Air China Cargo has
connections to more than 200 destinations.
• Despite a substantial reduction of the belly capacity of
passenger aircraft as a result of the COVID-19 pandemic,
significantly improved yields, higher utilisation of
freighters and lower fuel prices resulted in Air China
Cargo’s financial results in 2020 being significantly better
than last year.
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 133.
By leaning our processes
and being agile in
our decision making,
we focus on the best ways
to solve problems with
positivity and determination.
PRODUCTIVITY & VALUE
FOCUSED
23
Annual Report 2020
The Cathay Pacific Group’s attributable loss was HK$21,648 million for 2020 (2019: profit of
HK$1,691million). Cathay Pacific and Cathay Dragon reported a loss after tax of HK$17,393 million
for 2020 (2019: profit of HK$241 million), and the share of losses from subsidiaries and associates
was HK$4,255 million (2019: profit of HK$1,450 million).
FINANCIAL REVIEW
The loss for 2020 includes impairment and related charges
of HK$4,056 million relating to 34 aircraft that are unlikely to
re-enter meaningful economic service again before they
retire or are returned to lessors, together with certain airline
service subsidiaries’ assets and HK$3,973 million on
restructuring costs inclusive of a HK$1,590 million write off
of the deferred tax asset for Cathay Dragon.
The Group received HK$2,689 million of COVID-19 related
government grants globally, with HK$1,503 million
recognised as revenue from other services and recoveries
and HK$1,186 million recognised as cost reductions or
waivers within respective cost categories. In addition we
received support in the form of advanced ticket sales of
HK$1,008 million from the Hong Kong Special
Administrative Region Government which is held within
contract liabilities awaiting performance of the related
carriage services.
Further details of the financial impacts of COVID-19 can be
found in note 32 to the financial statements.
REVENUE
Group Cathay Pacific and Cathay Dragon
2020
HK$M
2019
HK$M Change
2020
HK$M
2019
HK$M Change
Passenger services 11,950 73,985 -83.8% 11,313 72,168 -84.3%
Cargo services 27,890 23,810 +17.1% 24,573 21,154 +16.2%
Other services and recoveries 7,094 9,178 -22.7% 6,842 8,284 -17.4%
Total revenue 46,934 106,973 -56.1% 42,728 101,606 -57.9%
Cathay Pacific Airways Limited
24
FINANCIAL REVIEW
CATHAY PACIFIC AND CATHAY DRAGON
• Passenger revenue decreased by 84.3% to HK$11,313
million. The number of revenue passengers carried
decreased by 86.9% to 4.6 million. Revenue passenger
kilometres decreased by 85.1%.
• The passenger load factor decreased by 24.3 percentage
points to 58.0%. Available seat kilometres decreased
by78.8%.
• Passenger yield increased by 4.8% to HK56.3 cents.
• First and business class revenues decreased by 85.1%
and the load factor decreased from 58.1% to 38.7%.
• Premium economy and economy class revenues
decreased by 84.0% and the load factor decreased from
86.3% to 61.2%.
• Cargo revenue increased by 16.2% to HK$24,573 million
despite a 35.5% decrease in available freight
tonnekilometers.
• The cargo load factor increased by 8.9 percentage points
and cargo yield increased by 58.3% to HK$2.96.
• The overall revenue load factor decreased by 9.7
percentage points to 67.7%. Due to the significant
reduction in capacity, the breakeven load factor rose
to101.4%.
• The annualised effect on revenue of changes in yield and
load factor is set out below:
HK$M
+ 1 percentage point in passenger load factor 194
+ 1 percentage point in cargo load factor 335
+ HK¢1 in passenger yield 201
+ HK¢1 in cargo yield 84
0
20,000
40,000
60,000
80,000
100,000
120,000
0
3,000
9,000
6,000
12,000
15,000
21,000
18,000
0
200
400
600
1,000
800
1,400
1,200
2016 2017 2018 2019 2020
HK$ million
Revenue
Passengers in ‘000
Cargo in ‘000 tonnes
Cathay Pacic and Cathay Dragon:
passengers and cargo carried
Cargo carried
Passengers carried
Other services and recoveries
Cargo services
Passenger services
1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20
%
60
65
70
75
80
85
105
100
95
90
2016 2017 2018 2019 2020
Revenue load factor
Breakeven load factor
Cathay Pacic and Cathay Dragon:
revenue and breakeven load factor
25
Annual Report 2020
0
20,000
40,000
60,000
80,000
100,000
120,000
0
3,000
9,000
6,000
12,000
15,000
21,000
18,000
0
200
400
600
1,000
800
1,400
1,200
2016 2017 2018 2019 2020
HK$ million
Revenue
Passengers in ‘000
Cargo in ‘000 tonnes
Cathay Pacic and Cathay Dragon:
passengers and cargo carried
Cargo carried
Passengers carried
Other services and recoveries
Cargo services
Passenger services
1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20
OPERATING EXPENSES
Group Cathay Pacific and Cathay Dragon
2020
HK$M
2019
HK$M Change
2020
HK$M
2019
HK$M Change
Staff 15,786 20,125 -21.6% 13,616 17,604 -22.7%
Inflight service and passenger expenses 1,102 5,306 -79.2% 1,093 5,284 -79.3%
Landing, parking and route expenses 6,868 17,758 -61.3% 6,268 16,900 -62.9%
Fuel, including hedging losses 11,379 29,812 -61.8% 10,710 28,778 -62.8%
Aircraft maintenance 5,772 9,858 -41.4% 4,745 9,231 -48.6%
Aircraft depreciation and rentals 11,879 12,022 -1.2% 11,060 11,640 -5.0%
Other depreciation, amortisation and rentals 2,720 2,991 -9.1% 1,924 2,132 -9.8%
Commissions 146 927 -84.3% 145 920 -84.2%
Others 2,987 4,847 -38.4% 3,524 6,280 -43.9%
Operating expenses 58,639 103,646 -43.4% 53,085 98,769 -46.3%
Net finance charges 2,895 2,939 -1.5% 2,313 2,446 -5.4%
Total operating expenses 61,534 106,585 -42.3% 55,398 101,215 -45.3%
• The Group’s total operating expenses decreased by
42.3% (with the combined Cathay Pacific and Cathay
Dragon operating expenses decreasing by 45.3%).
• The cost per ATK (with fuel) of Cathay Pacific and Cathay
Dragon increased from HK$3.06 to HK$4.14, an increase
of 35.3%.
• The cost per ATK (without fuel) of Cathay Pacific and
Cathay Dragon increased from HK$2.19 to HK$3.41, an
increase of 55.7%.
• The underlying cost per ATK (without fuel), which
excludes exceptional items, restructuring, impairment
and related charges, and are adjusted for the effect of
foreign currency movements, increased from HK$2.19 to
HK$3.09, an increase of 41.1%.
Net nance
charges
Commissions
Others
Sta
9%
Aircraft
maintenance
Depreciation,
amortisation
and rentals
24%
5%
0%
5%
26%
Fuel, including
hedging
losses
Inight service and
passenger expenses
Landing,
parking
and route
expenses
Group total operating expenses
2%
11%
18%
0
20
40
80
100
0
10
20
40
50
60 30
2016 2017 2018 2019 2020
US$ per barrel
(jet fuel)
Barrels
in million
Group fuel price and consumption
Into wing price – before hedging
Into wing price – after hedging
Uplifted volume
Cathay Pacific Airways Limited
26
FINANCIAL REVIEW
OPERATING RESULTS ANALYSIS
1st half
2020
HK$M
2nd half
2020
HK$M
Full year
2020
HK$M
1st half
2019
HK$M
2nd half
2019
HK$M
Full year
2019
HK$M
Cathay Pacific’s and Cathay Dragon’s (loss)/profit
 before exceptional items, restructuring,
 impairment and related charges and taxation (6,903) (5,726) (12,629) 966 (455) 511
Exceptional items (note 1) (40) (1) (41) (59) (61) (120)
Restructuring costs (note 2) – (2,383) (2,383) – – –
Impairment and related charges (note 3) (1,281) (1,534) (2,815) – – –
Non-recurring item (note 4) – – – – 114 114
Taxation (note 5) 863 (388) 475 (232) (32) (264)
Cathay Pacific’s and Cathay Dragon’s (loss)/profit
 after taxation (7,361) (10,032) (17,393) 675 (434) 241
Share of (losses)/profits from subsidiaries and
 associates (note 6) (2,504) (1,751) (4,255) 672 778 1,450
(Loss)/profit attributable to the shareholders of
 Cathay Pacific (9,865) (11,783) (21,648) 1,347 344 1,691
Adjusted (loss)/profit attributable to the
 shareholders of Cathay Pacific (note 7) (7,414) (6,441) (13,855) 1,406 291 1,697
Notes:
1) Exceptional items in 2020 included redundancy costs of HK$33 million in connection with the closure of outport crew bases, data security costs of
HK$9 million and HK$1 million credit associated with the acquisition of HK Express (2019: additional redundancy costs of HK$8 million in connection
with the reorganisation of our outports, data security costs of HK$41 million and costs of HK$71 million associated with the acquisition of HK Express).
2) Redundancy and related costs of HK$2,383 million in connection with the restructuring of the Group and the discontinuation of Cathay Dragon
operations.
3) 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.
4) The non-recurring item in 2019 reflects a gain on deemed partial disposal of an associate.
5) A write off of deferred tax assets on tax losses of HK$1,590 million for Cathay Dragon was recognised under Taxation.
6) Impairment and related charges of HK$658 million and HK$526 million were recognised for our laundry and catering plants respectively in the first half of
2020. HK$56 million was recognised for an impairment in an associate in the second half of 2020. A further HK$264 million Air China cross shareholding
effect of CX Group Q4 impairment and restructuring costs was also recognised.
7) An adjusted (loss)/profit attributable to the shareholders of Cathay Pacific was arrived at after excluding the above exceptional, restructuring, impairment
and non-recurring costs, and their estimated tax impacts.
27
Annual Report 2020
The movement in Cathay Pacific’s and Cathay Dragon’s profit/loss before exceptional items, restructuring, impairment and
related charges and taxation (isolating foreign currency movements) can be analysed as follows:
Reported
HK$M
Currency
movement
HK$M
Adjusted
HK$M
ATK unit*
% change Note
2019 Cathay Pacific’s and Cathay Dragon’s profit before
 exceptional items, impairment and related charges and taxation 511 511
Changes:
– Passenger and Cargo revenue (57,436) 1,008 (56,428) -10.6% 1
– Other services and recoveries (1,442) (19) (1,461) +86.3% 2
– Staff 4,019 (24) 3,995 +74.9% 3
– Inflight service and passenger expenses 4,191 (6) 4,185 -52.9% 4
– Landing, parking and route expenses 10,632 (50) 10,582 -15.4% 5
– Fuel, including hedging losses 18,068 (91) 17,977 -15.1% 6
– Aircraft maintenance 4,486 (34) 4,452 +17.1% 7
– Owning the assets** 921 (49) 872 +114.1% 8
– Other items (including commissions) 3,421 (305) 3,116 +26.7% 9
2020 Cathay Pacific’s and Cathay Dragon’s loss before
 exceptional items, restructuring, impairment and
 related charges and taxation (12,629) 430 (12,199)
*
ATK unit % change represents the adjusted revenue or cost component change per ATK.
**
includes aircraft and other depreciation, rentals and net finance charges.
Notes:
1) As per Review of Operations section for passenger and cargo services. Reduced unit rate results from a change in the passenger to cargo mix.
2) Decreases in passenger related recoveries, Asia Miles revenues and cargo handling revenues. Partially offset by income from COVID-19 government
concessions.
3) Staff costs lower due to the introduction of special leave schemes, attrition and restructuring reduced headcount, lower variable pay and no
discretionary bonuses, however, overall fixed cost nature results in a higher unit cost.
4) Savings in inflight service costs as RPK reduction higher than ATK reduction.
5) Lower landing, parking and route expenses as a result of reduced operations and government concessions.
6) Fuel costs decreased due to a 30.0% fall in the average into-plane fuel price, partially offset by fuel hedging losses.
7) Higher per-unit costs due to a continuing requirement for certain scheduled maintenance activities.
8) Depreciation and net finance costs overall lower, however higher on a per ATK basis due to its fixed nature.
9) Decreased sales, distribution and marketing costs and Asia Miles costs, however a portion of fixed overhead costs remained, increasing per unit costs.
FUEL EXPENDITURE AND HEDGING
A breakdown of the Group’s fuel cost is shown below:
2020
HK$M
2019
HK$M
Gross fuel cost 8,362 29,711
Fuel hedging losses 3,017 101
Fuel cost 11,379 29,812
Cathay Pacific Airways Limited
28
FINANCIAL REVIEW
• Fuel consumption in 2020 was 18.7 million barrels (2019:
46.6 million barrels), a decrease of 59.9% compared with
a decrease in capacity of 55.8%.
• The Group’s fuel hedging cover at 31st December 2020 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 1Q21 and
2Q21 is impacted by the capacity reductions associated
with COVID-19. The losses of HK$220 million on these
overhedged volumes were recognised in 2020 in
accordance with accounting standards.
• The Group does not speculate on oil prices but uses
hedging to manage short to medium term volatility in oil
prices and therefore its fuel costs. Hedging is not
riskfree.
TAXATION
• A tax credit has arisen principally as a result of losses
incurred by the Group. The tax credit is net of a write off of
a Cathay Dragon deferred tax asset on tax losses of
HK$1,590 million.
DIVIDENDS
• The Board announced on the 9th February 2021 that it
had resolved to defer the payment of preference share
dividends due on the 16th February 2021. 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 2020.
ASSETS
• Total assets at 31st December 2020 were HK$204,574
million.
• During the year, additions to property, plant and
equipment were HK$8,729 million, comprising HK$8,321
million in respect of aircraft and related equipment,
HK$249 million in respect of land and buildings and
HK$159 million in respect of other equipment.
0
40
80
120
240
200
160
40
44
48
52
64
56
60
211.1%
151.6%
69.7%
45.9%
38.8%
32.8%
22.6%
5.4%
59.49
58.03
55.95
51.61
47.30
45.92
48.72
47.27
% US$
Projected fuel hedging cover
Hedge Cover Average Strike Price
1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22
Total assets
Properties
and other
equipment
Intangible
assets
Aircraft and
related
equipment
Current
assets
Long-term
receivables and
investment
58%
7%
7%
13%
15%
29
Annual Report 2020
0
40,000
80,000
60,000
20,000
Borrowings in key currencies
HK$ million
HKD JPY USD Others
Others include SGD.
0
20,000
60,000
80,000
100,000
0.4
0.6
1.0
1.2
1.4
40,000 0.8
2016 2017 2018 2019 2020
HK$ million
Net debt and equity
Funds attributable to the shareholders of Cathay Pacic
Net borrowings
Net debt/equity ratio (see Borrowing and capital below)
Times
%
0
20
40
60
80
100
2016 2017 2018 2019 2020
Interest rate prole: borrowings (after derivatives)
Fixed
Floating
BORROWINGS AND CAPITAL
• Borrowings decreased by 4.2% to HK$93,129 million.
These are mainly denominated in United States dollars,
Hong Kong dollars and Japanese yen, and are fully
repayable by 2035, with 45.3% currently at fixed rates of
interest after taking into account derivative transactions.
Excluding lease liabilities previously classified as
operating leases, borrowings decreased by 4.2% to
HK$74,039 million, which are fully repayable by 2035,
with33.8% at fixed rates of interest with a similar
currencyprofile.
• Available unrestricted liquidity at 31st December 2020
totalled HK$28,593 million, comprising liquid funds of
HK$19,341 million and committed undrawn facilities of
HK$9,396 million, less pledged funds of HK$144 million.
To secure further liquidity in this difficult environment,
earlier this year we issued HK$6.74 billion in convertible
bonds, which will become due in 2026.
• Net borrowings (after deducting liquid funds) decreased
by 10.4% to HK$73,788 million. Disregarding the effect of
adopting HKFRS 16, net borrowings decreased by 12.4%
to HK$54,698 million.
• Funds attributable to the shareholders of Cathay Pacific
increased by 16.7% to HK$73,257 million. This was due to
the Group’s issuance of preference and rights shares
during the year totalling HK$31.2 billion and an increase in
other comprehensive income of HK$0.9 billion, offset by
losses for the year of HK$21.6 billion.
• Disregarding the effect of adopting HKFRS 16 on net
borrowings, the net debt/equity ratio decreased from
0.99 times to 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 1.01 and
1.31 times at 31st December 2020 and 31st December
2019 respectively.
Our service-oriented people
are equipped with the knowledge
and skills to inspire confidence
and trust, as we move
our customers forward in life.
HIGH PERFORMANCE
CULTURE
31
Annual Report 2020
SUSTAINABLE DEVELOPMENT
We apply sustainable development principles when doing
business and we take environmental and social
considerations into account when making business
decisions. It is our policy to comply with environmental and
social regulations and to educate our employees, engage
with others and set targets in relation to environmental and
social matters. 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.
SUSTAINABLE DEVELOPMENT REVIEW
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. We are proud of
the high-quality service that they give and 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 2020 will be
published in May 2021. It will be available at https://www.
cathaypacific.com/cx/en_HK/about-us/environment/
overview/introduction.html
PERFORMANCE UPDATES – CATHAY PACIFIC AND CATHAY DRAGON
2020 2019 Change
Environment
GHG emissions
Million tonnes of CO
2
e
7.0 18.0 -61.1%
GHG emissions per ATK
Grammes of CO
2
e
480 545 -11.9%
Electricity consumption
MWh
29,907 32,900 -9.1%
Paper consumption (office)
Tonnes
36 67 -46.3%
Paper recycled (office and inflight)
Tonnes
250 1,480 -83.1%
Metal recycled (office and inflight)
Kg
5,922 39,209 -84.9%
Plastic recycled (office and inflight)
Kg
8,789 43,108 -79.6%
People
 Total workforce
Number
19,452 27,342 -28.9%
By location
 Hong Kong
%
75.5 78.1 -2.6%pt
 Outport
%
24.5 21.9 +2.6%pt
By employment type
 Flight crew
%
16.5 15.0 +1.5%pt
 Cabin crew
%
40.8 48.4 -7.6%pt
 Ground staff
%
42.7 36.6 +6.1%pt
By gender
 Female
%
56.5 61.1 -4.6%pt
 Male
%
43.5 38.9 +4.6%pt
Data for Cathay Pacific and Cathay Dragon is presented.
Full indicator tables will be provided in Cathay Pacific’s Sustainable Development Report at
https://www.cathaypacific.com/cx/en_HK/about-us/environment/overview/introduction.html
Cathay Pacific Airways Limited
32
SUSTAINABLE DEVELOPMENT REVIEW
AWARDS AND RECOGNITIONS IN 2020
• Cathay Pacific has been a constituent of the FTSE4Good
Index for 12 years and the Hang Seng Corporate
Sustainability Index since its establishment in 2011. We
attained the “Performer” ranking in the inaugural Greater
Bay Area Business Sustainability Index (GBABSI). In 2020,
we responded to the Carbon Disclosure Project climate
change questionnaire and received a C rating.
• Cathay Pacific has received the Caring Company status
from the Hong Kong Council of Social Service every year
since the programme was launched in 2003 in
recognition of its good corporate citizenship.
• Cathay Pacific’s Flight Folder project won the Innovation
Award (Good Class) in the Hong Kong International Airport
(HKIA) Carbon Reduction Award Scheme 2020.
2020 HIGHLIGHTS
ENVIRONMENT
• In 2020, Cathay Pacific committed to achieving net zero
carbon emissions by 2050, through an international
approach, working with governments around the world
and through the United Nations.
• In September 2020, the oneworld alliance and its member
airlines announced a commitment to net zero carbon
emissions by 2050, becoming the first global airline
alliance to unite behind a common target to achieve
carbon neutrality.
• Cathay Pacific participates in an International Civil
Aviation Organization (ICAO) task force that leads the
aviation industry’s work in developing proposals for a fair,
equitable and effective global agreement on emissions.
We also take part in the ICAO Fuel Task Group which
specialises in the adoption of sustainable aviation fuel.
• Cathay Pacific engages with regulators and groups (the
IATA Sustainability and Environment Advisory Committee,
the Sustainable Aviation Fuel Users Group, the
Roundtable on Sustainable Biomaterials and the
Association of Asia Pacific Airlines) involved in shaping
climate change and aviation policy. The aim is to increase
awareness of climate change and to develop appropriate
solutions for the aviation industry.
• In response to the Carbon Offsetting and Reduction
Scheme for International Aviation (CORSIA), the Cathay
Pacific Group has completed all the necessary
preparation and the monitoring, verification and reporting
plan has been accepted by the authority.
• In compliance with the European Union’s Emissions
Trading Scheme, our 2020 emissions data from intra-EU
flights were reported on by an external auditor and
submitted to the UK Environment Agency in March 2021.
• In 2020, one Airbus A350-1000 aircraft was flown on its
delivery flight from Toulouse to Hong Kong using fuel
containing sustainable aviation fuel (biofuel).
• In 2020, we offset 41,134 tonnes of CO
2
through our
voluntary offset programme Fly Greener. Since the
programme was launched in 2007, over 300,000 tonnes
of CO
2
has been offset.
• In 2019, Cathay Pacific announced its three-year target to
reduce its single-use plastic footprint by half by the end
of 2022 from the 2018 baseline. So far, over 46 million
single-use plastic items have been removed from our
operations annually according to the 2018 baseline.
• In March 2020, Cathay Pacific participated in WWF’s
annual Earth Hour activity. We switched off all non-
essential lighting in our buildings and on billboards
outside Cathay City.
CONTRIBUTION TO THE COMMUNITY
• Efforts in 2020 centered on helping communities to cope
with the impact of COVID-19.
• In February when demand was high for medical supplies
but flights were disrupted, our cargo facility worked with
Hongkong Post to help facilitate the operation of its Air
Mail Centre to ease delivery bottlenecks. During the
month-long special operation, more than 90,000
shipments were processed.
• When travel restrictions were put in place around the
world, Cathay Pacific supported the Hong Kong SAR
Government in operating charter flights to bring affected
Hong Kong residents home. These included three flights
from Tokyo and eight flights from Wuhan and the wider
Hubei Province, bringing back over 1,200 Hong Kong
residents. All flights were operated by volunteer
flightcrew.
33
Annual Report 2020
• Cathay Pacific has been working with local non-profit
organisations, Feeding Hong Kong and Food Angel, which
provide surplus food to Hong Kong charities for
distribution to people in need. Feeding Hong Kong
collects unopened food items from inbound Cathay
Pacific flights. Food Angel collects unused and surplus
food from our lounges and the Cathay Pacific Catering
Services kitchens. More than 648 tonnes of surplus food
was collected and donated in 2020.
• We donated over 156,500 pre-prepared meals to the
Hong Kong community that were distributed by Food
Angel in 2020. Cathay Pacific has committed to further
donating an additional 100,000 meals in 2021.
• Staff volunteers from the Cathay Pacific Group also lent a
hand to pack and prepare emergency food parcels with
Feeding Hong Kong and distribute them to community
members in need.
• To facilitate online learning for students especially when
schools were closed, we refurbished and hand-delivered
790 iPads to five non-government organisations (NGO)
across Hong Kong that support children in need. Our
volunteers also helped guide parents on the use of iPads
and offered online homework tutorials to the children.
• As of 31st December 2020, more than 700 of our
employees have so far signed up for over 720 hours of
volunteer work to support our NGO partners and to give
back to the community during this challenging time.
• Cathay Pacific supports UNICEF through its “Change for
Good” inflight fundraising programme. Since its
introduction in 1991, HK$199 million has been raised
through the programme. In 2019, the latest audited year,
HK$6.8 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.
• The Cathay ChangeMaker programme continued in 2020.
The three individuals selected have made significant
contributions to environmental protection, youth
development and cultural inclusion, which are three key
pillars of our community engagement strategy. Cathay
Pacific works with its ChangeMakers to help create
shared values and enact positive social change.
OUR PEOPLE
• At 31st December 2020, the Cathay Pacific Group
employed more than 25,600 people worldwide. Around
20,800 of these people are based in Hong Kong. Cathay
Pacific employed more than 19,400 permanent
employees worldwide. Around 75% of these people are
based in Hong Kong.
• We invest heavily in the employee experience from
onboarding new hires to saying farewell when our people
leave or retire, and everything in between including
training, performance management and engagement.
• In response to changes brought about by the pandemic,
The Learning Academy developed a series of virtual
courses to cater for the greatly altered needs of our
learners. Subjects included effective remote working,
leading remote teams, becoming tech-savvy leaders, and
supporting and engaging teams remotely.
• Employee health and wellbeing is a key concern of the
Group during normal times; however, this year we further
enhanced our initiatives on physical and mental wellbeing
in response to the effects of the pandemic on our ways of
working and its impact on our business. This included
providing access to online wellbeing resources,
information, knowledge and tips through the Employee
Assistance Programme and our intranet, The Hub, in
addition to expert guidance and specialist support on any
kind of issue from everyday matters to more serious
wellbeing problems. Employee workshops with expert
speakers from the wellness industry were also held.
• We launched our flexible work programme, Work Your
Way, as a way to help our people better achieve a healthy
work-life balance and to further foster the innovative and
collaborative spirit we’ve witnessed this year. Under the
programme our employees can remote work up to two
days per week or can stagger their working day around a
schedule that suits them and their families.
• 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.
Cathay Pacific Airways Limited
34
EXECUTIVE DIRECTORS
HEALY, Patrick
#
, aged 55, has been Chairman and a
Director of the Company since November 2019. He is also
Chairman of Swire Coca-Cola Limited and a Director of
John Swire & Sons (H.K.) Limited, Swire Properties Limited
and Air China Limited. He joined the Swire group in 1988 and
has worked with the group in Hong Kong, Germany and the
Chinese mainland.
HUGHES, Gregory Thomas Forrest
#
, aged 59, has been
Chief Operations and Service Delivery Officer and a
Director of the Company since June 2017. He is also a
Director of Hong Kong Dragon Airlines Limited and Hong
Kong Express Airways Limited and Chairman of AHK Air
Hong Kong Limited. 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,
Korea, Indonesia, Japan and Australia.
LAM, Siu Por Ronald
#
, aged 48, has been Chief Customer
and Commercial Officer and a Director of the Company
since 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. He joined the Swire group in 1996 and
hasworked with the Company in Hong Kong, Japan and
SriLanka.
SHARPE, Rebecca Jane
#
(formerly known as WALLACE,
Rebecca Jane), aged 49, has been Chief Financial Officer
and a Director of the Company since January 2021. She is
also a Director of Hong Kong Express Airways Limited and
AHK Air Hong Kong Limited. 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, the Chinese mainland and Singapore.
TANG, Kin Wing Augustus
#
, aged 62, has been Chief
Executive Officer and a Director of the Company since
August 2019. He was appointed Director Corporate
Development of the Company in January 2005 and was an
Executive Director of the Company from January 2007 to
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 and Chairman of Hong Kong Dragon Airlines
Limited. He joined the Swire group in 1982 and has worked
with the group in Hong Kong, Malaysia and Japan.
NON-EXECUTIVE DIRECTORS
LOW, Mei Shuen Michelle
#
*
@
, aged 60, has been a Director
of the Company since October 2017. She is also Finance
Director of Swire Pacific Limited and a Director of John
Swire & Sons (H.K.) Limited and Swire Properties Limited.
She joined the Swire group in 1987. She has resigned as a
Director of the Company and from these other positions
with effect from 1st April 2021.
MURRAY, Martin James
#
*
@
, aged 54, became a Director of
the Company in November 2011. He was appointed Chief
Financial Officer (formerly Finance Director) and served as
an Executive Director of the Company from 15th November
2011 until 25th January 2021. He was also a Director of
Hong Kong Dragon Airlines Limited and AHK Air Hong Kong
Limited. He resigned from these positions with effect from
25th January 2021 and was appointed a Non-Executive
Director of the Company with effect from 1st April 2021. He
was also appointed Finance Director of Swire Pacific
Limited and a Director of John Swire & Sons (H.K.) Limited
and Swire Properties Limited with effect from 1st April 2021.
He joined the Swire group in 1995 and has worked with
thegroup in Hong Kong, the United States, Singapore
andAustralia.
DIRECTORS AND OFFICERS
35
Annual Report 2020
SONG, Zhiyong, aged 55, has been a Director of the
Company since March 2014 and Deputy Chairman since
29th December 2020. He is Chairman and Secretary of the
Communist Party Committee of Air China Limited and
Chairman and Secretary of the Communist Party Group of
China National Aviation Holding Corporation Limited.
SWIRE, Merlin Bingham
#
, aged 47, has been a Director of
the Company since June 2010. He is also Chairman of John
Swire & Sons (H.K.) Limited, Swire Pacific Limited and Swire
Properties Limited. He is also Deputy Chairman and a
shareholder of John Swire & Sons Limited. He joined the
Swire group in 1997 and has worked with the group in
HongKong, Australia, the Chinese mainland and London.
Heis brother to Samuel Swire, a Non-Executive Director of
the Company.
SWIRE, Samuel Compton
#+
, aged 40, has been a Director
of the Company since January 2015. He is also Chairman of
The China Navigation Company 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,
Singapore, the Chinese mainland, Sri Lanka and London.
Heis brother to Merlin Swire, a Non-Executive Director of
the Company.
XIAO, Feng*
@
, aged 52, has been a Director of the
Companysince January 2017. He is Chief Financial Officer
of Air ChinaLimited.
ZHANG, Zhuo Ping
#
, aged 49, has been a Director of the
Company since 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 59, has been a Director of the
Company since 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 56, has been a Director of the Company
since 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 64, has been a Director of
the Company since 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 60, has been a Director of
the Company since 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 56, has been a Director
of the Company since May 2015. He is 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
CHOW, Koon Ying (Paul)
#
, aged 49, has been Company
Secretary since January 2020. He joined the Company as
Group General Counsel on 1st July 2019 and before then he
was a partner of Davis Polk & Wardwell LLP.
#
Employees of the John Swire & Sons Limited group
+ Member of the Remuneration Committee
*
Member of the Audit Committee
@
Member of the Board Risk Committee
Cathay Pacific Airways Limited
36
We submit our report and the audited financial statements
for the year ended 31st December 2020 which are on pages
65 to 133.
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 121 and 122.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements incorporate the
financial statements of the Company and its subsidiaries
together with the Group’s interests in joint ventures and
associates. The financial performance of the Group for the
year ended 31st December 2020 and the financial position
of the Group and the Company at that date are set out in
thefinancial statements on pages 65 to 133. Details of
theassociates are provided under note 9 to the
financialstatements.
DIVIDENDS
The Directors decided not to declare an interim dividend for
the year ended 31st December 2020.
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 12th May 2021, the register of
members will be closed from 7th May 2021 to 12th May
2021, 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 Thursday,
6thMay2021.
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
of Operations and Sustainable Development Review. To the
37
Annual Report 2020
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 68 and in note 21 to the financial
statements, respectively.
ACCOUNTING POLICIES
The principal accounting policies are set out on pages 123
to 133.
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
27to the Listing Rules for the year covered by the
annualreport.
DONATIONS
During the year, the Company and its subsidiaries made
charitable donations amounting to HK$3 million in direct
payments and a further HK$1 million in the form of
discounts on airline travel.
PROPERTY, PLANT AND EQUIPMENT
Movements of property, plant and equipment are shown in
note 7 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 11 to the
financialstatements.
SHARE CAPITAL
On 9th June 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 11 existing ordinary shares held by shareholders
on 21st July 2020 at the subscription price of HK$4.68
per share.
Details of the recapitalisation proposal are set out in the
Company’s announcement dated 9th June 2020, the
circular to shareholders dated 19th June 2020 and the
prospectus dated 22nd July 2020.
Following approval by shareholders of the Company at the
Extraordinary General Meeting held on 13th July 2020 (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. The details of
use of proceeds from the rights issue and the preference
shares and warrants issue are set out in note 19 to the
financial statements.
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 2020, 6,437,200,203 ordinary shares and
195,000,000 preference shares were in issue (31st
December 2019: 3,933,844,572 ordinary shares). Details of
the movement of share capital are set out in note 19 to the
financial statements.
Cathay Pacific Airways Limited
38
DIRECTORS’ REPORT
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 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.
CAPITAL COMMITMENTS AND
CONTINGENCIES
The details of capital commitments and contingent
liabilities of the Group at 31st December 2020 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 (“JSSHK”), 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, Gregory Hughes,
Ronald Lam, Michelle Low, Rebecca Sharpe, Merlin Swire,
Samuel Swire, Augustus Tang and Zhang Zhuo Ping are
interested in the JSSHK Services Agreement (as defined
below). Martin Murray will also be so interested on his
becoming a Non-Executive Director on 1st April 2021.
Merlin Swire and Samuel Swire are also so interested as
shareholders, directors and employees of the Swire group.
Ivan Chu was so interested as a director and an employee of
the Swire group until his resignation with effect from 14th
April 2020.
Particulars of the fees paid and the expenses reimbursed
for the year ended 31st December 2020 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 4.7% of the
Group’s operating expenses in 2020. HAECO is a subsidiary
of 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 2020, the Group had
the following continuing connected transactions, details of
which are set out below:
(a) Pursuant to an agreement (“JSSHK Services
Agreement”) dated 1st December 2004, as amended and
restated on 18th September 2008 and 9th August 2019,
with JSSHK, JSSHK 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 such use.
In return for these services, JSSHK 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
39
Annual Report 2020
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 JSSHK 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 JSSHK, a wholly owned subsidiary
of Swire, is therefore a connected person of the
Company under the Listing Rules. The transactions
under the JSSHK 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 2020, no service fee
was payable by the Company to JSSHK under the JSSHK
Services Agreement and expenses of HK$197 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 2020 and under the
HAECO Framework Agreement, the amounts payable by
the Group to the HAECO group totalled HK$2,762 million;
and the amounts payable by the HAECO group to the
Group totalled HK$38 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 2020 and under the
Air China Framework Agreement, the amounts payable
by the Group to the Air China group totalled HK$70
million; and the amounts payable by the Air China group
to the Group totalled HK$50 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:
Cathay Pacific Airways Limited
40
DIRECTORS’ REPORT
(a) in the ordinary and usual course of business of
theGroup;
(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.
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
8% of sales and 29% of purchases during the year were
attributable to the Group’s five largest customers and
suppliers respectively. 6% of sales were made to the
Group’s largest customer and 9% 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
Zhang Zhuo Ping was appointed as a Director with effect
from 14th April 2020. Rebecca Sharpe was appointed as a
Director with effect from 25th January 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 2020. Ivan Chu
resigned as a Director with effect from 14th April 2020. Cai
Jianjiang resigned as Deputy Chairman and a Director with
effect from 29th December 2020. Song Zhiyong was
elected Deputy Chairman with effect from 29th December
2020. 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 has been appointed as a Non-Executive Director
with effect from 1st April 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, Gregory Hughes, Samuel Swire and
Zhao Xiaohang retire this year and, being eligible, offer
themselves for re-election. Martin Murray and Rebecca
41
Annual Report 2020
Sharpe 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$3.3 million. They
received no other emoluments from the Group. The four
Independent Non-Executive Directors agreed to have their
Directors’ fees and the committee fees reduced for 2020 in
recognition of the adverse effect of COVID-19.
DIRECTORS’ INTERESTS
At 31st December 2020, the register maintained under
Section 352 of the Securities and Futures Ordinance (“SFO”)
showed that a Director held the following interests in the
shares of Cathay Pacific Airways Limited and its associated
corporation (within the meaning of Part XV of the SFO), Air
China Limited:
Capacity
No. of
shares
Percentage of
voting shares (%)
Cathay Pacific Airways Limited
 Michelle Low Beneficial
owner
1,630 0.00003
 Merlin Swire Trust interest
(note)
30,000 0.00047
Air China Limited
 Michelle Low Beneficial
owner
40,000 0.00028
Note: All shares held by Merlin Swire under Trust interest were held by him
as one of the executors of a will and he did not have any beneficial
interest in those shares.
Other than as stated above, no Director or chief executive
of Cathay Pacific Airways Limited had any interest or short
position, whether beneficial or non-beneficial, in the shares
or underlying shares (including options) and debentures of
Cathay Pacific Airways Limited 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, Cai
Jianjiang 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 2020 or during the period from 1st January
2021 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 Laws
of 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
Cathay Pacific Airways Limited
42
DIRECTORS’ REPORT
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 31st
December 2020 the Company had been notified of the
following interests in the shares of the Company held by
substantial shareholders and other persons:
Long position No. of shares
Percentage of
voting shares (%) Type of interest (Note)
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)
Note: At 31st December 2020:
(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 is deemed to be interested in a total of 4,827,269,423 shares of the Company, in which its
subsidiary Air China is deemed interested.
(c) Swire and its wholly owned subsidiary JSSHK are 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 55.20% of the equity of Swire Pacific and controlling 64.28% 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.
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, 10th March 2021
43
Annual Report 2020
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 ensuring 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:
• code provisions, with which issuers are expected to
comply, but with which they may choose not to
comply,provided they give considered reasons for
non-compliance
• recommended best practices, with which issuers are
encouraged to comply, but which are provided for
guidance only.
CORPORATE GOVERNANCE REPORT
The Company supports the principles-based approach of
the 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; 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
exceptions which it believes do not benefit 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 has considered the
merits of establishing a nomination committee but has
concluded that it is 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 allows a more informed and balanced
decision to be made by the Board as to suitability for
therole.
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:
Cathay Pacific Airways Limited
44
CORPORATE GOVERNANCE REPORT
• 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.
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 and the Board Risk
Committee, the latter three 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 ensuring 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 and twelve 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, Gregory Hughes, Ronald Lam, Martin Murray,
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.
45
Annual Report 2020
The Non-Executive Directors bring independent advice,
judgement and, through constructive challenge, scrutiny of
executives and review of performance and risks. The Audit,
Board Risk and Remuneration Committees of the Board
comprise only Non-Executive Directors.
The Board considers that four of the twelve Non-Executive
Directors are independent in character and judgement and
fulfil the independence guidelines set out in Rule 3.13 of the
Listing Rules. Confirmation has been received from all
Independent 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
orbodies.
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.
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
Executive and Non-Executive 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 10th March 2021, the Board, having reviewed the
Board’s composition, nominated Gregory Hughes, Martin
Murray, Samuel Swire, Rebecca Sharpe and Zhao Xiaohang
for recommendation to shareholders for re-election at the
2021 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 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 Gregory
Hughes, Martin Murray, Samuel Swire, Rebecca Sharpe and
Zhao Xiaohang to the Board and their firm commitment to
their roles. 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:
Age 39-47 years (13%)
|
48-56 years (50%)
|
57-65 years (37%)
Gender Male (87%)
|
Female (13%)
Ethnicity American (6%)
|
Australian (6%)
|
British (38%)
|
Chinese (50%)
Years of service as Director 1-5 years (63%)
|
6-10 years (31%)
|
over 10 years (6%)
Skills, expertise and experience company executive (75%)
|
accounting, banking and finance (25%)
Cathay Pacific Airways Limited
46
CORPORATE GOVERNANCE REPORT
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
itsattention
• 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.
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 2020 Board meetings were determined in
2019 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 nine times in 2020. The attendance of
individual Directors at meetings of the Board and its
committees is set out in the table on page 47. Average
attendance at Board meetings was 99%. 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
beforemeetings.
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.
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.
47
Annual Report 2020
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
2020
Annual
General
Meeting
2020
EGM
Executive Directors
Patrick Healy – Chairman 9/9 3/3 4/4 11/12 3/3 √ √
Gregory Hughes 9/9 12/12 3/3 √ √
Ronald Lam 9/9 11/12 3/3 √ √
Martin Murray 9/9 3/3 4/4 12/12 √ √
Augustus Tang 9/9 3/3 4/4 12/12 3/3 √ √
Non-Executive Directors
Cai Jianjiang (resigned with effect
 from 29th December 2020) 9/9 0/3 X X
Ivan Chu (resigned with effect
 from 14th April 2020) 1/2 N/A N/A N/A
Michelle Low 9/9 3/3 4/4 12/12 3/3 √ √
Song Zhiyong 9/9 0/3 X X
Merlin Swire 9/9 3/3 √ √
Samuel Swire 9/9 3/3 3/3 √ X
Xiao Feng 9/9 3/3 4/4 12/12 0/3 X √
Zhang Zhuo Ping (appointed on
 14th April 2020) 7/7 2/3 √ √
Zhao Xiaohang 9/9 3/3 12/12 0/3 X X
Independent Non-Executive Directors
Bernard Chan 9/9 3/3 3/3 X √
John Harrison 9/9 3/3 4/4 3/3 √ √
Robert Milton 9/9 3/3 4/4 3/3 √ √
Andrew Tung 9/9 3/3 3/3 3/3 √ √
Average attendance 99% 100% 100% 100% 98% 73% 71% 76%
Cathay Pacific Airways Limited
48
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
andskills.
DIRECTORS’ AND OFFICERS’ INSURANCE
The Company has arranged appropriate insurance cover in
respect of potential legal actions against its Directors and
Officers.
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 and Officers 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 and senior executives
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 2020 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:
49
Annual Report 2020
BOARD SAFETY REVIEW COMMITTEE
The Board Safety Review Committee reviews and reports to
the Board on safety issues. It met twice during the year and
comprises its Chairman (Captain Timothy Jenkins) and all
the Non-Executive Directors and Independent Non-
Executive Directors of the Company. Four Executive
Directors and the Chief Executive Officer of Hong Kong
Dragon Airlines Limited also attend as observers.
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 four Non-Executive Directors
(Michelle Low, Song Zhiyong, Xiao Feng and Zhao
Xiaohang). Martin Murray will succeed Michelle Low as a
member of the Executive Committee on his becoming a
Non-Executive Director on 1st April 2021.
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), three Non-
Executive Directors (Michelle Low, 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. Martin Murray
will succeed Michelle Low as a member of the Finance
Committee on his becoming a Non-Executive Director on
1st April 2021.
REMUNERATION COMMITTEE
The Remuneration Committee comprises three Non-
Executive Directors (Andrew Tung, Bernard Chan and
Samuel Swire). Two of the Committee Members are
Independent Non-Executive Directors, one of whom,
Andrew Tung, is Chairman. All the members served for the
whole of 2020.
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
JSSHK, 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.
Cathay Pacific Airways Limited
50
CORPORATE GOVERNANCE REPORT
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 2020. At the meeting
held in October 2020, 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
2020
HK$
2021
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 51 to 53
AUDIT COMMITTEE – see pages 55 and 56
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 expert
• A Management Safety Committee chaired by the Chief
Executive Officer
• A Group Safety & Operational Risk Management
Department headed by the Group Safety Officer that
provides oversight of the management of all risks
associated with flight operations.
In 2019 the Board determined that the Group should
introduce similar governance to enhance and provide a
parallel focus on the management of all other corporate
risks in the Group. Accordingly, the following entities
were established:
• Board Risk Committee (BRC) – a Board level committee
whose membership is exclusively Non-Executive
Directors. The Committee’s role is to advise 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.
51
Annual Report 2020
• 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 four Non-
Executive Directors (John Harrison, Michelle Low, 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 solely 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. Martin Murray will succeed
Michelle Low as a member of the Board Risk Committee
with effect from 1st April 2021 on his becoming a Non-
Executive Director. All the others members served
throughout 2020.
The Board Risk Committee met quarterly in 2020.
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 model widely used in financial
services institutions, 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 in
Fig. 1.
RISK GOVERNANCE OVERVIEW
Board of Directors
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
Group 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
Note: It is recognised that Legal and Compliance sits between first and second lines; for practical purposes they are included in the first line.
Cathay Pacific Airways Limited
52
CORPORATE GOVERNANCE REPORT
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 have
historically been updated semi-annually and feed into the
Group register.
In addition to this bottom-up assessment, from 2019 the
risk registers have been enhanced via the medium of
annual workshops conducted with senior managers from
across the Group. These workshops have sought to
identify risks across the organisation including macro,
strategic and operational issues. The output from these
workshops is compiled into a list of the ‘Top 30’ corporate
risks which forms the initial focus of senior management
attention.
In addition to the top corporate risks, a structured
approach to managing the Group’s Environmental, Social
and Governance (ESG) risks was developed. This
approach is based on a risk taxonomy specifically defined
to identify, assess and mitigate ESG risks across the
business. All identified ESG risks are reported to the RMC
and the BRC and incorporated into the existing registers.
Assessment
Each of the Top 30 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 30.
Impact and vulnerability assessments are subject to
dynamic updates by the Group Corporate Risk function
working with the business and risk owners.
Mitigation
As part of the dimensioning exercise, mitigation measures
are also considered that might reduce either impact and/
53
Annual Report 2020
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 30
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’
whose conclusions will be presented to the Board on an
annual basis.
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
thisreview.
Areas of Focus in 2020
Focus in 2020 has been on identifying and managing risk
related to the ongoing COVID-19 pandemic, dimensioning
the Top 30 risks and establishing mitigation plans around
these, and continuing to monitor Data Governance and
Cybersecurity, where ongoing actions related to building
resilience across the Group have been reviewed and
progress tracked. These have included retention
governance and data exposure risk as well as ongoing
cyber security protections to meet industry best practice.
The emergence of COVID-19 and its impact on the
Group’s revenue and cash flow propelled it to the top of
the risk register by May; July’s recapitalisation
successfully mitigated its impact on the Group’s cash
position, which was further mitigated by a wide-ranging
restructure in late October. Nonetheless the pandemic
remains the top risk facing the business given its ongoing
revenue and operational impacts; this is likely to remain
the case until we see the widespread availability of
successful vaccines, the uplifting of travel restrictions and
the return of confidence in travel. The impact of 2019’s
social unrest combined with developments in Hong Kong
this year and the international media coverage of and
response to them may continue to threaten the
attractiveness of Hong Kong as a business and leisure
destination and transit hub once travel returns. The
competitiveness of Hong Kong International Airport in the
Greater Bay Area is also key to the effectiveness of the
Hong Kong hub going forwards. Other risks we have been
tracking closely this year are those related to third parties,
many of whose businesses have also been heavily
impacted by the pandemic, operational technologies and
climate change - for which a scenario planning exercise
will be performed to provide input into the Group’s longer
term strategy.
Workshops were conducted with middle management
across the year to identify emerging risks to the Group, to
identify and score risks related to each of the Group’s
subsidiaries, and to establish necessary mitigation plans
around these. A survey of risk culture was undertaken with
attendees of the workshops in mid-year, which provided
the basis of the Board Risk Committee’s assurance review
this year. It demonstrated significant progress had been
made in enhancing risk culture and risk management
effectiveness since the establishment of the new
governance and RMF in 2019.
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 55 and 56.
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.
Cathay Pacific Airways Limited
54
CORPORATE GOVERNANCE REPORT
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.
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 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
55
Annual Report 2020
resolving material internal control defects is reported
regularly to the Audit Committee and reviewed quarterly
by 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.
Detailed control guidelines have been set and made
available to all employees of the Company about the
handling and dissemination of corporate data which is
price sensitive.
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
seniormanagement.
Audit Committee
The Audit Committee, consisting of five Non-Executive
Directors (John Harrison, Michelle Low, Robert Milton,
Andrew Tung and Xiao Feng), assists the Board in
discharging its responsibilities for internal control and
other matters. Three of the Committee members are
Independent Non-Executive Directors, one of whom, John
Harrison, is Chairman. Martin Murray will succeed Michelle
Low as a member of the Audit Committee with effect from
1st April 2021 on his becoming a Non-Executive Director.
All the other members served for the whole of 2020.
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 three times in 2020. Regular
attendees at the meetings are the Chief Executive Officer,
Chief Financial Officer, Group General Counsel, 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 2020 included reviews
of the following matters:
• the completeness, accuracy and integrity of formal
announcements relating to the Group’s performance
including the 2019 annual and 2020 interim reports and
announcements, with recommendations to the Board
for approval
• the plans, cash flows and liquidity 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 2020
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 56
• the Company’s compliance with the CG Code
• the Company’s whistleblowing policy, diversity &
inclusion policy, anti-harassment policy, non-
discrimination policy and sustainable development
policy.
In 2021, the Committee has reviewed, and recommended
to the Board for approval, the 2020 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
Cathay Pacific Airways Limited
56
CORPORATE GOVERNANCE REPORT
Group Internal Audit and the assurances provided by the
Chief Financial Officer
• 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 relation to
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 auditors
include:
• 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 to
the Audit Committee, the Board and shareholders. The
auditors write annually to the members of the Audit
Committee 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 and that
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 of the non-audit work) at a
meeting of the Audit Committee.
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
• the auditors’ independence should not be impaired
• quality of service.
57
Annual Report 2020
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 2020 the total remuneration paid to the external
auditors was HK$24 million, being HK$16 million for audit,
HK$5 million for tax advice and HK$3 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 Engineering
(Neil Glenn), Director People (Patricia Hwang), Director
Flight Operations (Captain Chris Kempis), Chief Risk
Officer (Philippe Lacamp), Director Customer (Simon
Large), Director Commercial (Lavinia Lau), Director Service
Delivery (Alex McGowan), Director Cargo (Tom Owen) and
Group General Counsel (Paul Chow).
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.
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 his 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.
The methods used to communicate with shareholders
include the following:
• the Chief Financial Officer makes himself available for
meetings with major shareholders, investors and analysts
over two-month periods immediately after the
announcement of the interim and annual results and at
certain other times during the year. In addition, the Chief
Financial Officer attended regular meetings with analysts
and investors in Hong Kong, analyst briefings, investor
group briefings, overseas roadshows and investor
conferences during the year.
• through the Group’s website. This includes electronic
copies of financial reports, audio webcasts of analyst
presentations given at the time of the interim and annual
results announcements, slides of presentations given at
investor conferences, latest news, public announcements
and general information about the Group’s businesses
Cathay Pacific Airways Limited
58
CORPORATE GOVERNANCE REPORT
• 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 23rd June 2020. The meeting
was open to all shareholders . The Directors who attended
the meeting are shown in the table on page 47.
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
2019
• 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 in
issue, provided that the aggregate number of the shares
so allotted wholly for cash would not exceed 5% of the
number of the shares then in issue.
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’s website.
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 2021 are set out in the section of
this annual report headed Corporate and Shareholder
Information.
CONSTITUTIONAL DOCUMENTS
At the 2020 EGM, the adoption of a new articles of
association of the Company (the “New Articles”) was
approved by shareholders of the Company. A number of
amendments were made to the previous articles of
association of the Company to reflect the terms of the
preference shares and to bring the previous articles of
association in line with the Companies Ordinance which
became effective on 3rd March 2014. Details of the
amendments were set out in Appendix IV to the circular to
the shareholders dated 19th June 2020. The New Articles
(in both English and Chinese) is available on the websites of
both the Company and the Hong Kong Exchanges and
Clearing Limited.
59
Annual Report 2020
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 65 to 133, which
comprise the consolidated statement of financial position
as at 31st December 2020, 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 2020 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.
Our responsibilities 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.
Cathay Pacific Airways Limited
60
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 7, 8 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$131,925 million and
HK$15,061 million respectively as at 31st December 2020.
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.
The COVID-19 pandemic has resulted in reduced travel
demand and on 21st October 2020, the Group announced a
restructuring plan which includes the cessation of operations
of its subsidiary, Hong Kong Dragon Airlines Limited. The
Group has therefore reassessed its operating plans including
the expected timing of retirement of aircraft.
As a result of management’s reassessment, impairment losses
of HK$4,012 million were recognised on property, plant and
equipment and goodwill for the year ended 31st December
2020, which primarily included HK$2,764 million on the aircraft
and related equipment of Cathay Pacific Airways Limited and
Hong Kong Dragon Airlines Limited, and HK$1,223 million on
other items of property, plant and equipment and goodwill
relating to two subsidiaries, Cathay Pacific Catering Services
(H.K.) Limited and Vogue Laundry Service Limited.
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.
61
Annual Report 2020
REVENUE RECOGNITION
Refer to accounting policies 18 and 19 and notes 1 and 18 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 10, 12, 15, 17, 21 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$333
million and derivative financial liabilities of HK$1,387 million as
at 31st December 2020.
The decline in forecast flying activity and fuel consumption due
to the COVID-19 pandemic resulted in a discontinuation of
certain hedging relationships during 2020 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 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.
Cathay Pacific Airways Limited
62
INDEPENDENT AUDITOR’S REPORT
ASSESSMENT OF PROVISIONS FOR TAXATION, LITIGATION AND CLAIMS
Refer to accounting policy 22 and notes 4, 17 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 2020 totalled HK$3,033 million, of which HK$1,977
million was recorded as taxation in the consolidated statement
of financial position, and the remaining HK$1,056 million was
included within the balance of other payables in note 17 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.
ASSESSING AIRCRAFT MAINTENANCE PROVISIONS
Refer to accounting policy 6 and notes 12 and 17 to the consolidated financial statements
The Key Audit Matter How the matter was addressed in our audit
As at 31st December 2020, the Group held 68 aircraft under
lease arrangements under which the Group is contractually
committed to return the aircraft to the lessors in a certain
condition agreed with the lessors at the inception of
eachlease.
Management estimates the maintenance costs and the costs
associated with the restitution of life-limited parts at the end of
each reporting period and makes relevant provisions over the
lease term. The calculation of such costs includes a number of
variable factors and assumptions, including the anticipated
utilisation of the aircraft, cost of maintenance and the lifespan
of the life-limited parts.
Provisions for aircraft maintenance costs totalled HK$5,718
million as at 31st December 2020 and are included within other
long-term payables and trade and other payables in the
consolidated statement of financial position.
We identified assessing aircraft maintenance provisions as a
key audit matter because of the inherent level of complex and
subjective management judgements required in assessing the
variable factors and assumptions in order to quantify the
provision amounts.
Our audit procedures to assess aircraft maintenance
provisions included the following:
• assessing the design, implementation and operating
effectiveness of management’s key internal controls over
accounting for maintenance provisions for aircraft held
under leases;
• evaluating the provisioning model, methodology and key
assumptions adopted by management in estimating the
provisions and any changes therein by inspecting the terms
of the leases on a sample basis and comparing assumptions
to contract terms and the Group’s maintenance
costexperience;
• obtaining information about the utilisation pattern and
expected useful lives of life-limited parts of the aircraft from
personnel responsible for aircraft engineering, and
considering the consistency of the provisions with the
engineering department’s assessment of the condition
ofaircraft;
• performing a retrospective review of aircraft maintenance
provisions to evaluate whether the judgement and decisions
made by management in estimating the provisions in the
prior year indicated possible management bias.
63
Annual Report 2020
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.
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.
Cathay Pacific Airways Limited
64
INDEPENDENT AUDITOR’S REPORT
• 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
of the 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
the financial 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
10th March 2021
65
Annual Report 2020
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the year ended 31st December 2020
Note
2020
HK$M
2019
HK$M
2020
US$M
2019
US$M
Revenue
 Passenger services 11,950 73,985 1,532 9,485
 Cargo services 27,890 23,810 3,576 3,052
 Other services and recoveries 7,094 9,178 909 1,177
Total revenue 46,934 106,973 6,017 13,714
Expenses
 Staff (15,786) (20,125) (2,024) (2,580)
 Inflight service and passenger expenses (1,102) (5,306) (141) (680)
 Landing, parking and route expenses (6,868) (17,758) (880) (2,277)
 Fuel, including hedging losses (11,379) (29,812) (1,459) (3,822)
 Aircraft maintenance (5,772) (9,858) (740) (1,264)
 Aircraft depreciation and rentals (11,879) (12,022) (1,523) (1,541)
 Other depreciation, amortisation and rentals (2,720) (2,991) (349) (384)
 Commissions (146) (927) (19) (119)
 Others (2,987) (4,847) (383) (621)
Operating expenses (58,639) (103,646) (7,518) (13,288)
Operating (loss)/profit before non-recurring items (11,705) 3,327 (1,501) 426
Restructuring costs
32 (2,383) – (305) –
Impairment and related charges
32 (4,056) – (520) –
Gain on deemed partial disposal of an associate – 114 – 15
Operating (loss)/profit
2 (18,144) 3,441 (2,326) 441
 Finance charges (3,044) (3,276) (390) (420)
 Finance income 149 337 19 43
Net finance charges
3 (2,895) (2,939) (371) (377)
Share of (losses)/profits of associates (1,282) 1,643 (164) 211
(Loss)/profit before taxation (22,321) 2,145 (2,861) 275
Taxation
4 674 (454) 86 (58)
(Loss)/profit for the year (21,647) 1,691 (2,775) 217
Attributable to
 Ordinary shareholders of Cathay Pacific (21,876) 1,691 (2,804) 217
 Preference shareholder of Cathay Pacific 228 – 29 –
 Non-controlling interests 1 – – –
(Loss)/profit for the year (21,647) 1,691 (2,775) 217
(Loss)/earnings per ordinary share (2019 restated)
 Basic and diluted
5 (424.3)¢ 39.1¢ (54.4)¢ 5.0¢
(Loss)/profit for the year (21,647) 1,691 (2,775) 217
Other comprehensive income
 Items that may be reclassified subsequently to profit or loss:
  Cash flow hedges (1,041) 551 (134) 71
  Share of other comprehensive income of associates (203) (186) (26) (24)
  Exchange differences on translation of foreign operations 1,638 (472) 210 (61)
 Items that may not be reclassified subsequently to profit or loss:
  Defined benefit plans 599 1,061 77 136
   Revaluation of equity investments designated at fair value
   through other comprehensive income (non-recycling) – 33 – 4
Other comprehensive income for the year, net of taxation
6 993 987 127 126
Total comprehensive income for the year (20,654) 2,678 (2,648) 343
Total comprehensive income attributable to
 Ordinary shareholders of Cathay Pacific (20,883) 2,678 (2,677) 343
 Preference shareholder of Cathay Pacific 228 – 29 –
 Non-controlling interests 1 – – –
(20,654) 2,678 (2,648) 343
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$7.8.
The notes on pages 69 to 122 and the principal accounting policies on pages 123 to 133 form part of these financial statements.
Cathay Pacific Airways Limited
66
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
at 31st December 2020
Note
2020
HK$M
2019
HK$M
2020
US$M
2019
US$M
ASSETS AND LIABILITIES
Non-current assets and liabilities
Property, plant and equipment
7 131,925 140,114 16,914 17,963
Intangible assets
8 15,061 15,151 1,931 1,942
Investments in associates
9 26,489 27,055 3,396 3,469
Other long-term receivables and investments
10 2,905 3,823 372 490
Deferred tax assets
14 627 1,089 80 140
177,007 187,232 22,693 24,004
Interest-bearing liabilities
11 (68,880) (76,508) (8,831) (9,809)
Other long-term payables
12 (4,210) (4,806) (540) (616)
Deferred tax liabilities
14 (11,499) (13,564) (1,474) (1,739)
(84,589) (94,878) (10,845) (12,164)
Net non-current assets 92,418 92,354 11,848 11,840
Current assets and liabilities
Stock 1,719 1,812 220 232
Trade and other receivables
15 6,469 10,608 829 1,360
Assets held for sale 38 – 5 –
Liquid funds
16 19,341 14,864 2,480 1,906
27,567 27,284 3,534 3,498
Interest-bearing liabilities
11 (24,249) (20,752) (3,109) (2,660)
Trade and other payables
17 (12,376) (18,218) (1,587) (2,336)
Contract liabilities
18 (8,122) (15,941) (1,041) (2,044)
Taxation (1,977) (1,951) (253) (250)
(46,724) (56,862) (5,990) (7,290)
Net current liabilities (19,157) (29,578) (2,456) (3,792)
Total assets less current liabilities 157,850 157,654 20,237 20,212
Net assets 73,261 62,776 9,392 8,048
CAPITAL AND RESERVES
Share capital
19 48,322 17,106 6,195 2,193
Reserves
21 24,935 45,667 3,197 5,855
Funds attributable to the shareholders of Cathay Pacific 73,257 62,773 9,392 8,048
Non-controlling interests 4 3 – –
Total equity 73,261 62,776 9,392 8,048
The financial statements are prepared and presented in HK$, the functional currency. The US$ figures are shown only as supplementary
information and are translated at US$1:HK$7.8.
The notes on pages 69 to 122 and the principal accounting policies on pages 123 to 133 form part of these financial statements.
Patrick Healy John Harrison
Director Director
Hong Kong, 10th March 2021
67
Annual Report 2020
CONSOLIDATED STATEMENT OF
CASH FLOWS
for the year ended 31st December 2020
Note
2020
HK$M
2019
HK$M
2020
US$M
2019
US$M
Operating activities
 Cash (used in)/generated from operations
22 (11,237) 18,458 (1,441) 2,366
 Interest received 92 179 12 23
 Interest paid (2,223) (3,010) (285) (386)
 Tax paid (923) (285) (118) (36)
Net cash (outflow)/inflow from operating activities (14,291) 15,342 (1,832) 1,967
Investing activities
 Purchase of subsidiaries – (1,697) – (218)
 Net (increase)/decrease in liquid funds other than cash and
  cash equivalents (7,150) 1,796 (917) 230
 Proceeds from sales of property, plant and equipment 153 134 20 17
 Net increase in other long-term receivables and investments (2) (60) – (8)
 Payments for property, plant and equipment and
  intangible assets (5,418) (12,171) (695) (1,560)
 Dividends received from associates 675 394 87 51
 Loan to an associate (16) – (2) –
Net cash outflow from investing activities (11,758) (11,604) (1,507) (1,488)
Financing activities
 New financing
11 22,304 16,975 2,859 2,176
 Initial cash benefit from lease arrangements
14 – 837 – 107
 Loan and lease repayments
11 (30,134) (18,785) (3,863) (2,408)
 Proceeds from issue of rights shares
19 11,716 – 1,502 –
 Proceeds from issue of preference shares
19 19,500 – 2,500 –
 Payments of transaction costs on issue of rights shares and
  preference shares (77) – (10) –
 Dividends paid – to ordinary shareholders of Cathay Pacific – (1,495) – (192)
– to non-controlling interests – (1) –
–
Net cash inflow/(outflow) from financing activities 23,309 (2,469) 2,988 (317)
Net (decrease)/increase in cash and cash equivalents (2,740) 1,269 (351) 162
Cash and cash equivalents at 1st January 8,881 7,653 1,138 981
Effect of exchange differences 25 (41) 4 (5)
Cash and cash equivalents at 31st December
24 6,166 8,881 791 1,138
The financial statements are prepared and presented in HK$, the functional currency. The US$ figures are shown only as supplementary
information and are translated at US$1:HK$7.8.
The notes on pages 69 to 122 and the principal accounting policies on pages 123 to 133 form part of these financial statements.
Cathay Pacific Airways Limited
68
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 31st December 2020
Attributable to the shareholders of Cathay Pacific
Share
capital
HK$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$M
At 1st January 2020 17,106 45,867 (148) 634 (686) 62,773 3 62,776
Loss for the year – (21,648) – – – (21,648) 1 (21,647)
Other comprehensive income – 599 – (1,041) 1,435 993 – 993
Total comprehensive income
 for the year – (21,049) – (1,041) 1,435 (20,655) 1 (20,654)
Issue of rights shares 11,716 – – – – 11,716 – 11,716
Issue of preference shares 19,500 – – – – 19,500 – 19,500
Transaction costs on issue of rights
 shares and preference shares – (77) – – – (77) – (77)
At 31st December 2020 48,322 24,741 (148) (407) 749 73,257 4 73,261
At 1st January 2019 17,106 46,956 (181) 83 (28) 63,936 3 63,939
Impact on initial application of
 HKFRS 16 – (2,346) – – – (2,346) – (2,346)
At 1st January 2019, adjusted 17,106 44,610 (181) 83 (28) 61,590 3 61,593
Profit for the year – 1,691 – – – 1,691 – 1,691
Other comprehensive income – 1,061 33 551 (658) 987 – 987
Total comprehensive income for
 the year – 2,752 33 551 (658) 2,678 – 2,678
2018 second interim dividend – (787) – – – (787) – (787)
2019 first interim dividend – (708) – – – (708) – (708)
At 31st December 2019 17,106 45,867 (148) 634 (686) 62,773 3 62,776
The notes on pages 69 to 122 and the principal accounting policies on pages 123 to 133 form part of these financial statements.
69
Annual Report 2020
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
1. SEGMENT INFORMATION
(a) Segment results
2020
Cathay Pacific and
Cathay Dragon
HK$M
HK Express
HK$M
Air Hong
Kong
HK$M
Airline
services
HK$M
Associates
HK$M
Total
HK$M
Profit or loss
Sales to external customers 42,432 861 2,866 775 46,934
Inter-segment sales 296 – 90 1,877 2,263
Segment revenue 42,728 861 2,956 2,652 49,197
Segment (loss)/profit, before
 restructuring costs, impairment
 and related charges (10,357) (1,661) 852 (539) – (11,705)
Restructuring costs (2,383) – – – – (2,383)
Impairment and related charges (2,815) (1) – (1,184) (56) (4,056)
Segment (loss)/profit (15,555) (1,662) 852 (1,723) (56) (18,144)
Net finance charges (2,313) (274) – (308) – (2,895)
(17,868) (1,936) 852 (2,031) (56) (21,039)
Share of losses of associates – – – – (1,282) (1,282)
(Loss)/profit before taxation (17,868) (1,936) 852 (2,031) (1,338) (22,321)
Taxation 475 213 (137) (3) 126 674
(Loss)/profit for the year (17,393) (1,723) 715 (2,034) (1,212) (21,647)
Non-controlling interests – – – (1) – (1)
(Loss)/profit attributable to the
 shareholders of Cathay Pacific (17,393) (1,723) 715 (2,035) (1,212) (21,648)
Other segment information
Depreciation and amortisation 12,756 901 6 758 14,421
Purchase of property, plant and
 equipment and intangible
 assets 5,004 329 1 84 5,418
Cathay Pacific Airways Limited
70
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
1. SEGMENT INFORMATION (continued)
2019
Cathay Pacific and
Cathay Dragon
HK$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 101,377 1,893 2,633 1,070 106,973
Inter-segment sales 229 – 5 3,565 3,799
Segment revenue 101,606 1,893 2,638 4,635 110,772
Segment profit/(loss) 2,951 (196) 797 (111) 3,441
Net finance charges (2,446) (112) – (381) (2,939)
505 (308) 797 (492) 502
Share of profits of associates – – – – 1,643 1,643
Profit/(loss) before taxation 505 (308) 797 (492) 1,643 2,145
Taxation (264) 62 (130) 33 (155) (454)
Profit/(loss) for the year 241 (246) 667 (459) 1,488 1,691
Non-controlling interests – – – – – –
Profit/(loss) attributable to the
 shareholders of Cathay Pacific 241 (246) 667 (459) 1,488 1,691
Other segment information
Depreciation and amortisation 13,027 409 6 780 14,222
Purchase of property, plant and
 equipment and intangible assets 12,049 5 2 115 12,171
(i) Cathay Pacific and Cathay Dragon (until 21st October 2020) provide full service international passenger and
cargo air transportation under the Cathay Pacific and Cathay Dragon brands. 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.
71
Annual Report 2020
1. SEGMENT INFORMATION (continued)
(b) Geographical information
2020
HK$M
2019
HK$M
Revenue by origin of sale:
North Asia
 – Hong Kong and the Chinese mainland 29,567 54,198
 – Japan, Korea and Taiwan 3,168 9,974
Americas 3,944 14,084
Europe 2,649 10,377
Southeast Asia 3,686 7,598
Southwest Pacific 1,531 5,586
South Asia, Middle East and Africa 2,389 5,156
46,934 106,973
Analysis of net assets by geographical segment:
The major revenue earning asset is the aircraft fleet, which is registered in Hong Kong and is employed across
the Group’s worldwide route network. Management considers that there is no suitable basis for allocating such
assets and related liabilities to geographical segments. Accordingly, analysis of the Group’s assets by
geographical regions is not disclosed.
2. OPERATING (LOSS)/PROFIT
2020
HK$M
2019
HK$M
Operating (loss)/profit has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment
 – right-of-use assets 6,069 5,846
 – owned 7,779 7,826
Amortisation of intangible assets 573 550
Impairment
 – property, plant and equipment 3,973 –
 – intangible assets 39 –
 – investment in an associate 56 –
Expenses relating to short-term leases and leases of low-value assets 25 181
COVID-19-related rent concessions received (316) –
Gain on disposal of property, plant and equipment, net (34) (175)
Loss on disposal of intangible assets – 9
Cost of stock expensed 845 2,164
Exchange differences, net (295) (43)
Auditors’ remuneration 16 16
Dividend income from unlisted equity investments (49) (51)
Cathay Pacific Airways Limited
72
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
3. NET FINANCE CHARGES
2020
HK$M
2019
HK$M
Net interest charges comprise:
 – lease liabilities stated at amortised cost 1,058 1,404
 – bank loans and overdrafts
  – wholly repayable within five years 718 673
  – not wholly repayable within five years 543 1,090
 – other borrowings
  – wholly repayable within five years 125 110
  – not wholly repayable within five years 255 –
2,699 3,277
Income from liquid funds:
 – funds with investment managers and other liquid investments at
   fair value through profit or loss (63) (170)
 – bank deposits and others (86) (167)
(149) (337)
Fair value change:
 – gain on financial liabilities designated at fair value through profit or loss (73) (26)
 – loss on financial derivatives 418 25
345 (1)
2,895 2,939
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 loss from derivatives that are classified as fair
value through profit or loss of HK$210 million (2019: net loss of HK$40 million).
4. TAXATION
2020
HK$M
2019
HK$M
Current tax expenses
 – Hong Kong profits tax 137 137
 – overseas tax 124 205
 – under provisions for prior years 42 12
Deferred tax
 – origination and reversal of temporary differences (note 14) (977) 100
(674) 454
Hong Kong profits tax is calculated at 16.5% (2019: 16.5%) on the estimated assessable profits for the year. Overseas
tax is calculated at rates of tax applicable in countries in which the Group is assessable for tax. Tax provisions are
reviewed regularly to take into account changes in legislation, practice and the status of negotiations (see note 28(c)
to the financial statements).
73
Annual Report 2020
4. TAXATION (continued)
A reconciliation between tax credit/(charge) and accounting (loss)/profit at applicable tax rates is as follows:
2020
HK$M
2019
HK$M
(Loss)/profit before taxation (22,321) 2,145
Notional tax calculated at Hong Kong profits tax rate of 16.5% (2019: 16.5%) 3,683 (354)
Expenses not deductible for tax purposes (435) (148)
Income not subject to tax 136 44
Effect of changes in effective tax rate and jurisdictional differences (445) 284
Tax under provisions arising from prior years (42) (12)
Tax losses not recognised (1,286) (268)
Reversal of tax losses recognised in prior years (937) –
Tax credit/(charge) 674 (454)
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, of which HK$878 million was recognised in prior years.
Further information on deferred taxation is shown in note 14 to the financial statements.
5. (LOSS)/EARNINGS PER ORDINARY SHARE
2020 2019
Loss
(a)
HK$M
Weighted average
number of
ordinary shares
Per share
amount
HK cents
Profit
(a)
HK$M
Weighted average
number of
ordinary shares
(restated)
Per share
amount
HK cents
(restated)
Basic and diluted (loss)/
 earnings per ordinary share (21,876) 5,156,000,217 (424.3) 1,691 4,324,951,577 39.1
(a) The (loss)/profit amounts represent the (loss)/profit attributable to the ordinary shareholders of Cathay Pacific,
which is the (loss)/profit for the year after non-controlling interests and dividends attributable to the holder of
the cumulative preference shares classified as equity (see note 20(c) to the financial statements).
(b) On 10th August 2020, the Company issued 2,503,355,631 new ordinary shares at HK$4.68 each by way of rights
issue to qualifying ordinary shareholders. As required by HKAS 33 “Earnings per Share”, a retrospective
adjustment of 391,107,005 shares representing the bonus element in the rights issue was applied to the
calculation of the weighted average number of ordinary shares for the periods prior to the rights issue. Basic and
diluted (loss)/earnings per ordinary share for the prior periods have been restated accordingly.
(c) On 12th August 2020, the Company issued warrants which entitle the holder to subscribe for up to 416,666,666
ordinary shares. The Company’s warrants as at 31st December 2020 have an anti-dilutive effect to the loss per
ordinary share and there are no other potential dilutive ordinary shares in existence during the years ended 31st
December 2020 and 2019, and hence diluted (loss)/earnings per ordinary share is the same as the basic (loss)/
earnings per ordinary share.
Cathay Pacific Airways Limited
74
6. OTHER COMPREHENSIVE INCOME
2020
HK$M
2019
HK$M
Cash flow hedges
 – (loss)/gain recognised during the year (4,261) 1,455
 – loss/(gain) transferred to profit or loss (note 21) 3,105 (831)
 – deferred taxation (note 14) 115 (73)
Share of other comprehensive income of associates
 – recognised during the year (203) (186)
Exchange differences on translation of foreign operations
 – gain/(loss) recognised during the year 1,638 (556)
 – reclassified to profit or loss upon deemed partial disposal – 84
Defined benefit plans
 – remeasurement gain recognised during the year (note 13) 653 1,188
 – deferred taxation (note 14) (54) (127)
Revaluation of equity investments designated at fair value through other comprehensive
 income (non-recycling)
 – gain recognised during the year – 33
Other comprehensive income for the year 993 987
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
75
Annual Report 2020
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
7. PROPERTY, PLANT AND EQUIPMENT
Aircraft and related equipment Other equipment Land and buildings
Owned
HK$M
Finance
leased
HK$M
Right-of-
use
assets
(a)
HK$M
Owned
HK$M
Right-of-
use
assets
HK$M
Owned
HK$M
Right-of-
use
assets
HK$M
Under
construction
HK$M
Total
HK$M
Cost
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
At 1st January 2019 122,247 44,526 – 5,413 – 15,191 – 22 187,399
Adoption of HKFRS 16 –
 reclassification of finance
 leases
(a)
– (44,526) 44,526 – – – – – –
Adoption of HKFRS 16 –
 reclassification of leasehold
 land rental prepayments
(b)
– – – – – – 2,059 – 2,059
Adoption of HKFRS 16 –
 recognition of operating
 leases
(c)
– – 12,143 – 271 – 4,936 – 17,350
At 1st January 2019, adjusted 122,247 – 56,669 5,413 271 15,191 6,995 22 206,808
Purchase of a subsidiary 98 – 5,172 6 – 16 31 – 5,323
Additions 11,263 – 1,118 276 24 146 443 – 13,270
Disposals (2,938) – – (79) – (22) (94) – (3,133)
Transfers 1,694 – (1,694) – – 2 – (2) –
Other right-of-use asset
 adjustments – – (37) – (78) – 191 – 76
At 31st December 2019 132,364 – 61,228 5,616 217 15,333 7,566 20 222,344
Accumulated depreciation and impairment
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
At 1st January 2019 47,770 13,405 – 3,359 – 5,741 – – 70,275
Adoption of HKFRS 16 –
 reclassification of finance
 leases
(a)
– (13,405) 13,405 – – – – – –
Adoption of HKFRS 16 –
 reclassification of leasehold
 land rental prepayments
(b)
– – – – – – 843 – 843
At 1st January 2019, adjusted 47,770 – 13,405 3,359 – 5,741 843 – 71,118
Purchase of a subsidiary 5 – 463 4 – 10 8 – 490
Charge for the year 6,748 – 4,827 333 38 745 981 – 13,672
Disposals (2,938) – – (71) – (22) (19) – (3,050)
Transfers 942 – (942) – – – – – –
At 31st December 2019 52,527 – 17,753 3,625
38 6,474 1,813 – 82,230
Net book value
At 31st December 2020 75,726 – 41,920 1,416 226 7,456 5,161 20 131,925
At 31st December 2019 79,837 – 43,475 1,991 179 8,859 5,753 20 140,114
(a) Assets held under finance leases under HKAS 17 were reclassified as right-of-use assets upon adoption of HKFRS 16 on 1st January 2019.
(b) Leasehold land rental prepayments were reclassified as right-of-use assets upon adoption of HKFRS 16 on 1st January 2019.
(c) Assets held under operating leases under HKAS 17 were recognised as right-of-use assets upon adoption of HKFRS 16 on 1st January 2019.
Cathay Pacific Airways Limited
76
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
7. 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
the consolidated statement of financial position in accordance with accounting policies 6 and 9 respectively.
During the year, additions to right-of-use assets were HK$4,025 million (2019: HK$1,585 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 23 and 11 to the financial statements, respectively.
The Group has early adopted the Amendment to HKFRS 16 “COVID-19-Related Rent Concessions” and has
applied the practical expedient introduced by the Amendment to all eligible rent concessions received by the
Group during the year. Further information is provided in note 32 to the financial statements.
(i) Aircraft and related equipment
The Group has obtained the right to use aircraft and related equipment through lease arrangements.
The Group held 41 aircraft at 31st December 2020 (2019: 42) 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 to 10 years.
The Group held 68 aircraft at 31st December 2020 (2019: 69) 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 1
to 13 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. If the 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)
2020
HK$M
2019
HK$M
2020
HK$M
2019
HK$M
Aircraft and related equipment 32,782 35,259 7,925 8,993
(ii) Other equipment
The Group leases other equipment under leases expiring from 1 to 8 years. Some leases include an option to
renew the lease when all terms are renegotiated 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. The leases will expire within 27 years.
77
Annual Report 2020
7. PROPERTY, PLANT AND EQUIPMENT (continued)
(iv) Properties leased for own use
The Group leases other properties under leases expiring from 1 to 13 years. Some leases include an option
to renew the lease when all terms are renegotiated and some of the leases include insignificant amounts of
variable lease payments that are based on revenue or tonnage handled.
(b) Advance payments are made to manufacturers for aircraft and related equipment to be delivered in future years.
At 31st December 2020, advance payments included in owned aircraft and related equipment amounted to
HK$2,930 million (2019: HK$3,945 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 11 to the
financial statements.
(d) During the year, the carrying amounts of certain property, plant and equipment were written down by 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 (see note 8 to the financial statements) that there are 34 owned and
leased aircraft, under the Cathay Pacific and Cathay Dragon segment as disclosed in note 1 to the financial
statements, that are unlikely to re-enter meaningful economic service again before their retirement or return
to lessors by the end of 2021. Consequently an impairment charge of HK$2,764 million was recognised
during the year to write off these aircraft assets in full. Any delay of the base case passenger traffic recovery
profile could result in further impairment charges in future periods. The carrying value at 31st December
2020 of aircraft which are expected to retire or be returned to lessors in the first half of 2022 is HK$0.8
billion. At present, it is expected that such aircraft will re-enter meaningful economic service before their
retirement or return to lessors.
(ii) An impairment charge of HK$526 million (which comprises HK$143 million of other equipment and HK$383
million of land and buildings) was recognised to reduce the carrying values of Cathay Pacific Catering
Services (H.K.) Limited (“CPCS”)’s property, plant and equipment to its value in use. CPCS operates the
principal flight kitchen in Hong Kong. The recoverable amount for this CGU at 31st December 2020 is
HK$847 million.
(iii) An impairment charge of HK$658 million (which comprises HK$170 million of other equipment and HK$488
million of land and buildings) was recognised to reduce the carrying values of Vogue Laundry Service
Limited (“VLS”)’s property, plant and equipment to its value in use. VLS provides a comprehensive range of
services in laundry and dry cleaning of commercial linen, uniforms and guest garments. The recoverable
amount for this CGU at 31st December 2020 is HK$983 million.
(iv) Both CPCS and VLS form part of the Airline services reportable segment disclosed in note 1 to the financial
statements. Values in use were determined using cash flow projections to reflect decreased passenger
demand and thus revenues of CPCS and VLS (see note 8 to the financial statements). The pre-tax discount
rates used in the value in use assessments for CPCS and VLS were 9.0% and 9.0% respectively.
(v) Further, impairments on properties under leases totalling HK$25 million have been recognised during the
year reflecting a reduction in the expected usage of various rented buildings as a result of the pandemic.
Further details surrounding the impact of COVID-19 on the Group are disclosed in note 32 to the
financialstatements.
Cathay Pacific Airways Limited
78
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
8. INTANGIBLE ASSETS
Goodwill
HK$M
Computer
software
HK$M
Others
HK$M
Tot al
HK$M
Cost
At 1st January 2020 11,654 7,376 39 19,069
Additions – 522 – 522
At 31st December 2020 11,654 7,898 39 19,591
At 1st January 2019 7,666 6,828 39 14,533
Purchase of a subsidiary 3,988 33 – 4,021
Additions – 528 – 528
Disposals – (13) – (13)
At 31st December 2019 11,654 7,376 39 19,069
Accumulated amortisation and impairment
At 1st January 2020 – 3,898 20 3,918
Charge for the year – 569 4 573
Impairment 39 – – 39
At 31st December 2020 39 4,467 24 4,530
At 1st January 2019 – 3,342 17 3,359
Purchase of a subsidiary – 13 – 13
Charge for the year – 547 3 550
Disposals – (4) – (4)
At 31st December 2019 – 3,898 20 3,918
Net book value
At 31st December 2020 11,615 3,431 15 15,061
At 31st December 2019 11,654 3,478 19 15,151
Goodwill is allocated to the Group’s CGUs as follows:
2020
HK$M
2019
HK$M
Cathay Pacific 7,884 7,884
HK Express 3,616 3,616
Others 115 154
11,615 11,654
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.
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 VIU’s 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, a base 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.
79
Annual Report 2020
8. INTANGIBLE ASSETS (continued)
The calculations use cash flow projections that are based on business plans prepared by management and approved
by the 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
consistent with the assumptions that it considers a market participant would make.
For the Cathay Pacific CGU the base case assumes, in line with IATA’s economic outlook, that a recovery in passenger
traffic commences in the second half of 2021 but does not return to pre-crisis levels until 2024. Revenue efficiency
during the recovery period is assumed to remain weaker than historical actuals 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 2025-2030 it is assumed that growth will be slightly elevated with revenue
efficiency marginally weaker than historical averages. The downside scenario reflects an outcome where global
economic conditions recover but are subdued 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% (2019: 2.25%) which does not exceed the long-term average growth rate for the industry
(IATA’s most recent 20 year global forecast is 3.7%). Cash outflows include capital and maintenance expenditure for
the purchase of aircraft and other property, plant and equipment. The discount rate used of 7.4% (2019: 7.2%) 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 2020 and consequently no impairment has
been made. Compared with the 2019 impairment test, the negative impacts of the pandemic recovery period have
been partially offset by the long term benefits of our restructuring in late 2020 (see note 32(a)(iii) to the financial
statements and the anticipated migration of marginal or loss making ex-Cathay Dragon routes to the better suited
low cost carrier model of HK Express.
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
is considered appropriate. Similarly cash flows beyond the ten-year period are extrapolated with an estimated
general annual growth rate of 2.25% (2019: 2.25%). The discount rate used of 11.1% (2019: 7.5%) 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 2020 and consequently no impairment has been made.
Compared with the 2019 year end impairment test, the negative impacts of the pandemic recovery period have been
offset by a full operational reassessment of the low cost carrier and the anticipated transfer and optimisation of
ex-Cathay Dragon routes under the brand.
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. A delay (or acceleration) in recovery would extend (or reduce) our monthly HK$1.0-1.5 billion cash burn,
assuming no further mitigating actions are taken.
Impairment testing of our Airline service CGUs adopts, to the extent relevant, consistent recovery assumptions as
the Cathay Pacific CGU. Impairments of goodwill (included within “Others”) attributable to CPCS and VLS of HK$39
million were booked to reduce the carrying values of assets to their estimated recoverable amounts. This also
impacted the carrying value of their property, plant and equipment (see note 7(d) to the financial statements).
Management believes that any reasonably foreseeable change in any of the above key assumptions would not
causethe carrying amounts of the CGUs including related goodwill to exceed the recoverable amounts of the
respectiveCGUs.
Cathay Pacific Airways Limited
80
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
9. INVESTMENTS IN ASSOCIATES
2020
HK$M
2019
HK$M
Share of net assets
 – listed in Hong Kong 18,410 20,090
 – unlisted 4,342 3,404
Goodwill 3,483 3,266
26,235 26,760
Less: impairment loss (56) –
26,179 26,760
Loans due from associates 310 295
26,489 27,055
At 31st December 2020, the market value of the shares in an associate, Air China, listed in Hong Kong is HK$16,066
million (2019: HK$20,833 million).
Air China is considered material to the Group and the share of assets and liabilities and results is summarised
asbelow:
2020
HK$M
2019
HK$M
Gross amounts of the associate’s
 – current assets 28,931 27,452
 – non-current assets 314,595 294,621
 – current liabilities (103,672) (84,402)
 – non-current liabilities (137,193) (124,361)
Revenue 101,750 157,601
(Loss)/profit from continuing operations (15,564) 8,832
Other comprehensive income (1,637) (232)
Total comprehensive income (17,201) 8,600
Dividend received from the associate 128 309
Reconciled to the Group’s interests in the associate
 – gross amounts of net assets of the associate 102,661 113,310
 – Group’s share of net assets of the associate at effective interest
   (2020: 18.13%; 2019: 18.13%) 18,612 20,543
 – effect of cross shareholding and others (202) (453)
 – goodwill 3,483 3,266
21,893 23,356
81
Annual Report 2020
9. INVESTMENTS IN ASSOCIATES (continued)
Air China is a strategic partner for the Group and the national flag carrier and a leading provider of passenger, cargo
and other airline-related services in the Chinese mainland.
Cathay Pacific had a 18.13% interest at 31st December 2020 (2019: 18.13%) and had significant influence through
itsrepresentation on the Board of Directors of Air China and therefore equity accounted for its share of Air
China’sresults.
The Group’s 2020 results include Air China’s results for the 12 months ended 30th September 2020 and any
significant events or transactions for the period from 1st October 2020 to 31st December 2020. Air China’s most
recently available accounts were drawn up to 30th September 2020 (2019: 30th September 2019).
Due to the H-share market price for Air China having been below the value per share of the Group’s carrying
investment for a sustained period of more than six months, an impairment test was performed as at 31st December
2020 and no impairment loss was considered necessary as the recoverable amount exceeds the carrying value.
Aggregate information of associates that are not individually material is summarised as below:
2020
HK$M
2019
HK$M
Aggregate carrying amount of individually immaterial associates 4,596 3,699
Aggregate amounts of the Group’s share of those associates
 – profit from continuing operations 1,217 235
 – other comprehensive income 268 (54)
 – total comprehensive income 1,485 181
Principal associates are listed on page 122.
10. OTHER LONG-TERM RECEIVABLES AND INVESTMENTS
2020
HK$M
2019
HK$M
Unlisted equity investments
 – designated at fair value through other comprehensive income (non-recycling) 56 56
 – measured at fair value through profit or loss 759 830
Other long-term receivables measured at amortised cost 852 888
Derivative financial assets – long-term portion 243 1,579
Retirement benefit assets (note 13) 995 470
2,905 3,823
At 31st December 2019, total derivative financial assets of the Group which did not qualify for hedge accounting
amounted to HK$1,415 million, presented under long-term receivables. The full amount was settled during 2020.
At 31st December 2020, there were insignificant derivative financial assets of the Group which did not qualify for
hedge accounting.
Cathay Pacific Airways Limited
82
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
11. INTEREST-BEARING LIABILITIES
2020 2019
Note
Current
HK$M
Non-current
HK$M
Current
HK$M
Non-current
HK$M
Loans and other borrowings (a) 17,513 37,982 13,634 43,134
Lease liabilities
(b) 6,736 30,898 7,118 33,374
24,249 68,880 20,752 76,508
The Group’s net debt/equity ratio and adjusted net debt/equity ratio at the end of the current and previous reporting
periods are summarised below:
2020
HK$M
2019
HK$M
Non-current liabilities:
Loans and other borrowings 37,982 43,134
Lease liabilities 30,898 33,374
68,880 76,508
Current liabilities:
Loans and other borrowings 17,513 13,634
Lease liabilities 6,736 7,118
24,249 20,752
Total borrowings 93,129 97,260
Liquid funds (19,341) (14,864)
Net borrowings 73,788 82,396
Funds attributable to the shareholders of Cathay Pacific 73,257 62,773
Net debt/equity ratio 1.01 1.31
To allow for comparability of gearing ratios against group borrowing covenants, the Group has chosen to present a
subset of net borrowings and the net debt/equity ratio which exclude leases without asset transfer components.
Only lease liabilities which transfer ownership of the underlying asset to the Group by the end of the lease term or
contain a purchase option that the Group is reasonably certain to exercise are included.
2020
HK$M
2019
HK$M
Net borrowings 73,788 82,396
Less: lease liabilities without asset transfer components (19,090) (19,967)
Adjusted net borrowings, excluding leases without asset transfer components 54,698 62,429
Adjusted net debt/equity ratio, excluding leases without asset transfer components 0.75 0.99
83
Annual Report 2020
11. INTEREST-BEARING LIABILITIES (continued)
(a) Loans and other borrowings
2020
HK$M
2019
HK$M
Bank loans
 – secured 31,740 35,332
 – unsecured 14,889 18,247
Other borrowings
 – secured 5,318 –
 – unsecured 3,548 3,189
55,495 56,768
Amount due within one year included in current liabilities (17,513) (13,634)
37,982 43,134
Repayable as follows:
Bank loans
 – within one year 16,724 12,557
 – after one year but within two years 8,763 10,226
 – after two years but within five years 13,010 19,832
 – after five years 8,132 10,964
46,629 53,579
Other borrowings
 – within one year 789 1,077
 – after one year but within two years 2,246 301
 – after two years but within five years 2,685 1,811
 – after five years 3,146 –
8,866 3,189
Amount due within one year included in current liabilities (17,513) (13,634)
37,982 43,134
At 31st December 2020, aircraft and related equipment of HK$57,612 million (2019: HK$54,453 million) are
pledged as security for the secured loans and other borrowings.
Loans and other borrowings are repayable up to 2035.
Loans and other borrowings of the Group not wholly repayable within five years amounted to HK$29,295 million
(2019: HK$29,465 million).
At 31st December 2020, the Group had loans totalling HK$38,618 million (2019: HK$42,657 million) which were
defeased by funds and other investments. Accordingly, these loans and the related funds, as well as related
expenses and income, have been defeased in the financial statements.
Cathay Pacific Airways Limited
84
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
11. INTEREST-BEARING LIABILITIES (continued)
(b) Lease liabilities
The Group has commitments under lease agreements in respect of aircraft and related equipment, other
equipment and buildings. Lease liabilities are repayable on various dates up to 2033. The reconciliation of future
lease payments and their carrying values at the end of the current and previous reporting periods is as follows:
2020
HK$M
2019
HK$M
Future payments 41,213 45,104
Interest charges relating to future periods (3,579) (4,612)
Present value of future payments 37,634 40,492
Amount due within one year included in current liabilities (6,736) (7,118)
30,898 33,374
The present value of future payments is repayable as follows:
2020
HK$M
2019
HK$M
Within one year 6,736 7,118
After one year but within two years 6,280 6,587
After two years but within five years 13,232 16,848
After five years 11,386 9,939
37,634 40,492
The undiscounted future payments are repayable as follows:
2020
HK$M
2019
HK$M
Within one year 7,519 8,233
After one year but within two years 6,942 7,518
After two years but within five years 14,445 18,546
After five years 12,307 10,807
41,213 45,104
At 31st December 2019, the Group had financial liabilities designated at fair value through profit or loss of
HK$1,415 million, presented under lease liabilities. The full amount was settled during 2020.
85
Annual Report 2020
11. INTEREST-BEARING LIABILITIES (continued)
(c) Reconciliation of interest-bearing liabilities
Loans and other
borrowings
HK$M
Lease
liabilities
HK$M
Tot al
HK$M
At 1st January 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
At 1st January 2019 50,686 23,191 73,877
Adoption of HKFRS 16 – recognition of operating leases – 18,603 18,603
At 1st January 2019, adjusted 50,686 41,794 92,480
Purchase of subsidiaries 410 4,668 5,078
Changes from financing cash flows
 – new financing 16,729 246 16,975
 – repayments (11,070) (7,715) (18,785)
Other changes
 – exchange gain (228) (153) (381)
 – changes resulting from new leases – 1,605 1,605
 – changes resulting from lease modification – 76 76
 – changes resulting from lease termination – (75) (75)
 – changes in fair values – (24) (24)
 – others 241 70 311
At 31st December 2019 56,768 40,492 97,260
Cathay Pacific Airways Limited
86
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
12. OTHER LONG-TERM PAYABLES
2020
HK$M
2019
HK$M
Deferred liabilities 3,711 4,412
Derivative financial liabilities – long-term portion 499 394
4,210 4,806
The Group had a maintenance provision of HK$5,718 million (2019: HK$5,031 million) for returning the aircraft to
lessors to certain maintenance conditions. The movements during the year are as follows:
2020
HK$M
2019
HK$M
At 1st January 5,031 3,666
Purchase of a subsidiary – 909
Additional provision made 902 740
Provision utilised (215) (284)
At 31st December 5,718 5,031
Amount expected to be utilised within one year included in trade and other payables (2,397) (619)
Included in deferred liabilities above 3,321 4,412
At 31st December 2020, total derivative financial liabilities of the Group which did not qualify for hedge accounting
amounted to HK$423 million (2019: nil). The balance is included in above, except for HK$340 million (2019: nil) which
was included in trade and other payables.
13. 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.
87
Annual Report 2020
13. 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 are based on actuarial valuations prepared by an independent firm of actuaries, Mercer (Hong
Kong) Limited (“Mercer”), every three years 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 (except for the portion of the Company under SGRBS) were for the period
ended 31st December 2018.
Changes were effected on a considerable portion of SGRBS plan members in October 2020; conditions of
service were revised for flight staff and redundancies were announced. An independent actuarial valuation of the
SGRBS was prepared by Mercer for the period ended 31st December 2020. No other schemes were impacted by
the restructure and these were updated by Cannon Trustees Limited for the period ended 31st December 2020.
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 119.9% (2019: 106.8%) covered by the plan assets held by the trustees at 31st
December 2020.
2020
HK$M
2019
HK$M
Net expenses recognised in the profit or loss:
Current service cost 228 264
Net interest (income)/expense (26) 5
Gain on settlements (63) –
Total included in staff costs 139 269
Actual return on plan assets 542 814
2020
HK$M
2019
HK$M
Net assets recognised in the statement of financial position:
Present value of funded obligations 4,991 6,890
Fair value of plan assets (5,986) (7,360)
Retirement benefit assets (note 10) (995) (470)
Cathay Pacific Airways Limited
88
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
13. RETIREMENT BENEFITS (continued)
2020
HK$M
2019
HK$M
Movements in present value of funded obligations comprise:
At 1st January 6,890 7,547
Remeasurements
 – actuarial losses arising from changes in financial assumptions 323 167
 – experience gains (635) (765)
Movements for the year
 – current service cost 228 264
 – interest expense 175 229
 – gain on settlements (63) –
 – employee contributions 1 1
 – benefits paid (887) (627)
 – settlements paid (935) –
 – transfer (106) 74
At 31st December 4,991 6,890
The weighted average duration of the defined benefit obligations is six years (2019: six years).
2020
HK$M
2019
HK$M
Movements in fair value of plan assets comprise:
At 1st January 7,360 7,074
Movements for the year
 – return on plan assets excluding interest income 341 590
 – interest income 201 224
 – employee contributions 1 1
 – employer contributions 11 24
 – benefits paid (887) (627)
 – settlements paid (935) –
 – transfer (106) 74
At 31st December 5,986 7,360
In connection with restructuring of the Group in 2020, a curtailment gain of HK$63 million was incurred and
settlements paid to impacted plan members.
There were no plan amendments during the year.
89
Annual Report 2020
13. RETIREMENT BENEFITS (continued)
2020
HK$M %
2019
HK$M %
Fair value of plan assets comprises:
Equities
 – Asia Pacific 240 4 527 7
 – Europe 306 5 508 7
 – Americas 483 8 811 11
 – Emerging markets 935 16 1,361 18
Bonds
 – Global 954 16 1,535 21
 – Emerging markets 128 2 138 2
Absolute return funds 1,592 27 1,559 21
Cash 1,348 22 921 13
5,986 100 7,360 100
At 31st December 2020, the prices of 95% of equities and 13% of bonds were quoted on active markets (31st
December 2019: 96% and 28% 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$12 million to the schemes in 2021.
2020 2019
SGRBS CPALRS SGRBS CPALRS
The significant actuarial assumptions are:
Discount rate 1.64% 1.64% 2.93% 2.93%
Expected rate of future salary increases 3.00% 3.04% 3.00% 3.04%
The sensitivity of the defined benefit obligations to changes in the significant actuarial assumptions are set out
below. This shows how the defined benefit obligations at 31st December 2020 would have (increased)/decreased
as a result of 0.5% change in the actuarial assumptions:
Increase by 0.5% Decrease by 0.5%
2020
HK$M
2019
HK$M
2020
HK$M
2019
HK$M
Discount rate 129 203 (135) (211)
Expected rate of future salary increases (131) (210) 127 205
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.
Cathay Pacific Airways Limited
90
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
13. 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$50 million (2019: HK$162 million) which have been applied towards the contributions payable by
the Company.
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$950 million (2019:
HK$1,062 million).
14. DEFERRED TAXATION
2020
HK$M
2019
HK$M
Deferred tax assets:
 – provisions (74) (80)
 – tax losses (3,952) (3,405)
 – cash flow hedges (44) –
 – right-of-use assets (186) (144)
Deferred tax liabilities:
 – accelerated tax depreciation 4,472 4,667
 – investments in associates 928 1,121
 – cash flow hedges – 70
 – retirement benefits 94 47
Provision in respect of certain lease arrangements 9,634 10,199
10,872 12,475
The following amounts, determined after appropriate offsetting, are shown separately on the statement of
financialposition:
2020
HK$M
2019
HK$M
Net deferred tax asset recognised in the statement of financial position (627) (1,089)
Net deferred tax liability recognised in the statement of financial position 11,499 13,564
10,872 12,475
91
Annual Report 2020
14. DEFERRED TAXATION (continued)
2020
HK$M
2019
HK$M
Movements in deferred taxation comprise:
At 1st January 12,475 12,133
Movements for the year
 – purchase of a subsidiary – (231)
 – (credited)/charged to profit or loss
  – deferred tax (credit)/charge (note 4) (977) 100
  – operating expenses 95 91
 – (credited)/charged to other comprehensive income
  – transferred to cash flow hedge reserve (note 6) (115) 73
  – transferred to retained profit (note 6) 54 127
 – initial cash benefit from lease arrangements – 837
Current portion of provision in respect of certain lease arrangements included
 in current liabilities – taxation (660) (655)
At 31st December 10,872 12,475
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$29,698
million (2019: HK$15,882 million) to carry forward against future taxable profits. These amounts are analysed
asfollows:
2020
HK$M
2019
HK$M
No expiry date 19,592 5,793
Expiring within 2021 to 2037 10,106 10,089
29,698 15,882
The provision in respect of certain lease arrangements equates to payments which are expected to be made during
the years 2021 to 2030 (2019: 2020 to 2030) as follows:
2020
HK$M
2019
HK$M
After one year but within five years 5,578 5,027
After five years but within 10 years 4,056 4,508
After 10 years – 664
9,634 10,199
15. TRADE AND OTHER RECEIVABLES
2020
HK$M
2019
HK$M
Trade debtors, net of loss allowances 3,381 5,559
Derivative financial assets – current portion 90 431
Other receivables and prepayments 2,994 4,567
Due from associates and other related companies 4 51
6,469 10,608
Cathay Pacific Airways Limited
92
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
15. TRADE AND OTHER RECEIVABLES (continued)
2020
HK$M
2019
HK$M
Analysis of trade debtors (net of loss allowances) by invoice date:
Within one month 2,608 4,374
One to three months 505 713
More than three months 268 472
3,381 5,559
2020
HK$M
2019
HK$M
Analysis of trade debtors (net of loss allowances) by age:
Current 2,916 4,984
Within three months overdue 221 430
More than three months overdue 244 145
3,381 5,559
The movements in the expected credit loss allowance in respect of trade debtors during the year are as follows:
2020
HK$M
2019
HK$M
At 1st January 81 83
Amounts written off (3) (2)
At 31st December 78 81
16. LIQUID FUNDS
2020
HK$M
2019
HK$M
Cash and cash equivalents
Short-term deposits and bank balances (note 24) 6,166 8,881
Other liquid funds
Short-term deposits maturing beyond three months when placed 195 719
Funds with investment managers
 – debt securities listed outside Hong Kong 12,648 5,079
 – bank deposits 188 43
Other liquid investments
 – debt securities listed outside Hong Kong 6 5
 – bank deposits 138 137
Liquid funds 19,341 14,864
Included in other liquid investments are bank deposits of HK$138 million (2019: HK$137 million) and debt securities
ofHK$6 million (2019: HK$5 million) which are pledged as part of long-term financing arrangements. The
arrangements provide that these deposits and debt securities must be maintained at specified levels for the duration
of the financing.
93
Annual Report 2020
16. LIQUID FUNDS (continued)
Available unrestricted funds to the Group are as follows:
2020
HK$M
2019
HK$M
Liquid funds 19,341 14,864
Less: amounts pledged as part of long-term financing
 – debt securities listed outside Hong Kong (6) (5)
 – bank deposits (138) (137)
Committed undrawn facilities 9,396 5,289
Available unrestricted liquidity to the Group 28,593 20,011
Committed undrawn facilities may be drawn at any time in either Hong Kong dollar or United States dollar.
17. TRADE AND OTHER PAYABLES
2020
HK$M
2019
HK$M
Trade creditors 3,284 8,448
Derivative financial liabilities – current portion 1,311 523
Other payables 7,278 8,968
Due to associates 218 125
Due to other related companies 285 154
12,376 18,218
2020
HK$M
2019
HK$M
Analysis of trade creditors by invoice date:
Within one month 2,570 8,018
One to three months 262 403
More than three months 452 27
3,284 8,448
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$1,056 million (2019: HK$794 million) for possible or
actual taxation (other than income tax), litigation and claims. The movements during the year are as follows:
2020
HK$M
2019
HK$M
At 1st January 794 780
Additional provision made 284 152
Provision utilised (22) (138)
At 31st December 1,056 794
Cathay Pacific Airways Limited
94
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
18. CONTRACT LIABILITIES
The Group had the following contract liabilities recognised in the consolidated statement of financial position:
2020
HK$M
2019
HK$M
Passenger revenue (a) 2,480 8,954
Passenger fuel and insurance surcharge (a) 169 1,805
Loyalty programme (b) 5,473 5,182
8,122 15,941
The following table summarises the Group’s revenue recognised during the year that was included in the contract
liabilities at the beginning of the year:
2020
HK$M
2019
HK$M
Passenger revenue (a) 4,897 8,530
Passenger fuel and insurance surcharge (a) 726 1,682
Loyalty programme (b) 1,119 2,157
(a) The Group typically receives ticket fares from passengers in advance of carriage. The value of unflown
passenger sales is recognised as a contract liability until the transportation service is provided.
(b) The value attributable to the award of programme miles as part of initial sales transaction is deferred until such
time as the members redeem their programme miles.
19. SHARE CAPITAL
2020 2019
Number of shares HK$M Number of shares HK$M
Issued and fully paid
Ordinary shares
At 1st January 3,933,844,572 17,106 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 3,933,844,572 17,106
Preference shares
At 1st January – – – –
Shares issued on 12th August 2020 195,000,000 19,500 – –
At 31st December 195,000,000 19,500 – –
48,322 17,106
On 9th June 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
95
Annual Report 2020
19. SHARE CAPITAL (continued)
(b) the rights issue, being the issuance of 2,503,355,631 rights shares on the basis of seven rights shares for
every11 existing 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 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 or abrogate any of the special rights and privileges attached to the preference shares.
The preference shares will accrue dividends at the rate of:
(a) 3% per annum from and including the Issue Date to but excluding the date falling three years from the Issue Date
(the “First Step-up Date”);
(b) 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”);
(c) 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
(d) 9% per annum from and including the Third Step-up Date
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
9th June 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$100 each and
416,666,666 warrants on 12th August 2020.
There was no purchase, sale or redemption by the Company, or any of its subsidiaries, of the Company’s shares and
no exercise of warrants during the year. At 31st December 2020, 6,437,200,203 ordinary shares and 195,000,000
preference shares were in issue (31st December 2019: 3,933,844,572 ordinary shares).
20. DIVIDENDS
(a) Dividends payable to ordinary shareholders attributable to the year
2020
HK$M
2019
HK$M
No first interim dividend declared and paid for the year
 (2019: HK$0.18 per ordinary share) – 708
No second interim dividend proposed after the end of the reporting period (2019: nil) – –
– 708
(b) Dividends payable to ordinary shareholders attributable to the previous financial year, approved and paid during
the year
2020
HK$M
2019
HK$M
No second interim dividend in respect of the previous financial year, approved and
 paid during the year (2019: HK$0.20 per ordinary share) – 787
Cathay Pacific Airways Limited
96
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Financial Position
20. DIVIDENDS (continued)
(c) Dividends on cumulative preference shares issued by the Company
Dividends on cumulative preference shares are paid semi-annually in arrears at the current rate of 3% per annum
and can be deferred in whole or in part at the Company’s discretion. The dividends payable on 16th February
2021 have been deferred. The amount deferred of HK$292.5 million was in respect of dividends for the six month
period from the Issue Date 12th August 2020. The amount attributable to the preference shareholder for the
period ended 31st December 2020 was HK$228 million (as disclosed in the Consolidated Statement of Profit or
Loss and Other Comprehensive Income). Dividends on cumulative preference shares are not accrued until
declared and are classified as distributions from equity.
21. RESERVES
2020
HK$M
2019
HK$M
Retained profit 24,741 45,867
Investment revaluation reserve (non-recycling) (148) (148)
Cash flow hedge reserve (407) 634
Others 749 (686)
24,935 45,667
Investment revaluation reserve (non-recycling) of the Group comprises the cumulative net change in the fair value 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$1,211 million (2019: exchange losses of HK$427 million) and share of associates’ other negative
reserves of HK$462 million (2019: negative reserves of HK$259 million).
The (loss)/gain transferred from cash flow hedge reserve of the Group to profit or loss items was as follows:
2020
HK$M
2019
HK$M
Revenue 239 916
Fuel (3,030) (100)
Net finance charges (314) 15
Net (loss)/gain transferred to profit or loss (note 6) (3,105) 831
The cash flow hedge reserve of the Group is expected to be charged/(credited) to profit or loss or transferred to
relevant assets as noted below when the hedged transactions affect profit or loss or the relevant assets
arerecognised.
Total
HK$M
2021 617
2022 (299)
2023 (68)
2024 23
2025 36
Beyond 2025 98
407
97
Annual Report 2020
21. RESERVES (continued)
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$M
Investment
revaluation
reserve
(non-recycling)
HK$M
Cash flow
hedge
reserve
HK$M
Tot al
HK$M
Company
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
At 1st January 2019 37,147 (109) 92 37,130
Impact on initial application of HKFRS 16 (950) – – (950)
At 1st January 2019, adjusted 36,197 (109) 92 36,180
Profit for the year 879 – – 879
Other comprehensive income 967 – 554 1,521
Total comprehensive income for the year 1,846 – 554 2,400
2018 second interim dividend (787) – – (787)
2019 first interim dividend (708) – – (708)
At 31st December 2019 36,548 (109) 646 37,085
Distributable reserves of the Company at 31st December 2020 amounted to HK$15,969 million (2019: HK$36,548
million), as calculated under the provisions of Part 6 of the Hong Kong Companies Ordinance (Cap. 622).
Cathay Pacific Airways Limited
98
NOTES TO THE
FINANCIAL STATEMENTS
Statement of Cash Flows
22. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO CASH (USED IN)/GENERATED
FROM OPERATIONS
2020
HK$M
2019
HK$M
Operating (loss)/profit (18,144) 3,441
Depreciation of property, plant and equipment 13,848 13,672
Amortisation of intangible assets 573 550
Impairment of property, plant and equipment 3,973 –
Impairment of intangible assets 39 –
Gain on disposal of property, plant and equipment, net (34) (175)
Loss on disposal of intangible assets – 9
Impairment of investment in an associate 56 –
Gain on deemed partial disposal of an associate – (114)
Fair value losses/(gains) on equity investments measured at fair value through
 profit or loss 79 (88)
COVID-19-related rent concessions received (316) –
Loss/(gain) from financial derivatives, cash flow hedge reserve and other items
 not involving cash flows (41) (288)
Decrease in stock 93 16
Decrease in trade debtors and other receivables 3,751 1,776
Increase/(decrease) in net amounts due to associates and other related companies 271 (70)
(Decrease)/increase in trade creditors, other payables and deferred liabilities (7,555) 1,526
(Decrease)/increase in contract liabilities (7,819) 149
Non-operating movements in debtors and creditors (11) (1,946)
Cash (used in)/generated from operations (11,237) 18,458
23. TOTAL CASH OUTFLOW FOR LEASES
Cash outflows for leases included in the consolidated statement of cash flows comprise the following:
2020
HK$M
2019
HK$M
Within operating cash flows 708 990
Within investing cash flows 192 2
Within financing cash flows 6,298 7,469
7,198 8,461
Significant non-cash transactions for leases:
During the year ended 31st December 2020, the Group entered into new lease arrangements in respect of property,
plant and equipment with a total capitalised value at the inception of HK$3,797 million (2019: HK$1,579 million), a
significant proportion of which is related to the delivery of leased aircraft.
In addition, the Group settled the financial liabilities designated at fair value through profit or loss, together with the
lease embedded derivative instruments of HK$1,342 million.
24. ANALYSIS OF CASH AND CASH EQUIVALENTS
2020
HK$M
2019
HK$M
Short-term deposits and bank balances (note 16) 6,166 8,881
99
Annual Report 2020
NOTES TO THE
FINANCIAL STATEMENTS
Directors and Employees
25. DIRECTORS’ REMUNERATION
(a) Directors’ remuneration disclosed pursuant to section 383(1) of the Hong Kong Companies Ordinance and part 2
of the Companies (Disclosure of Information about Benefit of Directors) Regulation are:
Cash Non-cash
Basic
salary/
Fees
(note iii)
HK$’000
Bonus (in
respect
of 2019)
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
2020
Total
HK$’000
2019
Tot al
HK$’000
Executive Directors
Healy, Patrick (from
 November 2019) 1,092 106 556 549 35 271 777 3,386 368
Hogg, Rupert (up to
 August 2019) – 2,545 – – – – – 2,545 10,882
Hughes, Gregory 2,209 2,147 771 637 984 308 3,240 10,296 11,412
Lam, Ronald (from
 August 2019) 1,962 649 2,065 675 – 94 – 5,445 2,050
Loo, Paul (up to
 August 2019) – 1,177 – – – – – 1,177 4,680
Murray, Martin 2,399 2,101 2,642 691 881 371 – 9,085 11,142
Slosar, John
 (up to November 2019) – – – – – – – – 1,779
Tang, Augustus
 (from August 2019) 3,432 1,637 1,890 1,054 – 114 – 8,127 2,596
Non-Executive Directors
Cai, Jianjiang (up to
 December 2020) 575 – – – – – – 575 575
Chu, Ivan
 (up to April 2020) – – – – – – – – –
Low, Michelle – – – – – – – – –
Song, Zhiyong 575 – – – – – – 575 575
Swire, Merlin – – – – – – – – –
Swire, Samuel – – – – – – – – –
Xiao, Feng 947 – – – – – – 947 854
Zhang, Zhuo Ping
 (from April 2020) – – – – – – – – –
Zhao, Xiaohang 575 – – – – – – 575 575
Independent Non-
 Executive Directors
Chan, Bernard 599 – – – – – – 599 635
Harrison, John 970 – – – – – – 970 970
Lee, Irene (up to
 May 2019) – – – – – – – – 342
Milton, Robert (from
 May 2019) 970 – – – – – – 970 616
Tung, Andrew 796 – – – – – – 796 814
2020 Total 17,101 10,362 7,924 3,606 1,900 1,158 4,017 46,068
2019 Total 20,272 5,829 4,346 6,822 2,282 899 10,351 50,801
(i) Patrick Healy and Augustus Tang participated in the special unpaid leave scheme from 1st March to 31st March 2020 (equivalent to a
basic salary cut of 17%) and took a 30% basic salary cut from 1st April to 31st December 2020.
(ii) Gregory Hughes, Ronald Lam and Martin Murray participated in the special unpaid leave scheme from 1st March to 31st March 2020
(equivalent to a basic salary cut of 17%) and took a 25% basic salary cut from 1st April to 31st December 2020.
(iii) 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.
(iv) The total emoluments of Executive Directors are charged to the Group in accordance with the amount of time spent on its affairs.
Cathay Pacific Airways Limited
100
25. DIRECTORS’ REMUNERATION (continued)
(b) The five individuals whose emoluments were the highest in the Group for the year ended 31st December 2020
and 2019 are as follows:
2020 2019
Number of individuals:
 Executive Directors 3 3
 Senior managers 2 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$’000
2020
Total
HK$’000
2019
Tot al
HK$’000
2020 Total 11,504 8,286 10,613 3,356 3,375 1,319 3,240 41,693
2019 Total 11,995 7,137 7,492 6,143 3,544 824 10,203 47,338
The bonuses disclosed above are related to services for the previous year.
The number of the above executive directors and senior managers whose emoluments fell within the
followingbands:
HK$ 2020 2019
6,500,001 – 7,000,000 1 1
7,000,001 – 7,500,000 – 1
7,500,001 – 8,000,000 1 –
8,000,001 – 8,500,000 1 –
9,000,001 – 9,500,000 1 –
10,000,001 – 10,500,000 1 –
10,500,001 – 11,000,000 – 1
11,000,001 – 11,500,000 – 2
5 5
26. EMPLOYEE INFORMATION – CATHAY PACIFIC AND CATHAY DRAGON
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:
2020 2019
HK$ Director Flight staff Other staff Director Flight staff Other staff
0 – 1,000,000 13 14,125 9,496 14 14,897 10,467
1,000,001 – 1,500,000 1 1,066 327 – 622 294
1,500,001 – 2,000,000 – 663 99 1 1,010 89
2,000,001 – 2,500,000 – 440 67 1 398 65
2,500,001 – 3,000,000 1 455 19 1 519 19
3,000,001 – 3,500,000 1 280 9 – 437 9
3,500,001 – 4,000,000 – 187 7 – 248 5
4,000,001 – 4,500,000 – 79 5 – 94 2
4,500,001 – 5,000,000 – 26 – 1 27 –
5,000,001 – 5,500,000 1 2 1 – 4 2
5,500,001 – 6,000,000 – 2 1 – 1 1
6,000,001 – 6,500,000 – – 2 – – 1
6,500,001 – 7,000,000 – – 1 – – 1
7,000,001 – 7,500,000 – – – – – 1
7,500,001 – 8,000,000 – – 1 – – –
8,000,001 – 8,500,000 1 – – – – –
9,000,001 – 9,500,000 1 – – – – –
10,000,001 – 10,500,000 1 – – – – –
10,500,001 – 11,000,000 – – – 1 – –
11,000,001 – 11,500,000 – – – 2 – –
20 17,325 10,035 21 18,257 10,956
NOTES TO THE
FINANCIAL STATEMENTS
Directors and Employees
101
Annual Report 2020
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:
2020 2019
Associates
HK$M
Other related
parties
HK$M
Associates
HK$M
Other related
parties
HK$M
Revenue 78 12 412 23
Aircraft maintenance 906 1,830 1,264 2,511
Other operating expenses 230 259 775 308
Dividend income 675 48 394 48
Finance income 7 – 11 –
Property, plant and equipment purchase – 4 – 128
Lease payments – 94 – 104
Other related parties are companies under control of a company which has a 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. The amount of rent
payable by the Group under the leases is HK$9 million per month in total, which was determined with
reference to amounts charged by the related party to third parties. For the year ended 31st December 2020,
lease payments of HK$86 million (2019: HK$100 million) were paid. The balances of right-of-use assets and
lease liabilities as at 31st December 2020 were HK$509 million and HK$541 million respectively (2019:
HK$512 million and HK$535 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 2020 totalled HK$2,762 million (2019: HK$3,947 million).
The amounts receivable from the HAECO group for the year ended 31st December 2020 totalled HK$38
million (2019: HK$34 million).
As a director of HAECO, Merlin Swire is interested in the HAECO Framework Agreement. Michelle Low is
interested as a director of HAECO until her resignation with effect from 1st April 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.
Cathay Pacific Airways Limited
102
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
the 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 amounts payable to the Air China group for the year ended 31st December 2020
totalled HK$70 million (2019: HK$288 million). The amounts receivable from the Air China group for the year
ended 31st December 2020 totalled HK$50 million (2019: HK$377 million).
As directors or employees of Air China, Patrick Healy, Song Zhiyong, Xiao Feng and Zhao Xiaohang are
interested in the Air China Framework Agreement. Cai Jianjiang was so interested as a director of Air China
until his resignation with effect from 29th December 2020.
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 JSSHK (“JSSHK Services Agreement”). Under the JSSHK
Services Agreement, the Group paid fees and reimbursed costs to JSSHK 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 year ended 31st December 2020, no service fee was payable (2019: HK$25 million) and
expenses of HK$197 million (2019: HK$204 million) were reimbursed at cost.
As directors and/or employees of the Swire group, Patrick Healy, Gregory Hughes, Ronald Lam, Martin
Murray, Merlin Swire, Samuel Swire, Rebecca Sharpe, Augustus Tang and Zhang Zhuo Ping are interested in
the JSSHK Services Agreement. Merlin Swire and Samuel Swire are also so interested as shareholders,
directors and employees of the Swire group. Michelle Low is interested as a director and an employee of the
Swire group until her resignation with effect from 1st April 2021.
Transactions under the JSSHK Services Agreement are continuing connected transactions, in respect of
which the Company has complied with the disclosure requirements in accordance with Chapter 14A of
theListing Rules. For a definition of terms, please refer to the section of this annual report headed
Directors’Report.
(b) Amounts due from and due to associates and other related companies at 31st December 2020 are disclosed in
notes 15 and 17 to the financial statements. These balances arising in the normal course of business are non-
interest bearing and have no fixed repayment terms.
(c) Guarantees given by the Company in respect of bank loan facilities of an associate at 31st December 2020 are
disclosed in note 28(b) to the financial statements.
(d) There were no material transactions with Directors except for those relating to shareholdings (as disclosed in the
Directors’ Report and the Corporate Governance Report). Remuneration of Directors is disclosed in note 25 to
the financial statements.
NOTES TO THE
FINANCIAL STATEMENTS
Related Party Transactions
103
Annual Report 2020
NOTES TO THE
FINANCIAL STATEMENTS
Supplementary Information
28. CAPITAL COMMITMENTS AND CONTINGENCIES
(a) Outstanding capital commitments authorised at the year end but not provided for in the financial statements:
2020
HK$M
2019
HK$M
Authorised and contracted for 58,416 62,524
Authorised but not contracted for 5,951 3,189
64,367 65,713
(b) Guarantees in respect of lease obligations, bank loans and other liabilities outstanding at the year end:
2020
HK$M
2019
HK$M
Associates 1,320 1,430
(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 133.
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 and that such agreements infringed European competition law. The European Commission imposed a fine
of Euros 57.12 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 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. There is no fixed date for the General Court to issue its decision.
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.
Cathay Pacific Airways Limited
104
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 2020
totalled HK$636 million (2019: HK$875 million).
The movement in the expected credit loss allowance in respect of trade debtors during the year is set out in note
15 to the financial statements.
NOTES TO THE
FINANCIAL STATEMENTS
Supplementary Information
105
Annual Report 2020
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 16 to the financial statements) of HK$19,341
million (2019: HK$14,864 million) that is available for managing liquidity risk.
(i) Financial arrangements
The Group had access to the following liquid funds and undrawn facilities at the end of the reporting period:
2020
HK$M
2019
HK$M
Liquid funds (note 16) 19,341 14,864
Less: amounts pledged as part of long-term financing
 – debt securities listed outside Hong Kong (6) (5)
 – bank deposits (138) (137)
Committed undrawn facilities 9,396 5,289
Available unrestricted liquidity to the Group 28,593 20,011
2020
HK$M
2019
HK$M
Uncommitted bank overdraft facilities 343 330
Other uncommitted bank facilities 775 100
1,118 430
Due to the dynamic nature of the underlying businesses, the Group treasury function also maintains funding
flexibility through available committed and uncommitted credit facilities. Committed undrawn facilities may
be drawn at any time in either Hong Kong dollar or United States dollar. Uncommitted bank overdraft facilities
and other uncommitted bank facilities may be drawn at any time and may be terminated by the bank
withoutnotice.
(ii) Payment profile of financial liabilities
The analysis has been performed on the same basis as for 2019. The undiscounted payment profile of
financial liabilities is outlined as follows:
2020
Within
one year
HK$M
After one
year but
within two
years
HK$M
After two
years but
within five
years
HK$M
After five
years
HK$M
Total
HK$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)
Cathay Pacific Airways Limited
106
NOTES TO THE
FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
2019
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$M
Group
Loans and other borrowings (15,009) (11,737) (23,680) (11,616) (62,042)
Lease liabilities (8,233) (7,518) (18,546) (10,807) (45,104)
Other long-term payables – (1,871) (1,698) (843) (4,412)
Trade and other payables (17,695) – – – (17,695)
Derivative financial liabilities, net (579) (163) (102) (32) (876)
Total (41,516) (21,289) (44,026) (23,298) (130,129)
(c) Market risk
(i) Foreign currency risk
The Group’s revenue streams are denominated in a number of foreign currencies resulting in exposure to
foreign exchange rate fluctuations. The Group’s policy is to reduce foreign currency exposure on currencies
other than United States dollars. To manage this exposure, assets are, where possible, financed in those
foreign currencies in which sales transactions are anticipated, thus establishing a natural hedge. In addition,
the Group uses currency derivatives to reduce foreign currency exposure from highly probable forecast
sales transactions in foreign currencies. The use of foreign currency borrowings and currency derivatives to
hedge highly probable forecast sales transactions in foreign currencies is a key component of the financial
risk management process, as the change in value of the highly probable forecast sales transactions in
foreign currencies is effectively mitigated by the exchange differences realised on the repayment of foreign
currency borrowings and the settlement of currency derivatives.
Hedges of foreign currency risk
The following table details the carrying amount of foreign currency borrowings and the notional amount of
currency derivative contracts that have been designated as cash flow hedges of the Group’s highly probable
forecast sales transactions at the end of the reporting period:
2020
HK$M
2019
HK$M
Currency derivative contracts – outgoing currencies
Renminbi 1,236 4,923
Euros 360 1,652
Australian dollars 308 1,467
New Taiwan dollars 413 2,347
Japanese yen 208 1,168
Pound sterling 290 1,525
Others 547 3,263
Foreign currency borrowings
Japanese yen 4,575 5,071
Singapore dollars – 982
Others – 33
107
Annual Report 2020
29. FINANCIAL RISK MANAGEMENT (continued)
2020
HK$M
2019
HK$M
Carrying amount of currency derivative contracts
Asset – 181
Liability (216) (219)
Currency derivative assets are included in the “Other long-term receivables and investments” (note 10) and
“Trade and other receivables” (note 15), and currency derivative liabilities are included in the “Other long-
term payables” (note 12) and “Trade and other payables” (note 17) 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 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 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:
2020
USD to
2019
USD to
Renminbi 7.12 7.00
Euros 0.87 0.85
Australian dollars 1.44 1.42
New Taiwan dollars 29.61 29.85
Japanese yen 104.97 105.59
Pound sterling 0.77 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
the foreign 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.
Cathay Pacific Airways Limited
108
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:
2020
HK$M
2019
HK$M
Balance at 1st January 1,004 1,688
Effective portion of the cash flow hedge recognised in other
 comprehensive income (416) 146
Amounts reclassified to profit or loss* (239) (916)
Related tax 69 86
Balance at 31st December** 418 1,004
Change in fair value of the derivative instruments during the year (416) 146
Hedge ineffectiveness recognised in profit or loss – –
Effective portion of the cash flow hedge recognised in other
 comprehensive income (416) 146
*
Amount reclassified to profit or loss are recognised in “Passenger services revenue” and “Cargo services revenue” in the
consolidated statement of profit or loss. An insignificant amount is recognised in “Other expenses” in the consolidated
statement of profit or loss as the result of discontinued hedge accounting relating to forecast sales transaction no longer
expected to occur.
**
At 31st December 2020, the Group had HK$417 million (net of deferred tax) in the hedging reserve from discontinued hedges
(2019: HK$584 million, net of deferred tax).
Exposure to currency risk
The currencies giving rise to a risk of translation in the Group’s financial statements in 2020 are primarily
United States dollars, Euros, Australian dollars, Singapore dollars, Renminbi and Japanese yen (2019: United
States dollars, Euros, Australian dollars, Singapore dollars, Renminbi and Japanese yen).
At the reporting date, the exposure to these currencies in relation to recognised assets and liabilities was
asfollows:
2020
USD
HK$M
EUR
HK$M
AUD
HK$M
SGD
HK$M
RMB
HK$M
JPY
HK$M
Group
Loans due from an associate 290 – – – – –
Trade debtors and other receivables 2,556 207 90 16 731 187
Liquid funds 15,820 40 33 13 475 42
Loans and other borrowings (42,780) – – (1,021) – (1,044)
Lease liabilities (28,070) (46) (58) (11) (76) (4,405)
Trade creditors and other payables (3,307) (118) (39) (45) (200) (139)
Net exposure (55,491) 83 26 (1,048) 930 (5,359)
2019
USD
HK$M
EUR
HK$M
AUD
HK$M
SGD
HK$M
RMB
HK$M
JPY
HK$M
Group
Loans due from an associate 291 – – – – –
Trade debtors and other receivables 4,872 405 156 32 703 250
Liquid funds 11,878 86 22 63 559 31
Loans and other borrowings (43,131) – – (982) – (1,268)
Lease liabilities (29,563) (1,506) (31) (21) (94) (3,865)
Trade creditors and other payables (4,088) (316) (141) (92) (567) (171)
Net exposure (59,741) (1,331) 6 (1,000) 601 (5,023)
109
Annual Report 2020
29. FINANCIAL RISK MANAGEMENT (continued)
Sensitivity analysis for foreign currency exposure
A five percent appreciation of the Hong Kong dollar against the following currencies at the reporting date
would have resulted in a change in profit or loss and other equity components by the amounts shown below.
It represents the translation of financial assets and liabilities and the change in fair value of currency
derivatives at the reporting date. The analysis assumes that all other variables, in particular interest rates,
remain constant. It has been performed on the same basis as for 2019.
2020
Net increase/(decrease)
in profit or loss
HK$M
Net increase/(decrease)
in other equity components
HK$M
United States dollars* 2,702 (128)
Euros 2 16
Australian dollars 2 14
Singapore dollars 54 4
Renminbi (38) 41
Japanese yen 47 238
Net increase 2,769 185
2019
Net increase/(decrease)
in profit or loss
HK$M
Net increase/(decrease)
in other equity components
HK$M
United States dollars* 3,027 (935)
Euros 2 76
Australian dollars (2) 65
Singapore dollars (27) 64
Renminbi (29) 229
Japanese yen (1) 306
Net increase/(decrease) 2,970 (195)
*
Hong Kong dollars is pegged with United States dollars between the range of 7.75 to 7.85 (US$: 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 cash flow exposure to interest rate risk arises primarily from long-term borrowings at floating
rates. 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 exposures to IBORs on its financial instruments that will be replaced or
reformed as part of these market-wide initiatives. There is uncertainty over the timing and the methods of
transition in some jurisdictions that the Group operates in. The Group anticipates that IBOR reform will
impact its risk management and hedge accounting.
Cathay Pacific Airways Limited
110
NOTES TO THE
FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
The Finance Committee is monitoring the Group’s transition to alternative rates. The Group has identified its
contracts that reference IBOR cash flows, determined whether such contracts will need to be amended as a
result of IBOR reform and how to manage communication about IBOR reform with counterparties. The
Finance Committee reports to the Company’s Board of Directors quarterly.
Derivatives
The Group holds interest rate swaps for risk management purposes which are designated in cash flow
hedging relationships. The interest rate swaps have floating legs that are indexed to either Hong Kong
Interbank Offered Rate (HIBOR) or USD London Interbank Offered Rate (LIBOR). The Group’s derivative
instruments are governed by contracts based on the International Swaps and Derivatives Association’s
(ISDA) master agreements.
The Group has adhered to the ISDA 2020 IBOR Fallbacks Protocol and will monitor whether its
counterparties will also adhere. If there are counterparties who will not adhere to the protocol, the Group will
negotiate with them bilaterally to establish appropriate fallback clauses.
Hedge accounting
As at 31st December 2020, the Group’s hedged items and hedging instruments remain indexed to HIBOR or
USD LIBOR. These benchmark rates are still quoted each day and the IBOR cash flows are exchanged with
counterparties as usual.
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’s HIBOR and USD LIBOR cash flow hedging relationships extend beyond the anticipated
cessation date for these interbank offered rates. In regards to HIBOR, the Hong Kong Monetary Authority
has not announced any plan to discontinue HIBOR and it is expected that HIBOR will remain a credible
financial benchmark. In regards to USD LIBOR, the Group expects USD LIBOR to be discontinued as early as
the end of 2021. The preferred alternative reference rate for USD LIBOR is the Secured Overnight Financing
Rate (SOFR). However, there is uncertainty about when and how replacement may occur with respect to the
relevant hedged items and hedging instruments which hinges on the market developments and the
response of the contracted counterparties. Such uncertainty may impact the hedging relationship.
The Group applies the phase 1 amendments to HKFRS 9 which provide accounting reliefs to hedging
relationships directly affected by uncertainties related to IBOR reform. The amendments are adopted
retrospectively on 1st January 2020 and the accounting reliefs applied are outlined below:
– When considering the highly probable requirement, the Group has assumed that the HIBOR and 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 hedge is expected to be highly effective on a forward-looking basis the Group
has assumed that the HIBOR and 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.
– The Group has not recycled amounts in the cash flow hedge reserve relating to the period after the
reforms are expected to take effect.
The Group’s exposure to HIBOR designated in hedging relationships is HK$752 million and to USD LIBOR
designated hedging relationships is US$1,432 million at 31st December 2020 representing both the nominal
amount of the hedging interest rate swap and the principal amount of the hedged Hong Kong dollar and
United States dollar denominated variable rate financing liability maturing over the next seven years.
111
Annual Report 2020
29. FINANCIAL RISK MANAGEMENT (continued)
Hedges of interest rate risk
The following table details the interest rate swaps that have been designated as cash flow hedges of the
interest rate risk inherent in the Group’s variable rate financing liabilities at the end of the reporting period:
2020
HK$M
2019
HK$M
Notional amount
United States dollars 11,100 21,627
Hong Kong dollars 752 1,395
Others – 79
2020
HK$M
2019
HK$M
Carrying amount
Asset – 46
Liability (605) (273)
Interest rate swap assets are included in the “Other long-term receivables and investments” (note 10) and
“Trade and other receivables” (note 15), and interest rate swap liabilities are included in the “Other long-term
payables” (note 12) and “Trade and other payables” (note 17) line items in the consolidated statement of
financial position respectively.
The swaps will mature over the next seven years matching the maturity of the related financing liabilities and
have fixed swap rates ranging from 2.68% to 4.29% (2019: 1.60% to 4.29%).
The Group seeks to hedge the benchmark interest rate component only and applies a hedge ratio of 1:1. The
existence of an economic relationship between the interest rate swaps and the variable rate borrowings is
determined by matching their critical contract terms, including the reference interest rates, tenors, interest
repricing dates, maturity dates, interest payment dates, the notional amounts of the swaps and the
outstanding principal amounts of the financing liabilities.
The main source of ineffectiveness in these hedging relationships is the effect of the counterparty’s and the
Group’s own credit risk on the fair value of the swaps which is not reflected in the fair value of the hedged
cash flows attributable to the change in interest rates.
The following table provides a reconciliation of the hedging reserve in respect of interest rate risk and shows
the effectiveness of the hedging relationships:
2020
HK$M
2019
HK$M
Balance at 1st January (319) 11
Effective portion of the cash flow hedge recognised in other
 comprehensive income (638) (353)
Amounts reclassified to profit or loss* 314 (15)
Related tax 30 38
Balance at 31st December** (613) (319)
Change in fair value of the derivative instruments during the year (638) (353)
Hedge ineffectiveness recognised in profit or loss – –
Effective portion of the cash flow hedge recognised in other
 comprehensive income (638) (353)
*
Amounts reclassified to profit or loss are recognised in “Finance charges” in the consolidated statement of profit or loss.
HK$105 million of the total amount are the result of discontinued hedge accounting relating to early termination of
financingliabilities.
**
The entire balance in the hedging reserve relates to continuing hedges.
Cathay Pacific Airways Limited
112
NOTES TO THE
FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
Interest rate profile
At the reporting date, the interest rate profile of the interest-bearing financial instruments was as follows:
2020
HK$M
2019
HK$M
Fixed rate instruments
Loan due from an associate 16 –
Loans and other borrowings (8,367) (4,399)
Lease liabilities (21,191) (21,889)
Interest rate and cross currency interest rate swaps (13,664) (21,862)
Net exposure (43,206) (48,150)
2020
HK$M
2019
HK$M
Variable rate instruments
Loan due from an associate 290 291
Liquid funds 19,341 14,864
Loans and other borrowings (47,128) (52,369)
Lease liabilities (16,443) (18,603)
Interest rate and cross currency interest rate swaps 13,583 23,222
Net exposure (30,357) (32,595)
Sensitivity analysis for interest rate exposure
An increase of 25 basis points in interest rates at the reporting date would have decreased profit or loss and
increased other equity components by the amounts shown below. It represents the change in fair value of
interest rate swaps and financial liabilities designated at fair value through profit or loss at the reporting date
and the increase in net finance charges on variable rate financial instruments. The analysis assumes that all
other variables, in particular foreign currency rates, remain constant. It has been performed on the same
basis as for 2019.
2020 2019
Net decrease
in profit
or loss
HK$M
Net increase in
other equity
components
HK$M
Net decrease
in profit
or loss
HK$M
Net increase in
other equity
components
HK$M
Variable rate instruments (88) 54 (135) 57
(iii) Fuel price risk
Jet fuel is a major component of the Group’s operating expenses and the Group’s results are significantly
affected by the volatility in the price of jet fuel. The Group’s policy is to reduce fuel price risk by hedging a
percentage of its expected fuel consumption. Crude oil swaps which are economically equivalent to forward
contracts are used to achieve the Group’s desired hedging position.
113
Annual Report 2020
29. FINANCIAL RISK MANAGEMENT (continued)
Hedges of fuel price risk
The following table details the crude oil forward contracts that have been designated as cash flow hedges of
the Group’s highly probable forecast fuel purchase transactions at the end of the reporting period:
2020 2019
Notional amount Barrel (million) 21.2 28.9
Carrying amount
Asset
HK$M 333 368
Liability
HK$M (566) (425)
Crude oil forward contract assets are included in the “Other long-term receivables and investments” (note
10) and “Trade and other receivables” (note 15), and crude oil forward contract liabilities are included in the
“Other long-term payables” (note 12) and “Trade and other payables” (note 17) line items in the consolidated
statement of financial position respectively.
The crude oil forward contracts have a maturity of less than two years (2019: two years) from the reporting
date and have a weighted average strike price (Brent, US$/barrel) as follows:
2020
US$/barrel
2019
US$/barrel
Within one year 56.29 63.75
After one year but within two years 47.18 58.48
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.
The following table provides a reconciliation of the hedging reserve in respect of fuel price risk and shows
the effectiveness of the hedging relationships:
2020
HK$M
2019
HK$M
Balance at 1st January (51) (1,616)
Effective portion of the cash flow hedge recognised in other
 comprehensive income (3,207) 1,662
Amounts reclassified to profit or loss* 3,030 100
Related tax 16 (197)
Balance at 31st December** (212) (51)
Change in fair value of the derivative instruments during the year (3,207) 1,662
Hedge ineffectiveness recognised in profit or loss – –
Effective portion of the cash flow hedge recognised in other
 comprehensive income (3,207) 1,662
*
Amounts reclassified to profit or loss are recognised in “Fuel, including hedging losses” in the consolidated statement of profit
or loss. HK$315 million of the total amount are the result of discontinued hedge accounting relating to forecast fuel
consumptions no longer expected to occur.
**
The entire balance in the hedging reserve relates to continuing hedges.
Cathay Pacific Airways Limited
114
NOTES TO THE
FINANCIAL STATEMENTS
Supplementary Information
29. FINANCIAL RISK MANAGEMENT (continued)
Sensitivity analysis for jet fuel price derivatives
An increase/(decrease) of five percent in the jet fuel price at the reporting date would have resulted in a
change in profit or loss and other equity components by the amounts shown below. It represents the change
in fair value of crude oil forward contracts at the reporting date. The analysis assumes that all other variables
remain constant and it has been performed on the same basis as for 2019.
2020 2019
Net increase/
(decrease) in
profit or loss
HK$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$M
Increase in jet fuel price by 5% 71 376 – 620
Decrease in jet fuel price by 5% (71) (376) – (620)
(d) Fair values of financial assets and liabilities carried at other than fair value
The carrying amounts of the Group’s financial instruments carried at cost or amortised cost were not materially
different from their fair values at 31st December 2020 and 2019 except for the following financial instruments, for
which their carrying amounts and fair values are shown below:
2020 2019
Carrying
amount
HK$M
Fair value
HK$M
Carrying
amount
HK$M
Fair value
HK$M
Loans and other borrowings (55,495) (57,692) (56,768) (58,721)
The fair value of these financial instruments are measured using valuation techniques in which all significant
inputs are based on observable market data. The most significant inputs are market interest rates.
(e) Financial instruments carried at fair value
The following table presents the carrying value of financial instruments measured at fair value at 31st December
2020 across three levels of the fair value hierarchy defined in HKFRS 13 “Fair Value Measurement” with the fair
value of each financial instrument categorised in its entirety based on the lowest level of input that is significant
to that fair value measurement. Level 1 includes financial instruments with fair values measured using only
unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes financial
instruments with fair values measured using inputs other than quoted prices within Level 1 that are observable
for the asset or liability, either directly or indirectly. The fair value has been determined based on quotes from
market makers or discounted cash flow valuation techniques in which all significant inputs are based on
observable market data. The most significant inputs are market interest rates, exchange rates and fuel price.
Level 3 includes financial instruments with fair values measured using discounted cash flow valuation techniques
in which any significant input is not based on observable market data.
115
Annual Report 2020
29. FINANCIAL RISK MANAGEMENT (continued)
2020 2019
Level 1
HK$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$M
Recurring fair value measurement
Assets
Unlisted equity investments at fair value – – 815 815 – – 886 886
Liquid funds
 – funds with investment managers – 12,648 – 12,648 – 5,079 – 5,079
 – other liquid investments – 6 – 6 – 5 – 5
Derivative financial assets – 333 – 333 – 2,010 – 2,010
– 12,987 815 13,802 – 7,094 886 7,980
Liabilities
Financial liabilities designated at fair value
 through profit or loss – – – – – (1,415) – (1,415)
Derivative financial liabilities – (1,810) – (1,810) – (917) – (917)
– (1,810) – (1,810) – (2,332) – (2,332)
There were no transfers between Level 1 and Level 2 or transfers into or out of Level 3 fair value
hierarchyclassifications.
The fair value of the unlisted equity investments in Level 3 is determined using discounted cash flow valuation
techniques. The significant unobservable input used in the fair value measurement is the discount rate. At 31st
December 2020 and 2019, information about fair value measurements using significant unobservable inputs
(Level 3) is as follows:
Significant
unobservable inputs
Range of
unobservable
inputs
Relationship of unobservable
inputs to fair value
Possible
reasonable
change
(Negative)/positive
impact on fair value
(HK$M)
Unlisted equity
 investments
Discount rate 2020: 7.0-9.5%
(2019: 7.0-8.5%)
The higher the discount rate,
 the lower the fair value
2020: +/- 0.5%
(2019: +/- 0.5%)
2020: (50)/5
(2019: (28)/30)
The movement during the year in the balance of Level 3 fair value measurements is as follows:
2020
HK$M
2019
HK$M
Unlisted equity investments at fair value
At 1st January 886 765
Additions 8 –
Net unrealised gains recognised in other comprehensive income during the year – 33
Fair value (losses)/gains recognised in profit or loss during the year (79) 88
At 31st December 815 886
Cathay Pacific Airways Limited
116
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 of the 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
right to 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:
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$M
Group
Derivative financial assets 333 (125) 208
Derivative financial liabilities (1,810) 125 (1,685)
(1,477) – (1,477)
2019
Amount of financial
assets/(liabilities)
presented in the statement of
financial position
HK$M
Financial instruments
not offset in the
statement of financial
position
HK$M
Net amount
HK$M
Group
Derivative financial assets 2,010 (493) 1,517
Derivative financial liabilities (917) 493 (424)
1,093 – 1,093
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 a
low 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 11 to the financial statements and a ten
year history of net debt/equity ratio is included on pages 134 and 135 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 2020, no significant changes were made in the objectives, policies or
processes relating to the management of the Group’s capital risk management.
117
Annual Report 2020
31. COMPANY-LEVEL STATEMENT OF FINANCIAL POSITION
Note
2020
HK$M
2019
HK$M
2020
US$M
2019
US$M
ASSETS AND LIABILITIES
Non-current assets and liabilities
Property, plant and equipment 109,527 114,302 14,042 14,654
Intangible assets 10,898 3,475 1,397 446
Investments in subsidiaries 32,483 36,483 4,164 4,677
Investments in associates 10,796 10,797 1,384 1,384
Other long-term receivables and investments 2,206 3,104 283 398
165,910 168,161 21,270 21,559
Interest-bearing liabilities (61,118) (69,960) (7,836) (8,969)
Other long-term payables (2,358) (2,638) (302) (338)
Deferred tax liabilities (10,352) (12,207) (1,327) (1,565)
(73,828) (84,805) (9,465) (10,872)
Net non-current assets 92,082 83,356 11,805 10,687
Current assets and liabilities
Stock 1,522 1,588 195 204
Trade and other receivables 5,377 9,151 690 1,173
Liquid funds 6,070 9,042 778 1,159
12,969 19,781 1,663 2,536
Interest-bearing liabilities (23,150) (19,424) (2,968) (2,490)
Trade and other payables (8,743) (13,165) (1,121) (1,688)
Contract liabilities (7,892) (14,914) (1,012) (1,912)
Taxation (1,478) (1,443) (189) (185)
(41,263) (48,946) (5,290) (6,275)
Net current liabilities (28,294) (29,165) (3,627) (3,739)
Total assets less current liabilities 137,616 138,996 17,643 17,820
Net assets 63,788 54,191 8,178 6,948
CAPITAL AND RESERVES
Share capital
19 48,322 17,106 6,195 2,193
Reserves
21 15,466 37,085 1,983 4,755
Total equity 63,788 54,191 8,178 6,948
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, 10th March 2021
Cathay Pacific Airways Limited
118
NOTES TO THE
FINANCIAL STATEMENTS
Supplementary Information
32. IMPACTS OF COVID-19
The outbreak of COVID-19 in 2020 has severely impacted the Group’s operations and financial position. As a
consequence the Group undertook actions and responses. The significant uncertainty that remains as to a recovery
profile has influenced certain accounting judgements and estimates impacting the financial statements. Key aspects
are set out below:
(a) Liquidity and going concern
To reduce monthly cash burn, increase equity, reduce net debt and gearing, and aid in the Group’s recovery, the
following actions were undertaken:
(i) Initial cash preservation measures
These included significant capacity reductions, executive pay cuts, two voluntary special leave schemes
(with an uptake of 80% and 90% respectively), suspension of projects and non-essential expenditure,
concessions from suppliers and deferral of payments to them, and closure of outport crew bases. The Group
reached agreement with Airbus to defer delivery of A350-900’s and A350-1000’s from 2020 and 2021 to
2020-2023, and of A321neo’s from 2020-2023 to 2020-2025. Advanced negotiations are taking place with
Boeing for the deferral of 777-9 deliveries.
(ii) Recapitalisation
On 9th June 2020, Cathay Pacific announced a recapitalisation plan with aggregate proceeds, before
expenses, of approximately HK$39.0 billion. The plan consisted of three components:
– The Preference Shares and Warrants Issue, being the issuance by the Company to Aviation 2020 Limited
(wholly-owned by the Financial Secretary Incorporated as established under the Financial Secretary
Incorporation Ordinance (Cap. 1015)) of: (a) Preference Shares for an aggregate subscription price of
HK$19.5 billion; and (b) Warrants to subscribe for the Company’s ordinary shares with an aggregate
exercise price of approximately HK$1.95 billion (subject to adjustment);
– The Rights Issue, being a proposed rights issue of 2,503,355,631 Rights Shares on the
basis of seven Rights Shares for every eleven existing ordinary shares held on the Rights Issue Record
Date at a Rights Subscription Price of HK$4.68 to raise aggregate proceeds of approximately HK$11.7
billion; and
– The Bridge Loan, being a committed bridge loan facility to be extended by Aviation 2020 Limited to the
Company in an amount of HK$7.8 billion.
The Bridge Loan facility was extended to the Company on 9th June 2020 and remains undrawn. Rights
Shares were fully subscribed and issued on 10th August 2020. The Preference Shares and Warrants Issue
completed on 12th August 2020.
The impacts of the Recapitalisation on Earnings per ordinary share, Share capital and Dividends are
disclosed in notes 5, 19 and 20 to the financial statements, respectively.
(iii) Restructuring
On 21st October 2020, Cathay Pacific announced the restructuring of the Group.
– Cathay Dragon ceased operations with effect from 21st October 2020 and ongoing regulatory approval
was or will be sought for a significant number of Cathay Dragon’s routes to be operated by Cathay
Pacific and HK Express. This aims to achieve operational efficiency and brand synergy that will result in a
more focused, efficient and competitive business for the Group.
– Approximately 5,900 redundancies were effected across the Cathay Pacific Group (including Cathay
Dragon), representing approximately 17% of the Cathay Pacific Group’s established headcount.
– Hong Kong-based cabin and cockpit crew of Cathay Pacific were asked to transition onto new
conditions of service which were designed to match remuneration more closely to productivity and to
enhance market competitiveness.
119
Annual Report 2020
32. IMPACTS OF COVID-19 (continued)
As of 31st December 2020, the restructuring has been substantially implemented. The restructuring costs of
HK$2,383 million were primarily associated with the costs of redundancies. An additional write off of
deferred tax assets on tax losses of HK$1,590 million for Cathay Dragon was also recognised under note 4,
Taxation, to the financial statements.
Taking into account the net impact from the above, which resulted in unrestricted liquidity of HK$28.6 billion
at 31st December 2020, and from the proceeds of HK$6.7 billion guaranteed convertible bonds in February
2021, as disclosed under note 35 to the financial statements, Event after the reporting period, the directors
have assessed cash flow forecasts under various scenarios, including extended downside scenarios of
continued, heavily subdued passenger demand across the Group’s network through the forecast period, and
are of the opinion that the Group currently has sufficient unrestricted liquidity for at least the next 12 months
from the date of approval of the consolidated financial statements.
(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$4,056 million (pre-tax) was recognised for:
(i) The reduction in asset values (HK$2,764 million, note 7 to the financial statements) on 34 aircraft that are
unlikely to re-enter meaningful economic service again before their retirement or return to lessors, and
adjustment to the provision for fulfilling lease return conditions of leased aircraft included therein (HK$12
million net credit).
(ii) Impairments on goodwill (totalling HK$39 million, note 8 to the financial statements) and assets of CPCS and
VLS (totalling HK$1,184 million, note 7 to the financial statements) to reduce the carrying values of assets to
their estimated recoverable amounts; being the higher of fair value less costs of disposal and value in use.
(iii) Impairments on properties under leases totalling HK$25 million (see note 7 to the financial statements).
(iv) Impairment on investment in an associate of HK$56 million (see note 9 to the financial statements).
The above excludes the cross shareholding effect with Air China.
No other impairment was identified. Details on goodwill impairment assessments are disclosed in note 8 to the
financial statements.
(c) Government grants and other assistance
The Group recognised HK$2,689 million of government grants globally, mostly as a result of COVID-19.
HK$1,503 million in respect of income grants are presented as revenue from other services and recoveries.
HK$1,186 million in relation to cost reductions and waivers are presented net of the respective cost categories.
There were no unfulfilled conditions or contingencies attached to the grants at the year end.
(i) Hong Kong
Key sources of income grants were from the Hong Kong Employment Support Scheme, of which HK$886
million was received under the programme, and aircraft subsidies of HK$235 million for aircraft registered in
Hong Kong with a valid Certificate of Airworthiness as at 1st April 2020.
Cost reductions were predominantly from the Hong Kong Airport Authority, representing HK$1,080 million
discounts and waivers on airport facility costs.
(ii) Outport
A total of HK$368 million was received from outport governments, the majority of which relates to
employment support schemes and is presented as revenue from other services and recoveries.
Cathay Pacific Airways Limited
120
NOTES TO THE
FINANCIAL STATEMENTS
Supplementary Information
32. IMPACTS OF COVID-19 (continued)
(d) COVID-19 related rent concessions
During the year ended 31st December 2020, the Group received rent concessions in the form of a discount on
fixed payments as a direct consequence of the COVID-19 pandemic.
The Group has early adopted the Amendment to HKFRS 16 “COVID-19-Related Rent Concessions” and has
applied the practical expedient introduced by the Amendment to all eligible rent concessions received by the
Group during the year.
Rent concessions of HK$316 million received have been accounted for as negative variable lease payments
recognised in profit or loss. This amount includes concessions of HK$266 million received from government
vendors during the year and included as government grants and other assistance as disclosed above.
33. IMPACT OF FURTHER NEW ACCOUNTING STANDARDS
The HKICPA has issued a number of amendments and a new standard, HKFRS 17 “Insurance Contracts”, which are
not yet effective for the year ended 31st December 2020 and which have not been adopted in the financial
statements. These developments include the following which may be relevant to the Group.
• Amendments to HKFRS 3 “Reference to the Conceptual Framework”
• Amendments to HKAS 16 “Property, Plant and Equipment: Proceeds before Intended Use”
• Amendments to HKAS 37 “Onerous Contracts – Cost of Fulfilling a Contract”
• Annual Improvements to HKFRSs 2018-2020 Cycle
The Group has yet to assess the full impact of these developments. So far it is not expected that the adoption of them
will have a significant impact on the consolidated financial statements.
34. COMPARATIVE FIGURES
In note 22 to the financial statements, certain comparative figures have been adjusted to confirm to current year’s
presentation and to provide a clearer presentation on the impact of changes in working capital, financial derivatives
and cash flow hedge reserve over operating cash flows.
35. EVENT AFTER THE REPORTING PERIOD
On 27th January 2021, Cathay Pacific announced the issuance of HK$6.7 billion guaranteed convertible bonds at a
rate of 2.75%, with maturity in 2026. The issuance of bonds was completed on 5th February 2021 and proceeds were
fully received on that date.
The bonds will be recorded partly as a financial liability and partly as equity. The financial liability component will be
measured by discounting the future cash flows of the bonds at the rate of a similar debt instrument without the
conversion option. The difference between the present value of the liability component of the convertible bonds and
the total proceeds from the issuance of bonds will be recorded as equity.
121
Annual Report 2020
PRINCIPAL SUBSIDIARIES
AND ASSOCIATES
at 31st December 2020
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 Dragon Airlines
Limited
Hong Kong Operation of scheduled
airline services (ceased
operations with effect
from 21st October 2020)
100 500,000,000 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.
Cathay Pacific Airways Limited
122
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 17.74**
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 17.74%, another 17.04%, held through an economic interest with total holding at 34.78%.
123
Annual Report 2020
PRINCIPAL
ACCOUNTING POLICIES
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 7, 8, 29(e),
13 and 14 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.
• Amendments to HKFRS 3 “Definition of a Business”
• Amendments to HKFRS 9, HKAS 39 and HKFRS 7 “Interest Rate Benchmark Reform”
• Amendment to HKFRS 16 “COVID-19-Related Rent Concessions” (effective for annual periods beginning on or
after 1st June 2020)
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.
Amendments to HKFRS 3 have no impact on the results and financial position of the Group.
Amendments to HKFRS 9, HKAS 39 and HKFRS 7 “Interest Rate Benchmark Reform”
In accordance with the transition provisions, the Group has adopted phase 1 amendments to HKFRS 9, HKAS 39 and
HKFRS 7 retrospectively to hedging relationships that existed at the start of the reporting period and to the amount
accumulated in the cash flow hedge reserve at that date.
The amendments provide temporary relief from applying specific hedge accounting requirements to hedging
relationships directly affected by the Inter-Bank Offered Rate (IBOR) reform. The reliefs have the effect that IBOR
reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness continues to
be recorded in proft or loss. The reliefs will cease to apply when the uncertainty arising from the IBOR reform is no
longer present. No changes were required to be made to any of the amounts recognised in the current or prior period
as a result of these amendments.
Phase 2 amendments of the IBOR reform was issued in the current period with initial application from 1st January
2021. Phase 2 amendments focus on accounting reliefs once a new benchmark rate is in place. The reliefs have the
effect that changing basis for determining contractual cash flows for financial assets and liabilities that are as a
direct consequence of IBOR reform and are economically equivalent, will not result in an immediate gain or loss in the
profit or loss. The amendments also provide reliefs to allow hedge accounting to continue when the hedge
relationships are directly affected by IBOR reform. The Group has not yet moved any existing contracts to new
benchmark rates and therefore has not elected to early adopt the phase 2 amendments.
Amendment to HKFRS 16 “COVID-19-Related Rent Concessions”
The amendment provides a practical expedient that allows a lessee to by-pass the need to evaluate whether
certainqualifying rent concessions occurring as a direct consequence of the COVID-19 pandemic (“COVID-19-
related rent concessions”) are lease modifications and, instead, account for those rent concessions as if they were
not lease modifications.
Cathay Pacific Airways Limited
124
PRINCIPAL
ACCOUNTING POLICIES
1. BASIS OF ACCOUNTING (continued)
The Group has elected to early adopt the amendment and has applied the practical expedient to all qualifying COVID-
19-related rent concessions granted to the Group since 1st January 2020. 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. There is no impact on the opening balance of equity at 1st
January 2020.
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.
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
the net 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.
125
Annual Report 2020
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.
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 to an 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.
The anticipated useful life and estimated residual value of owned aircraft have been changed and applied
prospectively from 1st January 2020. This change in accounting estimates is applied prospectively from 1st January
2020 and has no significant impact on the results and financial position of the Group.
Cathay Pacific Airways Limited
126
PRINCIPAL
ACCOUNTING POLICIES
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
a lease 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.
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.
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.
127
Annual Report 2020
6. LEASED ASSETS (continued)
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
and which 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.
(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
which are 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.
Cathay Pacific Airways Limited
128
PRINCIPAL
ACCOUNTING POLICIES
8. FINANCIAL ASSETS (continued)
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.
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.
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Annual Report 2020
8. FINANCIAL ASSETS (continued)
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.
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
(ifavailable);
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.
Cathay Pacific Airways Limited
130
PRINCIPAL
ACCOUNTING POLICIES
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.
(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.
131
Annual Report 2020
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.
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.
Cathay Pacific Airways Limited
132
PRINCIPAL
ACCOUNTING POLICIES
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
the asset.
19. LOYALTY PROGRAMME
The Company operates a customer loyalty programme called Asia Miles (the “programme”). As members accumulate
miles by travelling on Cathay Pacific or Cathay Dragon 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 as a 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 selling price, 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.
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.
133
Annual Report 2020
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
be made. 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 is remote.
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.
Cathay Pacific Airways Limited
134
STATISTICS
2020
2019
#
(restated)
2018
#
(restated)
2017
#
(restated)
2016
#
(restated)
2015
#
(restated)
2014
#
(restated)
2013
#
(restated)
2012
#
(restated)
2011
#
(restated)
Consolidated profit or loss summary HK$M
Passenger services 11,950 73,985 73,119 66,408 66,926 73,047 75,734 71,826 70,133 67,778
Cargo services 27,890 23,810 28,316 23,903 20,063 23,122 25,400 23,663 24,555 25,980
Other services and recoveries 7,094 9,178 9,625 6,973 5,762 6,173 4,857 4,995 4,688 4,648
Revenue 46,934 106,973 111,060 97,284 92,751 102,342 105,991 100,484 99,376 98,406
Operating expenses (58,639) (103,646) (107,465) (99,563) (93,276) (95,678) (101,556) (96,724) (97,763) (93,125)
Operating (loss)/profit before non-recurring items (11,705) 3,327 3,595 (2,279) (525) 6,664 4,435 3,760 1,613 5,281
Profit on disposal of investments – – – 586 – – – – – –
Gain on deemed partial disposal of associates – 114 – 244 – – – – – –
Restructuring costs (2,383) – – – – – – – – –
Impairment and related charges (4,056) – – – – – – – – –
Net finance charges (2,895) (2,939) (2,114) (1,761) (1,301) (1,164) (1,158) (1,019) (884) (744)
Share of (losses)/profits of associates (1,282) 1,643 1,762 2,630 2,049 1,965 772 838 754 1,708
(Loss)/profit before taxation (22,321) 2,145 3,243 (580) 223 7,465 4,049 3,579 1,483 6,245
Taxation 674 (454) (466) (308) (497) (1,157) (599) (675) (409) (779)
(Loss)/profit for the year (21,647) 1,691 2,777 (888) (274) 6,308 3,450 2,904 1,074 5,466
Attributable to
 Ordinary shareholders of Cathay Pacific (21,876) 1,691
2,345 (1,259) (575) 6,000 3,150 2,620 862 5,297
 Preference shareholder of Cathay Pacific 228 – – – – – – – – –
 Non-controlling interests 1 – 432 371 301 308 300 284 212 169
(Loss)/profit for the year (21,647) 1,691 2,777 (888) (274) 6,308 3,450 2,904 1,074 5,466
Dividends paid to ordinary shareholders – (1,495) (590) – (1,259) (2,046) (1,022) (551) (1,338) (3,777)
Consolidated statement of financial position summary HK$M
Property, plant and equipment and intangible assets 146,986 155,265 128,298 122,403 117,390 111,158 108,789 104,737 93,703 82,099
Long-term receivables and investments 29,394 30,878 31,585 32,212 27,902 27,947 29,290 27,449 24,776 23,393
Borrowings (93,129) (97,260)* (73,877) (78,394) (70,169) (63,105) (65,096) (67,052) (59,546) (43,335)
Liquid funds less bank overdrafts 19,341 14,864 15,296 19,094 20,290 20,647 21,098 27,736 24,182 19,597
Net borrowings (73,788) (82,396)* (58,581) (59,300) (49,879) (42,458) (43,998) (39,316) (35,364) (23,738)
Net current liabilities (excluding liquid funds, bank overdrafts and current
 portion of borrowings) (14,249) (23,690) (20,329) (18,649) (21,727) (23,961) (22,478) (19,110) (15,711) (16,685)
Other long-term payables (4,210) (4,806) (4,649) (3,502) (7,517) (15,838) (10,487) (1,318) (3,205) (3,650)
Deferred taxation (10,872) (12,475) (12,385) (11,892) (10,643) (8,781) (9,263) (9,429) (8,061) (6,651)
Net assets 73,261 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138 54,768
Financed by:
Funds attributable to the ordinary shareholders of Cathay Pacific** 53,529 62,773
63,936 61,101 55,365 47,927 51,722 62,888 56,021 54,633
Funds attributable to the preference shareholder of Cathay Pacific 19,728 – – – – – – – – –
Funds attributable to the shareholders of Cathay Pacific 73,257 62,773 63,936 61,101 55,365 47,927 51,722 62,888 56,021 54,633
Non-controlling interests 4 3 3 171 161 140 131 125 117 135
Total equity 73,261 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138 54,768
Per ordinary share
Ordinary shareholders’ funds
HK$ 8.32 15.96 16.25 15.53 14.07 12.18 13.15 15.99 14.24 13.89
EBITDA HK$ (0.97) 4.91 3.85 2.68 2.56 4.45 3.44 3.04 2.31 3.34
(Loss)/earnings – basic and diluted HK cents (424.3) 39.1 54.2 (29.1) (13.3) 138.7 72.8 60.6 19.9 122.5
Dividend HK$ – 0.18 0.30 0.05 0.05 0.53 0.36 0.22 0.08 0.52
Ratios
(Loss)/profit margin
% (46.1) 1.6 2.1 (1.3) (0.6) 5.9 3.0 2.6 0.9 5.4
Return on capital employed % (12.8) 3.5 4.0 0.8 1.0 8.0 4.7 4.0 2.3 8.4
Dividend cover Times – 2.4 2.0 (6.4) (2.9) 2.9 2.2 3.0 2.7 2.6
Cash interest cover Times (5.3) 6.5 10.4 4.9 9.1 25.5 20.7 23.8 20.9 41.7
Gross debt/equity ratio Times 1.27 1.55 1.16 1.28 1.27 1.32 1.26 1.07 1.06 0.79
Net debt/equity ratio Times 1.01 1.31* 0.92 0.97 0.90 0.89 0.85 0.63 0.63 0.43
Adjusted net debt/equity ratio (excludes leases without asset
 transfer components)* Times 0.75 0.99 0.92 0.97 0.90 0.89 0.85 0.63 0.63 0.43
*
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.
#
Includes restated figures on basic and diluted (loss)/earnings per ordinary share. Further details are disclosed in note 5 to the financial statements.
135
Annual Report 2020
2020
2019
#
(restated)
2018
#
(restated)
2017
#
(restated)
2016
#
(restated)
2015
#
(restated)
2014
#
(restated)
2013
#
(restated)
2012
#
(restated)
2011
#
(restated)
Consolidated profit or loss summary HK$M
Passenger services 11,950 73,985 73,119 66,408 66,926 73,047 75,734 71,826 70,133 67,778
Cargo services 27,890 23,810 28,316 23,903 20,063 23,122 25,400 23,663 24,555 25,980
Other services and recoveries 7,094 9,178 9,625 6,973 5,762 6,173 4,857 4,995 4,688 4,648
Revenue 46,934 106,973 111,060 97,284 92,751 102,342 105,991 100,484 99,376 98,406
Operating expenses (58,639) (103,646) (107,465) (99,563) (93,276) (95,678) (101,556) (96,724) (97,763) (93,125)
Operating (loss)/profit before non-recurring items (11,705) 3,327 3,595 (2,279) (525) 6,664 4,435 3,760 1,613 5,281
Profit on disposal of investments – – – 586 – – – – – –
Gain on deemed partial disposal of associates – 114 – 244 – – – – – –
Restructuring costs (2,383) – – – – – – – – –
Impairment and related charges (4,056) – – – – – – – – –
Net finance charges (2,895) (2,939) (2,114) (1,761) (1,301) (1,164) (1,158) (1,019) (884) (744)
Share of (losses)/profits of associates (1,282) 1,643 1,762 2,630 2,049 1,965 772 838 754 1,708
(Loss)/profit before taxation (22,321) 2,145 3,243 (580) 223 7,465 4,049 3,579 1,483 6,245
Taxation 674 (454) (466) (308) (497) (1,157) (599) (675) (409) (779)
(Loss)/profit for the year (21,647) 1,691 2,777 (888) (274) 6,308 3,450 2,904 1,074 5,466
Attributable to
 Ordinary shareholders of Cathay Pacific (21,876) 1,691
2,345 (1,259) (575) 6,000 3,150 2,620 862 5,297
 Preference shareholder of Cathay Pacific 228 – – – – – – – – –
 Non-controlling interests 1 – 432 371 301 308 300 284 212 169
(Loss)/profit for the year (21,647) 1,691 2,777 (888) (274) 6,308 3,450 2,904 1,074 5,466
Dividends paid to ordinary shareholders – (1,495) (590) – (1,259) (2,046) (1,022) (551) (1,338) (3,777)
Consolidated statement of financial position summary HK$M
Property, plant and equipment and intangible assets 146,986 155,265 128,298 122,403 117,390 111,158 108,789 104,737 93,703 82,099
Long-term receivables and investments 29,394 30,878 31,585 32,212 27,902 27,947 29,290 27,449 24,776 23,393
Borrowings (93,129) (97,260)* (73,877) (78,394) (70,169) (63,105) (65,096) (67,052) (59,546) (43,335)
Liquid funds less bank overdrafts 19,341 14,864 15,296 19,094 20,290 20,647 21,098 27,736 24,182 19,597
Net borrowings (73,788) (82,396)* (58,581) (59,300) (49,879) (42,458) (43,998) (39,316) (35,364) (23,738)
Net current liabilities (excluding liquid funds, bank overdrafts and current
 portion of borrowings) (14,249) (23,690) (20,329) (18,649) (21,727) (23,961) (22,478) (19,110) (15,711) (16,685)
Other long-term payables (4,210) (4,806) (4,649) (3,502) (7,517) (15,838) (10,487) (1,318) (3,205) (3,650)
Deferred taxation (10,872) (12,475) (12,385) (11,892) (10,643) (8,781) (9,263) (9,429) (8,061) (6,651)
Net assets 73,261 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138 54,768
Financed by:
Funds attributable to the ordinary shareholders of Cathay Pacific** 53,529 62,773
63,936 61,101 55,365 47,927 51,722 62,888 56,021 54,633
Funds attributable to the preference shareholder of Cathay Pacific 19,728 – – – – – – – – –
Funds attributable to the shareholders of Cathay Pacific 73,257 62,773 63,936 61,101 55,365 47,927 51,722 62,888 56,021 54,633
Non-controlling interests 4 3 3 171 161 140 131 125 117 135
Total equity 73,261 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138 54,768
Per ordinary share
Ordinary shareholders’ funds
HK$ 8.32 15.96 16.25 15.53 14.07 12.18 13.15 15.99 14.24 13.89
EBITDA HK$ (0.97) 4.91 3.85 2.68 2.56 4.45 3.44 3.04 2.31 3.34
(Loss)/earnings – basic and diluted HK cents (424.3) 39.1 54.2 (29.1) (13.3) 138.7 72.8 60.6 19.9 122.5
Dividend HK$ – 0.18 0.30 0.05 0.05 0.53 0.36 0.22 0.08 0.52
Ratios
(Loss)/profit margin
% (46.1) 1.6 2.1 (1.3) (0.6) 5.9 3.0 2.6 0.9 5.4
Return on capital employed % (12.8) 3.5 4.0 0.8 1.0 8.0 4.7 4.0 2.3 8.4
Dividend cover Times – 2.4 2.0 (6.4) (2.9) 2.9 2.2 3.0 2.7 2.6
Cash interest cover Times (5.3) 6.5 10.4 4.9 9.1 25.5 20.7 23.8 20.9 41.7
Gross debt/equity ratio Times 1.27 1.55 1.16 1.28 1.27 1.32 1.26 1.07 1.06 0.79
Net debt/equity ratio Times 1.01 1.31* 0.92 0.97 0.90 0.89 0.85 0.63 0.63 0.43
Adjusted net debt/equity ratio (excludes leases without asset
 transfer components)* Times 0.75 0.99 0.92 0.97 0.90 0.89 0.85 0.63 0.63 0.43
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.
Cathay Pacific Airways Limited
136
STATISTICS
2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Cathay Pacific and Cathay Dragon operating summary
Available tonne kilometres
Million
14,620 33,077 32,387 31,439 30,462 30,048 28,440 26,259 26,250 26,383
Revenue tonne kilometres
Million
10,220 24,090 24,543 23,679 22,418 22,220 20,722 18,696 18,819 19,309
Available seat kilometres
Million
34,609 163,244 155,362 150,138 146,086 142,680 134,711 127,215 129,595 126,340
Revenue passengers carried
‘000
4,631 35,233 35,468 34,820 34,323 34,065 31,570 29,920 28,961 27,581
Revenue passenger kilometres
Million
20,079 134,397 130,630 126,663 123,478 122,330 112,257 104,571 103,837 101,536
Revenue load factor
%
67.7 77.4 79.6 79.7 79.5 79.9 78.1 76.6 75.7 76.5
Passenger load factor
%
58.0 82.3 84.1 84.4 84.5 85.7 83.3 82.2 80.1 80.4
Cargo carried
‘000 tonnes
1,332 2,022 2,152 2,056 1,854 1,798 1,723 1,539 1,563 1,649
Cargo revenue tonne kilometres
Million
8,309 11,311 12,122 11,633 10,675 10,586 10,044 8,750 8,942 9,648
Cargo load factor
%
73.3 64.4 68.8 67.8 64.4 64.2 64.3 61.8 64.2 67.2
Excess baggage carried
Tonnes
563 2,179 2,329 2,449 2,471 2,596 2,699 2,599 2,711 3,103
Kilometres flown
Million
226 618 611 596 579 576 550 512 502 494
Block hours
‘000 hours
304 880 877 857 826 823 789 735 715 695
Aircraft departures
‘000
55 175 177 175 172 173 167 160 154 146
Length of scheduled routes network
‘000 kilometres
437 670 715 653 636 620 586 576 602 568
Number of destinations at year end
Destinations
255 255 232 200 182 179 210 190 179 167
Staff number at year end
Number
19,452 27,342 26,623 26,029 26,674 26,833 25,755 24,572 23,844 23,015
ATK per staff
‘000
752 1,256 1,217 1,208 1,142 1,120 1,104 1,069 1,101 1,146
On-time performance
Departure (within 15 minutes)
%
86.7 76.3 72.7 71.2 72.1 64.7 70.1 75.5 77.4 82.0
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 8.9
 A321-200 1.1 9.1 10.1 9.4 9.4 9.8 9.9 8.8 8.9 8.4
 A330-300 2.3 9.8 10.4 10.7 11.4 12.1 12.4 12.0 12.3 12.1
 A340-300 – – – 3.8 8.3 8.5 11.6 13.3 12.7 13.0
 A350-900 3.9 14.6 15.0 14.1 12.7 – – – – –
 A350-1000 10.2 14.6 12.6 – – – – – – –
 747-400 – – – – 5.2 5.7 8.2 10.9 12.7 13.7
 747-400F/BCF/ERF/8F 13.1 12.4 12.8 12.5 11.7 11.9 11.8 10.9 11.4 13.8
 777-200/300 1.3 8.0 8.6 8.8 9.4 8.6 8.8 8.3 8.4 8.2
 777-300ER 3.7 14.9 15.6 16.0 16.0 15.9 16.1 15.8 15.7 15.7
Fleet average 4.3 11.9 12.3 12.3 12.2 12.2 12.2 11.8 12.0 12.3
Fleet profile
Cathay Pacific (and Cathay Dragon as at 31st December 2020)
 A320-200 11 –
– – – – – – – –
 A321-200 7 – – – – – – – – –
 A321-200neo 2 – – – – – – – – –
 A330-300 51 29 33 37 41 42 40 35 37 33
 A340-300 – – – – 4 7 11 11 11 13
 A350-900 27 24 22 22 10 – – – – –
 A350-1000 13 12 8 – – – – – – –
 747-400 – – – – – 3 7 13 18 21
 747-400F – – – – – 4 5 6 6 6
 747-400BCF – 1 1 – 1 1 1 1 6 8
 747-400ERF 6 6 6 6 6 6 6 6 6 6
 747-8F 14 14 14 14 14 13 13 13 8 4
 777-200 – 1 4 5 5 5 5 5 5 5
 777-300 17 17 14 12 12 12 12 12 12 12
 777-300ER 51 51 52 53 53 53 47 38 29 24
Total 199 155 154 149 146 146 147 140 138 132
Aircraft operated by Cathay Dragon (note 1):
 A320-200 – 15
15 15 15 15 15 15 15 11
 A321-200 – 8 8 8 8 8 8 6 6 6
 A330-300 – 25 25 24 20 19 18 20 17 15
Total – 48 48 47 43 42 41 41 38 32
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.
137
Annual Report 2020
2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Cathay Pacific and Cathay Dragon operating summary
Available tonne kilometres
Million
14,620 33,077 32,387 31,439 30,462 30,048 28,440 26,259 26,250 26,383
Revenue tonne kilometres
Million
10,220 24,090 24,543 23,679 22,418 22,220 20,722 18,696 18,819 19,309
Available seat kilometres
Million
34,609 163,244 155,362 150,138 146,086 142,680 134,711 127,215 129,595 126,340
Revenue passengers carried
‘000
4,631 35,233 35,468 34,820 34,323 34,065 31,570 29,920 28,961 27,581
Revenue passenger kilometres
Million
20,079 134,397 130,630 126,663 123,478 122,330 112,257 104,571 103,837 101,536
Revenue load factor
%
67.7 77.4 79.6 79.7 79.5 79.9 78.1 76.6 75.7 76.5
Passenger load factor
%
58.0 82.3 84.1 84.4 84.5 85.7 83.3 82.2 80.1 80.4
Cargo carried
‘000 tonnes
1,332 2,022 2,152 2,056 1,854 1,798 1,723 1,539 1,563 1,649
Cargo revenue tonne kilometres
Million
8,309 11,311 12,122 11,633 10,675 10,586 10,044 8,750 8,942 9,648
Cargo load factor
%
73.3 64.4 68.8 67.8 64.4 64.2 64.3 61.8 64.2 67.2
Excess baggage carried
Tonnes
563 2,179 2,329 2,449 2,471 2,596 2,699 2,599 2,711 3,103
Kilometres flown
Million
226 618 611 596 579 576 550 512 502 494
Block hours
‘000 hours
304 880 877 857 826 823 789 735 715 695
Aircraft departures
‘000
55 175 177 175 172 173 167 160 154 146
Length of scheduled routes network
‘000 kilometres
437 670 715 653 636 620 586 576 602 568
Number of destinations at year end
Destinations
255 255 232 200 182 179 210 190 179 167
Staff number at year end
Number
19,452 27,342 26,623 26,029 26,674 26,833 25,755 24,572 23,844 23,015
ATK per staff
‘000
752 1,256 1,217 1,208 1,142 1,120 1,104 1,069 1,101 1,146
On-time performance
Departure (within 15 minutes)
%
86.7 76.3 72.7 71.2 72.1 64.7 70.1 75.5 77.4 82.0
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 8.9
 A321-200 1.1 9.1 10.1 9.4 9.4 9.8 9.9 8.8 8.9 8.4
 A330-300 2.3 9.8 10.4 10.7 11.4 12.1 12.4 12.0 12.3 12.1
 A340-300 – – – 3.8 8.3 8.5 11.6 13.3 12.7 13.0
 A350-900 3.9 14.6 15.0 14.1 12.7 – – – – –
 A350-1000 10.2 14.6 12.6 – – – – – – –
 747-400 – – – – 5.2 5.7 8.2 10.9 12.7 13.7
 747-400F/BCF/ERF/8F 13.1 12.4 12.8 12.5 11.7 11.9 11.8 10.9 11.4 13.8
 777-200/300 1.3 8.0 8.6 8.8 9.4 8.6 8.8 8.3 8.4 8.2
 777-300ER 3.7 14.9 15.6 16.0 16.0 15.9 16.1 15.8 15.7 15.7
Fleet average 4.3 11.9 12.3 12.3 12.2 12.2 12.2 11.8 12.0 12.3
Fleet profile
Cathay Pacific (and Cathay Dragon as at 31st December 2020)
 A320-200 11 –
– – – – – – – –
 A321-200 7 – – – – – – – – –
 A321-200neo 2 – – – – – – – – –
 A330-300 51 29 33 37 41 42 40 35 37 33
 A340-300 – – – – 4 7 11 11 11 13
 A350-900 27 24 22 22 10 – – – – –
 A350-1000 13 12 8 – – – – – – –
 747-400 – – – – – 3 7 13 18 21
 747-400F – – – – – 4 5 6 6 6
 747-400BCF – 1 1 – 1 1 1 1 6 8
 747-400ERF 6 6 6 6 6 6 6 6 6 6
 747-8F 14 14 14 14 14 13 13 13 8 4
 777-200 – 1 4 5 5 5 5 5 5 5
 777-300 17 17 14 12 12 12 12 12 12 12
 777-300ER 51 51 52 53 53 53 47 38 29 24
Total 199 155 154 149 146 146 147 140 138 132
Aircraft operated by Cathay Dragon (note 1):
 A320-200 – 15
15 15 15 15 15 15 15 11
 A321-200 – 8 8 8 8 8 8 6 6 6
 A330-300 – 25 25 24 20 19 18 20 17 15
Total – 48 48 47 43 42 41 41 38 32
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.
Cathay Pacific Airways Limited
138
STATISTICS
20202011 2013 2018 201920172016201520142012
600
1,600
1,400
1,200
1,800
2,000
2,200
800
1,000
20202011 2013 2018 201920172016201520142012
20202011 2013 2018 201920172016201520142012
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
20202011 2013 2018 201920172016201520142012
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 Pacic share price
2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Productivity
Cost per ATK
 (with fuel)
HK$ 4.14 3.06 3.27 3.12 3.02 3.14 3.50 3.58 3.65 3.46
ATK per HK$’000
 staff cost
Unit 1,074 1,879 1,801 1,775 1,730 1,764 1,750 1,720 1,785 1,936
Aircraft utilisation
Hours per day 4.3 11.9 12.3 12.3 12.2 12.2 12.2 11.8 12.0 12.3
Share prices
HK$
High 10.0 13.9 14.7 13.4 14.0 20.6 17.7 16.8 15.9 23.1
Low 5.1 9.5 9.9 10.4 10.1 12.7 13.7 12.2 11.9 11.9
Year-end 7.2 11.5 11.1 12.1 10.2 13.4 16.9 16.4 14.2 13.3
Price ratios (Note)
Times
Price/earnings (1.7) 26.8 18.6 (37.8) (69.8) 8.8 21.1 24.6 64.9 9.9
Market capitalisation/
 funds attributable
 to the ordinary
 shareholders
 of Cathay Pacific 0.9 0.7 0.7 0.8 0.7 1.1 1.3 1.0 1.0 1.0
Price/cash flows (3.3) 2.5 2.5 7.4 5.2 3.1 5.4 4.6 6.1 3.4
Note: Based on year end share price, where applicable.
139
Annual Report 2020
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.
GLOSSARY
RATIOS
Earnings/(loss)
per ordinary share
=
Profit/(loss) attributable to the
ordinary shareholders of
CathayPacific
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
Cathay Pacific
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 Cathay Pacific
and CathayDragon
ATK of Cathay Pacific
and CathayDragon
Cathay Pacific Airways Limited
140
CORPORATE AND SHAREHOLDER
INFORMATION
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.
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: ir@cathaypacific.com
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 2020
Website: www.mybnymdr.com Annual report available to shareholders 8th April 2021
Annual General Meeting 12th May 2021
STOCK CODES
Hong Kong Stock Exchange 00293 Six months ending 30th June 2021
ADR CPCAY Interim results announcement August 2021
Interim dividend payable October 2021
© Cathay Pacific Airways Limited
國泰航空有限公司
DESIGN: FORMAT LIMITED
www.format.com.hk
Printed in Hong Kong
www.cathaypacic.com