Cathay Pacific Airways Limited Annual Report 2019 A N N U A L R E P O R T XXXXXXXXXX Cathay Pacific Airways Limited Stock Code: 293 Management Discussion and Analysis 4 Financial and Operational...

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Cathay Pacific Airways Limited Annual Report 2019
A N N U A L R E P O R T XXXXXXXXXX
Cathay Pacific Airways Limited
Stock Code: 293
Management Discussion and Analysis
4 Financial and Operational Highlights
6 Chairman’s Statement
9 Review of Operations
26 Financial Review
33 Sustainable Development Review
Corporate Governance
36 Directors and Officers
38 Directors’ Report
45 Corporate Governance Report
Financial Statements
63 Independent Auditor’s Report
69 Consolidated Statement of Profit or
Loss and Other Comprehensive Income
70 Consolidated Statement of
Financial Position
71 Consolidated Statement of
Cash Flows
72 Consolidated Statement of
Changes in Equity
73 Notes to the Financial Statements
121 Principal Subsidiaries and
Associates
123 Principal Accounting Policies
138 Statistics
143 Glossary
144 Corporate and Shareholder Information
144 Disclaimer
C O N T E N T S
A Chinese translation of this Annual Report is available
upon request from the Company’s Registrars.
本年報的中文譯本於本公司的股份登記處備索。
Cathay Pacific Airways Limited (“Cathay Pacific”),
with its subsidiaries Hong Kong Dragon Airlines Limited
(“Cathay Dragon”), Hong Kong Express Airways Limited
(“HK Express”) and AHK Air Hong Kong Limited
(“Air Hong Kong”), operated 236 aircraft at the end of 2019,
directly connecting Hong Kong to 119 destinations in
35 countries worldwide (255 and 54 respectively with
codeshare agreements), including 26 destinations in
Mainland China. The Cathay Pacific Group is 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 operated 155 passenger and cargo
aircraft at 31st December 2019. The Group’s other
investments include its catering, ground-handling and
cargo terminal companies, and corporate headquarters at
Hong Kong International Airport.
Hong Kong
Cathay Dragon, a regional full-service airline registered and
based in Hong Kong, is a wholly owned subsidiary of Cathay
Pacific operating 48 aircraft at 31st December 2019.
HK Express, a low-cost airline based in Hong Kong offering
scheduled services within Asia, is a wholly owned subsidiary
of Cathay Pacific operating 24 aircraft at 31st December
2019. Air Hong Kong, an express all-cargo carrier offering
scheduled services in Asia, is a wholly owned subsidiary of
Cathay Pacific operating nine aircraft at 31st December
2019. 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
Mainland China. The Group continues to invest heavily in its
home city. At 31st December 2019 it had 70 new aircraft due
for delivery up to 2024.
At 31st December 2019, Cathay Pacific and its subsidiaries
employed more than 34,200 people worldwide, of whom
around 28,200 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. Cathay Dragon is an affiliate member
of oneworld.
Cathay Pacific
Cathay Pacific Freighter
Cathay Dragon
HK Express
Air Hong Kong
Cathay Pacific Airways Limited4
G R O U P F I N A N C I A L S TAT I S T I C S
XXXXXXXXXXChange
Results
Revenue HK$ million 106,973 111, XXXXXXXXXX%
Profit attributable to the shareholders of Cathay Pacific HK$ million 1,691 2, XXXXXXXXXX%
Earnings per share HK cents XXXXXXXXXX%
Dividend per share HK$ XXXXXXXXXX%
Profit margin % XXXXXXXXXX%pt
Financial position*
Funds attributable to the shareholders of Cathay Pacific* HK$ million 62,773 63, XXXXXXXXXX%
Net borrowings* HK$ million 82,396 58, XXXXXXXXXX%
Shareholders’ funds per share* HK$ XXXXXXXXXX%
Net debt/equity ratio* Times XXXXXXXXXXtimes
O P E R AT I N G S TAT I S T I C S – C AT H A Y PA C I F I C A N D C AT H A Y D R A G O N
XXXXXXXXXXChange
Available tonne kilometres (“ATK”) Million 33,077 32, XXXXXXXXXX%
Available seat kilometres (“ASK”) Million 163,244 155, XXXXXXXXXX%
Available cargo tonne kilometres (“AFTK”)** Million 17,558 17, XXXXXXXXXX%
Revenue tonne kilometres (“RTK”) Million 24,090 24, XXXXXXXXXX%
Passenger revenue per ASK HK cents XXXXXXXXXX%
Revenue passenger kilometres (“RPK”) Million 134,397 130, XXXXXXXXXX%
Revenue passengers carried ‘000 35,233 35, XXXXXXXXXX%
Passenger load factor % XXXXXXXXXX%pt
Passenger yield HK cents XXXXXXXXXX%
Cargo revenue per AFTK** HK$ XXXXXXXXXX%
Cargo revenue tonne kilometres (“RFTK”)** Million 11,311 12, XXXXXXXXXX%
Cargo carried** ‘000 tonnes 2,022 2, XXXXXXXXXX%
Cargo load factor** % XXXXXXXXXX%pt
Cargo yield** HK$ XXXXXXXXXX%
Cost per ATK (with fuel) HK$ XXXXXXXXXX%
Fuel consumption per million RTK Barrels 1,867 1, XXXXXXXXXX%
Fuel consumption per million ATK Barrels 1,360 1, XXXXXXXXXX%
Cost per ATK (without fuel) HK$ XXXXXXXXXX%
Underlying***cost per ATK (without fuel) HK$ XXXXXXXXXX%
ATK per HK$’000 staff cost Unit 1,879 1, XXXXXXXXXX%
ATK per staff ‘000 1,256 1, XXXXXXXXXX%
Aircraft utilisation Hours per day XXXXXXXXXX%
On-time performance % XXXXXXXXXX%pt
Average age of fleet Years XXXXXXXXXXyears
GHG emissions Million tonnes of CO2e XXXXXXXXXX –
GHG emissions per ATK Grammes of CO2e XXXXXXXXXX%
Lost time injury rate Number of injuries per 100
full-time equivalent employees
XXXXXXXXXX%
* Shareholders’ funds, net borrowings and net debt/equity ratio at 31st December 2019 are arrived at after taking account of the effect of HKFRS 16.
Disregarding the effect of adopting HKFRS 16, the net debt/equity ratio increased from 0.92 times to 0.96 times. Further details can be found in
accounting policy 1.
** Including mail. Mail is no longer referred to separately but mail services continue to be accounted for under cargo services.
*** Underlying costs exclude exceptional items, non-recurring item for 2019 and 2018, and are adjusted for the effect of foreign currency movements, as
well as the adoption of HKFRS 16 for the year ended 31st December 2019.
F I N A N C I A L A N D
O P E R A T I O N A L   H I G H L I G H T S
5Annual Report 2019
F L E E T
H K E X P R E S S
C AT H A Y PA C I F I C / C AT H A Y D R A G O N
2020 Target –
3 Airbus A XXXXXXXXXX
4 Airbus A350-900
6 Airbus A321-200neo
2019 Took delivery –
4 Airbus A XXXXXXXXXX
2 Airbus A350-900
3 Boeing XXXXXXXXXX
O P E R AT I N G H I G H L I G H T S
C U S T O M E R P R O P O S I T I O NN E T W O R K
XXXXXXXXXX2019
Cathay Pacific Cathay Dragon
Average 2019:
76.3%
Average 2018:
72.7%
O N -T I M E P E R F O R M A N C E
2019
Seattle Komatsu
Niigata
Average 2019*:
90.4%
2020 Target –
4 Airbus A320-200neo
4x more
Inflight
Entertainment
Hong Kong
5Annual Report 2019
* Period from 20th July 2019 to 31st December 2019
New food
and beverage
offerings
New
products for
customers
7 destinations
unique to the Group
Cathay Pacific Cathay Dragon
Cathay Pacific Airways Limited6
O V E R V I E W
2019 was a turbulent year for the Cathay Pacific Group. With
our three-year transformation programme starting to bear
fruit we delivered a positive performance in the first half of
2019 notwithstanding a difficult environment brought about
by geopolitical and trade tensions. However, with social
unrest in Hong Kong intensifying over the second half of
the year and mounting US-China trade tensions, we
experienced a sharp drop in both inbound and outbound
passenger traffic. We were faced with an incredibly
challenging environment to operate as the Hong Kong
economy slipped into recession. As a result, our second-
half results – traditionally stronger compared to first-half
results – fell well below what we would have hoped for.
The Cathay Pacific Group reported an attributable profit of
HK$1,691 million for 2019. This compares with a HK$2,345
million profit for 2018. The earnings per share was HK43.0
cents in 2019 compared to an earnings per share of HK59.6
cents in 2018. The Cathay Pacific Group reported an
attributable profit of HK$344 million in the second half of
2019, compared to an attributable profit of HK$1,347 million
in the first half of 2019 and an attributable profit of
HK$2,608 million in the second half of 2018. Cathay Pacific
and Cathay Dragon reported an attributable loss of HK$434
million in the second half of 2019, compared to an
attributable profit of HK$675 million in the first half of 2019
and an attributable profit of HK$1,253 million in the second
half of 2018.
Overall, passenger and cargo yields were under intense
pressure in 2019 and both were below those seen in 2018.
Events in Hong Kong in the second half of the year
significantly reduced load factors, forward bookings and
the number of passengers we carried. Inbound traffic was
hit hard, particularly on short-haul and Mainland China
routes, while outbound traffic also decreased. Demand for
premium travel was weak and we became increasingly
reliant on lower-yielding transit traffic. We carried 0.7%
fewer passengers in 2019 than in 2018.
C H A I R M A N ’ S S T A T E M E N T
Cargo demand was depressed all year as a result of US-
China trade tensions and was noticeably below that of 2018.
However, it did pick up later in 2019 during the traditional
high season, reflecting new consumer product, specialist
airfreight shipments and restocking ahead of holiday
periods. Exports from Mainland China and Hong Kong to
trans-Pacific and European markets were more
encouraging later in the year. Nevertheless, the cargo
business performed significantly below expectations
in 2019.
To boost the competitiveness of Hong Kong International
Airport as a global cargo hub, the Group together with the
Airport Authority of Hong Kong announced in December it
would introduce a new Terminal Charge concession
effective 1st April 2020. The reduction ranges from 18% to
more than 20% compared with the current charge levels
and is applicable to shipments from Hong Kong on all four of
the Group’s airlines.
We benefited from lower fuel prices for most of the year, but
were adversely affected by a strong US dollar. There was a
2.7% decrease in non-fuel costs per available tonne
kilometre (ATK), reflecting our focus on productivity and
efficiency as part of our successful transformation
programme.
In July 2019, we completed the acquisition of low-cost
carrier HK Express, now a wholly owned subsidiary of
Cathay Pacific. In November, we announced that the airline
would begin taking delivery of half of our new narrow-body
Airbus A321-200neo fleet (16 of 32 new aircraft) from 2022
as part of the Group’s efforts to optimise the deployment of
the passenger fleets of its airlines.
In May 2019 we built on our commitment to our customers
with the launch of our new brand direction, ‘Move Beyond’,
expressing our drive to always exceed their expectations.
Despite the challenges of the second half of the year, this
period saw some of our most extensive enhancements to
the customer experience proposition in recent years. These
included a major expansion to our inflight entertainment
7Annual Report 2019
content library; new bedding, amenities and culinary
options in our First and Business Class cabins; an elevated
Economy Class dining experience on our long-haul services
departing Hong Kong; and the reopening of our newly
renovated Shanghai Pudong lounge. All are designed to
give our customers more reasons to fly with us.
B U S I N E S S P E R F O R M A N C E O F C AT H A Y
PA C I F I C A N D C AT H A Y D R A G O N
Passenger revenue in 2019 was HK$72,168 million, a
decrease of 1.3% compared to 2018. RPK traffic increased
by 2.9%, while ASK capacity increased by 5.1%, albeit this
was less than originally expected. Consequently the load
factor decreased by 1.8 percentage points, to 82.3%. Yield
decreased by 3.9% to HK53.6 cents, reflecting a strong US
dollar, intense competition and reduced travel in the second
half of 2019 as a result of the social unrest in Hong Kong.
Inbound and outbound traffic, particularly on short-haul
Mainland China routes, substantially reduced from August
to December. We became increasingly reliant on low-
yielding transit traffic, which was relatively less affected.
Premium class travel was also weak during this period.
To mitigate these challenges, in October we introduced a
number of short-term tactical measures, including
frequency cuts on more than a dozen routes during the
winter season and suspending our service to Medan
indefinitely. We examined expenditure to focus on increased
productivity and cost saving, along with implementing a
hiring freeze, prioritising projects and deferring or
cancelling non-critical expenditure.
Cargo revenue in 2019 was HK$21,154 million, a decrease of
14.2% compared to 2018. RFTK traffic decreased by 6.7%,
whilst AFTK capacity decreased by 0.3%. Consequently the
load factor decreased by 4.4 percentage points, to 64.4%.
Yield decreased by 7.9% to HK$1.87, reflecting a strong
US dollar and weakened cargo demand resulting from
intensified US-China trade tensions.
Total fuel costs (before the effect of fuel hedging)
decreased by HK$3,110 million (or 9.8%) compared with
2018. Prices decreased but we flew more. After taking
hedging losses into account, fuel costs decreased by
HK$4,454 million or 13.4% compared to 2018. The net cost
of fuel is the Airlines’ most significant cost, accounting for
28.4% of operating costs in 2019 (compared to 31.4%
in 2018).
Non-fuel costs per available tonne kilometre decreased
slightly, reflecting our focus on productivity and efficiency.
We continued to take delivery of new and more fuel-
efficient aircraft, including six Airbus A350 aircraft. We now
have 24 Airbus A XXXXXXXXXXand 12 Airbus A XXXXXXXXXXaircraft
in our fleet. We also took delivery of three used Boeing
XXXXXXXXXXaircraft during the year. At the same time we retired
three Boeing XXXXXXXXXXaircraft, and returned four Airbus
A XXXXXXXXXXand one Boeing 777-300ER leased aircraft to
their lessors.
B U S I N E S S P E R F O R M A N C E O F O T H E R
S U B S I D I A R I E S A N D A S S O C I AT E S
HK Express reported a post-acquisition loss for 2019,
against expectations of a small profit. The airline suffered
from reduced demand to and from Asia as a result of the
Hong Kong social unrest.
Air Hong Kong’s results attributable to the shareholders of
Cathay Pacific improved year on year. In 2019 we owned
100% of the airline compared with 60% in 2018. On a 100%
like-for-like basis there was a decrease in profit. This was in
part due to gains on disposal of certain aircraft in 2018, and
in part due to a new block space agreement and an
underlying decrease in capacity and cargo uplift in 2019.
Our airline services subsidiaries generally performed worse
than 2018 due to reduced activity and rising cost pressures.
Whilst our share of Air China’s results (accounted for three
months in arrears) marginally improved, Air China Cargo
suffered a significant decline in results as trade tensions
escalated, negatively impacting air traffic and yield, and
reducing throughput tonnage for its cargo terminals.
Cathay Pacific Airways Limited8
C H A I R M A N ’ S S T A T E M E N T
P R O S P E C T S
Following the impact of social unrest in Hong Kong in the
latter half of 2019, the first half of 2020 was expected to be
extremely challenging financially, with an already reduced
winter season capacity. This has been exacerbated by the
significant negative impact of COVID-19, (see note 36 of the
Accounts). It is difficult to predict when these conditions will
improve. Travel demand has dropped substantially and we
have taken a series of short-term measures in response.
These have included a sharp reduction of capacity in our
passenger network. Despite these measures we expect to
incur a substantial loss for the first half of 2020.
We expect our passenger business to be under severe
pressure this year and that our cargo business will continue
to face headwinds. However, we are cautiously optimistic
about cargo following the recent reduction in US-China
trade tensions and we have maintained our cargo capacity
intact. The US dollar is expected to remain strong in 2020,
and intense competition, especially in long-haul economy
class, will continue to place significant pressure on yields.
Although there is much uncertainty, we have an incredible
brand with a reputation and track record of premium service
and commitment to our customers that differentiates us
from our competitors. These qualities and values remain at
the heart of everything we do and are what will help us
through the current challenges.
Our three-year transformation programme has left the
business leaner and more resilient, and we move forward
with a culture of continuous improvement. Investment in our
products, customers and fleet is ongoing. We will continue
to take delivery of new aircraft in 2020 and, with the hope
that the environment will improve, we will retain the flexibility
to add capacity back to the market as soon as we are able
to. Our plan to take delivery of 70 new and more fuel-
efficient aircraft by 2024 remains unchanged.
The hard work and determination of our teams of
professionals over the past year, and in the current
COVID-19 crisis, has been outstanding. I would like to thank
them for the dedication they have shown during these
exceptionally challenging times in ensuring our ability to
maintain our operations as smoothly and efficiently as
possible. As a Group, we remain unwavering in our
commitment to our customers, our people and our home
hub, which we have proudly served for more than seven
decades. We will continue to invest significantly in
delivering an industry-leading experience for our customers
and in strengthening Hong Kong’s position as a world-class
global aviation hub.
Patrick Healy
Chairman
Hong Kong, 11th March 2020
9Annual Report 2019
2019 was a turbulent year for the Cathay Pacific Group. With our three-year transformation
programme starting to bear fruit we delivered a positive performance in the first half of 2019
notwithstanding a difficult environment brought about by geopolitical and trade tensions.
However, with social unrest in Hong Kong intensifying over the second half of the year and
mounting US-China trade tensions, we experienced a sharp drop in both inbound and outbound
passenger traffic. We were faced with an incredibly challenging environment to operate as the
Hong Kong economy slipped into recession. As a result, our second-half results – traditionally
stronger compared to first-half results – fell well below what we would have hoped for.
Overall, passenger and cargo yields were under intense
pressure in 2019 and both were below those seen in 2018.
Events in Hong Kong in the second half of the year
significantly reduced load factors, forward bookings and
the number of passengers we carried. Inbound traffic was
hit hard, particularly on short-haul and Mainland China
routes, while outbound traffic also decreased. Demand for
premium travel was weak and we became increasingly
reliant on lower-yielding transit traffic. We carried 0.7%
fewer passengers in 2019 than in 2018.
Cargo demand was depressed all year as a result of US-
China trade tensions and was noticeably below that of 2018.
However, it did pick up later in 2019 during the traditional
high season, reflecting new consumer product, specialist
airfreight shipments and restocking ahead of holiday
periods. Exports from Mainland China and Hong Kong to
trans-Pacific and European markets were more
encouraging later in the year. Nevertheless, the cargo
business performed significantly below expectations
in 2019.
R E V I E W O F O P E R A T I O N S
T R A N S F O R M AT I O N
In 2017, we laid the foundations. We put in place a more
efficient head office organisation and reduced our Hong
Kong headcount. We formed a central Digital team to
improve our use of technology and analyse data, a Lean
team which focuses on business process improvement and
a Global Business Services team which focuses on shared
efficiency.
In 2018, we started restructuring our operations outside
Hong Kong, benefited from productivity improvements,
increased our digital capabilities and concentrated on
developing a shared service capability. We improved inflight
dining, passenger comfort, the way we contact passengers
and our loyalty programmes. We extended our network at a
record rate and improved our service delivery training. We
also increased our ancillary sources of revenue.
C U S T O M E R
C E N T R I C
We place great importance in listening
to our customers and are continually
enhancing our products and services,
both on the ground and in the air, to
provide a Life Well Travelled.
11Annual Report 2019
In 2019, we focused on continuous improvement in our
airlines’ core activities, which have been broken down
into nine processes as part of an effort to obtain stronger
cooperation across business functions. Business units
proposed over 1,100 transformation initiatives, many of
which provided financial or other benefits in 2019. These
initiatives included improvements to sourcing, increasing
maintenance productivity and the development of new
sources of revenue. We have projects focusing on
improving our global contact centres and our integrated
operations control units. Our SAP system is improving our
financial analysis and our ability to control spending. Our
crew management programme is improving productivity.
We are also investing more in digital and analytical
capability, and in process automation. Our Global Business
Services team has taken on tasks resulting from the
redesign and relocation of some business processes. For
our customers we have introduced new seats, installed
Wi-Fi across our long-haul fleet of aircraft, enhanced food
and beverage offerings in all classes and upgraded our
digital platform to give customers more control of their
journey – with the promise of more to come.
While the primary goal of the transformation programme is
to ensure our business returns to sustainable financial
health, the intentions are of course broader and deeper.
How we build a winning team and how we create a business
that can compete and win beyond 2019 is dependent on the
success with which we anticipate and react to changing
customer expectations, as well as providing a proposition
to our customers that makes us more attractive than
competitive alternatives. To that end in the first half of 2019,
we commenced a new brand journey, which has the
R E V I E W O F O P E R A T I O N S
Passenger services • Loyalty and reward programmes
purpose of moving people forward in life, through our ability
to connect them to meaningful people, places and
experiences. ‘Move Beyond’ reflects our determination to
challenge what is considered standard; to move beyond and
be the very best we can be. We are moving beyond for our
customers by bringing personal recognition and a sense of
care and reliability to the whole travel experience. Living up
to this aspiration will enable Cathay Pacific to reach levels of
service and customer experience that place us amongst
the world’s greatest service brands.
C AT H A Y PA C I F I C A N D C AT H A Y D R A G O N
PA S S E N G E R S E R V I C E S
Cathay Pacific and Cathay Dragon carried 35.2 million
passengers in 2019, a decrease of 0.7% compared to 2018.
Revenue decreased by 1.3% to HK$72,168 million. RPK
traffic increased by 2.9%, while ASK capacity increased
by 5.1%, albeit this was less than originally expected.
Consequently the load factor decreased by 1.8 percentage
points, to 82.3%. Yield decreased by 3.9% to HK53.6 cents,
reflecting a strong US dollar, intense competition and
reduced travel in the second half of 2019 as a result of the
social unrest in Hong Kong. Inbound and outbound traffic,
particularly on short-haul Mainland China routes,
substantially reduced from August to December. We
became increasingly reliant on low-yielding transit traffic,
which was relatively less affected. Premium class travel was
also weak during this period. To mitigate these challenges,
in October we introduced a number of short-term tactical
measures, including frequency cuts on more than a dozen
routes during the winter season and suspending our service
to Medan indefinitely.
Cathay Pacific Airways Limited12
I N N O VAT I O N
• We launched an elevated First Class experience with new
soft products and amenities from UK brand Bamford, new
tableware and wellness-themed dining options.
• We also introduced enhanced bedding and amenities
from UK brand Bamford in our Business Class cabins,
including a plusher pillow and the addition of a mattress
and slippers – both highly requested by customers. Our
new Business Class dining experience has now been
rolled out across all long-haul routes since July 2019.
AVAILABLE SEAT KILOMETRES (“ASK”), LOAD FACTOR AND Y IELD CHANGE BY REGION
FOR 2019 WERE AS FOLLOWS:
ASK (million) Load factor (%) Yield
XXXXXXXXXXChange XXXXXXXXXXChange Change
Americas 43,555 40, XXXXXXXXXX% XXXXXXXXXX%pt -5.0%
Europe 34,677 32, XXXXXXXXXX% XXXXXXXXXX%pt -5.9%
North Asia 31,914 31, XXXXXXXXXX% XXXXXXXXXX%pt -1.9%
Southeast Asia 21,483 20, XXXXXXXXXX% XXXXXXXXXX%pt -1.7%
Southwest Pacific 18,799 18, XXXXXXXXXX% XXXXXXXXXX%pt -3.0%
South Asia, Middle East and Africa 12,816 12, XXXXXXXXXX% XXXXXXXXXX%pt +0.2%
Overall 163,244 155, XXXXXXXXXX% XXXXXXXXXX%pt -3.9%
R E V I E W O F O P E R A T I O N S
Passenger services • Loyalty and reward programmes
• In November 2019, we launched a new partnership
collaboration with Michelin-starred Hong Kong dining
group, Black Sheep Restaurants, featuring restaurant-
inspired meals in Economy Class on all long-haul routes
departing Hong Kong.
• We reopened our newly renovated Shanghai Pudong
Cathay Pacific Lounge in July 2019 – the first of our
lounges in Mainland China and 11th globally to feature our
signature, awards-winning airport lounge design.
• We opened The Sanctuary, a dedicated yoga and
wellness area inside The Pier Business Class Lounge at
Hong Kong International Airport in January 2019, in
collaboration with The Pure Group.
15,000
20,000
25,000
30,000
35,000
40,000
10, XXXXXXXXXX
52.0
53.0
54.0
55.0
56.0
57.0
0
20,000
40,000
100,000
80,000
60,000
40.0
42.0
44.0
46.0
50.0
48.0
HK$ million
Passenger capacity, load factor and efficiency
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
1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19
13Annual Report 2019
• In September 2019, Cathay Pacific won the Best Inflight
Service Award at the TTG Travel Awards 2019.
• In September 2019, Cathay Pacific received a Gold award
for Excellence in HR Structure Transformation at the HR
Distinction Awards 2019 Hong Kong.
• In November 2019, Cathay Pacific was ranked within
the top five of the World’s Top 20 Airlines on
AirlineRatings.com.
• In November 2019, Cathay Dragon won Best Airline
Economy Class at the Business Traveller China Awards.
At the same awards, the Cathay Pacific Group’s Marco
Polo Club programme won Best Frequent Flyer
Programme.
• In December 2019, Cathay Pacific won Best Airline in Asia
at the Best in Business Travel Awards by Business
Traveler (US) magazine.
H O M E M A R K E T – H O N G KO N G A N D
P E A R L R I V E R D E LTA
• Our weekly “fanfares” promotions in Hong Kong continue
to demonstrate our commitment to offering good-value
fares in our home market. There was a “super fanfare”
promotion in April.
• Demand during the 2019 Chinese New Year and Easter
holiday period was strong, particularly on short-haul
routes from Hong Kong.
• Premium class demand was strong at the beginning of
the year, particularly on long-haul routes, but tapered off
in the second-half of the year placing pressure on yield.
• In November, we launched our annual senior citizen
discount for Hong Kong and Macau residents aged 65
and above, and accompanying adults.
• From January 2019, we have progressively been rolling
out a series of new “Hong Kong Flavours” dishes featuring
locally inspired cuisine across all cabins on long-haul
flights departing Hong Kong.
• We greatly expanded our inflight entertainment library,
quadrupling the number of movies, adding more
complete boxsets and introducing a live sports channel
on our Airbus A350 flights.
• The installation of Wi-Fi across our long-haul fleet of
aircraft continued. By the end of the first quarter of 2021,
all our long-haul aircraft will have Wi-Fi.
• We relaunched our locally brewed craft beer, Betsy Beer,
and made it available to passengers in all cabins on all
long-haul flights, as well as in our lounges in Hong Kong
International Airport.
• We revamped our cathaypacific.com homepage,
upgraded our online booking platform and added live chat
function on key pages (booking creation and
management, online check-in) to offer easier and faster
transactions.
• We continued to take delivery of new and more modern
aircraft, including six Airbus A350 aircraft.
AWA R D S
• In February 2019, Cathay Pacific was awarded Best First
Class Sparkling and Best Business Class Red at the
Cellars in the Sky 2018 awards by Business Traveller
magazine.
• In June 2019, Cathay Pacific featured in the World’s Top
10 Airlines of 2019 category at the Skytrax World Airline
Awards. At the same awards, Cathay Dragon was runner-
up in The World’s Best Regional Airlines 2019 category.
• In September 2019, Cathay Pacific won Best Airport
Lounge for The Pier First Class Lounge in Hong Kong at
the 2019 Business Traveller Asia-Pacific Awards.
https://www.cathaypacific.com
Cathay Pacific Airways Limited14
A M E R I C A S
• Demand on our routes to the Americas fell short of
increases in capacity throughout 2019, though this was
especially felt in the second half of the year.
• Cathay Pacific introduced a four-times-weekly service to
Seattle in March, using Airbus A XXXXXXXXXXaircraft. The
service became daily in July.
• In response to reduced demand resulting from social
unrest in Hong Kong, in October 2019 Cathay Pacific
reduced the frequency of its services to Washington D.C.,
New York (JFK) and Vancouver for the winter season.
• In October 2019, Cathay Pacific started to use an
additional Airbus A XXXXXXXXXXaircraft on its San Francisco
route for the winter season.
E U R O P E
• Demand was strong for Europe throughout 2019 where
our passenger traffic almost caught up with the capacity
increase.
• Europe was well supported by strong transit traffic
from Australia throughout 2019 where additional travel
volume offset a yield decrease as a result of a weaker
Australian dollar.
• Demand was also good for leisure travel from Taiwan
to Europe.
• Cathay Pacific increased the frequency of its services to
Madrid from five flights per week to daily between June
and October 2019.
• In response to reduced demand resulting from social
unrest in Hong Kong, in October 2019 Cathay Pacific
reduced the frequency of its service to Paris and
suspended its service to Dublin for the winter season.
• Cathay Pacific expanded its codeshare agreement with
the Lufthansa group so as to include three more routes to
Europe. Cathay Pacific now places its code on
Lufthansa’s flights between Hong Kong and Frankfurt and
Munich, and on Swiss International Air Lines’ flights
between Hong Kong and Zurich.
N O R T H A S I A
• Demand for business and leisure travel to and from
North Asia was firm in the first half of the year with
strong demand on Taiwan routes, but weakened in the
second half.
• Cathay Pacific introduced a two-times-weekly seasonal
service to Komatsu from April to October 2019.
• Inbound passenger traffic from Mainland China dropped
significantly in the second half of the year as travel
sentiment weakened due to social unrest in Hong Kong. In
2019, revenue passenger kilometres to and from
Mainland China were down 10.9% compared with 2018.
• Our Japan routes performed very well in October with the
Rugby World Cup generating good demand, especially
from England and South Africa when both teams
advanced to the final.
• Cathay Dragon reduced the frequency of its service to
Shanghai (Pudong) from 105 to 84 flights per week for the
winter season. Among those cancellations, 14 were
effective only from November 2019.
• In response to reduced demand resulting from social
unrest in Hong Kong, in October 2019 Cathay Pacific and
Cathay Dragon reduced the frequency of their services to
Beijing, Taipei, Seoul and Osaka, while Cathay Dragon
suspended its service to Tokyo (Haneda) for the winter
season.
S O U T H E A S T A S I A
• Demand for travel to Southeast Asia destinations was
robust in the first half of 2019 – load factors were strong,
but there was pressure on yield. Bookings dropped
significantly in the second half of the year as sentiment
for travel weakened due to social unrest in Hong Kong.
• In response to reduced demand resulting from social
unrest in Hong Kong, in October 2019 Cathay Pacific
reduced the frequency of its service to Bangkok, while
Cathay Dragon suspended its service to Denpasar (Bali)
for the winter season and suspended its service to Medan
indefinitely.
R E V I E W O F O P E R A T I O N S
Passenger services • Loyalty and reward programmes
15Annual Report 2019
S O U T H W E S T PA C I F I C
• Traffic on Southwest Pacific routes performed well
throughout the year, helped by capacity reductions by
other airlines and strong demand for travel to Europe.
This was partially offset by a lower yield on transit revenue
and a weaker Australian dollar.
• In October 2019, Cathay Pacific suspended its service
to Cairns.
S O U T H A S I A , M I D D L E E A S T A N D A F R I C A
• Traffic on Indian routes benefited from capacity
reductions by Indian carriers in the first half of the year.
• Demand for travel to Colombo was negatively affected by
the bombings in April 2019. Frequencies were reduced.
• From June 2019, Cathay Pacific increased the frequency
of its services to Hyderabad from four to five times
weekly.
• From July 2019, Cathay Dragon increased the frequency
of its services to Dhaka from four to five times weekly.
• Our South Asia routes performed positively throughout
2019, buoyed by strong demand for travel between India
and North America.
• In response to reduced demand resulting from social
unrest in Hong Kong, in October 2019 Cathay Pacific
reduced the frequency of its service to Colombo for the
winter season.
• Yield pressure remained severe on our South Africa route.
LOYA LT Y A N D R E WA R D P R O G R A M M E S
M A R C O P O LO C L U B
• 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.
A S I A M I L E S
• Asia Miles is a leading travel and lifestyle rewards
programme in Asia. It has more than 12 million members
and over 800 partners worldwide, including 26 airlines,
more than 150 hotel brands and over 400 dining partners
and shops.
• There was a 30% increase in redemptions by Asia Miles
members on Cathay Pacific and Cathay Dragon flights
compared to last year.
• A new arrangement for mileage expiry was launched, with
new miles credited on or after 1st January 2020 being
under an activity-based rule. As long as members earn or
redeem any of their miles at least once in an 18 month
period, the balance of the new miles will remain active.
• Marco Polo Club members are also members of
Asia Miles.
O P E R A T I O N A L
E X C E L L E N C E
Our efficient, environmentally-friendly
fleet of aircraft enables us to expand our
network, boost our connectivity and provide
our customers with more travel choices.
17Annual Report 2019
C AT H A Y PA C I F I C A N D C AT H A Y D R A G O N
C A R G O S E R V I C E S
Cargo revenue in 2019 was HK$21,154 million, a decrease of
14.2% compared to 2018. RFTK traffic decreased by 6.7%,
R E V I E W O F O P E R A T I O N S
Cargo services • Fleet
whilst AFTK capacity decreased by 0.3%. Consequently the
load factor decreased by 4.4 percentage points, to 64.4%.
Yield decreased by 7.9% to HK$1.87, reflecting a strong US
dollar and weakened cargo demand resulting from
intensified US-China trade tensions.
0
4,000
2,000
6,000
8,000
10,000
12,000
0.4
0.8
0.6
1.0
1.2
1.4
1.6
1.0
1.4
1.2
1.6
1.8
2.0
2.2
2,000
4,000
6,000
8,000
14,000
10,000
12,000
Cargo capacity, load factor and efficiency
Million
Cargo revenue and yield trend
HK$ million HK$HK$
Cargo revenue
Cargo yield
Available cargo tonne kilometres (AFTK)
Load factor
Cargo revenue per AFTK
1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19
AVAILABLE CARGO TONNE KILOMETRES (“AFTK”), LOAD FACTOR AND Y IELD CHANGE
FOR 2019 WERE AS FOLLOWS:
AFTK (million) Load factor (%) Yield
XXXXXXXXXXChange XXXXXXXXXXChange Change
Cathay Pacific and Cathay Dragon 17,558 17, XXXXXXXXXX% XXXXXXXXXX%pt -7.9%
Cathay Pacific Airways Limited18
• Cargo demand was depressed throughout 2019,
reflecting weaker global trade brought about by ongoing
US-China trade tensions and a weaker global economy.
Overall load factor for 2019 was down compared to the
previous year.
• Cargo demand picked up in the latter part of 2019 during
the traditional high season, reflecting new consumer
product, specialist airfreight shipments and restocking
ahead of holiday periods. Exports from Mainland China
and Hong Kong to trans-Pacific and European markets
were more encouraging later in the year. Nevertheless,
the cargo business performed significantly below
expectations in 2019.
• In April 2019, we expanded our joint-business agreement
with Lufthansa Cargo, so as to start eastbound joint
shipments from Europe to Hong Kong.
• In April 2019, Cathay Pacific became the first airline to be
awarded CEIV Fresh, IATA’s accreditation for perishable
cargo handling, reflecting our commitment to provide
specialised cargo solutions.
• In July 2019, we introduced a fire containment bag
solution that allows for the safe carriage of standalone
lithium-ion batteries on our freighter aircraft.
• While we still experienced an increase in demand in the
last quarter of the year – the traditional high season –
from new consumer products and the e-commerce
sector, overall volumes and yields were significantly down
in comparison with a record year in 2018.
• We adjusted our freighter services across our network.
• We took our one Boeing 747-400BCF freighter aircraft out
of service in September 2019 in preparation for
retirement in 2020.
• As of 1st September, Cathay Pacific Cargo is the General
Sales and Service Agent (GSSA) for all HK Express cargo
activities.
F L E E T D E V E LO P M E N T
• At 31st December 2019, Cathay Pacific operated 155
aircraft, Cathay Dragon operated 48 aircraft, HK Express
operated 24 aircraft and Air Hong Kong operated nine
aircraft (a total of 236 aircraft). There are 70 new aircraft
on order for delivery up to 2024.
• We took delivery of two Airbus A XXXXXXXXXXand four Airbus
A XXXXXXXXXXaircraft in 2019 and now have a total of 24
Airbus A XXXXXXXXXXand 12 Airbus A XXXXXXXXXXin our fleet.
We expect to have 28 Airbus A XXXXXXXXXXin service by the
end of 2020 and 20 Airbus A XXXXXXXXXXaircraft in service
by the end of 2021.
• We took delivery of three used Boeing XXXXXXXXXXaircraft in
2019. Three Boeing XXXXXXXXXXaircraft were retired and four
Airbus A330-300s and one Boeing 777-300ER were
returned to their lessors.
• We expect to take delivery of 17 aircraft in 2020, including
four Airbus A350-900, three Airbus A XXXXXXXXXX, six
Airbus A321-200neo and four Airbus A320-200neo
aircraft.
R E V I E W O F O P E R A T I O N S
Cargo services • Fleet
19Annual Report 2019
F L E E T P R O F I L E *
Number at
31st December 2019
Leased** Firm orders Expiry of operating leases**
Aircraft
type Owned Finance Operating Total
Average
age ‘20 ‘21
‘22 and
beyond Total ‘20 ‘21 ‘22 ‘23 ‘24
‘25 and
beyond
Aircraft operated by Cathay Pacific:
A XXXXXXXXXX XXXXXXXXXX
A XXXXXXXXXX6 4 4 2
A XXXXXXXXXX3 5 8
747-400BCF XXXXXXXXXX
747-400ERF XXXXXXXXXX
747-8F XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
777-300ER XXXXXXXXXX2 3 6
XXXXXXXXXX
Total XXXXXXXXXX XXXXXXXXXX
Aircraft operated by Cathay Dragon:
A XXXXXXXXXX 4(a) 3 3
A XXXXXXXXXX 2 2 1
A321-200neo XXXXXXXXXX
A XXXXXXXXXXb XXXXXXXXXX
Total XXXXXXXXXX XXXXXXXXXX
Aircraft operated by HK Express:
A XXXXXXXXXX 4
A XXXXXXXXXX
A320-200neo XXXXXXXXXXc) 5
A321-200neo 16(d) 16
Total XXXXXXXXXX XXXXXXXXXX
Aircraft operated by Air Hong Kong:
A300-600F*** XXXXXXXXXX
Total XXXXXXXXXX
Grand total XXXXXXXXXX XXXXXXXXXX7 7 28
* The table includes two aircraft parked in preparation for retirement (one Boeing XXXXXXXXXXaircraft and one Boeing 747-400BCF freighter) and does not
reflect aircraft movements after 31st December 2019. The two parked aircraft were deregistered in February 2020.
** With effect from 1st January 2019, leases previously classified as operating leases are accounted for in a similar manner to finance leases as a result of
an accounting standard change (HKFRS 16; see accounting policy 1). The majority of operating leases captured in the above table are within the scope
of HKFRS 16.
*** Under the new block space agreement Air Hong Kong entered into with DHL International which commenced on 1st January 2019, the nine Airbus
A300-600F freighters are considered 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 A XXXXXXXXXXaircraft expired in February 2020. The aircraft was returned to its lessor.
(b) 11 of these aircraft are owned by Cathay Pacific and leased by Cathay Dragon.
(c) These aircraft are operating leased.
(d) These aircraft, ordered by Cathay Dragon, will be operated by HK Express from 2022.
B U I L D I N G T H E
H O N G K O N G H U B
A modern fleet with value fare proposition enables
HK Express to leverage new opportunities within
the region and help strengthen Hong Kong’s
position as Asia’s leading international aviation hub.
21Annual Report 2019
R E V I E W O F O T H E R S U B S I D I A R I E S
A N D A S S O C I AT E S
The share of profits from other subsidiaries and associates
in 2019 decreased by 26.1% to HK$1,450 million from
HK$1,961 million. The decline was mainly attributable to
losses in HK Express since acquisition, lower cargo tonnage
handled through our cargo terminal and a reduced share of
profits from Air China Cargo. Set out below is a review of the
performance and operations of principal subsidiaries and
associates.
H O N G KO N G E X P R E S S A I R WA Y S L I M I T E D
( “ H K E X P R E S S ” )
• On 19th July 2019, Cathay Pacific completed the
acquisition of 100% of the share capital of Hong Kong
Express Airways Limited.
• HK Express is Hong Kong’s only low-cost carrier, focusing
on serving leisure travel destinations.
• At the end of 2019, HK Express operated an all Airbus
narrow-body fleet of 24 aircraft, including eight Airbus
A XXXXXXXXXXaircraft, 11 Airbus A XXXXXXXXXXaircraft and five
Airbus A320-200neo aircraft. The young fleet had an
average age of just below five years. It is expected to take
delivery of five more Airbus A320-200neo aircraft by
early 2021.
• HK Express will receive an order previously made by
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
R E V I E W O F O P E R A T I O N S
Review of other subsidiaries and associates
leverage new opportunities within the region and help
strengthen Hong Kong’s position as Asia’s leading
international aviation hub.
• HK Express operates flights to 24 destinations including
Bangkok, Da Nang, Fukuoka, Nagoya, Ningbo, Osaka,
Phuket, Saipan, Seoul, Taichung and Tokyo.
• After the acquisition, HK Express launched the Hong
Kong-Okinawa service and suspended the Hong Kong-
Chiang Rai service.
• On-time performance was 90.4% within 15 minutes
during the post-acquisition period.
• For the period from 20th July to 31st December 2019,
capacity amounted to 4,583 million available seat
kilometres. The average load factor was 91.5% during
the period.
• HK Express recorded an after tax loss during the post-
acquisition period of HK$246 million, against
expectations of a small profit. The airline suffered from
reduced demand to and from Asia as a result of the Hong
Kong social unrest.
• Ancillary revenue penetration as a percentage of total
revenue was 21.7% during the period. This included
non-flight scheduled revenue which arises from the sale
of baggage, priority boarding, allocated seats and
administration fees, all directly attributable to the low-fare
business of HK Express.
• Acquisition details are further detailed in note 26 to the
financial statements.
Cathay Pacific Airways Limited22
HK Express
Period from 20th July 2019
to 31st December 2019
HK$M
Revenue
Passenger services* 1,817
Cargo services 23
Other services and recoveries* 53
Total revenue 1,893
Expenses
Staff (307)
Inflight service and passenger expenses (23)
Landing, parking and route expenses (476)
Fuel cost (459)
Aircraft maintenance (244)
Aircraft depreciation and rentals (386)
Other depreciation, amortisation and rentals (17)
Commissions (7)
Others (170)
Operating expenses (2,089)
Net finance charges (112)
Total operating expenses (2,201)
Loss before taxation (308)
Taxation 62
Loss after taxation (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.
HK Express
Period from 20th July 2019
to 31st December 2019
Operating Statistics
Available seat kilometres (“ASK”) Million 4,583
Passenger revenue per ASK HK cents 40.8
Revenue passenger kilometres (“RPK”) Million 4,195
Revenue passengers carried ‘000 1,888
Passenger load factor % 91.5
Passenger yield HK cents 44.6
Cost per ASK (with fuel) HK cents 46.0
Fuel consumption per million ASK Barrels 150
Fuel consumption per million RPK Barrels 164
Cost per ASK (without fuel) HK cents 36.0
ASK per HK$’000 staff cost Unit 14,932
ASK per staff ‘000 4,287
Aircraft utilisation Hours per day 8.9
On-time performance % 90.4
Average age of fleet Years 4.9
R E V I E W O F O P E R A T I O N S
Review of other subsidiaries and associates
23Annual Report 2019
A H K A I R H O N G KO N G L I M I T E D
( “A I R   H O N G KO N G” )
• Air Hong Kong principally operates express cargo
services for DHL Express.
• At the end of 2019, Air Hong Kong operated nine dry
leased Airbus A300-600F freighters, one wet leased
Airbus A300-622RF freighter, one wet leased A330-243F
freighter and two wet leased A XXXXXXXXXXpassenger-to-
freighter converted freighters.
• Air Hong Kong operates six flights per week services to
Bangkok, Ho Chi Minh City, Osaka, Penang (via Ho Chi
Minh City), Seoul, Shanghai, Singapore, Taipei and Tokyo
and five flights per week services to Beijing, Cebu (via
Manila) and Nagoya.
• On-time performance was 87% within 15 minutes.
• Compared with 2018, capacity decreased by 3.7% to 703
million available tonne kilometres. The load factor
increased by 2.5 percentage points to 68.6%. Revenue
tonne kilometres decreased by 0.2% to 482 million.
• At the end of 2018, Air Hong Kong became a wholly
owned subsidiary of Cathay Pacific, having been
previously 60% owned by Cathay Pacific. Air Hong Kong
continues to operate an agreed freighter network to
destinations in Asia for DHL International. It does so under
a new block space agreement with DHL International for a
15-year term, which commenced on 1st January 2019.
• Air Hong Kong’s results attributable to the shareholders
of Cathay Pacific improved year on year. On a 100%
like-for-like basis there was a decrease in profit. This was
in part due to gains on disposal of certain aircraft in 2018,
and in part due to the new block space agreement and
the underlying decrease in capacity and cargo uplift
in 2019.
P R I N C I PA L A I R L I N E S E R V I C E S
S U B S I D I A R I E S
C AT H A Y PA C I F I C C AT E R I N G S E R V I C E S
( H . K . ) L I M I T E D ( “ C P C S ” ) A N D K I T C H E N S
O U T S I D E H O N G KO N G
• CPCS, a wholly owned subsidiary, operates the principal
flight kitchen in Hong Kong.
• CPCS provides flight catering services to 51 international
airlines in Hong Kong. It produced 29.6 million meals and
handled 70,520 flights in 2019 (representing a daily
average of 81,000 meals and 193 flights, a decrease of
1.3% and 4.0% respectively from 2018).
• Profits fell in 2019. Revenue decreased because of a
decrease in business volume. Labour and overhead costs
were higher.
• The profits of the flight kitchens outside Hong Kong
decreased compared to the previous year.
C AT H A Y PA C I F I C S E R V I C E S L I M I T E D
( “ C P S L” )
• CPSL, a wholly owned subsidiary, owns and operates the
Group’s cargo terminal at Hong Kong International
Airport. The terminal’s annual handling capacity is 2.6
million tonnes. At the end of 2019, CPSL provided cargo
handling services to 14 airlines.
• CPSL handled 1.9 million tonnes of cargo in 2019, 53%
of which were trans-shipments. Export and import
shipments accounted for 31% and 16% respectively of
the total.
• The financial results in 2019 declined compared with
those of 2018. This was mainly due to lower tonnage
handled.
H O N G KO N G A I R P O R T S E R V I C E S
L I M I T E D ( “ H A S ” )
• HAS, a wholly owned subsidiary, provides ramp and
passenger handling services at Hong Kong International
Airport. At the end of 2019, it provided ground handling
services to 21 airlines, including Cathay Pacific and
Cathay Dragon.
• In 2019, HAS had 44% and 5% market shares in ramp and
passenger handling businesses respectively at Hong
Kong International Airport. The number of flights handled
under ramp handling business increased by 0.3% in 2019.
The number of flights handled under passenger handling
business decreased by 42% against last year. The
reduction in passenger handling business followed the
transfer of Cathay Dragon’s passenger handling business
to Cathay Pacific in March 2018.
Cathay Pacific Airways Limited24
• The financial results in 2019 were worse than those in
2018. This reflected the loss of the Cathay Dragon
passenger handling business and the reduction of
customers’ flight frequencies in the second half of
the year.
V O G U E L A U N D R Y S E R V I C E L I M I T E D
( “ V O G U E L A U N D R Y ” )
• Vogue Laundry, a wholly owned subsidiary, provides a
comprehensive range of services in laundry and dry
cleaning of commercial linen, uniform and guest garment.
• It operates a commercial laundry plant in Yuen Long
Industrial Park and runs 13 valet shops in Hong Kong
serving retail customers at the end of 2019.
• Vogue Laundry processed 102 million pieces of laundry
items in 2019 comparing to 107 million pieces in 2018.
The financial results of 2019 declined compared with that
of 2018 mainly due to lower volume of laundry items being
handled.
P R I N C I PA L A S S O C I AT E S
A I R C H I N A L I M I T E D ( “A I R C H I N A” )
• Air China, in which Cathay Pacific had a 18.13% interest at
31st December 2019, is the national flag carrier and
leading provider of passenger, cargo and other airline-
related services in Mainland China.
• At 31st December 2019, Air China operated 327 domestic
and 124 international (including regional) routes to 43
countries and regions, including 65 overseas cities, three
regional cities and 119 domestic cities.
• 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 2019 results include Air China’s results
for the 12 months ended 30th September 2019, adjusted
for any significant events or transactions in the period
from 1st October 2019 to 31st December 2019.
• For the 12 months ended 30th September 2019, Air
China’s financial results improved compared to those for
the 12 months ended 30th September 2018.
A I R C H I N A C A R G O C O. , LT D.
( “A I R   C H I N A C A R G O ” )
• Air China Cargo is the leading provider of air cargo
services in Mainland China. It has its headquarters in
Beijing. Its main operating base is in Shanghai Pudong.
• In October 2019, the Cathay Pacific Group’s equity and
economic interest in Air China Cargo of 49.00% was
reduced to 34.78%, when the China National Aviation
Holding Company group, as part of a mixed ownership
reform to transform the business from an airport-to-
airport service provider into a total logistics solution
provider, injected certain equity interests and cash. A gain
of HK$114 million was recorded on this deemed partial
disposal.
• At 31st December 2019, Air China Cargo operated 15
freighters. It flies to nine cities in Mainland China and 11
cities outside Mainland China. 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.
• In 2019, Air China Cargo’s financial results declined from
2018 due to slowing air cargo market.
DATA S E C U R I T Y I N C I D E N T
In October 2018, Cathay Pacific announced that it had
discovered unauthorised access to passenger data and
notified privacy regulators in affected jurisdictions,
including the Hong Kong Privacy Commissioner for
Personal Data. In June 2019, the Hong Kong Privacy
Commissioner published a report on the data incident.
Investigations by privacy regulators in Singapore, Turkey,
Taiwan and the United Kingdom have been closed. Cathay
Pacific continues to respond to the investigations and
enquiries of other privacy regulators.
A N T I T R U S T P R O C E E D I N G S
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 19 set out on page 137.
R E V I E W O F O P E R A T I O N S
Review of other subsidiaries and associates
P R O D U C T I V I T Y &
V A L U E F O C U S E D
By leaning our work processes and
being more agile in our decision making,
we are focusing in areas which our
customers value most.
Cathay Pacific Airways Limited26
F I N A N C I A L R E V I E W
The Cathay Pacific Group reported an attributable profit of HK$1,691 million for 2019. This
compares with a HK$2,345 million profit for 2018. The earnings per share was HK43.0 cents in
2019 compared to an earnings per share of HK59.6 cents in 2018. The Cathay Pacific Group
reported an attributable profit of HK$344 million in the second half of 2019, compared to an
attributable profit of HK$1,347 million in the first half of 2019 and an attributable profit of
HK$2,608 million in the second half of 2018. Cathay Pacific and Cathay Dragon reported an
attributable loss of HK$434 million in the second half of 2019, compared to an attributable
profit of HK$675 million in the first half of 2019 and an attributable profit of HK$1,253 million in
the second half of 2018.
C AT H A Y PA C I F I C A N D C AT H A Y D R A G O N
• Passenger revenue decreased by 1.3% to HK$72,168
million. The number of revenue passengers carried
decreased by 0.7% to 35.2 million. Revenue passenger
kilometres increased by 2.9%.
• The passenger load factor decreased by 1.8 percentage
points to 82.3%. Available seat kilometres increased by
5.1%.
• Passenger yield decreased by 3.9% to HK53.6 cents.
• First and business class revenues decreased by 3.4% and
the load factor decreased from 76.1% to 75.7%.
• Premium economy and economy class revenues
decreased by 0.2% and the load factor decreased from
85.5% to 83.4%.
• Cargo revenue decreased by 14.2% to HK$21,154 million.
There was a 0.3% decrease in capacity.
• The cargo load factor decreased by 4.4 percentage
points. Cargo yield decreased by 7.9% to HK$1.87.
R E V E N U E
Group Cathay Pacific and Cathay Dragon
2019
HK$M
2018
HK$M Change
2019
HK$M
2018
HK$M Change
Passenger services 73,985 73, XXXXXXXXXX% 72,168 73, XXXXXXXXXX%
Cargo services 23,810 28, XXXXXXXXXX% 21,154 24, XXXXXXXXXX%
Other services and recoveries 9,178 9, XXXXXXXXXX% 8,284 8, XXXXXXXXXX%
Total revenue 106,973 111, XXXXXXXXXX% 101,606 106, XXXXXXXXXX%
27Annual Report 2019
0
20,000
40,000
60,000
80,000
100,000
120,000
0
3,000
9,000
6,000
12,000
15,000
21,000
18,000
0
200
400
600
1,000
800
1,400
1,200
XXXXXXXXXX2019
HK$ million
Revenue
Passengers in ‘000 Cargo in ‘000 tonnes
Cathay Pacific and Cathay Dragon:
passengers and cargo carried
Cargo carried
Passengers carriedOther services and recoveries
Cargo services
Passenger services
1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19
• The overall revenue load factor decreased by 2.2
percentage points to 77.4%. The breakeven load factor
was 77.2%.
• The annualised effect on revenue of changes in yield and
load factor is set out below:
HK$M
+ 1 percentage point in passenger load factor 874
+ 1 percentage point in cargo load factor 328
+ HK¢1 in passenger yield 1,344
+ HK¢1 in cargo yield 113
%
60
65
70
75
80
85
90
XXXXXXXXXX2019
Revenue load factor
Breakeven load factor
Cathay Pacific and Cathay Dragon:
revenue and breakeven load factor
Cathay Pacific Airways Limited28
F I N A N C I A L R E V I E W
O P E R AT I N G E X P E N S E S
Group Cathay Pacific and Cathay Dragon
2019
HK$M
2018
HK$M Change
2019
HK$M
2018
HK$M Change
Staff 20,125 20, XXXXXXXXXX% 17,604 17, XXXXXXXXXX%
Inflight service and passenger expenses 5,306 5, XXXXXXXXXX% 5,284 5, XXXXXXXXXX%
Landing, parking and route expenses 17,758 17, XXXXXXXXXX% 16,900 17, XXXXXXXXXX%
Fuel, including hedging losses 29,812 33, XXXXXXXXXX% 28,778 33, XXXXXXXXXX%
Aircraft maintenance 9,858 9, XXXXXXXXXX% 9,231 8, XXXXXXXXXX%
Aircraft depreciation and rentals* 12,022 12, XXXXXXXXXX% 11,640 12, XXXXXXXXXX%
Other depreciation, amortisation and rentals* 2,991 2, XXXXXXXXXX% 2,132 2, XXXXXXXXXX%
Commissions XXXXXXXXXX% XXXXXXXXXX%
Others 4,847 4, XXXXXXXXXX% 6,280 6, XXXXXXXXXX%
Operating expenses 103,646 107, XXXXXXXXXX% 98,769 104, XXXXXXXXXX%
Net finance charges* 2,939 2, XXXXXXXXXX% 2,446 1, XXXXXXXXXX%
Total operating expenses 106,585 109, XXXXXXXXXX% 101,215 105, XXXXXXXXXX%
* The adoption of HKFRS 16 has resulted in increased depreciation and finance charges, offset by a reduction in lease charges.
• The Group’s total operating expenses decreased by 2.7%
(with the combined Cathay Pacific and Cathay Dragon
operating expenses decreasing by 4.5%).
• The cost per ATK (with fuel) of Cathay Pacific and Cathay
Dragon decreased from HK$3.27 to HK$3.06.
• The cost per ATK (without fuel) of Cathay Pacific and
Cathay Dragon decreased from HK$2.25 to HK$2.19.
• The underlying cost per ATK (without fuel), which
excludes exceptional items, non-recurring item and
adjusts for the effect of foreign currency movements and
the adoption of HKFRS 16, decreased from HK$2.24 to
HK$2.22, a decrease of 0.9%.
Net finance
charges
Commissions
Others
Staff
9% Aircraft maintenance
Depreciation,
amortisation
and rentals14%
3%
1%
4%
19%
Fuel, including
hedging
losses
Inflight service and
passenger expenses
Landing,
parking
and route
expenses
Group total operating expenses
5%
17%
28%
0
20
40
80
100
0
10
20
40
50
60 30
XXXXXXXXXX2019
US$ per barrel
( jet fuel)
Barrels
in million
Group fuel price and consumption
Into wing price – before hedging
Into wing price – after hedging
Uplifted volume
29Annual Report 2019
O P E R AT I N G R E S U LT S A N A LY S I S
1st half
2019
HK$M
2nd half
2019
HK$M
Full year
2019
HK$M
1st half
2018
HK$M
2nd half
2018
HK$M
Full year
2018
HK$M
Cathay Pacific and Cathay Dragon’s
 profit/(loss) before exceptional items,
 non-recurring item and taxation XXXXXXXXXX) 1,539 695
Exceptional items* XXXXXXXXXX XXXXXXXXXX)
Non-recurring item** – XXXXXXXXXX – – –
Taxation XXXXXXXXXX XXXXXXXXXX)
Cathay Pacific and Cathay Dragon’s
 profit/(loss) after exceptional items,
 non-recurring item and taxation XXXXXXXXXX) 1,253 384
Share of profits from subsidiaries and associates XXXXXXXXXX, XXXXXXXXXX,355 1,961
Profit/(loss) attributable to the shareholders
 of Cathay Pacific 1, XXXXXXXXXX, XXXXXXXXXX,608 2,345
* Exceptional items in 2019 included 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 (2018: a HK$101 million gain on the disposal of CO2
emissions credits, redundancy costs of HK$201 million incurred in connection with the reorganisation of our outports and data security costs of
HK$58 million).
** Non-recurring item in 2019 included a HK$114 million gain on deemed partial disposal of Air China Cargo.
The movement in Cathay Pacific and Cathay Dragon’s profit before exceptional items, non-recurring item and taxation
(isolating the effect of the adoption of HKFRS 16 and foreign currency movements) can be analysed as follows:
Reported
HK$M
HKFRS 16
adoption
HK$M
Currency
movement
HK$M
Adjusted
HK$M
ATK unit *
% change Note
2018 Cathay Pacific and Cathay Dragon’s
 profit before tax XXXXXXXXXX
Changes:
– Passenger and Cargo revenue (4,460) 1,213 (3, XXXXXXXXXX% 1
– Other services and recoveries XXXXXXXXXX% 2
– Staff XXXXXXXXXX2.3% 3
– Inflight service and passenger expenses XXXXXXXXXX% 4
– Landing, parking and route expenses XXXXXXXXXX) -1.4% 5
– Fuel, including hedging losses 4, XXXXXXXXXX, XXXXXXXXXX% 6
– Aircraft maintenance XXXXXXXXXX) +2.0% 7
– Owning the assets** XXXXXXXXXX.9% 8
– Other items (including commissions XXXXXXXXXX XXXXXXXXXX% 9
2019 Cathay Pacific and Cathay Dragon’s
 profit before tax XXXXXXXXXX
* ATK unit % change represents the adjusted revenue or cost component change per ATK.
** includes aircraft and other depreciation, rentals and net finance charges.
Notes:
1) As per Review of Operations section for passenger and cargo services.
2) Lower cargo ancillary contribution from Atlas operations and lower aircraft lease income and related recoveries from Air Hong Kong. Lower inflight sales
recoveries; offset by a 17% increase in Asia Miles revenues.
3) Reduction in unit staff costs following the reorganisation of our outports and capped discretionary bonuses for 2019.
4) Lower inflight cost of sales in line with reduction in inflight sales recoveries.
5) Reduction in cargo handling costs resulting from decrease in cargo activities.
6) 10% fall in the average into-plane fuel price and a decrease in fuel hedging losses.
7) Increase in engine overhaul and component overhaul costs, partially offset by lower lease return and stock provisions.
8) Decreased aircraft leasing costs on the cessation of the Atlas contract.
9) Increased marketing costs associated with ‘Move Beyond’ and increased activity levels in Asia Miles.
Cathay Pacific Airways Limited30
F I N A N C I A L R E V I E W
F U E L E X P E N D I T U R E A N D H E D G I N G
A breakdown of the Group’s fuel cost is shown below:
2019
HK$M
2018
HK$M
Gross fuel cost 29,711 32,424
Fuel hedging losses 101 1,445
Fuel cost 29,812 33,869
0
10
20
30
50
40
56
58
60
62
66
64
40%
40%
40%
38%
35%
30%
20%
10%
64.96
65.36
63.58
61.27
59.84
58.33
57.12
57.24
% US$
Fuel hedging cover
Hedge Cover Average Strike Price
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21
• 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 above indicates
the estimated percentage of projected consumption by
year covered by hedging transactions at various Brent
strike prices. The projected consumption in 1Q20 and
2Q20 is currently being impacted by the capacity
reductions associated with COVID-19; as such the
percentage covered during this period will increase.
• The Group does not speculate on oil prices but uses
hedging to manage the risk of changes in oil prices and
therefore its fuel costs. Hedging is not risk free.
TA X AT I O N
• The tax charge decreased by HK$12 million to HK$454
million, principally due to the reduced year on year result.
D I V I D E N D S
• Dividends paid for the year were HK$708 million. No
second interim dividend is proposed.
• The dividend per share decreased to HK$0.18 for 2019
(2018: HK$0.30).
A S S E T S
• Total assets at 31st December 2019 were HK$214,516
million.
• As a result of the adoption of HKFRS 16 (which changed the
required accounting for operating leases to recognise
right-of-use assets), right-of-use assets of HK$17,350
million were brought onto the consolidated statement of
financial position at 1st January 2019.
• During the year, additions to property, plant and equipment
were HK$13,270 million, comprising HK$12,381 million in
respect of aircraft and related equipment, HK$589 million
in respect of land and buildings and HK$300 million in
respect of other equipment.
Total assets
Buildings
and other
equipment
Intangible
assets
Aircraft and
related
equipment
Current
assets
Long-term
investments
and others
57%
7%
8%
13%
15%
Fuel consumption in 2019 was 46.6 million barrels (2018:
45.8 million barrels), an increase of 1.7% compared with an
increase in capacity of 2.0%.
• The Group’s fuel hedging cover at 31st December 2019 is
set out in the chart below.
31Annual Report 2019
B O R R O W I N G S A N D C A P I TA L
• Borrowings (which reflect the adoption of HKFRS 16)
increased by 31.7% to HK$97,260 million. These are
mainly denominated in United States dollars, Hong Kong
dollars and Japanese yen, and are fully repayable by
2033, with 52.8% currently at fixed rates of interest after
taking into account derivative transactions. HKFRS 16
did not make a major change to the currency profile of
borrowings. Excluding lease liabilities previously
classified as operating leases, borrowings increased by
4.6% to HK$77,293 million, which are fully repayable by
2031, with 44.2% at fixed rates of interest.
• Available unrestricted liquidity at 31st December 2019
totalled HK$20,011 million, comprising liquid funds of
HK$14,864 million (79.9% of which are denominated in
United States dollars) and committed undrawn facilities of
HK$5,289 million, less pledged funds of HK$142 million.
• Net borrowings (reflecting the adoption of HKFRS 16 and
after taking liquid funds and bank overdrafts into account)
increased by 40.7% to HK$82,396 million. Disregarding
the effect of adopting HKFRS 16, net borrowings
increased by 6.6% to HK$62,429 million.
• Funds attributable to the shareholders of Cathay Pacific
decreased by 1.8% to HK$62,773 million. This was due to
retained net profits and other comprehensive income,
0
40,000
80,000
60,000
20,000
Borrowings in key currencies
HK$ million
HKD JPY USD Others
Others include EUR and SGD.
0
20,000
60,000
80,000
100,000
0.4
0.6
1.0
1.2
1.4
40,000 0.8
XXXXXXXXXX2019
HK$ million
Net debt and equity
Funds attributable to the shareholders of Cathay Pacific
Net borrowings
Net debt/equity ratio (see Borrowing and capital below)
Times
%
0
20
40
60
80
100
XXXXXXXXXX2019
Interest rate profile: borrowings (after derivatives)
Fixed
Floating
less the dividend distribution, being more than offset by
the impact to opening reserves on the initial application
of HKFRS 16.
• Disregarding the effect of adopting HKFRS 16, the net
debt/equity ratio increased from 0.92 times to 0.96 times
(against borrowing covenants of 2.0). Taking into account
the effect of adopting HKFRS 16, the net debt/equity ratio
was 1.31 and 1.25 times at 31st December 2019 and 1st
January 2019 respectively.
H I G H
P E R F O R M A N C E
C U L T U R E
Our exceptionally well-trained and
service-orientated people are equipped
with the knowledge and skills to enrich the
travel experience of customers at every
stage of their journey with us.
33Annual Report 2019
S U S T A I N A B L E
D E V E L O P M E N T R E V I E W
S U S TA I N A B L E D E V E LO P M E N T
We apply sustainable development principles when doing
business. 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 people to mitigate or reduce the
environmental and social impact of the decisions which
they make.
We operate an environmental management system which is
based on ISO14001:2015 certification. The system is
audited once a year externally and internally. Opportunities
for improvement are identified during these audits.
We engage with the communities in which we operate and
involve our employees in doing so. We prioritise our
community activities but maintain flexibility in order to
respond to specific local needs.
Our people are one of our greatest assets. We are proud of
the high-quality service which 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 2019 will be
published in June 2020. It will be available at
https://sustainability.cathaypacific.com/past-reports/
reports-download/
P E R F O R M A N C E U P DAT E S – C AT H A Y PA C I F I C A N D C AT H A Y D R A G O N
XXXXXXXXXXChange
Environment
GHG emissions Million tonnes of CO2e XXXXXXXXXX –
GHG emissions per ATK Grammes of CO2e XXXXXXXXXX%
Electricity consumption MWh 32,900 37, XXXXXXXXXX%
Paper consumption (office) Tonnes XXXXXXXXXX%
Paper recycled (office and inflight) Tonnes 1,480 1, XXXXXXXXXX%
Metal recycled (office and inflight) Kg 39,209 37, XXXXXXXXXX%
Plastic recycled (office and inflight) Kg 43,108 39, XXXXXXXXXX%
People
 Total workforce Number 27,342 26, XXXXXXXXXX%
By location
 Hong Kong % XXXXXXXXXX%pt
 Outport % XXXXXXXXXX%pt
By employment type
 Flight crew % XXXXXXXXXX%pt
 Cabin crew % XXXXXXXXXX%pt
 Ground staff % XXXXXXXXXX%pt
By gender
 Female % XXXXXXXXXX%pt
 Male % XXXXXXXXXX%pt
Full indicator tables will be provided in Cathay Pacific’s Sustainable Development Report at
https://www.cathaypacific.com/cx/en_HK/about-us/environment/our-publications.html
https://sustainability.cathaypacific.com/past-reports/reports-download/
https://www.cathaypacific.com/cx/en_HK/about-us/environment/our-publications.html
Cathay Pacific Airways Limited34
AWA R D S A N D R E C O G N I T I O N S I N XXXXXXXXXX
• Cathay Pacific continues to be a constituent of the
FTSE4Good Index for 11 years and the Hang Seng
Corporate Sustainability Index since its establishment in
2011. In 2019, we responded to the Carbon Disclosure
Project climate change questionnaire and received a
B rating.
• In 2019, Cathay Pacific was awarded the Best in
Environmental, Social and Governance (ESG) and Best in
Reporting in the large market capitalisation category
respectively at the BDO ESG Awards.
XXXXXXXXXXH I G H L I G H T S
E N V I R O N M E N T
• Cathay Pacific participates in an International Civil
Aviation Organization task force which leads the aviation
industry’s work in developing proposals for a fair,
equitable and effective global agreement on emissions.
• 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
aviation policy with respect to climate change. 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.
S U S T A I N A B L E
D E V E L O P M E N T R E V I E W
• In compliance with the European Union’s Emissions
Trading Scheme, our 2019 emissions data from intra-EU
flights were reported on by an external auditor and
submitted to the UK Environment Agency in March 2020.
• In 2019, all our Airbus A XXXXXXXXXXaircraft were flown on
their delivery flights from Toulouse using fuel containing
biofuel.
• As of November 2019, Cathay Pacific and Cathay Dragon
flights have gone completely paperless with the launch of
the Flight Folder project, reducing both fuel use and
waste of paper.
• We have introduced two new projects as part of the Fly
Greener voluntary carbon offset programme. In 2019, we
offset 32,321 tonnes of CO2. Since the programme was
launched in 2007, over 197,000 tonnes of CO2 have
been offset.
• Since Cathay Pacific announced its single-use plastic
strategy in 2018, over 32 million pieces of single-use
plastic were removed from our operations annually. In
2019, Cathay Pacific also announced its three-year target
to reduce its single-use plastic footprint by half by 2022.
• Cathay Pacific Catering Services (H.K.) Limited (CPCS)
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 the CPCS
kitchens. More than 400 tonnes of surplus food were
donated in 2019.
• In March 2019, 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.
35Annual Report 2019
C O N T R I B U T I O N T O T H E C O M M U N I T Y
• The 8th “I Can Fly” programme took place in XXXXXXXXXX
secondary school students and 60 volunteers took part
in this six-month programme, which offers aviation
knowledge, visits to partner organisations, and hands-on
projects to address social issues. 30 outstanding
students were taken on an overseas trip to the Flight
Training school in Adelaide to meet with Cathay Pacific’s
cadet pilots.
• In 2019, Cathay Pacific launched the Cathay
ChangeMakers programme, which aims to recognise and
pay tribute to leaders in their respective fields who
contribute positively towards a better future. Besides
flights sponsorship, Cathay Pacific also made use of its
community engagement programme, and employee and
member communications to raise awareness of such
worthwhile causes. The three 2019 ChangeMakers were
Ms Gigi Tung, founder of food rescue NGO Food Angel; Mr
Craig Leeson, Director of documentary ‘A Plastic Ocean’;
and Mr Jeffrey Andrews, a social worker who helps ethnic
minorities in Hong Kong adapt to cultural differences and
integrate into the local community.
• Cathay Pacific supports UNICEF through its “Change for
Good” inflight fundraising programme. Our passengers
contributed HK$9.5 million in 2018 to help improve the
lives of vulnerable children worldwide. Since its
introduction in 1991, nearly HK$193 million has been
raised through the programme.
• In June 2019, a group of Cathay Pacific staff went to
Guizhou province in Mainland China to see how “Change
for Good” donations are put to good use within the local
community.
• A percentage of the “Change for Good” donations are
passed to the Cathay Pacific Wheelchair Bank, which
raises funds to provide specially adapted wheelchairs for
children with neuromuscular diseases.
• We organised tours of our headquarters at Hong Kong
International Airport for around 9,340 visitors in 2019.
• The Cathay Aviation Certificate programme is jointly
organised with the Hong Kong Air Cadet Corps and the
Scout Association of Hong Kong. Participants gain
first-hand knowledge of the Hong Kong aviation industry
and are mentored by Cathay Dragon pilots. In 2019,
Cathay Pacific and Cathay Dragon pilots mentored 40
participants over nine months. To date, over 360
participants have graduated from the programme. Over
55% of the graduates have started aviation-related
careers.
• Cathay Pacific has received the Caring Company status
from the Hong Kong Council of Social Service every year
since 2003 in recognition of its good corporate
citizenship.
• Cathay Pacific conducted a number of employee
briefings on the topic of Modern Slavery in 2019. The
Group also published its Modern Slavery & Human
Trafficking Policy this year.
C O M M I T M E N T T O S TA F F
• At 31st December 2019, the Cathay Pacific Group
employed more than 34,200 people worldwide. Around
28,200 of these people are based in Hong Kong. Cathay
Pacific and Cathay Dragon employed more than 27,300
permanent staff worldwide. Around 78% of these people
are based in Hong Kong.
• Cathay Pacific and Cathay Dragon recruited more than
3,000 staff in 2019, including 1,500 cabin crew and
350 pilots.
• In 2019, more than 100 cadets graduated from the Cathay
Pacific cadet pilot programme.
• 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 Limited36
E X E C U T I V E D I R E C T O R S
HEALY, Patrick#, aged 54, 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
Mainland China.
HUGHES, Gregory Thomas Forrest#, aged 58, 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 47, 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 and a Director of AHK Air Hong Kong
Limited. He joined the Swire group in 1996 and has worked
with the Company in Hong Kong, Japan and Sri Lanka.
MURRAY, Martin James#, aged 53, has been Chief
Financial Officer (formerly Finance Director) and a Director
of the Company since November 2011. He is also a Director
of Hong Kong Dragon Airlines Limited and AHK Air Hong
Kong Limited. He was previously Deputy Finance Director of
Swire Pacific Limited. He joined the Swire group in 1995 and
has worked with the group in Hong Kong, the United States,
Singapore and Australia.
D I R E C T O R S A N D O F F I C E R S
TANG, Kin Wing Augustus#, aged 61, 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.
N O N - E X E C U T I V E D I R E C T O R S
CAI, Jianjiang, aged 56, has been a Director of the
Company since November 2009 and Deputy Chairman
since March 2014. He is Chairman of China National Aviation
Holding Corporation Limited and Air China Limited.
CHU, Kwok Leung Ivan#, aged 58, has been a Director of
the Company since March 2011. He served as Chief
Operating Officer from March 2011 to March 2014 and Chief
Executive from March 2014 to April 2017. 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 has resigned from these positions with effect
from 14th April 2020. He is a member of the Chinese
People’s Political Consultative Conference Shanghai
Committee. He joined the Swire group in 1984 and has
worked with the group in Hong Kong, Mainland China,
Taiwan, Thailand and Australia.
LOW, Mei Shuen Michelle#*@, aged 59, 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.
SONG, Zhiyong, aged 54, has been a Director of the
Company since March 2014. He is Vice Chairman and
President of Air China Limited.
37Annual Report 2019
SWIRE, Merlin Bingham#, aged 46, 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, Mainland China and London. He is brother
to Samuel Swire, a Non-Executive Director of the Company.
SWIRE, Samuel Compton#+, aged 39, 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, Mainland China, Sri Lanka and London. He is
brother to Merlin Swire, a Non-Executive Director of the
Company.
XIAO, Feng*@, aged 51, has been a Director of the Company
since January 2017. He is Chief Financial Officer of Air China
Limited.
ZHANG, Zhuo Ping#, aged 48, was appointed a Director of
the Company with effect from 14th April 2020. He was also
appointed a Director of John Swire & Sons (H.K.) Limited and
Swire Pacific Limited and Chairman of John Swire & Sons
(China) Limited with effect from the same date. He spent his
early career in investment banking. He was with the Swire
group from 2002 to 2011, spending much of his time in
Mainland China, 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 58, has been a Director of the
Company since June 2011. He is Vice President of Air China
Limited.
I N D E P E N D E N T N O N - E X E C U T I V E
D I R E C T O R S
CHAN, Bernard Charnwut+ (formerly known as CHAN, Chi
Sze Bernard), aged 55, has been a Director of the Company
since December 2018. He is President and an Executive
Director of Asia Financial Holdings Limited and 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 63, has been a Director of
the Company since May 2015. He is an Independent Non-
Executive Director of AIA Group Limited, Grosvenor Asia
Pacific Limited and BW Group Limited and Vice Chairman of
BW LPG 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 59, 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 the 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 the
Chairman of United Continental Holdings, Inc., holding
company of United Airlines, from April 2016 to April 2018.
TUNG, Lieh Cheung Andrew+*, aged 55, has been a
Director of the Company since May 2015. He is a Non-
Executive Director of Orient Overseas (International)
Limited. He is also an Independent Non-Executive Director
of Standard Chartered Bank (Hong Kong) Limited.
C O M PA N Y S E C R E TA R Y
CHOW, Koon Ying (Paul)#, aged 48, 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 Limited38
We submit our report and the audited financial statements
for the year ended 31st December 2019 which are on pages
69 to 137.
P R I N C I PA L A C T I V I T I E S
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.
C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
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 2019 and the financial position
of the Group and the Company at that date are set out in the
financial statements on pages 69 to 137. Details of the joint
ventures and associates are provided under note 10 to the
financial statements.
D I V I D E N D S
The first interim dividend of HK$0.18 per share was paid on
3rd October 2019, representing a distribution of HK$708
million. The Directors decided not to declare a second
interim dividend for the year ended 31st December 2019.
The Company’s dividend policy is to distribute
approximately half of its consolidated profit after tax,
excluding non-cash exceptional items. The application of
D I R E C T O R S ’ R E P O R T
this policy and final declarations are however subject to
consideration of other factors, such as the strength of the
Company’s own statement of financial position, the
Company’s own profits, trading conditions and the
prevailing and forecast economic environment.
C LO S U R E O F R E G I S T E R O F M E M B E R S
To facilitate the processing of proxy voting for the annual
general meeting to be held on 13th May 2020, the register
of members will be closed from 8th May 2020 to 13th May
2020, 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, 7th May 2020.
B U S I N E S S R E V I E W A N D P E R F O R M A N C E
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
39Annual Report 2019
provided in the section of this annual report headed Review
of Operations and Sustainable Development Review. To the
extent necessary for an understanding of the development,
performance or position of the Group’s business, a
discussion of the Group’s compliance with the relevant laws
and regulations that have a significant impact on the Group
is provided in the sections of this annual report headed
Review of Operations, Corporate Governance Report and
Directors’ Report.
R E S E R V E S
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 72 and in note 22 to the financial
statements, respectively.
A C C O U N T I N G P O L I C I E S
The principal accounting policies are set out on pages 123
to 137.
E N V I R O N M E N TA L , S O C I A L A N D
G O V E R N A N C E
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.
D O N AT I O N S
During the year, the Company and its subsidiaries made
charitable donations amounting to HK$3 million in direct
payments and a further HK$7 million in the form of
discounts on airline travel.
P R O P E R T Y, P L A N T A N D E Q U I P M E N T
Movements of property, plant and equipment are shown in
note 8 to the financial statements. Details of aircraft
acquisitions are set out on page 19.
B A N K A N D O T H E R B O R R O W I N G S
The net bank loans and other borrowings, including lease
liabilities, of the Group are shown in note 12 to the financial
statements.
S H A R E C A P I TA L
There was no purchase, sale or redemption by the
Company, or any of its subsidiaries, of the Company’s
shares during the year and the Group has not adopted any
share option scheme.
At 31st December 2019, 3,933,844,572 shares were in issue
(31st December 2018: 3,933,844,572 shares). There has
been no movement in share capital during the year.
C A P I TA L C O M M I T M E N T S A N D
C O N T I N G E N C I E S
The details of capital commitments and contingent
liabilities of the Group at 31st December 2019 are set out in
note 30 to the financial statements.
A G R E E M E N T F O R S E R V I C E S
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, Martin Murray, Merlin Swire,
Samuel Swire and Augustus Tang are, and Zhang Zhuo Ping
will be, interested in the JSSHK Services Agreement (as
defined below). Merlin Swire and Samuel Swire are also so
interested as shareholders, directors and employees of the
Swire group. Rupert Hogg and Paul Loo were so interested
as directors and employees of the Swire group until their
resignation with effect from 19th August 2019. John Slosar
was so interested as a director and an employee of the
Swire group until his resignation with effect from the
conclusion of the Company’s board meeting held on 6th
November 2019. Ivan Chu is 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 2019 are set out below
and also given in note 29 to the financial statements.
Cathay Pacific Airways Limited40
D I R E C T O R S ’ R E P O R T
S I G N I F I C A N T C O N T R A C T S
Contracts between the Group and Hong Kong Aircraft
Engineering Company Limited (“HAECO”) and its subsidiary,
Taikoo (Xiamen) Aircraft Engineering Company Limited
(“TAECO”), for the maintenance and overhaul of aircraft and
related equipment accounted for approximately 3.8% of the
Group’s operating expenses in 2019. 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.
D I S C LO S E A B L E T R A N S A C T I O N
The Company, Hong Kong Express Holding Company
Limited (as seller) and HNA Aviation Group Co., Ltd. (as
seller’s guarantor) entered into a share purchase agreement
on 27th March 2019 for the Company to purchase and the
seller to sell a 100% equity interest in Hong Kong Express
Airways Limited. This transaction constituted a
discloseable transaction for the Company under the Listing
Rules and was completed on 19th July 2019, in respect of
which announcements dated 27th March 2019 and 19th
July 2019 were published. The consideration was HK$4,765
million, comprising (i) a cash consideration of HK$1,802
million payable in cash; and (ii) a non-cash consideration of
HK$2,963 million settled through the issue and novation of
promissory loan notes.
C O N T I N U I N G C O N N E C T E D
T R A N S A C T I O N S
During the year ended 31st December 2019, 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
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 2019, the fees
payable by the Company to JSSHK under the JSSHK
Services Agreement totalled HK$25 million and
expenses of HK$204 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
41Annual Report 2019
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 2019 and under the
HAECO Framework Agreement, the amounts payable by
the Group to the HAECO group totalled HK$3,947 million;
and the amounts payable by the HAECO group to the
Group totalled HK$34 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 2019 and under the
Air China Framework Agreement, the amounts payable
by the Group to the Air China group totalled HK$288
million; and the amounts payable by the Air China group
to the Group totalled HK$377 million.
The Independent Non-Executive Directors, who are not
interested in any connected transactions with the Group,
have reviewed and confirmed that the continuing
connected transactions as set out above have been
entered into by the Group:
(a) in the ordinary and usual course of business of 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:
Cathay Pacific Airways Limited42
D I R E C T O R S ’ R E P O R T
(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.
M A J O R C U S T O M E R S A N D S U P P L I E R S
8% of sales and 35% of purchases during the year were
attributable to the Group’s five largest customers and
suppliers respectively. 2% of sales were made to the
Group’s largest customer and 12% 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.
D I R E C T O R S
Robert Milton was appointed as a Director with effect from
the conclusion of the Company’s 2019 Annual General
Meeting held on 15th May 2019. Ronald Lam and Augustus
Tang were appointed as Directors with effect from 19th
August 2019. Patrick Healy was appointed as a Director and
elected as Chairman with effect from the conclusion of the
Company’s board meeting held on 6th November 2019.
Zhang Zhuo Ping has been appointed as a Director with
effect from 14th April 2020. 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. Irene Lee retired as a Director at the
conclusion of the Company’s 2019 Annual General Meeting
held on 15th May 2019. Rupert Hogg and Paul Loo resigned
as Directors with effect from 19th August 2019. John Slosar
retired as Chairman and a Director with effect from the
conclusion of the Company’s board meeting held on 6th
November 2019. Ivan Chu has resigned as a Director with
effect from 14th April 2020.
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, Song Zhiyong, Merlin Swire and Xiao
Feng retire this year and, being eligible, offer themselves for
re-election. Patrick Healy, Ronald Lam, Robert Milton,
Augustus Tang and Zhang Zhuo Ping, 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.
43Annual Report 2019
D I R E C T O R S ’ I N T E R E S T S
At 31st December 2019, 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 Personal 1, XXXXXXXXXX
Air China Limited
Michelle Low Personal 40, XXXXXXXXXX
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.
D I R E C T O R S ’ I N T E R E S T S
I N C O M P E T I N G B U S I N E S S
Pursuant to Rule 8.10 of the Listing Rules, Patrick Healy,
John Slosar, 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.
D I R E C T O R S O F S U B S I D I A R I E S
The names of all directors who have served on the boards
of the subsidiaries of the Company during the year ended
31st December 2019 or during the period from 1st January
2020 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).
P E R M I T T E D I N D E M N I T Y
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
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.
S U B S TA N T I A L S H A R E H O L D E R S
The register of interests in shares and short positions
maintained under Section 336 of the SFO shows that at 31st
December 2019 the Company had been notified of the
following interests in the shares of the Company held by
substantial shareholders and other persons:
Cathay Pacific Airways Limited44
D I R E C T O R S ’ R E P O R T
Long position No. of shares
Percentage of
voting shares (%) Type of interest (Note)
1. Air China Limited 2,949,997, XXXXXXXXXXAttributable interest (a)
2. China National Aviation Holding Corporation Limited 2,949,997, XXXXXXXXXXAttributable interest (b)
3. Swire Pacific Limited 2,949,997, XXXXXXXXXXAttributable interest (a)
4. John Swire & Sons Limited 2,949,997, XXXXXXXXXXAttributable interest (c)
5. Qatar Airways Group Q.C.S.C. 392,991, XXXXXXXXXXBeneficial interest (d)
Note: At 31st December 2019:
(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 2,949,997,987 shares of the Company,
comprising:
(i) 1,770,238,000 shares directly held by Swire Pacific;
(ii) 1,179,759,987 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: 288,596,335 shares held by Angel Paradise Ltd., 280,078,680 shares held
by Custain Limited, 191,922,273 shares held by Easerich Investments Inc., 189,976,645 shares held by Grand Link Investments Holdings Ltd.,
207,376,655 shares held by Motive Link Holdings Inc. and 21,809,399 shares held by Perfect Match Assets Holdings Ltd.
(b) China National Aviation Holding Corporation Limited is deemed to be interested in a total of 2,949,997,987 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 2,949,997,987 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 392,991,000 shares of the Company as beneficial owner.
P U B L I C F LO AT
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.
A U D I T O R S
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, 11th March 2020
45Annual Report 2019
G O V E R N A N C E C U LT U R E
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.
C O R P O R AT E G O V E R N A N C E S TAT E M E N T
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:
C O R P O R A T E
G O V E R N A N C E R E P O R T
• 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.
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.
https://www.cathaypacific.com
Cathay Pacific Airways Limited46
T H E B O A R D O F D I R E C T O R S
R O L E O F T H E B O A R D
The Company is governed by a Board of Directors, which
has responsibility for strategic leadership and control of the
Group designed to maximise shareholder value, while taking
due account of the interests of those with whom the Group
does business and others.
Responsibility for achieving the Company’s objectives and
running the business on a day-to-day basis is delegated to
management. The Board exercises a number of reserved
powers which include:
• maintaining and promoting the culture of the Company
• formulation of long-term strategy
• approving public announcements, including financial
statements
• committing to major acquisitions, divestments and
capital projects
• authorising significant changes to the capital structure
and material borrowings
• any issue, or buy-back, of equity securities under the
relevant general mandates
• approving treasury policy
• setting dividend policy
• approving appointments to the Board
• reviewing the board diversity policy with a view to the
Board having a balance of skills, experience and diversity
of perspectives appropriate to the Company’s
businesses
• ensuring that appropriate management development and
succession plans are in place
• setting the Group remuneration policy
• approving annual budgets and forecasts
• reviewing operational and financial performance
• reviewing the effectiveness of the Group’s risk
management and internal control systems
• ensuring the adequacy of the resources, staff
qualifications and experience, training programmes and
budget of the Company’s accounting, internal audit and
financial reporting functions.
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.
C H A I R M A N A N D C H I E F E X E C U T I V E
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
C O R P O R A T E
G O V E R N A N C E R E P O R T
47Annual Report 2019
• 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.
B O A R D C O M P O S I T I O N
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, Ivan Chu, Gregory Hughes, Ronald Lam,
Michelle Low, Martin Murray and Augustus Tang are and
Zhang Zhuo Ping will be, directors and/or employees of the
Swire group. Merlin Swire and Samuel Swire are
shareholders, directors and employees of the Swire group.
The Non-Executive Directors 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.
A P P O I N T M E N T A N D R E - E L E C T I O N
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.
Cathay Pacific Airways Limited48
On 11th March 2020, the Board, having reviewed the Board’s
composition, nominated Patrick Healy, Ronald Lam, Robert
Milton, Song Zhiyong, Merlin Swire, Augustus Tang, Xiao
Feng and Zhang Zhuo Ping for recommendation to
shareholders for election/re-election at the 2020 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 Patrick Healy,
Ronald Lam, Robert Milton, Song Zhiyong, Merlin Swire,
Augustus Tang and Xiao Feng to the Board and their firm
commitment to their roles. The Board is satisfied with the
independence of Robert Milton having regard to the criteria
laid down in the Listing Rules. The particulars of the
Directors standing for election/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.
B O A R D D I V E R S I T Y
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 XXXXXXXXXXyears (18%) | 48-56 years (41%) | 57-65 years (41%)
Gender Male (94%) | Female (6%)
Ethnicity American (6%) | Australian (6%) | British (29%) | Chinese (59%)
Years of service as Director 1-5 years (65%) | 6-10 years (29%) | over 10 years (6%)
Skills, expertise and experience company executive (76%) | accounting, banking and finance (24%)
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.
R E S P O N S I B I L I T I E S O F D I R E C T O R S
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.
C O R P O R A T E
G O V E R N A N C E R E P O R T
49Annual Report 2019
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.
B O A R D P R O C E S S E S
All committees of the Board follow the same processes as
the full Board.
The dates of the 2019 Board meetings were determined in
2018 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 six times in 2019. The attendance of
individual Directors at meetings of the Board and its
committees is set out in the table on page 50. Average
attendance at Board meetings was 96%. 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.
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.
Cathay Pacific Airways Limited50
Meetings attended by Members/Held
Board
Audit
Committee
Board Risk
Committee
Remuneration
Committee
Finance
Committee
Board
Safety
Review
Committee
2019
Annual
General
Meeting
Executive Directors
Patrick Healy – Chairman (appointed
 on 6th November 2019) N/A N/A N/A
John Slosar – Chairman (retired
 on 6th November XXXXXXXXXX/6 1/2 √
Rupert Hogg (resigned with effect
 from 19th August XXXXXXXXXX/5 7/8 1/1 √
Gregory Hughes 6/6 9/12 2/2 √
Ronald Lam (appointed
 on 19th August XXXXXXXXXX/1 3/4 1/1 N/A
Paul Loo (resigned with effect
 from 19th August XXXXXXXXXX/5 8/8 1/1 √
Martin Murray 6/6 11/12 √
Augustus Tang (appointed
 on 19th August XXXXXXXXXX/1 4/4 1/1 N/A
Non-Executive Directors
Cai Jianjiang 6/6 0/2 X
Ivan Chu 6/6 2/2 √
Michelle Low 6/6 3/3 1/2 7/12 2/2 √
Song Zhiyong 6/6 0/2 X
Merlin Swire 6/6 2/2 √
Samuel Swire 6/6 2/2 2/2 √
Xiao Feng 6/6 3/3 2/2 10/12 0/2 X
Zhao Xiaohang 6/6 9/12 0/2 X
Independent Non-Executive Directors
Bernard Chan 5/6 2/2 2/2 √
John Harrison 6/6 3/3 2/2 2/2 √
Irene Lee (retired
 on 15th May XXXXXXXXXX/2 1/1 1/1 1/1 √
Robert Milton (appointed
 on 15th May XXXXXXXXXX/4 2/2 2/2 0/1 N/A
Andrew Tung 5/6 2/3 1/1 2/2 √
Average attendance 96% 93% 88% 100% 81% 69% 76%
C O R P O R A T E
G O V E R N A N C E R E P O R T
51Annual Report 2019
C O N T I N U O U S P R O F E S S I O N A L
D E V E LO P M E N T
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.
D I R E C TO R S ’ A N D O F F I C E R S ’ I N S U R A N C E
The Company has arranged appropriate insurance cover in
respect of potential legal actions against its Directors and
Officers.
C O N F L I C T S O F I N T E R E S T
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.
D E L E G AT I O N B Y T H E B O A R D
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.
S E C U R I T I E S T R A N S A C T I O N S
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 2019 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.
Cathay Pacific Airways Limited52
The following committees have been established to assist
the Board in discharging its responsibilities:
B O A R D S A F E T Y R E V I E W C O M M I T T E E
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.
E X E C U T I V E C O M M I T T E E
The Executive Committee comprises the Chief Executive
Officer (Augustus Tang) (Committee Chairman), three other
Executive Directors (Gregory Hughes, Ronald Lam and
Martin Murray) and five Non-Executive Directors (Cai
Jianjiang, Michelle Low, Song Zhiyong, Xiao Feng and Zhao
Xiaohang).
F I N A N C E C O M M I T T E E
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 Martin Murray), three Non-
Executive Directors (Michelle Low, Xiao Feng and Zhao
Xiaohang), the Head of Financial Services (Christopher
Buckley), the Head of Treasury (Susan Ng) and an
independent representative from the financial community.
R E M U N E R AT I O N C O M M I T T E E
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. Andrew Tung succeeded Irene
Lee as Chairman of the Remuneration Committee with
effect from the conclusion of the Company’s 2019 Annual
General Meeting held on 15th May 2019. All the other
members served for the whole of 2019.
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 27 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.
C O R P O R A T E
G O V E R N A N C E R E P O R T
53Annual Report 2019
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.
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
meeting in October 2019. At this meeting 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 27 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
2019
HK$
2020
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
B O A R D R I S K C O M M I T T E E – see pages 54 to 57
A U D I T C O M M I T T E E – see pages 58 to 60
A C C O U N TA B I L I T Y A N D A U D I T
1. F I N A N C I A L R E P O R T I N G
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. R I S K M A N A G E M E N T
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.
Cathay Pacific Airways Limited54
C O R P O R A T E
G O V E R N A N C E R E P O R T
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 – 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 – an executive
committee chaired by the Chief Executive Officer
responsible for the design, delivery and direct
oversight of the RMF and, through it, the management
of all corporate risks within the Company.
• Group Corporate Risk Department – headed by a Chief
Risk Officer reporting to the Chief Executive Officer.
This department has specific responsibility for
developing, maintaining and ensuring the
effectiveness of the RMF.
Board Risk Committee
The Board Risk Committee, consisting of four Non-
Executive Directors (Michelle Low, John Harrison, Robert
Milton and Xiao Feng), was established on 1st July 2019
and is charged with supporting the Board in its
responsibility for all risk management within the Group,
focusing 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. All the members served for
the second half of 2019 (after establishment of the
committee on 1st July 2019).
The Board Risk Committee met twice in 2019. 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 work of the Committee during 2019 included reviews
of the following matters:
• the Group’s RMF
• the Group’s risk management policy and processes
• the Group’s data governance and cybersecurity risks
• the impact of the social and political situation in Hong
Kong on the Group
• risk management issues relating to Hong Kong
Express Airways Limited, which became a wholly
owned subsidiary of the Company on 19th July 2019.
The Chief Risk Officer was appointed in April 2019 and
each of the new committees have so far held two
meetings.
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 on
page 55.
55Annual Report 2019
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
practiced 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.
* It is recognised that Legal and Compliance sits between first and second lines; for practical purposes they are included in the first line.
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
Cathay Pacific Airways Limited56
C O R P O R A T E
G O V E R N A N C E R E P O R T
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.
From 2019 the risk registers have been compiled
through the medium of workshops conducted with
senior managers. 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.
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/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.
57Annual Report 2019
Areas of Focus in 2019
Focus in 2019 has been on establishing the new RMF and
enhancing risk identification and dimensioning. Areas
covered so far have included Data Governance and
Cybersecurity, where ongoing actions related to building
resilience across the Group have been reviewed and
progress tracked. They have included strengthening of
data consents, retention governance and data exposure
risk as well as ongoing cyber security protections to
meet industry best practice.
There has been much focus this year on risk related to
the potential decreased attractiveness of Hong Kong as
an international destination or transit point given
ongoing events in the city, and the impact of these on the
Group. A response to this under the temporary
governance of a working group and steering committee
chaired by the Chief Executive Officer was set up to
coordinate related actions across the Group, with
particular focus on the security and safety of our
customers and our people, and on identifying emerging
risks in relation to the situation which in this environment
have significantly increased velocity and potential to
compound. Response to the downturn in travel to Hong
Kong, particularly from the region, has included network-
wide promotion of connecting traffic to beyond
destinations.
Workshops were also conducted to identify and score
risks related to the acquisition and operation of HK
Express, use of third parties, and organisation and
culture, and to establish the necessary mitigation plans
around these. More are planned on risks related to
operational technologies and climate change, and risk
related to the situation in Hong Kong as an aviation hub
will continue to be monitored. In all cases action plans
are agreed with appointed risk owners in the business,
improvements tracked and risk scores amended
accordingly.
3. I N T E R N A L C O N T R O L
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 between pages 58 and 60.
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.
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.
Cathay Pacific Airways Limited58
C O R P O R A T E
G O V E R N A N C E R E P O R T
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 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 senior
management.
Audit Committee
The Audit Committee, consisting of five Non-Executive
Directors (Michelle Low, John Harrison, 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. With effect from the
conclusion of the Company’s 2019 Annual General
Meeting held on 15th May 2019, John Harrison
59Annual Report 2019
succeeded Irene Lee as Chairman of the Audit
Committee and Robert Milton was appointed as a
member of the Audit Committee. All the other members
served for the whole of 2019.
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 2019. 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 2019 included reviews
of the following matters:
• the completeness, accuracy and integrity of formal
announcements relating to the Group’s performance
including the 2018 annual and 2019 interim reports
and announcements, with recommendations to the
Board for approval
• the Group’s compliance with certain regulatory and
statutory requirements
• the Group’s internal control systems
• the approval of the 2020 annual Internal Audit
programme and review of progress on the 2019
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 60
• the Company’s compliance with the CG Code
• the Company’s fuel hedging policy.
In 2020, the Committee has reviewed, and
recommended to the Board for approval, the 2019
financial statements.
Assessing the Effectiveness of Risk Management
and Internal Control Systems
On behalf of the Board, the Audit Committee and the
Board Risk Committee (in relation to risk management)
review annually the continued effectiveness of the
Group’s risk management and internal control systems
dealing with risk and financial accounting and reporting,
the effectiveness and efficiency of operations,
compliance with laws and regulations, and risk
management functions.
This assessment considers:
• the scope and quality of management’s ongoing
monitoring of risks and of the risk management and
internal control systems, the work and effectiveness of
Group Internal Audit and the assurances provided by
the Chief 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
Cathay Pacific Airways Limited60
• 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.
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 2019 the total remuneration paid to the external
auditors was HK$24 million, being HK$16 million for audit,
HK$7 million for tax advice and HK$1 million for other
professional services.
C O R P O R A T E
G O V E R N A N C E R E P O R T
61Annual Report 2019
4. M A N A G E M E N T C O M M I T T E E
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 (Martin Murray),
Director Engineering (Neil Glenn), Director Customer
(Simon Large), Director Flight Operations (Captain Chris
Kempis), Director People (Tom Owen), Director Service
Delivery (Algernon Yau), Director Commercial (Lavinia
Lau) 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.
O T H E R M AT T E R S
C O M PA N Y S E C R E TA R Y
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.
I N S I D E I N F O R M AT I O N
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.
S H A R E H O L D E R S
C O M M U N I C AT I O N W I T H
S H A R E H O L D E R S A N D I N V E S T O R S
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
• 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 XXXXXXXXXX. The
relevant contact details are set out in the section of this
annual report headed Corporate and Shareholder
Information.
mailto:ir%40cathaypacific.com?subject=
Cathay Pacific Airways Limited62
T H E A N N U A L G E N E R A L M E E T I N G
The Annual General Meeting is an important forum in which
to engage with shareholders. The most recent Annual
General Meeting was held on 15th May 2019. The meeting
was open to all shareholders and to the press. The Directors
who attended the meeting are shown in the table on
page 50.
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 items
were:
• receiving the report of the Directors and the audited
financial statements for the year ended 31st December
2018
• 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.
D I V I D E N D P O L I C Y
Cathay Pacific has a policy on the payment of dividends,
which is set out in the section of this annual report headed
Directors’ Report.
S H A R E H O L D E R E N G A G E M E N T
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.
O T H E R I N F O R M AT I O N F O R
S H A R E H O L D E R S
Key shareholder dates for 2020 are set out in the section of
this annual report headed Corporate and Shareholder
Information.
No amendment has been made to the Company’s Articles
of Association during the year.
C O R P O R A T E
G O V E R N A N C E R E P O R T
63Annual Report 2019
I N D E P E N D E N T
A U D I T O R ’ S R E P O R T
To the members of
Cathay Pacific Airways Limited
(Incorporated in Hong Kong with
limited liability)
R E P O R T O N T H E A U D I T O F T H E
C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
O P I N I O N
We have audited the consolidated financial statements of
Cathay Pacific Airways Limited and its subsidiaries
(together “the Group”) set out on pages 69 to 137, which
comprise the consolidated statement of financial position
as at 31st December 2019, 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 2019 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.
B A S I S O F O P I N I O N
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.
K E Y A U D I T M AT T E R S
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 Limited64
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
R E V E N U E R E C O G N I T I O N
Refer to accounting policy 15 and notes 1 and 19 to the consolidated financial statements
The Key Audit Matter How the matter was addressed in our audit
Passenger and cargo sales are recognised as revenue when
the related transportation service is provided. The value of the
sales for which the related transportation service has not yet
been provided at the end of the reporting period, adjusted for
breakage, is recorded as a contract liability.
The value attributed to programme awards under the Group’s
customer loyalty programme, Asia Miles, is recognised as a
contract liability. This arises as members of the programme
accumulate Asia Miles by travelling on the Group’s flights or
when the Group sells Asia Miles to participating partners in the
programme. The amount is subsequently recognised as
income when the related goods or services are provided
subsequent to the redemption of the Asia Miles. Management
allocates the amount received in relation to mileage earning
flights, based on stand-alone selling price, between the flight
and Asia Miles earned by members of the programme.
The Group maintains sophisticated information technology
(“IT”) systems in order to track the point of service provision for
each sale and also to track the issuance and subsequent
redemption and utilisation of Asia Miles.
We identified revenue recognition as a key audit matter
because revenue is one of the Group’s key performance
indicators and it involves complicated IT systems and
allocation of revenue between flights and Asia Miles, all of
which give rise to an inherent risk that revenue could be
recorded in the incorrect period or could be subject to
manipulation to meet targets or expectations.
Our audit procedures to assess revenue recognition included
the following:
• assessing the design, implementation and operating
effectiveness of management’s general IT controls and key
application controls over the Group’s IT systems which
govern revenue recognition, including access controls,
controls over programme changes, interfaces between
different systems and key manual internal controls over
revenue recognition;
• performing analytical procedures on passenger and cargo
revenue by developing an expectation using independent
inputs and information generated from the Group’s IT
systems and comparing such expectations with recorded
revenue;
• inspecting underlying documentation for journal entries
which met specified risk-based criteria;
• assessing management’s allocation of the amount received
in relation to mileage earning flights between the flight and
Asia Miles earned by members of the programme, with
reference to the prices for third party Asia Miles sales and
assessing whether or not there was an indication of
management bias;
• inspecting the key terms and conditions of contracts with
major partners of the Asia Miles programme to assess if
there were any terms and conditions that may have affected
the accounting treatment of the related Asia Miles.
H E D G E A C C O U N T I N G
Refer to accounting policy 10 and notes 11, 13, 16, 18, 22 and 31 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
HKFRSs is applied for a majority of these arrangements, and
related contracts gave rise to derivative financial assets of
HK$595 million and derivative financial liabilities of HK$917
million as at 31st December 2019.
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 hedging contracts, necessitating a
sophisticated system to record and track each contract and
determine the related valuations at each financial reporting
date and because the valuation of hedging instruments and
consideration of hedge effectiveness can involve a significant
degree of both complexity and management judgement and is
subject to an inherent risk of error.
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 related hedge
accounting;
• requesting 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 considering
whether the related accounting treatment was in
accordance with the requirements of the prevailing
accounting standards;
• re-performing calculations of hedge effectiveness on a
sample basis;
• 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.
65Annual Report 2019
A S S E S S M E N T O F P R O V I S I O N S F O R TA X AT I O N , L I T I G AT I O N A N D C L A I M S
Refer to accounting policy 19 and notes 5, 18 and 30 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 30(d) to the
consolidated financial statements.
Provisions for taxation, litigation and claims represented
management’s best estimates of the amounts likely to be
required to settle these matters. The amount recorded at
31st December 2019 totalled HK$2,745 million, of which
HK$1,951 million was recorded as taxation in the
consolidated statement of financial position, and the
remaining HK$794 million was included within the balance of
other payables in note 18 to the consolidated financial
statements.
We identified the assessment of provisions for taxation,
litigation and claims as a key audit matter because the
estimates on which these provisions are based involve a
significant degree of management judgement in interpreting
the various relevant rules, regulations and practices and in
considering precedents in the various jurisdictions and
because determining the level of provisions may be subject
to a degree of management bias.
Our audit procedures to assess the provisions for taxation,
litigation and claims included the following:
• engaging our internal tax specialists in Hong Kong and the
relevant overseas jurisdictions 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.
A S S E S S I N G T H E C A R R Y I N G VA L U E O F A I R C R A F T A N D R E L AT E D E Q U I P M E N T
Refer to accounting policy 5 and note 8 to the consolidated financial statements
The Key Audit Matter How the matter was addressed in our audit
The carrying value of the Group’s aircraft and related
equipment as at 31st December 2019 was HK$123,312
million and the related depreciation charge for the year
ended 31st December 2019 was HK$11,575 million.
Estimated useful lives, residual values and the carrying value
of aircraft and related equipment are reviewed annually
taking into consideration factors such as changes in fleet
composition, current and forecast market values and
technical factors which may affect the useful life expectancy
of the assets and, therefore, could have a material impact on
any impairment charges or the depreciation charge for the
year.
We identified the assessment of the carrying value of aircraft
and related equipment as a key audit matter because of its
significance to the consolidated financial statements and
because applying the Group’s accounting policies in this
area involves a significant degree of judgement by
management in considering the nature, timing and likelihood
of changes to the factors noted above, which may affect the
carrying value of the Group’s aircraft and related equipment,
the depreciation charge and any impairment charges for the
current and future years.
Our audit procedures to assess the carrying value of aircraft and
related equipment included the following:
• assessing the estimated useful lives and residual values of
aircraft and related equipment with reference to the Group’s
historical experience and future operating plans including
future acquisitions and retirement of aircraft, policies adopted
by other comparable airlines and our knowledge of the airline
industry;
• challenging any changes to the estimated useful lives and
residual values of aircraft by considering external information
such as third party quotations, recent sales data for similar
aircraft or actual sales agreements the Group entered into
which might lead to an adjustment to the remaining useful lives
or residual values;
• discussing indicators of possible impairment of aircraft and
related equipment with management of the Group and, where
such indicators were identified, assessing whether
management had performed impairment testing in accordance
with the requirements of the prevailing accounting standards;
• challenging the assumptions and critical judgements used by
management in their impairment assessments by comparing
management’s past estimates and plans to the current year’s
estimates and plans taking into account recent developments
in the airline industry and market conditions.
Cathay Pacific Airways Limited66
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
A S S E S S I N G A I R C R A F T M A I N T E N A N C E P R O V I S I O N S
Refer to accounting policy 6 and notes 13 and 18 to the consolidated financial statements
The Key Audit Matter How the matter was addressed in our audit
As at 31st December 2019, the Group operated 69 aircraft
held 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$5,031
million as at 31st December 2019 and are included within other
long-term payables and trade and other payables in the
consolidated statement of financial position.
We have 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 reviewing the terms
of the leases 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.
A S S E S S I N G P O T E N T I A L I M PA I R M E N T O F G O O D W I L L A L LO C AT E D T O T H E C A S H - G E N E R AT I N G U N I T
( “ C G U ” ) O F H O N G KO N G E X P R E S S A I R WA Y S L I M I T E D ( “ H K E X P R E S S ” )
Refer to accounting policy 2 and notes 9 and 26 to the consolidated financial statements
The Key Audit Matter How the matter was addressed in our audit
The Group acquired HK Express on 19th July 2019. Goodwill
amounting to HK$3,988 million arose on the acquisition, of
which HK$3,616 million was allocated to the CGU of HK
Express and HK$372 million was allocated to the CGU of
Cathay Pacific Airways Limited and Hong Kong Dragon Airlines
Limited.
Management performed an impairment assessment of
goodwill allocated to the CGU of HK Express as at
31st December 2019 by comparing the carrying value of
HK Express as a CGU with its value in use based on discounted
cash flow forecasts.
The preparation of discounted cash flow forecasts of
HK Express involves estimating future cash flows, growth rates
and discount rates which can be inherently uncertain given the
recency of the transaction and HK Express’ business model as
a low cost carrier which is different from the other airlines
operated by the Group.
We identified the assessment of potential impairment of
goodwill allocated to the CGU of HK Express as a key audit
matter because the year-end assessment performed by
management contains certain judgemental assumptions which
could be subject to management bias.
Our audit procedures to assess the potential impairment of
goodwill allocated to the CGU of HK Express included the
following:
• assessing management’s identification of the CGU and the
allocation of assets to the CGU for the purpose of
impairment assessment;
• engaging our internal valuation specialists to assess the
methodology adopted by management in its impairment
assessment of goodwill allocated to the CGU of HK Express
with reference to the requirements of the prevailing
accounting standards;
• evaluating the assumptions adopted in the preparation of
the discounted cash flow forecast, including projected
future growth rates for income and expenses and discount
rate with reference to our understanding of the business,
historical trends and available industry information and
market data;
• comparing the budgeted results prepared at the time of the
acquisition with the actual post-acquisition performance of
HK Express to assess the reliability of the cash flow forecast
prepared at the time of acquisition, and making enquiries of
management as to the reasons for any significant variations
identified;
• performing sensitivity analyses on the key assumptions,
including projected profitability and the discount rate,
adopted in the discounted cash flow forecast and assessing
whether there were any indicators of management bias in
the selection of these assumptions.
67Annual Report 2019
I N FO R MAT I O N OT H ER T HAN T H E C O N S O LI DAT ED
F I NAN C IAL S TAT EM EN T S AN D AU D I TO R ’ S R EP O R T
T H ER EO N
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.
R ES P O N S I B I L I T I ES O F T H E D I R ECTO R S FO R T H E
C O N S O LI DAT ED F I NAN C IAL S TAT EM EN T S
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.
AU D I TO R ’ S R ES P O N S I B I L I T I ES FO R T H E AU D I T O F
T H E C O N S O LI DAT ED F I NAN C IAL S TAT EM EN T S
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 Limited68
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
• 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, related safeguards.
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
11th March 2020
69Annual Report 2019
C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S
A N D O T H E R C O M P R E H E N S I V E I N C O M E
for the year ended 31st December 2019
Note
2019
HK$M
2018
HK$M
2019
US$M
2018
US$M
Revenue
 Passenger services 73,985 73,119 9,485 9,374
 Cargo services 23,810 28,316 3,052 3,630
 Other services and recoveries 9,178 9,625 1,177 1,234
Total revenue 106,973 111,060 13,714 14,238
Expenses
 Staff (20, XXXXXXXXXX,211) (2,580) (2,591)
 Inflight service and passenger expenses (5,306) (5, XXXXXXXXXX)
 Landing, parking and route expenses (17, XXXXXXXXXX,486) (2,277) (2,242)
 Fuel, including hedging losses (29, XXXXXXXXXX,869) (3,822) (4,342)
 Aircraft maintenance (9,858) (9,401) (1,264) (1,205)
 Aircraft depreciation and rentals (12, XXXXXXXXXX,743) (1,541) (1,634)
 Other depreciation, amortisation and rentals (2,991) (2, XXXXXXXXXX)
 Commissions XXXXXXXXXX111)
 Others (4,847) (4, XXXXXXXXXX)
Operating expenses (103, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,777)
Operating profit before non-recurring items 3,327 3, XXXXXXXXXX
Gain on deemed partial disposal of an associate 2 114 – 15 –
Operating profit 3 3,441 3, XXXXXXXXXX
 Finance charges (3,276) (2, XXXXXXXXXX)
 Finance income XXXXXXXXXX
Net finance charges 4 (2,939) (2, XXXXXXXXXX)
Share of profits of associates 1,643 1, XXXXXXXXXX
Profit before taxation 2,145 3, XXXXXXXXXX
Taxation XXXXXXXXXX) (60)
Profit for the year 1,691 2, XXXXXXXXXX
Non-controlling interests – (432) – (55)
Profit attributable to the shareholders of Cathay Pacific 1,691 2, XXXXXXXXXX
Earnings per share (basic and diluted XXXXXXXXXX¢ 59.6¢ 5.5¢ 7.6¢
Profit for the year 1,691 2, XXXXXXXXXX
Other comprehensive income
 Items that may not be reclassified subsequently to profit or loss:
  Revaluation of equity investments designated at fair value
   through other comprehensive income (non-recycling) 33 – 4 –
  Defined benefit plans 1, XXXXXXXXXX)
 Items that may be reclassified subsequently to profit or loss:
  Cash flow hedges 551 1, XXXXXXXXXX
  Share of other comprehensive income of associates XXXXXXXXXX
  Exchange differences on translation of foreign operations XXXXXXXXXX, XXXXXXXXXX)
Other comprehensive income for the year, net of taxation XXXXXXXXXX
Total comprehensive income for the year 2,678 3, XXXXXXXXXX
Total comprehensive income attributable to
 Shareholders of Cathay Pacific 2,678 2, XXXXXXXXXX
 Non-controlling interests – 432 – 55
2,678 3, XXXXXXXXXX
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$7.8.
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative information in 2018 is not
restated. See accounting policy 1.
The notes on pages 73 to 122 and the principal accounting policies on pages 123 to 137 form part of these financial statements.
Cathay Pacific Airways Limited70
C O N S O L I D A T E D S T A T E M E N T
O F F I N A N C I A L P O S I T I O N
at 31st December 2019
Note
2019
HK$M
2018
HK$M
2019
US$M
2018
US$M
ASSETS AND LIABILITIES
Non-current assets and liabilities
Property, plant and equipment 8 140,114 117,124 17,963 15,016
Intangible assets 9 15,151 11,174 1,942 1,432
Investments in associates 10 27,055 27,570 3,469 3,534
Other long-term receivables and investments 11 3,823 4, XXXXXXXXXX
Deferred tax assets 15 1, XXXXXXXXXX
187,232 160,676 24,004 20,599
Long-term liabilities 12 (76, XXXXXXXXXX,183) (9,809) (7,716)
Other long-term payables 13 (4,806) (4, XXXXXXXXXX)
Deferred tax liabilities 15 (13, XXXXXXXXXX,178) (1,739) (1,689)
(94, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,001)
Net non-current assets 92,354 82,666 11,840 10,598
Current assets and liabilities
Stock 1,812 1, XXXXXXXXXX
Trade and other receivables 16 10,608 12,475 1,360 1,599
Liquid funds 17 14,864 15,315 1,906 1,964
27,284 29,618 3,498 3,797
Current portion of long-term liabilities 12 (20, XXXXXXXXXX,694) (2,660) (1,756)
Trade and other payables 18 (18, XXXXXXXXXX,646) (2,336) (2,262)
Contract liabilities 19 (15, XXXXXXXXXX,792) (2,044) (2,025)
Bank overdrafts – unsecured – (19) – (2)
Taxation (1,951) (1, XXXXXXXXXX)
Dividend payable to non-controlling interests – (1) – –
(56, XXXXXXXXXX,345) (7,290) (6,198)
Net current liabilities (29, XXXXXXXXXX,727) (3,792) (2,401)
Total assets less current liabilities 157,654 141,949 20,212 18,198
Net assets 62,776 63,939 8,048 8,197
CAPITAL AND RESERVES
Share capital 20 17,106 17,106 2,193 2,193
Reserves 22 45,667 46,830 5,855 6,004
Funds attributable to the shareholders of Cathay Pacific 62,773 63,936 8,048 8,197
Non-controlling interests 3 3 – –
Total equity 62,776 63,939 8,048 8,197
The financial statements are prepared and presented in HK$, the functional currency. The US$ figures are shown only as supplementary
information and are translated at US$1:HK$7.8.
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative information in 2018 is not
restated. See accounting policy 1.
The notes on pages 73 to 122 and the principal accounting policies on pages 123 to 137 form part of these financial statements.
Patrick Healy John Harrison
Director Director
Hong Kong, 11th March 2020
71Annual Report 2019
C O N S O L I D A T E D S T A T E M E N T
O F C A S H F L O W S
for the year ended 31st December 2019
Note
2019
HK$M
2018
HK$M
2019
US$M
2018
US$M
Operating activities
 Cash generated from operations 23 18,458 17,737 2,366 2,274
 Interest received XXXXXXXXXX
 Interest paid (3,010) (1, XXXXXXXXXX)
 Tax paid XXXXXXXXXX, XXXXXXXXXX)
Net cash inflow from operating activities 15,342 14,525 1,967 1,862
Investing activities
 Purchase of subsidiaries 26(b) (1,697) – (218) –
 Net decrease in liquid funds other than cash and
  cash equivalents 1,796 4, XXXXXXXXXX
 Proceeds from sales of property, plant and equipment XXXXXXXXXX
 Proceeds from sales of intangible assets – 196 – 25
 Proceeds from sales of assets held for sale – 865 – 111
 Net increase in other long-term receivables and
  investments (60) – (8) –
 Payments for property, plant and equipment and
  intangible assets (12, XXXXXXXXXX,991) (1,560) (2,050)
 Dividends received from associates XXXXXXXXXX
 Net repayments of loans to associates – 1,121 – 144
Net cash outflow from investing activities (11,604) (8,632) (1,488) (1,106)
Financing activities
 Purchase of non-controlling interests – (36) – (5)
 New financing 12 16,975 11,237 2,176 1,441
 Initial cash benefit from lease arrangements XXXXXXXXXX, XXXXXXXXXX
 Loan and lease repayments 12 (18, XXXXXXXXXX,198) (2,408) (2,077)
 Dividends paid – to the shareholders of Cathay Pacific (1, XXXXXXXXXX)
– to non-controlling interests XXXXXXXXXX) – (72)
Net cash outflow from financing activities (2,469) (5, XXXXXXXXXX)
Increase in cash and cash equivalents 1, XXXXXXXXXX
Cash and cash equivalents at 1st January 7,653 6, XXXXXXXXXX
Effect of exchange differences XXXXXXXXXX)
Cash and cash equivalents at 31st December 25 8,881 7,653 1,138 981
The financial statements are prepared and presented in HK$, the functional currency. The US$ figures are shown only as supplementary
information and are translated at US$1:HK$7.8.
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative information in 2018 is not
restated. See accounting policy 1.
The notes on pages 73 to 122 and the principal accounting policies on pages 123 to 137 form part of these financial statements.
Cathay Pacific Airways Limited72
C O N S O L I D A T E D S T A T E M E N T
O F C H A N G E S I N E Q U I T Y
for the year ended 31st December 2019
Attributable to the shareholders of Cathay Pacific
Share
capital
HK$M
Retained
profit
HK$M
Investment
revaluation
reserve
(recycling)
HK$M
Investment
revaluation
reserve
(non-
recycling)
HK$M
Cash flow
hedge
reserve
HK$M
Others
HK$M
Total
HK$M
Non-
controlling
interests
HK$M
Total
equity
HK$M
Balance at 31st December
 2018 17,106 46,956 – XXXXXXXXXX, XXXXXXXXXX,939
Impact on initial application
 of HKFRS 16 – (2,346) – – – – (2,346) – (2,346)
Adjusted balance at
 1st January XXXXXXXXXX,106 44,610 – XXXXXXXXXX, XXXXXXXXXX,593
Profit for the year – 1,691 – – – – 1,691 – 1,691
Other comprehensive
 income – 1,061 – XXXXXXXXXX – 987
Total comprehensive
 income for the year – 2,752 – XXXXXXXXXX,678 – 2,678
2018 second interim
 dividend – (787) – – – – (787) – (787)
2019 first interim dividend – (708) – – – – (708) – (708)
At 31st December XXXXXXXXXX,106 45,867 – XXXXXXXXXX, XXXXXXXXXX,776
Balance at 31st December
 2017 17,106 44,115 505 – (1, XXXXXXXXXX, XXXXXXXXXX,272
Impact on initial application
 of HKFRS 9 – XXXXXXXXXX) – (39) – – –
Impact on initial application
 of HKFRS 15 – 631 – – – – 631 – 631
Adjusted balance at
 1st January XXXXXXXXXX,106 45,471 – XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,903
Profit for the year – 2,345 – – – – 2, XXXXXXXXXX,777
Other comprehensive
 income – (270) – – 1, XXXXXXXXXX – 449
Total comprehensive
 income for the year – 2,075 – – 1, XXXXXXXXXX, XXXXXXXXXX,226
2017 interim dividend – (197) – – – – (197) – (197)
2018 first interim dividend – (393) – – – – (393) – (393)
Dividends paid to
 non-controlling interests – – – – – – – XXXXXXXXXX)
Purchase of
 non-controlling interests – – – – – – – XXXXXXXXXX)
At 31st December XXXXXXXXXX,106 46,956 – XXXXXXXXXX, XXXXXXXXXX,939
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative information in 2018 is not
restated. See accounting policy 1.
The notes on pages 73 to 122 and the principal accounting policies on pages 123 to 137 form part of these financial statements.
73Annual Report 2019
1. S E G M E N T I N F O R M AT I O N
(a) Segment results
2019
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 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, XXXXXXXXXX3,441
Net finance charges (2, XXXXXXXXXX) – XXXXXXXXXX,939)
XXXXXXXXXX502
Share of profits of associates – – – – 1,643 1,643
Profit/(loss) before taxation XXXXXXXXXX) 1,643 2,145
Taxation XXXXXXXXXX XXXXXXXXXX)
Profit/(loss) for the year XXXXXXXXXX) 1,488 1,691
Non-controlling interests – – – – – –
Profit/(loss) attributable to the
 shareholders of Cathay Pacific XXXXXXXXXX) 1,488 1,691
Other segment information
Depreciation and amortisation 13, XXXXXXXXXX,222
Purchase of property, plant and
 equipment and intangible assets 12, XXXXXXXXXX,171
2018
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 106,194 – 3,653 1,213 111,060
Inter-segment sales 318 – 6 3,651 3,975
Segment revenue 106,512 – 3,659 4,864 115,035
Segment profit/(loss) 2,390 – 1, XXXXXXXXXX,595
Net finance charges (1,853) – XXXXXXXXXX,114)
537 – 1, XXXXXXXXXX,481
Share of profits of associates – – – – 1,762 1,762
Profit/(loss) before taxation 537 – 1, XXXXXXXXXX,762 3,243
Taxation (153) – XXXXXXXXXX)
Profit/(loss) for the year 384 – 1, XXXXXXXXXX,618 2,777
Non-controlling interests – – (432) – – (432)
Profit/(loss) attributable to the
 shareholders of Cathay Pacific 384 – XXXXXXXXXX,618 2,345
Other segment information
Depreciation and amortisation 9,207 – XXXXXXXXXX,802
Purchase of property, plant and
 equipment and intangible assets 15,860 – XXXXXXXXXX,991
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Profit or Loss and Other Comprehensive Income
Cathay Pacific Airways Limited74
1. S E G M E N T I N F O R M AT I O N (continued)
(i) Cathay Pacific and Cathay Dragon 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 has changed in the year ended 31st December 2019
following the acquisition of HK Express (note 26 to the financial statements). Reportable segments are aligned
with financial information provided regularly to the Group’s executive management.
Due to such a change in the reportable segments, the previously reported segment results for the year ended
31st December 2018 have been restated to be comparable with the revised segmentation approach as required
by HKFRS 8 “Operating Segments”.
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.
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative
information in 2018 is not restated. See accounting policy 1.
(b) Geographical information
2019
HK$M
2018
HK$M
Revenue by origin of sale:
North Asia
 – Hong Kong and Mainland China 54,198 56,994
 – Japan, Korea and Taiwan 9,974 10,882
Americas 14,084 14,167
Europe 10,377 10,592
Southeast Asia 7,598 8,072
Southwest Pacific 5,586 5,455
South Asia, Middle East and Africa 5,156 4,898
106,973 111,060
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.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Profit or Loss and Other Comprehensive Income
75Annual Report 2019
2. G A I N O N D E E M E D PA R T I A L D I S P O S A L O F A N A S S O C I AT E
On 31st October 2019, the Cathay Pacific Group’s equity and economic interest in Air China Cargo of 49.00% was
reduced to 34.78%, when the China National Aviation Holding Company group, as part of a mixed ownership reform to
transform the business from an airport-to-airport service provider into a total logistics solution provider, injected
certain equity interests and cash. A gain of HK$114 million was recorded on this deemed partial disposal.
3. O P E R AT I N G P R O F I T
2019
HK$M
2018
HK$M
Operating profit has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment
 – right-of-use assets 5,846 2,015
 – owned 7,826 7,234
Amortisation of intangible assets XXXXXXXXXX
Operating lease rentals for leases previously classified as operating leases under
 HKAS 17
 – land and buildings – 1,107
 – aircraft and related equipment – 4,579
 – others – 106
Expenses relating to short-term leases 181 –
(Gain)/loss on disposal of property, plant and equipment, net XXXXXXXXXX
Loss/(gain) on disposal of intangible assets 9 (101)
Cost of stock expensed 2,164 1,859
Exchange differences, net XXXXXXXXXX
Auditors’ remuneration 16 15
Dividend income from unlisted equity investments XXXXXXXXXX)
The Group has initially applied HKFRS 16 at 1st January 2019 to recognise right-of-use assets relating to leases
which were previously classified as operating leases under HKAS 17. The carrying amount of the finance leased
assets which were previously included in property, plant and equipment is also reclassified as a right-of-use asset.
After initial recognition of right-of-use assets at 1st January 2019, the Group as a lessee is required to recognise the
depreciation of right-of-use assets, instead of the previous policy of recognising rental expenses incurred under
operating leases on a straight-line basis over the lease term. Under the transition methods chosen, comparative
information in 2018 is not restated. See accounting policy 1.
Cathay Pacific Airways Limited76
4. N E T F I N A N C E C H A R G E S
2019
HK$M
2018
HK$M
Net interest charges comprise:
 – leases liabilities stated at amortised cost 1,404 656
 – bank loans and overdrafts
  – wholly repayable within five years XXXXXXXXXX
  – not wholly repayable within five years 1,090 948
 – other loans
  – wholly repayable within five years XXXXXXXXXX
3,277 2,308
Income from liquid funds:
 – funds with investment managers and other liquid investments at fair value
   through profit or loss XXXXXXXXXX)
 – bank deposits and others XXXXXXXXXX)
XXXXXXXXXX)
Fair value change:
 – gain on financial liabilities designated at fair value through profit or loss XXXXXXXXXX)
 – loss on financial derivatives 25 224
(1) 149
2,939 2,114
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$40 million (2018: net loss of HK$71 million).
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative
information in 2018 is not restated. See accounting policy 1.
5. TA X AT I O N
2019
HK$M
2018
HK$M
Current tax expenses
 – Hong Kong profits tax XXXXXXXXXX
 – overseas tax XXXXXXXXXX
 – under provisions for prior years 12 28
Deferred tax
 – origination and reversal of temporary differences (note XXXXXXXXXX)
454 466
Hong Kong profits tax is calculated at 16.5% (2018: 16.5%) on the estimated assessable profits for the year. Overseas
tax is calculated at rates of tax applicable in countries in which the Group is assessable for tax. Tax provisions are
reviewed regularly to take into account changes in legislation, practice and the status of negotiations (see note 30(c)
to the financial statements).
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Profit or Loss and Other Comprehensive Income
77Annual Report 2019
5. TA X AT I O N (continued)
A reconciliation between tax charge and accounting profit at applicable tax rates is as follows:
2019
HK$M
2018
HK$M
Profit before taxation 2,145 3,243
Notional tax calculated at Hong Kong profits tax rate of 16.5% (2018: 16.5% XXXXXXXXXX)
Expenses not deductible for tax purposes XXXXXXXXXX)
Income not subject to tax 44 36
Effect of changes in effective tax rate and jurisdictional differences XXXXXXXXXX
Tax under provisions arising from prior years XXXXXXXXXX)
Tax losses not recognised XXXXXXXXXX)
Tax charge XXXXXXXXXX)
Further information on deferred taxation is shown in note 15 to the financial statements.
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative
information in 2018 is not restated. See accounting policy 1.
6. E A R N I N G S P E R S H A R E ( B A S I C A N D D I L U T E D)
Earnings per share is calculated by dividing the profit attributable to the shareholders of Cathay Pacific of HK$1,691
million (2018: HK$2,345 million) by the daily weighted average number of shares in issue throughout the year of 3,934
million (2018: 3,934 million) shares. Diluted earnings per share is the same as basic earnings per share as there were
no dilutive potential shares in issue throughout the year.
7. O T H E R C O M P R E H E N S I V E I N C O M E
2019
HK$M
2018
HK$M
Defined benefit plans
 – remeasurement gain/(loss) recognised during the year (note 14) 1, XXXXXXXXXX)
 – deferred taxation (note XXXXXXXXXX
Revaluation of equity investments designated at fair value through other
 comprehensive income (non-recycling)
 – gain recognised during the year 33 –
Cash flow hedges
 – gain recognised during the year 1,455 428
 – (gain)/loss transferred to profit or loss (note XXXXXXXXXX,366
 – deferred taxation (note XXXXXXXXXX)
Share of other comprehensive income of associates
 – recognised during the year XXXXXXXXXX
Exchange differences on translation of foreign operations
 – loss recognised during the year XXXXXXXXXX,495)
 – reclassified to profit or loss upon deemed partial disposal 84 –
Other comprehensive income for the year XXXXXXXXXX
Cathay Pacific Airways Limited78
8. P R O P E R T Y, P L A N T A N D E Q U I P M E N T
Aircraft and related equipment Other equipment Land and buildings
Owned
HK$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 XXXXXXXXXX,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, XXXXXXXXXX,191 6, XXXXXXXXXX,808
Purchase of a subsidiary 98 – 5,172 6 – 16 31 – 5,323
Additions 11,263 – 1, XXXXXXXXXX – 13,270
Disposals (2,938) – – (79) – XXXXXXXXXX) – (3,133)
Transfers 1,694 – (1,694) – – 2 – (2) –
Other right-of-use asset
 adjustments – – (37) – (78) – 191 – 76
At 31st December XXXXXXXXXX,364 – 61,228 5, XXXXXXXXXX,333 7, XXXXXXXXXX,344
At 1st January XXXXXXXXXX,301 43,711 – 5,424 – 15,141 – 35 174,612
Exchange difference – – – (1) – – – – (1)
Additions 12,936 2,136 – 157 – 129 – 32 15,390
Disposals (2,311) – – (167) – (92) – XXXXXXXXXX,602)
Transfers 1,321 (1,321) – – – 13 – (13) –
At 31st December XXXXXXXXXX,247 44,526 – 5,413 – 15,191 – 22 187,399
Accumulated depreciation and impairment
At 1st January XXXXXXXXXX,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, XXXXXXXXXX – 13,672
Disposals (2,938) – – (71) – XXXXXXXXXX) – (3,050)
Transfers 942 – (942) – – – – – –
At 31st December XXXXXXXXXX,527 – 17,753 3, XXXXXXXXXX,474 1,813 – 82,230
At 1st January XXXXXXXXXX,944 12,237 – 3,165 – 5,084 – – 63,430
Charge for the year 6,149 2,015 – 360 – 725 – – 9,249
Disposals (2,170) – – (166) – (68) – – (2,404)
Transfers XXXXXXXXXX) – – – – – – –
At 31st December XXXXXXXXXX,770 13,405 – 3,359 – 5,741 – – 70,275
Net book value
At 31st December XXXXXXXXXX,837 – 43,475 1, XXXXXXXXXX,859 5, XXXXXXXXXX,114
At 31st December XXXXXXXXXX,477 31,121 – 2,054 – 9,450 – 22 117,124
(a) Assets held under finance leases under HKAS 17 have been reclassified as right-of-use assets upon adoption of HKFRS 16 on
1st January 2019.
(b) Leasehold land rental prepayments have been reclassified as right-of-use assets upon adoption of HKFRS 16 on 1st January 2019.
(c) Assets held under operating leases under HKAS 17 have been recognised as right-of-use assets upon adoption of HKFRS 16 on
1st January 2019.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
79Annual Report 2019
8. P R O P E R T Y, P L A N T A N D E Q U I P M E N T (continued)
Applicable prior to 1st January 2019
The Group had the right to use certain assets under lease arrangements. These were classified as either finance
leases or operating leases.
(a) Finance leased assets
Certain aircraft were held under finance leases with purchase options to be exercised at the end of the
respective leases. The remaining lease terms ranged from 1 to 11 years. Some of the rent payments were on a
floating basis which were generally linked to market rates of interest. All leases permitted subleasing rights
subject to appropriate consent from lessors. Early repayment penalties would be payable on some of the leases
should they be terminated prior to their specified expiry dates.
(b) Operating leased assets
Certain aircraft, land, buildings and other equipment were held under operating leases.
Under the operating lease arrangements for aircraft, the lease rentals were partially fixed and partially floating
and subleasing was not allowed. At 31st December 2018, 60 aircraft held under operating leases, most with
purchase options, were not capitalised.
Operating leases for land, buildings and other equipment were normally set with fixed rental payments with
options to renew the leases upon expiry at new terms.
The future minimum lease payments payable under operating leases committed at 31st December 2018 for each
of the following periods were as follows:
2018
HK$M
Aircraft and related equipment:
 – within one year 3,469
 – after one year but within two years 3,109
 – after two years but within five years 6,017
 – after five years 3,055
15,650
Land, buildings and other equipment:
 – within one year 858
 – after one year but within two years 485
 – after two years but within five years 932
 – after five years 2,033
4,308
19,958
Applicable from 1st January 2019
(c) 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 which were previously classified as operating leases under HKAS 17. The Group has
initially applied HKFRS 16 using the modified retrospective approach at 1st January 2019. Under this approach,
the Group adjusted the opening balances at 1st January 2019 to recognise right-of-use assets and lease
liabilities relating to these leases (See accounting policy 1). From 1st January 2019 onwards, future lease
payments are recognised as lease liabilities in the consolidated statement of financial position in accordance
with accounting policies 6 and 9.
Cathay Pacific Airways Limited80
8. P R O P E R T Y, P L A N T A N D E Q U I P M E N T (continued)
During the year ended 31st December 2019, additions to right-of-use assets were HK$1,585 million, a significant
proportion of which is related to the delivery of a leased aircraft.
Details of cash outflows and significant non-cash transaction for leases, and the maturity analysis of lease
liabilities are set out in notes 24 and 12 to the financial statements, respectively.
(i) Aircraft and related equipment
The Group has obtained the right to use aircraft and related equipment through lease arrangements.
The Group held 42 aircraft at 31st December 2019 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 69 aircraft at 31st December 2019 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 11 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 is 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 at lease commencement date 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)
HK$M
Potential future lease payments under
extension options not included in lease
liabilities (undiscounted)
HK$M
Aircraft and related equipment 35,259 8,993
(ii) Other equipment
The Group leases other equipment under leases expiring from 1 to 9 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 28 years.
(iv) Properties leased for own use
The Group leases other properties under leases expiring from 1 to 14 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.
(d) Advance payments are made to manufacturers for aircraft and related equipment to be delivered in future years.
As at the year end, advance payments included in owned aircraft and related equipment amounted to HK$3,945
million (2018: HK$3,560 million) for the Group. No depreciation is provided on these advance payments.
(e) Security, including charges over the assets concerned and relevant insurance policies, is provided to the leasing
companies or other parties that provide the underlying finance. Further information is provided in note 12 to the
financial statements.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
81Annual Report 2019
9. I N TA N G I B L E A S S E T S
Goodwill
HK$M
Computer
software
HK$M
Others
HK$M
Total
HK$M
Cost
At 1st January 2019 7,666 6, XXXXXXXXXX,533
Purchase of a subsidiary 3,988 33 – 4,021
Additions – 528 – 528
Disposals – (13) – (13)
At 31st December XXXXXXXXXX,654 7, XXXXXXXXXX,069
At 1st January 2018 7,666 6, XXXXXXXXXX,146
Additions – 601 – 601
Disposals – – XXXXXXXXXX)
At 31st December 2018 7,666 6, XXXXXXXXXX,533
Accumulated amortisation and impairment
At 1st January 2019 – 3, XXXXXXXXXX,359
Purchase of a subsidiary – 13 – 13
Charge for the year – XXXXXXXXXX
Disposals – (4) – (4)
At 31st December 2019 – 3, XXXXXXXXXX,918
At 1st January 2018 – 2, XXXXXXXXXX,925
Charge for the year – XXXXXXXXXX
Disposals – – XXXXXXXXXX)
At 31st December 2018 – 3, XXXXXXXXXX,359
Net book value
At 31st December XXXXXXXXXX,654 3, XXXXXXXXXX,151
At 31st December 2018 7,666 3, XXXXXXXXXX,174
Goodwill is allocated to the Group’s cash-generating units (“CGUs”) as follows:
2019
HK$M
2018
HK$M
Cathay Pacific and Cathay Dragon 7,884 7,512
HK Express 3,616 –
Others XXXXXXXXXX
11,654 7,666
Goodwill attributable to Cathay Pacific and Cathay Dragon of HK$7,884 million (2018: HK$7,512 million) relates
primarily to the acquisition of Cathay Dragon, with new additions in the year of HK$372 million being goodwill from
the acquisition of HK Express allocated to the Cathay Pacific and Cathay Dragon CGU. The recoverable amount of
Cathay Pacific and Cathay Dragon CGU is determined based on value-in-use calculations. These calculations use
cash flow projections based on three-year financial budgets approved by the Board and business plans covering
years four to ten. A ten-year forecast is considered appropriate for the airline operations to take into account
expected growth plans, inflationary pressures and modest productivity improvements. Cash flows beyond the
ten-year period are extrapolated with an estimated general annual growth rate of 1.50% to 2.25% (2018: 1.5% to
3.0%) which does not exceed the long-term average growth rate for the business in which the CGU operates. The
discount rate used of 7.2% (2018: 8.2%) is pre-tax and reflects the specific risks related to the relevant segment.
Cathay Pacific Airways Limited82
9. I N TA N G I B L E A S S E T S (continued)
Goodwill attributable to HK Express of HK$3,616 million (2018: nil) relates to the acquisition of HK Express and arose
from the synergies expected to be derived from resource optimisation, cost savings and improved services. The
recoverable amount of HK Express CGU is determined based on value-in-use calculations. These calculations use
cash flow projections based on twelve-year business plans approved by the Board. A twelve-year forecast is
considered appropriate for this newly-acquired airline operation to take into account expected growth plans,
inflationary pressures and modest productivity improvements. Cash flows beyond the twelve-year period are
extrapolated with an estimated general annual growth rate of 1.50% to 2.25% which does not exceed the long-term
average growth rate for the business in which the CGU operates. The discount rate used of 7.5% is pre-tax and
reflects the specific risks related to the relevant segment.
Management believes that any reasonably foreseeable change in any of the above key assumptions would not cause
the carrying amounts of the CGUs and the related goodwill to exceed their respective recoverable amounts.
10. I N V E S T M E N T S I N A S S O C I AT E S
2019
HK$M
2018
HK$M
Share of net assets
 – listed in Hong Kong 20,090 20,821
 – unlisted 3,404 3,115
Goodwill 3,266 3,337
26,760 27,273
Loans due from associates XXXXXXXXXX
27,055 27,570
At 31st December 2019, the market value of the shares in an associate, Air China, listed in Hong Kong is HK$20,833
million (2018: HK$17,962 million).
Air China is considered material to the Group and the share of assets and liabilities and results is summarised
as below:
2019
HK$M
2018
HK$M
Gross amounts of the associate’s
 – current assets 27,452 28,740
 – non-current assets 294,621 246,280
 – current liabilities (84, XXXXXXXXXX,479)
 – non-current liabilities (124, XXXXXXXXXX,043)
Revenue 157,601 154,285
Profit from continuing operations 8,832 7,895
Other comprehensive income XXXXXXXXXX,119
Total comprehensive income 8,600 12,014
Dividend received from the associate XXXXXXXXXX
Reconciled to the Group’s interests in the associate
 – gross amounts of net assets of the associate 113,310 115,498
 – Group’s share of net assets of the associate at effective interest
   (2019: 18.13%; 2018: 18.13%) 20,543 20,940
 – effect of cross shareholding and others XXXXXXXXXX)
 – goodwill 3,266 3,337
23,356 24,158
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
83Annual Report 2019
10. I N V E S T M E N T S I N A S S O C I AT E S (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 Mainland China.
The Group’s 2019 results include Air China’s results for the 12 months ended 30th September 2019 and any
significant events or transactions for the period from 1st October 2019 to 31st December 2019. Air China’s most
recently available accounts were drawn up to 30th September XXXXXXXXXX: 30th September 2018).
Air China has initially applied IFRS 16 “Leases” at 1st January 2019 to recognise additional right-of-use assets of
HK$38,844 million and lease liabilities of HK$46,209 million relating to leases which were previously classified as
operating leases under IAS 17 “Leases”. Under the transition methods chosen, comparative information in 2018 is not
restated. See accounting policy 1.
Aggregate information of associates that are not individually material is summarised as below:
2019
HK$M
2018
HK$M
Aggregate carrying amount of individually immaterial associates 3,699 3,412
Aggregate amounts of the Group’s share of those associates
 – profit from continuing operations XXXXXXXXXX
 – other comprehensive income XXXXXXXXXX)
 – total comprehensive income XXXXXXXXXX
Principal associates are listed on page 122.
11. O T H E R LO N G -T E R M R E C E I VA B L E S A N D I N V E S T M E N T S
2019
HK$M
2018
HK$M
Unlisted equity investments
 – designated at fair value through other comprehensive income (non-recycling) 56 23
 – measured at fair value through profit or loss XXXXXXXXXX
Leasehold land rental prepayments – 1,173
Other long-term receivables measured at amortised cost XXXXXXXXXX
Derivative financial assets – long-term portion 1,579 1,860
Retirement benefit assets (note XXXXXXXXXX –
3,823 4,015
At 31st December 2018, leasehold land was held under medium-term leases in Hong Kong with a total unamortised
value of HK$1,216 million. The balance is included in above, except for HK$43 million which was included in trade and
other receivables.
At 1st January 2019, leasehold land rental prepayments have been reclassified as right-of-use assets upon adoption
of HKFRS 16. See note 8 to the financial statements.
At 31st December 2019, total derivative financial assets of the Group which did not qualify for hedge accounting
amounted to HK$1,415 million (2018: HK$1,478 million). The balance is included in above, except for HK$8 million
which was included in trade and other receivables at 31st December 2018.
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative
information in 2018 is not restated. See accounting policy 1.
Cathay Pacific Airways Limited84
12. LO N G -T E R M L I A B I L I T I E S
XXXXXXXXXX
Note
Current
HK$M
Non-current
HK$M
Current
HK$M
Non-current
HK$M
Long-term loans (a) 13,634 43,134 9,734 40,952
Lease liabilities (b) 7,118 33,374 3,960 19,231
20,752 76,508 13,694 60,183
(a) Long-term loans
2019
HK$M
2018
HK$M
Bank loans
 – secured 35,332 34,772
 – unsecured 18,247 12,623
Other loans
 – unsecured 3,189 3,291
56,768 50,686
Amount due within one year included in current liabilities (13,634) (9,734)
43,134 40,952
Repayable as follows:
Bank loans
 – within one year 12,557 8,236
 – after one year but within two years 10,226 10,128
 – after two years but within five years 19,832 16,940
 – after five years 10,964 12,091
53,579 47,395
Other loans
 – within one year 1,077 1,498
 – after one year but within two years XXXXXXXXXX
 – after two years but within five years 1,811 819
3,189 3,291
Amount due within one year included in current liabilities (13,634) (9,734)
43,134 40,952
At 31st December 2019, aircraft and related equipment of HK$54,453 million (2018: HK$51,626 million) are
pledged as security for the secured bank loans.
Borrowings other than bank loans are repayable on various dates up to 2022 while bank loans are repayable up
to 2031.
Long-term loans of the Group not wholly repayable within five years amounted to HK$29,465 million (2018:
HK$30,799 million).
At 31st December 2019, the Group had long-term loans totalling HK$42,657 million (2018: HK$42,019 million)
which were defeased by funds and other investments. Accordingly, these liabilities and the related funds, as well
as related expenditure and income, have been defeased in the financial statements.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
85Annual Report 2019
12. LO N G -T E R M L I A B I L I T I E S (continued)
(b) Lease liabilities
The Group has commitments under lease agreements in respect of aircraft, property facilities and offices and
other equipment. Lease liabilities are repayable on various dates up to 2033. The reconciliation of future lease
payments and their carrying values at the end of the current and previous reporting periods and at the date of
transition to HKFRS 16 is as follows:
At 31st
December 2019
HK$M
At 31st
December 2018
HK$M
Impact of initial
application of
HKFRS 16
HK$M
At 1st
January 2019
HK$M
Future payments 45,104 25,951 21,153 47,104
Interest charges relating to future periods (4,612) (2,760) (2,550) (5,310)
Present value of future payments 40,492 23,191 18,603 41,794
Amount due within one year included in
 current liabilities (7,118) (3,960) (3,333) (7,293)
33,374 19,231 15,270 34,501
The present value of future payments is repayable as follows:
At 31st
December 2019
HK$M
At 31st
December 2018
HK$M
Impact of initial
application of
HKFRS 16
HK$M
At 1st
January 2019
HK$M
Within one year 7,118 3,960 3,333 7,293
After one year but within two years 6,587 3,107 3,323 6,430
After two years but within five years 16,848 10,038 6,913 16,951
After five years 9,939 6,086 5,034 11,120
40,492 23,191 18,603 41,794
The undiscounted future payments are repayable as follows:
At 31st
December 2019
HK$M
At 31st
December 2018
HK$M
Impact of initial
application of
HKFRS 16
HK$M
At 1st
January 2019
HK$M
Within one year 8,233 4,604 3,993 8,597
After one year but within two years 7,518 3,637 3,819 7,456
After two years but within five years 18,546 11,059 7,821 18,880
After five years 10,807 6,651 5,520 12,171
45,104 25,951 21,153 47,104
At 31st December 2019, the Group had financial liabilities designated at fair value through profit or loss of
HK$1,415 million (2018: HK$1,567 million).
Cathay Pacific Airways Limited86
12. LO N G -T E R M L I A B I L I T I E S (continued)
(c) Reconciliation of long-term liabilities
Long-term
loans
HK$M
Lease
liabilities
HK$M
Total
HK$M
At 1st January XXXXXXXXXX,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 subsidiary 410 4,668 5,078
Changes from financing cash flows
 – new financing 16, XXXXXXXXXX,975
 – loan and lease repayments (11,070) (7, XXXXXXXXXX,785)
Other changes
 – exchange gain XXXXXXXXXX)
 – changes resulting from new leases – 1,605 1,605
 – changes resulting from lease modification – 76 76
 – changes resulting from lease termination – XXXXXXXXXX)
 – changes in fair values – XXXXXXXXXX)
 – others XXXXXXXXXX
At 31st December XXXXXXXXXX,768 40,492 97,260
At 1st January XXXXXXXXXX,894 24,500 78,394
Changes from financing cash flows
 – new financing 8,523 2,714 11,237
 – loan and finance lease repayments (12,053) (4, XXXXXXXXXX,198)
Other changes
 – exchange loss XXXXXXXXXX
 – changes in fair values – XXXXXXXXXX)
 – others XXXXXXXXXX
At 31st December XXXXXXXXXX,686 23,191 73,877
The Group has initially applied HKFRS 16 at 1st January 2019 to recognise lease liabilities relating to leases which
were previously classified as operating leases under HKAS 17. These liabilities have been aggregated with the
brought forward balances relating to leases previously classified as finance leases. Under the transition methods
chosen, comparative information in 2018 is not restated and relates solely to leases previously classified as
finance leases. See accounting policy 1.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
87Annual Report 2019
13. O T H E R LO N G -T E R M PA YA B L E S
2019
HK$M
2018
HK$M
Deferred liabilities 4,412 3,335
Derivative financial liabilities - long-term portion XXXXXXXXXX
Retirement benefit liabilities (note 14) – 473
4,806 4,649
Included in deferred liabilities above, the Group had a maintenance provision of HK$5,031 million (2018: HK$3,666
million) for returning the aircraft to lessors to certain maintenance conditions. The movements during the year are
as follows:
2019
HK$M
2018
HK$M
At 1st January 3,666 3,217
Purchase of a subsidiary 909 –
Additional provision made XXXXXXXXXX
Provision utilised XXXXXXXXXX)
At 31st December 5,031 3,666
Amount expected to be utilised within one year included in trade and other payables XXXXXXXXXX)
4,412 3,185
At 31st December 2019 and 2018, there was insignificant balance of derivative financial liabilities of the Group which
did not qualify for hedge accounting.
14. R E T I R E M E N T B E N E F I T S
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 (“Vogue”) 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, Vogue
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.
Cathay Pacific Airways Limited88
14. R E T I R E M E N T B E N E F I T S (continued)
The majority of the Group’s schemes are final salary guarantee lump sum defined benefit plans.
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 under the provision of Hong Kong’s Occupational
Retirement Schemes Ordinance.
The disclosures are based on actuarial valuations prepared by an independent firm of actuaries, Mercer (Hong
Kong) Limited (“Mercer”), every three years. 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 were for the period ended 31st December 2018.
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 106.8% (2018: 93.7%) covered by the plan assets held by the trustees at 31st
December 2019.
2019
HK$M
2018
HK$M
Net expenses recognised in the profit or loss:
Current service cost XXXXXXXXXX
Net interest cost 5 6
Total included in staff costs XXXXXXXXXX
Actual return/(loss) on plan assets XXXXXXXXXX)
2019
HK$M
2018
HK$M
Net (assets)/liabilities recognised in the statement of financial position:
Present value of funded obligations 6,890 7,547
Fair value of plan assets (7,360) (7,074)
Retirement benefit (assets)/liabilities (notes 11 and XXXXXXXXXX
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
89Annual Report 2019
14. R E T I R E M E N T B E N E F I T S (continued)
2019
HK$M
2018
HK$M
Movements in present value of funded obligations comprise:
At 1st January 7,547 7,937
Remeasurements:
 – actuarial losses/(gains) arising from changes in financial assumptions XXXXXXXXXX)
 – experience (gains)/losses XXXXXXXXXX
Movements for the year
 – current service cost XXXXXXXXXX
 – interest expense XXXXXXXXXX
 – employee contributions 1 2
 – benefits paid XXXXXXXXXX)
 – transfer 74 (30)
At 31st December 6,890 7,547
The weighted average duration of the defined benefit obligations is six years (2018: six years).
2019
HK$M
2018
HK$M
Movements in fair value of plan assets comprise:
At 1st January 7,074 8,041
Movements for the year
 – return/(loss) on plan assets excluding interest income XXXXXXXXXX)
 – interest income XXXXXXXXXX
 – employee contributions 1 2
 – employer contributions 24 27
 – benefits paid XXXXXXXXXX)
 – transfer 74 (30)
At 31st December 7,360 7,074
There were no plan amendments, curtailments and settlements during the year.
2019
HK$M %
2018
HK$M %
Fair value of plan assets comprises:
Equities
 – Asia Pacific XXXXXXXXXX
 – Europe XXXXXXXXXX
 – Americas XXXXXXXXXX
 – Emerging markets 1, XXXXXXXXXX,159 16
Bonds
 – Global 1, XXXXXXXXXX,820 26
 – Emerging markets XXXXXXXXXX
Absolute return funds 1, XXXXXXXXXX,460 21
Cash XXXXXXXXXX
7, XXXXXXXXXX,074 100
Cathay Pacific Airways Limited90
14. R E T I R E M E N T B E N E F I T S (continued)
At 31st December 2019, the prices of 96% of equities and 28% of bonds were quoted on active markets (31st
December 2018: 96% and 39% 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$24 million to the schemes in 2020.
XXXXXXXXXX
SGRBS CPALRS SGRBS CPALRS
The significant actuarial assumptions are:
Discount rate 2.93% 2.93% 3.34% 3.34%
Expected rate of future salary increases 3.00% 3.04% 5.00% 3.04%
The sensitivity of the defined benefit obligations to changes in the actuarial assumptions are set out below. This
shows how the defined benefit obligations at 31st December 2019 would have (increased)/decreased as a result
of 0.5% change in the actuarial assumptions:
Increase by 0.5% Decrease by 0.5%
2019
HK$M
2018
HK$M
2019
HK$M
2018
HK$M
Discount rate XXXXXXXXXX)
Expected rate of future salary increases XXXXXXXXXX
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 significant actuarial assumptions the same
method has been applied as when calculating the retirement benefit liabilities recognised in the statement of
financial position.
(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$162 million (2018: nil) 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 the profit or loss were HK$1,062 million
(2018: HK$1,271 million).
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
91Annual Report 2019
15. D E F E R R E D TA X AT I O N
2019
HK$M
2018
HK$M
Deferred tax assets:
 – provisions XXXXXXXXXX)
 – tax losses (3,405) (2,944)
 – cash flow hedges – (3)
 – retirement benefits – (55)
 – right-of-use assets (144) –
Deferred tax liabilities:
 – accelerated tax depreciation 4,667 4,419
 – investments in associates 1,121 1,125
 – cash flow hedges 70 –
 – retirement benefits 47 –
Provision in respect of certain lease arrangements 10,199 9,926
12,475 12,385
The following amounts, determined after appropriate offsetting, are shown separately on the statement of financial
position:
2019
HK$M
2018
HK$M
Net deferred tax asset recognised in the statement of financial position (1, XXXXXXXXXX)
Net deferred tax liability recognised in the statement of financial position 13,564 13,178
12,475 12,385
2019
HK$M
2018
HK$M
Movements in deferred taxation comprise:
At 1st January 12,385 11,892
Impact on initial application of HKFRS 15 – 71
Impact on initial application of HKFRS XXXXXXXXXX) –
At 1st January 2019, adjusted 12,133 11,963
Movements for the year
 – purchase of a subsidiary (231) –
 – charged/(credited) to profit or loss
  – deferred tax charge/(credit) (note XXXXXXXXXX)
  – operating expenses 91 83
 – charged/(credited) to other comprehensive income
  – transferred to cash flow hedge reserve (note XXXXXXXXXX
  – transferred to retained profit (note XXXXXXXXXX)
 – initial cash benefit from lease arrangements 837 1,029
Current portion of provision in respect of certain lease arrangements included in
 current liabilities – taxation XXXXXXXXXX)
At 31st December 12,475 12,385
Cathay Pacific Airways Limited92
15. D E F E R R E D TA X AT I O N (continued)
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$15,882
million (2018: HK$14,373 million) to carry forward against future taxable profits. These amounts are analysed
as follows:
2019
HK$M
2018
HK$M
No expiry date 5,793 4,282
Expiring within 2021 to XXXXXXXXXX,089 10,091
15,882 14,373
The provision in respect of certain lease arrangements equates to payments which are expected to be made during
the years 2020 to XXXXXXXXXX: 2019 to 2029) as follows:
2019
HK$M
2018
HK$M
After one year but within five years 5,027 4,204
After five years but within 10 years 4,508 4,906
After 10 years XXXXXXXXXX
10,199 9,926
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative
information in 2018 is not restated. See accounting policy 1.
16. T R A D E A N D O T H E R R E C E I VA B L E S
2019
HK$M
2018
HK$M
Trade debtors, net of loss allowances 5,559 6,559
Derivative financial assets – current portion XXXXXXXXXX
Other receivables and prepayments 4,567 5,343
Due from associates and other related companies 51 74
10,608 12,475
2019
HK$M
2018
HK$M
Analysis of trade debtors (net of loss allowances) by invoice date:
Within one month 4,374 5,009
One to three months 713 1,166
More than three months XXXXXXXXXX
5,559 6,559
2019
HK$M
2018
HK$M
Analysis of trade debtors (net of loss allowances) by age:
Current 4,984 5,519
Within three months overdue XXXXXXXXXX
More than three months overdue XXXXXXXXXX
5,559 6,559
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
93Annual Report 2019
16. T R A D E A N D O T H E R R E C E I VA B L E S (continued)
The movements in the expected credit loss allowance in respect of trade debtors during the year are as follows:
2019
HK$M
2018
HK$M
At 1st January 83 45
Amounts written off (2) –
Impairment losses recognised – 38
At 31st December 81 83
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative
information in 2018 is not restated. See accounting policy 1.
17. L I Q U I D F U N D S
2019
HK$M
2018
HK$M
Short-term deposits and bank balances (note 25) 8,881 7,672
Short-term deposits maturing beyond three months when placed 719 2,488
Funds with investment managers
 – debt securities listed outside Hong Kong 5,079 4,963
 – bank deposits 43 27
Other liquid investments
 – debt securities listed outside Hong Kong 5 5
 – bank deposits XXXXXXXXXX
Liquid funds 14,864 15,315
Included in other liquid investments are bank deposits of HK$137 million (2018: HK$160 million) and debt securities of
HK$5 million (2018: HK$5 million) which are pledged as part of long-term financing arrangements. The arrangements
provide that these deposits and debt securities must be maintained at specified levels for the duration of the
financing.
Available unrestricted funds to the Group are as follows:
2019
HK$M
2018
HK$M
Liquid funds 14,864 15,315
Less amounts pledged as part of long-term financing
 – debt securities listed outside Hong Kong (5) (5)
 – bank deposits XXXXXXXXXX)
Committed undrawn facilities 5,289 4,680
Available unrestricted liquidity to the Group 20,011 19,830
Committed undrawn facilities may be drawn at any time in either Hong Kong dollar or United States dollar.
Cathay Pacific Airways Limited94
18. T R A D E A N D O T H E R PA YA B L E S
2019
HK$M
2018
HK$M
Trade creditors 8,448 6,801
Derivative financial liabilities – current portion 523 1,218
Other payables 8,968 9,255
Due to associates XXXXXXXXXX
Due to other related companies XXXXXXXXXX
18,218 17,646
2019
HK$M
2018
HK$M
Analysis of trade creditors by invoice date:
Within one month 8,018 6,425
One to three months XXXXXXXXXX
More than three months 27 39
8,448 6,801
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$794 million (2018: HK$780 million) for possible or
actual taxation (other than income tax), litigation and claims. The movements during the year are as follows:
2019
HK$M
2018
HK$M
At 1st January XXXXXXXXXX
Additional provision made XXXXXXXXXX
Provision utilised XXXXXXXXXX)
At 31st December XXXXXXXXXX
The Group has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative
information in 2018 is not restated. See accounting policy 1.
19. C O N T R A C T L I A B I L I T I E S
The Group had the following contract liabilities recognised in the consolidated statement of financial position:
2019
HK$M
2018
HK$M
Passenger revenue (i) 8,954 9,149
Passenger fuel and insurance surcharge (i) 1,805 1,804
Loyalty programme (ii) 5,182 4,839
15,941 15,792
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
95Annual Report 2019
19. C O N T R A C T L I A B I L I T I E S (continued)
The following table summarises the Group’s revenue recognised during the year that was included in the contract
liabilities at the beginning of the year:
2019
HK$M
2018
HK$M
Passenger revenue (i) 8,530 9,110
Passenger fuel and insurance surcharge (i) 1,682 628
Loyalty programme (ii) 2,157 2,159
(i) The Group typically receives ticket fares from passengers in advance of carriage. The value of unflown
passenger sales is recognised as a contract liability until the transportation service is provided.
(ii) The value attributable to the award of programme miles as part of initial sales transaction is deferred until such
time as the members redeem their programme miles.
20. S H A R E C A P I TA L
XXXXXXXXXX
Number of shares HK$M Number of shares HK$M
Issued and fully paid
At 1st January and at 31st December 3,933,844,572 17,106 3,933,844,572 17,106
There was no purchase, sale or redemption by the Company, or any of its subsidiaries, of the Company’s shares
during the year. At 31st December 2019, 3,933,844,572 shares were in issue (31st December 2018: 3,933,844,572
shares).
21. D I V I D E N D S
(a) Dividends payable to equity shareholders attributable to the year
2019
HK$M
2018
HK$M
First interim dividend declared and paid of HK$0.18 per share
 (2018: HK$0.10 per share XXXXXXXXXX
No second interim dividend proposed after the end of the reporting period
 (2018: HK$0.20 per share) – 787
708 1,180
(b) Dividends payable to equity shareholders attributable to the previous financial year, approved and paid during
the year
2019
HK$M
2018
HK$M
Second interim dividend in respect of the previous financial year, approved and
 paid during the year, of HK$0.20 per share (2018: HK$0.05 per share XXXXXXXXXX
Cathay Pacific Airways Limited96
22. R E S E R V E S
2019
HK$M
2018
HK$M
Retained profit 45,867 46,956
Investment revaluation reserve (non-recycling XXXXXXXXXX)
Cash flow hedge reserve 634 83
Others XXXXXXXXXX)
45,667 46,830
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 31 to the financial statements for details of the Group’s hedging instruments.
Other reserves of the Group comprise exchange losses arising from revaluation of foreign investments which
amounted to HK$427 million (2018: exchange gains of HK$45 million) and share of associates’ other negative
reserves of HK$259 million (2018: HK$73 million).
The gain/(loss) transferred from cash flow hedge reserve of the Group to profit or loss items was as follows:
2019
HK$M
2018
HK$M
Revenue XXXXXXXXXX
Fuel XXXXXXXXXX,415)
Net finance charge XXXXXXXXXX)
Net gain/(loss) transferred to profit or loss (note XXXXXXXXXX,366)
The cash flow hedge reserve of the Group is expected to be charged/(credited) to profit or loss or transferred to
relevant assets as noted below when the hedged transactions affect profit or loss or the relevant assets are
recognised.
Total
HK$M
2020 (9)
XXXXXXXXXX)
XXXXXXXXXX)
XXXXXXXXXX)
XXXXXXXXXX)
Beyond 2024 2
(634)
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.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Financial Position
97Annual Report 2019
22. R E S E R V E S (continued)
Retained
profit
HK$M
Investment
revaluation
reserve
(recycling)
HK$M
Investment
revaluation
reserve
(non-recycling)
HK$M
Cash flow
hedge
reserve
HK$M
Others
HK$M
Total
HK$M
Company
Balance at 31st December XXXXXXXXXX,147 – XXXXXXXXXX – 37,130
Impact on initial application of HKFRS XXXXXXXXXX) – – – – (950)
Adjusted balance at 1st January XXXXXXXXXX,197 – XXXXXXXXXX – 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 XXXXXXXXXX,548 – XXXXXXXXXX – 37,085
Balance at 31st December XXXXXXXXXX,004 505 – (1, XXXXXXXXXX,021
Impact on initial application of HKFRS XXXXXXXXXX) – – –
Impact on initial application of HKFRS 15 491 – – – – 491
Adjusted balance at 1st January XXXXXXXXXX,109 – XXXXXXXXXX, XXXXXXXXXX,512
Profit for the year 1,898 – – – – 1,898
Other comprehensive income (270) – – 1,579 1 1,310
Total comprehensive income for the year 1,628 – – 1,579 1 3,208
2017 interim dividend (197) – – – – (197)
2018 first interim dividend (393) – – – – (393)
At 31st December XXXXXXXXXX,147 – XXXXXXXXXX – 37,130
Distributable reserves of the Company at 31st December 2019 amounted to HK$36,548 million (2018: HK$37,147
million), as calculated under the provisions of Part 6 of the Hong Kong Companies Ordinance (Cap. 622).
The Group and the Company has initially applied HKFRS 16 at 1st January 2019. Under the transition methods
chosen, comparative information in 2018 is not restated. See accounting policy 1.
Cathay Pacific Airways Limited98
23. R E C O N C I L I AT I O N O F O P E R AT I N G P R O F I T T O C A S H G E N E R AT E D F R O M
O P E R AT I O N S
2019
HK$M
2018
HK$M
Operating profit 3,441 3,595
Depreciation of property, plant and equipment 13,672 9,249
Amortisation of intangible assets XXXXXXXXXX
(Gain)/loss on disposal of property, plant and equipment, net XXXXXXXXXX
Loss/(gain) on disposal of intangible assets 9 (101)
Gain on deemed partial disposal of an associate (114) –
Fair value gains on equity investments measured at fair value through profit or loss XXXXXXXXXX)
(Gain)/loss transferred from cash flow hedge reserve and other items not involving
 cash flows XXXXXXXXXX,691
Decrease/(increase) in stock XXXXXXXXXX)
Decrease/(increase) in trade debtors, other receivables and derivative financial assets 2,127 (1,174)
(Decrease)/increase in net amounts due to associates and other related companies XXXXXXXXXX
Increase in trade creditors, other payables, derivative financial liabilities and
 deferred liabilities 364 1,815
Increase in contract liabilities 149 1,243
Non-operating movements in debtors and creditors XXXXXXXXXX,117
Cash generated from operations 18,458 17,737
The Group has initially applied HKFRS 16 at 1st January 2019 to recognise right-of-use assets and lease liabilities
relating to leases which were previously classified as operating leases under HKAS 17. Previously, cash payments
under operating leases made by the Group as a lessee were classified as operating activities in the consolidated
statement of cash flows. Under HKFRS 16, except for short-term lease payments, payments for leases of low value
assets and variable lease payments not included in the measurement of lease liabilities, all other rentals paid on
leases are now split into interest element and capital element (see note 24 to the financial statements), the latter of
which is classified as financing cash outflows. Under the transition methods chosen, comparative information in
2018 is not restated. See accounting policy 1.
24. T O TA L C A S H O U T F LO W F O R L E A S E S
The adoption of HKFRS 16 introduces a change in classification of cash flows of certain rentals paid on leases (see
accounting policy 1). The comparative amounts have not been restated.
Cash outflows for leases included in the consolidated statement of cash flows comprise the following:
2019
HK$M
2018
HK$M
Within operating cash flows 990 5,872
Within investing cash flows 2 2
Within financing cash flows 7,469 3,669
8,461 9,543
Significant non-cash transaction for leases:
During the year ended 31st December 2019, the Group entered into new lease arrangements in respect of property,
plant and equipment with a total capitalised value at the inception of HK$1,579 million, a significant proportion of
which is related to the delivery of a leased aircraft.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Cash Flows
99Annual Report 2019
25. A N A LY S I S O F C A S H A N D C A S H E Q U I VA L E N T S
2019
HK$M
2018
HK$M
Short-term deposits and bank balances (note 17) 8,881 7,672
Bank overdrafts - unsecured – (19)
8,881 7,653
26. B U S I N E S S C O M B I N AT I O N
Cathay Pacific acquired 100% of the voting equity interest of HK Express on 19th July 2019 for a total consideration
of HK$4,765 million, comprising (i) a cash consideration of HK$1,802 million, and (ii) a non-cash consideration of
HK$2,963 million settled through the issue and novation of promissory loan notes.
The valuation of HK Express was determined following arm’s length negotiation between the parties, based on the
underlying value of HK Express and having regard to the trading multiples of comparable airlines. The goodwill arising
on the acquisition of HK Express is principally attributable to improvements and synergistic benefits that Cathay
Pacific foresees under full ownership given that the business models are largely complementary.
Established in 2004, HK Express began implementing its low-cost carrier (“LCC”) strategy in 2013 and now provides
scheduled air services to 28 destinations mainly in North Asia. Its current fleet comprises 24 aircraft (13 Airbus A320
aircraft and 11 Airbus A321 aircraft), with five Airbus A320 aircraft committed to be delivered. All aircraft are on
leases with no purchase option.
The acquisition represents an attractive and practical way for the Group to support the long-term development and
expansion of its aviation business, and to enhance its competitiveness.
There will be synergies with the Group arising from, among others, head office rationalisation, group procurement
benefits (particularly lease terms), route optimisation and various cost savings from shared services.
The acquired business contributed revenue of HK$1,893 million and net loss of HK$246 million to the Group for the
period from the acquisition date to 31st December 2019.
Acquisition-related costs of HK$71 million that were not directly attributable to the issue of shares are included in
other operating expenses in the consolidated statement of profit or loss and in operating cash flows in the
consolidated statement of cash flows.
If the acquisition had occurred on 1st January 2019, the acquired business would have contributed pro-forma
revenue of HK$4,303 million and net loss of HK$585 million to the Group for the year ended 31st December 2019.
These amounts have been calculated using the subsidiaries’ results and adjusting them for:
– differences in the accounting policies between the Group and the subsidiaries, and
– the additional depreciation and amortisation that would have been charged assuming the fair value adjustments
to property, plant and equipment and intangible assets had applied from 1st January 2019, together with the
consequential tax effects.
Details of the purchase consideration and the net assets acquired are as follows:
HK$M
Purchase consideration (refer to note 26(b) below):
– cash paid* 1,802
– promissory loan notes issued 2,963
Total purchase consideration 4,765
* Included within the cash consideration is a claims escrow amount of HK$245 million which is to be released, net of any warranty claims,
upon the completion of the HK Express audited financial statements for 2019.
Cathay Pacific Airways Limited100
26. B U S I N E S S C O M B I N AT I O N (continued)
The assets and liabilities recognised as a result of the acquisition are as follows:
Fair value
HK$M
Property, plant and equipment 4,833
Intangible assets 20
Other long-term receivables 638
Deferred tax assets 231
Trade and other receivables 3,488
Cash and cash equivalents 105
Long-term liabilities (5,078)
Other long-term payables (909)
Trade and other payables (1,561)
Contract liabilities (957)
Taxation (33)
Net identifiable assets acquired 777
Add: goodwill 3,988
Total purchase consideration 4,765
There are no deemed material intangible assets requiring separate recognition, and there are no material contingent
liabilities assumed. The goodwill, split as HK$3,616 million allocated to the HK Express CGU and HK$372 million
allocated to the Cathay Pacific and Cathay Dragon CGU is principally attributable to the potential improvements and
synergies arising from a combination of the businesses and is not deductible for tax purposes.
(a) Acquired receivables
The fair value of acquired trade debtors is HK$75 million. The gross contractual amount for trade debtors due is
HK$75 million with no loss allowance recognised on acquisition.
(b) Purchase consideration – cash outflow
Analysis of the net outflow of cash and cash equivalents in respect of the purchase of subsidiaries is as follows:
HK$M
Cash consideration 1,802
Less: cash and cash equivalents acquired (105)
Net cash outflow from investing activities 1,697
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Statement of Cash Flows
101Annual Report 2019
27. D I R E C T O R S ’ R E M U N E R AT I O N
(a) Directors’ remuneration disclosed pursuant to section XXXXXXXXXXof 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 i)
HK$’000
Bonus
(note ii)
HK$’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$’000
2019
Total
HK$’000
2018
Total
HK$’000
Executive Directors
Healy, Patrick
 (from November XXXXXXXXXX – 11 84 – – XXXXXXXXXX –
Hogg, Rupert
 (up to August XXXXXXXXXX,387 2, XXXXXXXXXX,529 814 – 3,591 10,882 9,059
Hughes, Gregory 2,636 1, XXXXXXXXXX, XXXXXXXXXX,409 11,412 7,488
Lam, Ronald
 (from August XXXXXXXXXX,105 – XXXXXXXXXX – 175 – 2,050 –
Loo, Paul
 (up to August XXXXXXXXXX, XXXXXXXXXX,119 610 – 217 – 4,680 4,796
Murray, Martin 2,904 1, XXXXXXXXXX, XXXXXXXXXX,203 11,142 7,447
Slosar, John
 (up to November XXXXXXXXXX,698 – – 15 – 66 – 1,779 1,999
Tang, Augustus
 (from August XXXXXXXXXX,407 – XXXXXXXXXX – – – 2,596 –
Non-Executive Directors
Cai, Jianjiang 575 – – – – – – XXXXXXXXXX
Chu, Ivan – – – – – – – – –
Low, Michelle – – – – – – – – –
Song, Zhiyong 575 – – – – – – XXXXXXXXXX
Swire, Merlin – – – – – – – – –
Swire, Samuel – – – – – – – – –
Xiao, Feng 854 – – – – – – XXXXXXXXXX
Zhao, Xiaohang 575 – – – – – – XXXXXXXXXX
Independent Non-
 Executive Directors
Chan, Bernard
 (from December XXXXXXXXXX – – – – – – 635 53
Harrison, John 906 – – – – – – XXXXXXXXXX
Lee, Irene
 (up to May XXXXXXXXXX – – – – – – XXXXXXXXXX
Milton, Robert
 (from May XXXXXXXXXX – – – – – – 616 –
Tung, Andrew 814 – – – – – – XXXXXXXXXX
Wong, Peter
 (up to November 2018) – – – – – – – – 698
2019 Total 20,272 5,829 4,346 6,822 2, XXXXXXXXXX,351 50,801
2018 Total 18,427 – 3,786 2,247 – 443 11,456 36,359
(i) 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.
(ii) Management bonus is related to services for 2018 and was paid in 2019. Other discretionary bonuses were paid in 2018 or 2019.
(iii) The total emoluments of Executive Directors are charged to the Group in accordance with the amount of time spent on its affairs.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Directors and Employees
Cathay Pacific Airways Limited102
27. D I R E C T O R S ’ R E M U N E R AT I O N (continued)
(b) The five individuals whose emoluments were the highest in the Group for the year ended 31st December 2019
and 2018 are as follows:
XXXXXXXXXX
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
2019
Total
HK$’000
2018
Total
HK$’000
2019 Total 11,995 7,137 7,492 6,143 3, XXXXXXXXXX,203 47,338
2018 Total 12,243 1,433 7,842 2, XXXXXXXXXX,064 36,900
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$ XXXXXXXXXX
6,000,001 – 6,500,000 – 1
6,500,001 – 7,000,000 1 1
7,000,001 – 7,500,000 1 2
9,000,001 – 9,500,000 – 1
10,500,001 – 11,000,000 1 –
11,000,001 – 11,500,000 2 –
5 5
28. E M P LOY E E I N F O R M AT I O N – C AT H A Y PA C I F I C A N D C AT H A Y D R A G O N
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:
XXXXXXXXXX
HK$ Director Flight staff Other staff Director Flight staff Other staff
0 – 1,000, XXXXXXXXXX,897 10, XXXXXXXXXX,107 10,579
1,000,001 – 1,500,000 – XXXXXXXXXX – XXXXXXXXXX
1,500,001 – 2,000,000 1 1, XXXXXXXXXX,023 96
2,000,001 – 2,500, XXXXXXXXXX – 438 81
2,500,001 – 3,000, XXXXXXXXXX – 534 21
3,000,001 – 3,500,000 – 437 9 – 437 7
3,500,001 – 4,000,000 – 248 5 – 271 4
4,000,001 – 4,500,000 – 94 2 – 108 –
4,500,001 – 5,000, XXXXXXXXXX – 1 32 1
5,000,001 – 5,500,000 – 4 2 – 6 –
5,500,001 – 6,000,000 – 1 1 – 2 –
6,000,001 – 6,500,000 – – 1 – – 1
6,500,001 – 7,000,000 – – 1 – – 1
7,000,001 – 7,500,000 – – 1 2 – –
9,000,001 – 9,500,000 – – – 1 – –
10,500,001 – 11,000,000 1 – – – – –
11,000,001 – 11,500,000 2 – – – – –
21 18,257 10, XXXXXXXXXX,543 11,091
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Directors and Employees
103Annual Report 2019
29. R E L AT E D PA R T Y T R A N S A C T I O N S
(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:
XXXXXXXXXX
Associates
HK$M
Other related
parties
HK$M
Associates
HK$M
Other related
parties
HK$M
Revenue XXXXXXXXXX
Aircraft maintenance 1,264 2,511 1,212 2,992
Other operating expenses XXXXXXXXXX
Dividend income XXXXXXXXXX
Finance income 11 – 35 –
Property, plant and equipment purchase – 128 – 43
Lease payments – 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 three to nine 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. Upon adoption of HKFRS 16 on 1st
January 2019, the Group recognised the right-of-use assets and lease liabilities of HK$554 million and
HK$570 million respectively. For the year ended 31st December 2019, lease payments of HK$100 million
were paid. The balances of right-of-use assets and lease liabilities as at 31st December 2019 were HK$512
million and HK$535 million respectively.
The lease payments are included in continuing connected transactions in note 29(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 2019 totalled HK$3,947 million (2018: HK$4,227 million).
The amounts receivable from the HAECO group for the year ended 31st December 2019 totalled HK$34
million (2018: HK$23 million).
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.
(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 2019
totalled HK$288 million (2018: HK$300 million). The amounts receivable from the Air China group for the year
ended 31st December 2019 totalled HK$377 million (2018: HK$495 million).
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.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Related Party Transactions
Cathay Pacific Airways Limited104
29. R E L AT E D PA R T Y T R A N S A C T I O N S (continued)
(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 2019, service fees of HK$25 million (2018: HK$51 million) were
paid and expenses of HK$204 million (2018: HK$154 million) were reimbursed at cost.
As directors and/or employees of the Swire group, Patrick Healy, Gregory Hughes, Ronald Lam, Michelle Low,
Martin Murray, Merlin Swire, Samuel Swire and Augustus Tang are, and Zhang Zhuo Ping will be, interested in
the JSSHK Services Agreement. Merlin Swire and Samuel Swire are also so interested as shareholders,
directors and employees of the Swire group. Rupert Hogg and Paul Loo were so interested as directors and
employees of the Swire group until their resignation with effect from 19th August 2019. John Slosar was so
interested as a director and an employee of the Swire group until his resignation with effect from the
conclusion of the Company’s board meeting held on 6th November 2019. Ivan Chu is interested as a director
and an employee of the Swire group until his resignation with effect from 14th April 2020.
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 2019 are disclosed in
notes 16 and 18 to the financial statements. These balances arising in the normal course of business are non-
interest bearing and have no fixed repayment terms.
(c) Guarantees given by the Company in respect of bank loan facilities of an associate at 31st December 2019 are
disclosed in note 30(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 27 to
the financial statements.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Related Party Transactions
105Annual Report 2019
30. C A P I TA L C O M M I T M E N T S A N D C O N T I N G E N C I E S
(a) Outstanding capital commitments authorised at the year end but not provided for in the financial statements:
2019
HK$M
2018
HK$M
Authorised and contracted for 62,524 73,896
Authorised but not contracted for 3,189 2,579
65,713 76,475
Operating lease commitments at 31st December 2018 are shown in note 8(b) to the financial statements.
(b) Guarantees in respect of lease obligations, bank loans and other liabilities outstanding at the year end:
2019
HK$M
2018
HK$M
Associates 1,430 2,473
(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 19 on page 137.
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.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Supplementary Information
Cathay Pacific Airways Limited106
31. F I N A N C I A L R I S K M A N A G E M E N T
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 a
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 funds 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 30(b) to the financial
statements. Collateral and guarantees received in respect of credit terms granted at 31st December 2019
totalled HK$875 million (2018: HK$1,167 million).
The movement in the expected credit loss allowance in respect of trade debtors during the year is set out in note
16 to the financial statements.
(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.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Supplementary Information
107Annual Report 2019
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
At the end of the reporting period the Group held liquid funds (note 17 to the financial statements) of HK$14,864
million (2018: HK$15,315 million) that is available for managing liquidity risk. Due to the dynamic nature of the
underlying businesses, the Group treasury function also maintains funding flexibility through available
committed and uncommitted credit facilities.
(i) Financial arrangements
The Group had access to the following liquid funds and undrawn facilities at the end of the reporting period:
2019
HK$M
2018
HK$M
Liquid funds (note 17) 14,864 15,315
Less amounts pledged as part of long-term financing
 – debt securities listed outside Hong Kong (5) (5)
 – bank deposits XXXXXXXXXX)
Committed undrawn facilities 5,289 4,680
Available unrestricted liquidity to the Group 20,011 19,830
2019
HK$M
2018
HK$M
Uncommitted bank overdraft facilities XXXXXXXXXX
Other uncommitted bank facilities 100 1,588
430 1,920
Committed undrawn facilities may be drawn at any time in either Hong Kong dollar or United States dollar.
Uncommitted bank overdraft facilities and other uncommitted bank facilities may be drawn at any time and
may be terminated by the bank without notice.
(ii) Payment profile of financial liabilities
The analysis has been performed on the same basis as for 2018, except for the application of HKFRS 16 from
1st January 2019. Under the HKFRS 16 transition methods chosen, comparative information in 2018 is not
restated. The undiscounted payment profile of financial liabilities is outlined as follows:
2019
Within
one year
HK$M
After one
year but
within two
years
HK$M
After two
years but
within five
years
HK$M
After five
years
HK$M
Total
HK$M
Group
Long-term loans (15, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,042)
Lease liabilities (8,233) (7, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,104)
Other long-term payables – (1,871) (1, XXXXXXXXXX,412)
Trade and other payables (17,695) – – – (17,695)
Derivative financial liabilities, net XXXXXXXXXX XXXXXXXXXX)
Total (41, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,129)
Cathay Pacific Airways Limited108
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
2018
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$M
Group
Long-term loans (11, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,296)
Obligations under finance leases (4,604) (3, XXXXXXXXXX,059) (6, XXXXXXXXXX,951)
Other long-term payables – XXXXXXXXXX, XXXXXXXXXX,335)
Trade and other payables (16,428) – – – (16,428)
Derivative financial liabilities, net (1, XXXXXXXXXX) (1,955)
Total (33, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,965)
(c) Market risk
(i) Foreign currency risk
The Group’s revenue streams are denominated in a number of foreign currencies resulting in exposure to
foreign exchange rate fluctuations. The Group’s policy is to reduce foreign currency exposure on currencies
other than United States dollars. To manage this exposure, assets are, where possible, financed in those
foreign currencies in which sales transactions are anticipated, thus establishing a natural hedge. In addition,
the Group uses currency derivatives to reduce foreign currency exposure from highly probable forecast
sales transactions in foreign currencies. The use of foreign currency borrowings and currency derivatives to
hedge highly probable forecast sales transactions in foreign currencies is a key component of the financial
risk management process, as the change in value of the highly probable forecast sales transactions in
foreign currencies is effectively mitigated by the exchange differences realised on the repayment of
financial commitments and the settlement of currency derivatives.
Hedges of foreign currency risk
The following table details the carrying amount of foreign currency borrowings and the notional amount of
currency derivative contracts that have been designated as cash flow hedges of the Group’s highly probable
forecast sales transactions at the end of the reporting period:
2019
HK$M
2018
HK$M
Currency derivative contracts – outgoing currencies
Renminbi 4,923 6,204
Euros 1,652 1,371
Australian dollars 1,467 1,556
New Taiwan dollars 2,347 2,405
Japanese yen 1,168 975
Pound sterling 1,525 1,195
Others 3,263 3,516
Foreign currency borrowings
Japanese yen 5,071 5,324
Singapore dollars XXXXXXXXXX
Others 33 33
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Supplementary Information
109Annual Report 2019
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
2019
HK$M
2018
HK$M
Carrying amount of currency derivative contracts
Asset XXXXXXXXXX
Liability XXXXXXXXXX)
Forward exchange contract assets are included in the “Other long-term receivables and investments” (note
11) and “Trade and other receivables” (note 16), and forward exchange contract liabilities are included in the
“Other long-term payables” (note 13) and “Trade and other payables” (note 18) line items in the consolidated
statement of financial position respectively.
The 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 two years from the reporting date and have an average forward exchange rate between the
respective foreign currencies and United States dollars as follows:
2019
USD to
2018
USD to
Renminbi XXXXXXXXXX
Euros XXXXXXXXXX
Australian dollars XXXXXXXXXX
New Taiwan dollars XXXXXXXXXX
Japanese yen XXXXXXXXXX
Pound sterling XXXXXXXXXX
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. Correspondingly, the hedged item is measured
based on the forward exchange rate.
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 Limited110
31. F I N A N C I A L R I S K M A N A G E M E N T (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:
2019
HK$M
2018
HK$M
Balance at 1st January 1,688 1,153
Effective portion of the cash flow hedge recognised in other
 comprehensive income XXXXXXXXXX
Amounts reclassified to profit or loss* XXXXXXXXXX)
Related tax 86 (44)
Balance at 31st December** 1,004 1,688
Change in fair value of the derivative instruments during the year XXXXXXXXXX
Hedge ineffectiveness recognised in profit or loss – –
Effective portion of the cash flow hedge recognised in other
 comprehensive income XXXXXXXXXX
* Amounts reclassified to profit or loss are recognised in the “Passenger services revenue” and “Cargo services revenue” line
items in the consolidated statement of profit or loss.
** At 31st December 2019, the Group had HK$584 million (net of deferred tax) in the hedging reserve from discontinued hedges
(2018: HK$764 million, net of deferred tax).
Exposure to currency risk
The currencies giving rise to a risk of translation in the Group’s financial statements in 2019 are primarily
United States dollars, Euros, Australian dollars, Singapore dollars, Renminbi and Japanese yen (2018: United
States dollars, Euros, Australian dollars, Singapore dollars, Renminbi and Japanese yen).
At the reporting date, the exposure to these currencies in relation to recognised assets and liabilities was as
follows:
2019
USD
HK$M
EUR
HK$M
AUD
HK$M
SGD
HK$M
RMB
HK$M
JPY
HK$M
Group
Loans due from an associate 291 – – – – –
Trade debtors and other receivables 4, XXXXXXXXXX250
Liquid funds 11, XXXXXXXXXX
Long-term loans (43,131) – – (982) – (1,268)
Lease liabilities (29,563) (1, XXXXXXXXXX) (3,865)
Trade creditors and other payables (4, XXXXXXXXXX XXXXXXXXXX)
Currency derivatives at notional value 20, XXXXXXXXXX, XXXXXXXXXX,923) (1,168)
Net exposure (39,233) (1,568) (1, XXXXXXXXXX,322) (6,191)
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Supplementary Information
111Annual Report 2019
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
2018
USD
HK$M
EUR
HK$M
AUD
HK$M
SGD
HK$M
RMB
HK$M
JPY
HK$M
Group
Loans due from an associate 293 – – – – –
Trade debtors and other receivables 5, XXXXXXXXXX356
Liquid funds 11, XXXXXXXXXX
Long-term loans (35,640) – – (974) – (1,313)
Obligations under finance leases (16,942) (1,599) – – – (4,011)
Trade creditors and other payables (6, XXXXXXXXXX XXXXXXXXXX)
Currency derivatives at notional value 28, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX)
Net exposure (13,370) (1,602) (1,516) (1,076) (5,302) (6,120)
In addition to the exposure shown above, the Group is exposed to currency risk from its future net operating
cash flows in foreign currencies, principally United States dollars, Renminbi, Euros, Australian dollars, New
Taiwan dollars, Japanese yen and Pound sterling.
Sensitivity analysis for foreign currency exposure
A five percent appreciation of the Hong Kong dollar against the following currencies at the reporting date
would have resulted in a change in profit or loss and other equity components by the amounts shown below.
It represents the translation of financial assets and liabilities and the change in fair value of currency
derivatives at the reporting date. The analysis assumes that all other variables, in particular interest rates,
remain constant. It has been performed on the same basis as for 2018, except for the application of HKFRS
16 from 1st January 2019. Under the HKFRS 16 transition methods chosen, comparative information in 2018
is not restated.
2019
Net increase/(decrease)
in profit or loss
HK$M
Net increase/(decrease) in
other equity components
HK$M
United States dollars* 3, XXXXXXXXXX)
Euros 2 76
Australian dollars (2) 65
Singapore dollars XXXXXXXXXX
Renminbi XXXXXXXXXX
Japanese yen XXXXXXXXXX
Net increase/(decrease) 2, XXXXXXXXXX)
Cathay Pacific Airways Limited112
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
2018
Net increase/(decrease)
in profit or loss
HK$M
Net increase/(decrease) in
other equity components
HK$M
United States dollars* 2, XXXXXXXXXX)
Euros 3 60
Australian dollars (2) 65
Singapore dollars – 53
Renminbi XXXXXXXXXX
Japanese yen XXXXXXXXXX
Net increase/(decrease) 1,976 (88)
* Hong Kong dollars is pegged with United States dollars between the range of 7.75 to 7.85 (US$: HK$). The above analysis on five
percent appreciation of Hong Kong dollars against United States dollars is for illustrative purpose only.
(ii) Interest rate risk
The Group’s cash flow exposure to interest rate risk arises primarily from long-term borrowings at floating
rates. Interest rate swaps are used to achieve an appropriate mix of fixed rate and floating rate exposure
consistent with the Group’s policy. Interest rate risk is measured by using sensitivity analysis on variable rate
financial instruments.
Hedges of interest rate risk
The following table details the interest rate swaps that have been designated as cash flow hedges of the
interest rate risk inherent in the Group’s variable rate financing liabilities at the end of the reporting period:
2019
HK$M
2018
HK$M
Notional amount
United States dollars 21,627 28,175
Hong Kong dollars 1,395 4,118
Others 79 156
2019
HK$M
2018
HK$M
Carrying amount
Asset 46 375
Liability XXXXXXXXXX)
Interest rate swap assets are included in the “Other long-term receivables and investments” (note 11) and
“Trade and other receivables” (note 16), and interest rate swap liabilities are included in the “Other long-term
payables” (note 13) and “Trade and other payables” (note 18) line items in the consolidated statement of
financial position respectively.
The swaps will mature over the next eight years matching the maturity of the related financing liabilities and
have fixed swap rates ranging from 1.60% to 4.29% (2018: 1.60% to 4.29%).
The Group seeks to hedge the benchmark interest rate component only and applies a hedge ratio of 1:1. The
existence of an economic relationship between the interest rate swaps and the variable rate borrowings is
determined by matching their critical contract terms, including the reference interest rates, tenors, interest
repricing dates, maturity dates, interest payment dates, the notional amounts of the swaps and the
outstanding principal amounts of the financing liabilities.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Supplementary Information
113Annual Report 2019
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
The main source of ineffectiveness in these hedging relationships is the effect of the counterparty’s and the
Group’s own credit risk on the fair value of the swaps which is not reflected in the fair value of the hedged
cash flows attributable to the change in interest rates.
The following table provides a reconciliation of the hedging reserve in respect of interest rate risk and shows
the effectiveness of the hedging relationships:
2019
HK$M
2018
HK$M
Balance at 1st January XXXXXXXXXX)
Effective portion of the cash flow hedge recognised in other
 comprehensive income XXXXXXXXXX
Amounts reclassified to profit or loss* XXXXXXXXXX
Related tax 38 (33)
Balance at 31st December** XXXXXXXXXX
Change in fair value of the derivative instruments during the year XXXXXXXXXX
Hedge ineffectiveness recognised in profit or loss – –
Effective portion of the cash flow hedge recognised in other
 comprehensive income XXXXXXXXXX
* Amounts reclassified to profit or loss are recognised in the “Finance charges” line item in the consolidated statement of profit
or loss.
** The entire balance in the hedging reserve relates to continuing hedges.
Interest rate profile
At the reporting date the interest rate profile of the interest-bearing financial instruments was as follows:
2019
HK$M
2018
HK$M
Fixed rate instruments
Long-term loans (4,399) (1,778)
Lease liabilities (21,889) (5,308)
Interest rate and currency swaps (21, XXXXXXXXXX,190)
Net exposure (48, XXXXXXXXXX,276)
2019
HK$M
2018
HK$M
Variable rate instruments
Loan due from an associate XXXXXXXXXX
Liquid funds 14,864 15,315
Long-term loans (52, XXXXXXXXXX,908)
Lease liabilities (18, XXXXXXXXXX,883)
Interest rate and currency swaps 23,222 32,630
Net exposure (32, XXXXXXXXXX,553)
Cathay Pacific Airways Limited114
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
Sensitivity analysis for interest rate exposure
An increase of 25 basis points in interest rates at the reporting date would have decreased profit or loss and
increased other equity components by the amounts shown below. It represents the change in fair value of
interest rate swaps and financial liabilities designated at fair value through profit or loss at the reporting date
and the increase in net finance charges on variable rate financial instruments. The analysis assumes that all
other variables, in particular foreign currency rates, remain constant. It has been performed on the same
basis as for 2018, except for the application of HKFRS 16 from 1st January 2019. Under the HKFRS 16
transition methods chosen, comparative information in 2018 is not restated.
XXXXXXXXXX
Net decrease
in profit
or loss
HK$M
Net increase in
other equity
components
HK$M
Net decrease
in profit
or loss
HK$M
Net increase in
other equity
components
HK$M
Variable rate instruments XXXXXXXXXX
(iii) Fuel price risk
Jet fuel is a major component of the Group’s operating expenses and the Group’s results are significantly
affected by the volatility in the price of jet fuel. The Group’s policy is to reduce fuel price risk by hedging a
percentage of its expected fuel consumption. Crude oil swaps which are economically equivalent to forward
contracts are used to achieve the Group’s desired hedging position.
Hedges of fuel price risk
The following table details the crude oil forward contracts that have been designated as cash flow hedges of
the Group’s highly probable forecast fuel purchase transactions at the end of the reporting period:
XXXXXXXXXX
Notional amount Barrel 28,897,164 23,286,402
Carrying amount
Asset HK$M 368 –
Liability HK$M XXXXXXXXXX,854)
Crude oil forward contract assets are included in the “Other long–term receivables and investments” (note
11) and “Trade and other receivables” (note 16), and crude oil forward contract liabilities are included in the
“Other long-term payables” (note 13) and “Trade and other payables” (note 18) line items in the consolidated
statement of financial position respectively.
The crude oil forward contracts have a maturity of less than two years (2018: two years) from the reporting
date and have an average strike price (Brent, US$/barrel) as follows:
2019
US$/barrel
2018
US$/barrel
Within one year XXXXXXXXXX
After one year but within two years XXXXXXXXXX
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 entered into after 1st January 2018 following the adoption of HKFRS 9 “Financial Instruments”.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Supplementary Information
115Annual Report 2019
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
For the highly probable forecast fuel purchase transactions on or after 1st January 2018, 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. Prior to 1st January 2018, the entire price risk of jet
fuel was designated as hedged item.
The following table provides a reconciliation of the hedging reserve in respect of fuel price risk and shows
the effectiveness of the hedging relationships:
2019
HK$M
2018
HK$M
Balance at 1st January (1,616) (2,446)
Effective portion of the cash flow hedge recognised in other
 comprehensive income 1, XXXXXXXXXX)
Amounts reclassified to profit or loss* 100 1,415
Related tax XXXXXXXXXX)
Balance at 31st December** XXXXXXXXXX,616)
Change in fair value of the derivative instruments during the year 1, XXXXXXXXXX)
Hedge ineffectiveness recognised in profit or loss*** – (22)
Effective portion of the cash flow hedge recognised in other
 comprehensive income 1, XXXXXXXXXX)
* Amounts reclassified to profit or loss are recognised in the “Fuel, including hedging losses” line item in the consolidated
statement of profit or loss.
** The entire balance in the hedging reserve relates to continuing hedges.
*** Hedge ineffectiveness is recognised in the “Others” line item in the consolidated statement of profit or loss.
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 2018.
XXXXXXXXXX
Net increase
in profit or loss
HK$M
Net increase/
(decrease) in
other equity
components
HK$M
Net increase
in profit or loss
HK$M
Net increase/
(decrease) in
other equity
components
HK$M
Increase in jet fuel price by 5% – XXXXXXXXXX
Decrease in jet fuel price by 5% – XXXXXXXXXX)
Cathay Pacific Airways Limited116
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
(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 2019 and 2018 except for the following financial instruments, for
which their carrying amounts and fair values are shown below:
XXXXXXXXXX
Carrying
amount
HK$M
Fair value
HK$M
Carrying
amount
HK$M
Fair value
HK$M
Long-term loans (56, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,496)
The fair value of these financial instruments are measured using quoted prices in active markets for similar
assets or liabilities, or 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
2019 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.
XXXXXXXXXX
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$M
Total
HK$M
Recurring fair value
 measurement
Assets
Unlisted equity Investments
 at fair value – – XXXXXXXXXX – – XXXXXXXXXX
Liquid funds
 – funds with investment
   managers – 5,079 – 5,079 – 4,963 – 4,963
 – other liquid investments – 5 – 5 – 5 – 5
Derivative financial assets – 2,010 – 2,010 – 2,359 – 2,359
– 7, XXXXXXXXXX,980 – 7, XXXXXXXXXX,092
Liabilities
Financial liabilities designated
 at fair value through profit
 or loss – (1,415) – (1,415) – (1,567) – (1,567)
Derivative financial liabilities – (917) – (917) – (2,059) – (2,059)
– (2,332) – (2,332) – (3,626) – (3,626)
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Supplementary Information
117Annual Report 2019
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
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 2019 and 2018, 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$M)
Unlisted equity
 investments
Discount rate 2019: XXXXXXXXXX%
(2018: 8.5%)
The higher the discount rate,
 the lower the fair value
2019: +/- 0.5%
(2018: +/- 0.5%)
2019: (28)/30
(2018: (17)/18)
The movement during the year in the balance of Level 3 fair value measurements is as follows:
2019
HK$M
2018
HK$M
Unlisted equity investments at fair value
At 1st January XXXXXXXXXX
Net unrealised gains recognised in other comprehensive income during the year 33 –
Fair value gains recognised in profit or loss during the year 88 43
At 31st December XXXXXXXXXX
Any gain or loss arising from the remeasurement of the Group’s equity investments held for strategic purposes
are recognised in the investment revaluation reserve (non-recycling) in other comprehensive income. Upon
disposal of the equity investments, the amount accumulated in other comprehensive income is transferred
directly to retained earnings.
Any gain or loss arising from the remeasurement of the Group’s equity investments held for trading purposes
are recognised in profit or loss as “Others”.
(f) Offsetting financial assets and financial liabilities
2019
Amount of financial
assets/(liabilities)
presented in the statement
of financial position
HK$M
Financial instruments
not offset in the
statement of financial
position
HK$M
Net amount
HK$M
Group
Derivative financial assets 2, XXXXXXXXXX,517
Derivative financial liabilities XXXXXXXXXX)
1,093 – 1,093
Cathay Pacific Airways Limited118
31. F I N A N C I A L R I S K M A N A G E M E N T (continued)
2018
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$M
Group
Derivative financial assets 2, XXXXXXXXXX,880
Derivative financial liabilities (2, XXXXXXXXXX,580)
300 – 300
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA)
master agreements, providing offsetting in the event of default. The ISDA agreements do not meet the criteria
for offsetting in the statement of financial position. This is because the Group does not currently have any legally
enforceable right to offset recognised amounts, as the right to offset is enforceable only on the occurrence of
future events such as default on the bank loans or other credit events.
32. C A P I TA L R I S K M A N A G E M E N T
The Group’s objectives when managing capital are to ensure a sufficient level of liquid funds and to establish an
optimal capital structure which maximises shareholders’ value.
The Group regards the net debt/equity ratio as the key measurement of capital risk management. The definition of
net debt/equity ratio is shown on page 143 and a ten year history is included on pages 138 and 139 of the
annual report.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Supplementary Information
119Annual Report 2019
33. C O M PA N Y- L E V E L S TAT E M E N T O F F I N A N C I A L P O S I T I O N
Note
2019
HK$M
2018
HK$M
2019
US$M
2018
US$M
ASSETS AND LIABILITIES
Non-current assets and liabilities
Property, plant and equipment 114,302 99,520 14,654 12,759
Intangible assets 3,475 3, XXXXXXXXXX
Investments in subsidiaries 36,483 34,815 4,677 4,463
Investments in associates 10,797 10,798 1,384 1,384
Other long-term receivables and investments 3,104 2, XXXXXXXXXX
168,161 151,474 21,559 19,419
Long-term liabilities (69, XXXXXXXXXX,935) (8,969) (7,684)
Other long-term payables (2,638) (3, XXXXXXXXXX)
Deferred tax liabilities (12, XXXXXXXXXX,814) (1,565) (1,515)
(84, XXXXXXXXXX, XXXXXXXXXX,872) (9,596)
Net non-current assets 83,356 76,624 10,687 9,823
Current assets and liabilities
Stock 1,588 1, XXXXXXXXXX
Trade and other receivables 9,151 11,050 1,173 1,417
Liquid funds 9,042 9,150 1,159 1,173
19,781 21,826 2,536 2,798
Current portion of long-term liabilities (19, XXXXXXXXXX,632) (2,490) (1,748)
Trade and other payables (13, XXXXXXXXXX,182) (1,688) (1,818)
Contract liabilities (14, XXXXXXXXXX,498) (1,912) (1,987)
Bank overdrafts – unsecured – (19) – (2)
Taxation (1, XXXXXXXXXX113)
(48, XXXXXXXXXX,214) (6,275) (5,668)
Net current liabilities (29, XXXXXXXXXX,388) (3,739) (2,870)
Total assets less current liabilities 138,996 129,086 17,820 16,549
Net assets 54,191 54,236 6,948 6,953
CAPITAL AND RESERVES
Share capital 20 17,106 17,106 2,193 2,193
Reserves 22 37,085 37,130 4,755 4,760
Total equity 54,191 54,236 6,948 6,953
The financial statements are prepared and presented in HK$, the functional currency. The US$ figures are shown only as supplementary
information and are translated at US$1:HK$7.8.
The Company has initially applied HKFRS 16 at 1st January 2019. Under the transition methods chosen, comparative information in 2018 is
not restated. See accounting policy 1.
Patrick Healy John Harrison
Director Director
Hong Kong, 11th March 2020
Cathay Pacific Airways Limited120
34. I M PA C T O F F U R T H E R N E W A C C O U N T I N G S TA N DA R D S
The HKICPA has issued a number of amendments and a new standard, HKFRS 17 “Insurance Contracts”, which
become effective for accounting periods beginning on or after 1st January 2020 and which are not adopted in the
financial statements. These developments include the following which may be relevant to the Group.
• Amendments to HKFRS 3 “Definition of a Business”
• Amendments to HKAS 1 and HKAS 8 “Definition of Material”
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.
35. C O M PA R AT I V E F I G U R E S
In the consolidated and company-level statement of financial position, “unearned transportation revenue” has been
renamed as “contract liabilities” in accordance with HKFRS 15. Accordingly, passenger fuel and insurance surcharge
received in advance of carriage, previously included in “other payables” is presented under “contract liabilities”.
Certain comparative figures have been adjusted to conform to current year’s presentation.
36. E V E N T A F T E R T H E R E P O R T I N G P E R I O D
The outbreak of COVID-19 since January 2020 has resulted in a challenging operational environment, and will
adversely impact the Group’s financial performance and liquidity position. Travel demand has dropped substantially
and the Group has taken a number of short-term measures in response, including aggressive reduction of passenger
capacity measured in Available Seat Kilometres (ASK) by approximately 30% for February and 65% for March and
April, with frequencies cut approximately 65% and 75% over the same periods. Substantial passenger capacity and
frequency reduction is also likely for May as we continue to monitor and match market demand. As at the end of
February, passenger load factor had declined to approximately 50% and year-on-year yield had also fallen
significantly. It is difficult to predict when these conditions will improve. However, the Group is expected to incur a
substantial loss for the first half of 2020. The Group’s available unrestricted liquidity as at 31st December 2019 was
HK$20.0 billion. The Directors believe that with the cost saving measures being taken, the Group’s strong vendor
relationships, as well as the Group’s liquidity position and availability of sources of funds, the Group will remain a
going concern.
N O T E S T O T H E
F I N A N C I A L S T A T E M E N T S
Supplementary Information
121Annual Report 2019
S U B S I D I A R I E S
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 XXXXXXXXXXshares
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 XXXXXXXXXXshares
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 XXXXXXXXXXshares
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
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.
P R I N C I P A L S U B S I D I A R I E S
A N D A S S O C I A T E S
at 31st December 2019
Cathay Pacific Airways Limited122
A S S O C I AT E S
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%.
P R I N C I P A L S U B S I D I A R I E S
A N D A S S O C I A T E S
123Annual Report 2019
1. B A S I S O F A C C O U N T I N G
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 and 12 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.
The HKICPA has issued a new HKFRS, HKFRS 16 “Leases”, and a number of amendments to HKFRSs that are first
effective for the current accounting period of the Group. Except for HKFRS 16 “Leases”, none of the developments
have had a material effect on how the Group’s results and financial position for the current or prior periods have been
prepared or presented in these financial statements.
The Group has not applied any new standard or interpretation that is not yet effective for the current accounting
period.
HKFRS 16 “Leases”
HKFRS 16 replaces HKAS 17 “Leases” and related interpretations, HK(IFRIC) 4 “Determining whether an arrangement
contains a lease”, HK(SIC) 15 “Operating leases – incentives”, and HK(SIC) 27 “Evaluating the substance of
transactions involving the legal form of a lease”. The distinction between operating and finance leases is removed for
lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be
recognised on the consolidated statement of financial position for all leases by lessees, except for leases that have a
lease term of 12 months or less (“short- term leases”) and leases of low-value assets. The standard does not
significantly change the accounting of lessors.
HKFRS 16 also introduces additional qualitative and quantitative disclosure requirements which aim to enable users
of the financial statements to assess the effect that leases have on the financial position, financial performance and
cash flows of an entity.
The Group has initially applied HKFRS 16 at 1st January 2019 using the modified retrospective approach, under which
the cumulative effect of initial application is recognised in retained profit at 1st January 2019. Accordingly, the
comparative information presented for 2018 has not been restated and is presented as previously reported under
HKAS 17 and related interpretations.
Further details of the nature and effect of the changes to previous accounting policies and the transition options
applied are set out below:
(a) New definition of a lease
HKFRS 16 defines a lease on the basis of whether a customer controls the use of an identified asset for a period
of time, which may be determined by a defined amount of use. 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.
The Group has chosen to apply the new definition of a lease to all contracts on transition to the new standard.
The reclassifications and the adjustments arising from the initial adoption of HKFRS 16 are recognised in the
opening balance of the consolidated statement of financial position at 1st January 2019.
P R I N C I P A L
A C C O U N T I N G P O L I C I E S
Cathay Pacific Airways Limited124
1. B A S I S O F A C C O U N T I N G (continued)
(b) Lease accounting and transitional impact
On adoption of HKFRS 16, the Group recognised lease liabilities in relation to leases which had previously been
classified as operating leases under the principles of HKAS 17. These liabilities were measured at the present
value of the remaining lease payments, discounted using the incremental borrowing rate of the lessees at
1st January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities at
1st January 2019 was 3.92%.
A reconciliation between commitments under operating leases for future periods at 31st December 2018 and
lease liabilities recognised at 1st January 2019 under HKFRS 16 is provided below:
HK$M
Operating lease commitments disclosed at 31st December XXXXXXXXXX,958
Less: commitments relating to leases exempt from capitalisation:
 – leases with remaining lease term ending on or before 31st December 2019,
   short-term leases and leases of low-value assets (301)
Less: adjustments for contracts reassessed based on the lease definition in HKFRS 16 (4)
Add: adjustments as a result of a different treatment of extension and termination options 1,500
21,153
Less: total future interest charges (2,550)
Present value of remaining lease payments, discounted using the incremental borrowing rate
 at 1st January XXXXXXXXXX,603
Add: obligations under finance leases recognised at 31st December XXXXXXXXXX,191
Lease liabilities recognised at 1st January XXXXXXXXXX,794
Of which are:
Current lease liabilities 7,293
Non-current lease liabilities 34,501
41,794
The associated right-of-use assets for aircraft and other significant leases were measured on a modified
retrospective basis as if the new rules had always been applied since the commencement dates of the leases,
but discounted using the respective incremental borrowing rates at 1st January 2019. Other right-of-use assets
were measured at the amount equal to the lease liabilities. There were no onerous lease contracts that would
have required an adjustment to the right-of-use assets at the date of initial application.
P R I N C I P A L
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125Annual Report 2019
1. B A S I S O F A C C O U N T I N G (continued)
The change in accounting policy affected the following items in the consolidated and company-level statement
of financial position at 1st January 2019:
At 31st
December 2018
HK$M
Impact of initial
application of
HKFRS 16
HK$M
At 1st
January 2019
HK$M
Group
Assets
Property, plant and equipment 117,124 18,566 135,690
Investments in associates 27,570 (1,219) 26,351
Other long-term receivables and investments 4,015 (1,173) 2,842
Deferred tax assets XXXXXXXXXX
Trade and other receivables 12, XXXXXXXXXX,288
Liabilities
Trade and other payables (17, XXXXXXXXXX,628)
Long-term liabilities (73, XXXXXXXXXX, XXXXXXXXXX,480)
Deferred tax liabilities (13, XXXXXXXXXX,923)
Equity
Reserves (46,830) 2,346 (44,484)
Company
Assets
Property, plant and equipment 99,520 13,959 113,479
Trade and other receivables 11, XXXXXXXXXX,927
Liabilities
Trade and other payables (14, XXXXXXXXXX,164)
Long-term liabilities (73, XXXXXXXXXX, XXXXXXXXXX,495)
Deferred tax liabilities (11, XXXXXXXXXX,690)
Equity
Reserves (37, XXXXXXXXXX,180)
To ease the transition to HKFRS 16, the Group applied the following recognition exemption and practical
expedients permitted by the standard at the date of initial application of HKFRS 16:
• when measuring the lease liabilities at the date of initial application of HKFRS 16, the Group applied a single
discount rate to a portfolio of leases with reasonably similar characteristics;
• the Group elected not to apply the requirements of HKFRS 16 in respect of the recognition of lease liabilities
and right-of-use assets to leases for which the remaining lease term ends within 12 months from the date of
initial application of HKFRS 16 , i.e. where the lease term ends on or before 31st December 2019;
• the Group excluded the initial direct costs from the measurement of the right-of-use asset at the date of
initial application of HKFRS 16; and
• the Group applied hindsight in determining the lease term where the contract contains options to extend or
terminate the lease.
Cathay Pacific Airways Limited126
1. B A S I S O F A C C O U N T I N G (continued)
The adoption of HKFRS 16 caused a significant increase in the Group’s total borrowings and hence the Group’s
adjusted net debt/equity ratio rose from 0.92 to 1.25 on 1st January 2019 when compared to its position at
31st December 2018.
The Group’s net debt/equity ratio at the end of the current and previous reporting periods under HKFRS 16 and
HKAS 17 was as follows:
HKFRS 16
31st December
2019
HK$M
(Hypothetical)
HKAS 17
31st December
2019
HK$M
HKFRS 16
1st January
2019
HK$M
HKAS 17
31st December
2018
HK$M
Non-current liabilities:
Long-term loans 43,134 43,134 40,952 40,952
Lease liabilities 33,374 17,480 34,501 19,231
76,508 60,614 75,453 60,183
Current liabilities:
Long-term loans 13,634 13,634 9,734 9,734
Lease liabilities 7,118 3,045 7,293 3,960
20,752 16,679 17,027 13,694
Total borrowings 97,260 77,293 92,480 73,877
Liquid funds less bank overdrafts (14, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,296)
Net borrowings 82,396 62,429 77,184 58,581
Funds attributable to the shareholders of
 Cathay Pacific 62,773 65,264 61,590 63,936
Adjusted net debt/equity ratio XXXXXXXXXX
(c) Impact on the financial performance, financial position and cash flows
After the initial recognition of right-of-use assets and lease liabilities as at 1st January 2019, the Group as a
lessee is required to recognise interest expense accrued on the outstanding balance of the lease liability, and the
depreciation of the right-of-use asset, instead of the previous policy of recognising rental expenses incurred
under operating leases on a straight-line basis over the lease term.
In the consolidated statement of cash flows, the Group as a lessee is required to split rentals paid under
capitalised leases into their interest element and capital element (see note 24 to the financial statements), the
latter of which is classified as financing cash outflows, similar to how leases previously classified as finance
leases under HKAS 17 were treated, instead of the previous classification of rental expenses within operating
cash outflows for operating leases under HKAS 17.
The Group’s lessee accounting policy is outlined in accounting policy 6(a)(i).
P R I N C I P A L
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127Annual Report 2019
1. B A S I S O F A C C O U N T I N G (continued)
The estimated effects of adopting HKFRS 16 on the financial statements for the year ended 31st December 2019
are as follows:
HK$M
Estimated effect on consolidated statement of profit or loss and other comprehensive income*:
Decrease/(increase) in expenses
Lease charges 4,507
Depreciation of property, plant and equipment (3,849)
Finance charges (744)
Exchange differences, net 71
Taxation (11)
Decrease in profit attributable to the shareholders of Cathay Pacific (26)
Decrease in earnings per share (basic and diluted) (0.7)¢
HK$M
Estimated effect on consolidated statement of financial position*:
Increase/(decrease) in assets
Property, plant and equipment** 19,937
Investments in associates (1,219)
Other long-term receivables and investments (1,130)
Deferred tax assets 31
Trade and other receivables (168)
17,451
(Increase)/decrease in liabilities
Trade and other payables 18
Long-term liabilities** (19,967)
Other long-term payables (222)
Deferred tax liabilities 229
(19,942)
Equity
Decrease in reserves 2,491
* Excluding the impact on share of profits of associates for the year ended 31st December 2019.
** At 19th July 2019, the Group recognised the right-of-use assets and lease liabilities of HK$4,732 million and HK$4,668 million
respectively arising from acquisition of HK Express.
HK$M
Estimated effect on consolidated statement of cash flows:
Increase in cash generated from operations 4,445
Increase in interest paid (744)
Increase in net cash inflow from operating activities 3,701
Increase in loan and lease repayments (3,701)
Increase in net cash outflow from financing activities (3,701)
Cathay Pacific Airways Limited128
2. B A S I S O F C O N S O L I DAT I O N
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. A S S O C I AT E S
Associates are those companies, not being subsidiaries, in which the Group holds a substantial long-term interest in
the equity share capital and over which the Group is in a position to exercise significant influence.
The consolidated statement of profit or loss and other comprehensive income includes the Group’s share of results
of associates as reported in their financial statements made up to dates not earlier than three months prior to 31st
December. In the consolidated statement of financial position, investments in associates represent the Group’s
share of net assets, goodwill arising on acquisition of the associates (less any impairment) and loans to those
companies.
In the Company’s statement of financial position, investments in associates are stated at cost less any impairment
loss recognised and loans to those companies. The results of associates are accounted for by the Company on the
basis of dividends received and receivable.
4. F O R E I G N C U R R E N C I E S
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.
P R I N C I P A L
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129Annual Report 2019
4. F O R E I G N C U R R E N C I E S (continued)
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 directly 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 directly in equity via the
statement of changes in equity.
5. P R O P E R T Y, P L A N T A N D E Q U I P M E N T
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:
Passenger aircraft over 20 years to residual value of the lower of 10% of cost or expected realisable value
Freighter aircraft over 20-27 years to residual value of between 10% and 20% of cost and over 10 years to nil
residual value for freighters converted from passenger aircraft
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.
Cathay Pacific Airways Limited130
6. L E A S E D A S S E T S
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
(i) Policy applicable from 1st January 2019
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.
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131Annual Report 2019
6. L E A S E D A S S E T S (continued)
Where the lease is capitalised, the right-of-use asset recognised is initially measured at cost comprising
the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses
outlined in accounting policy 5.
The lease liability is remeasured under the following circumstances:
• a change in future lease payments arising from a change in an index or a rate;
• a change in the Group’s estimate of the amount expected to be payable under a residual value
guarantee; or
• a change arising from the reassessment of whether the Group will be reasonably certain to exercise a
purchase, extension or termination option.
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.
(ii) Policy applicable prior to 1st January 2019
In the comparative period, property, plant and equipment held under lease agreements that transferred
substantially all the risks and rewards of ownership was treated as if it had been purchased outright at fair
market value and the corresponding liabilities to the lessor, net of interest charges, were included as
obligations under finance leases. Leases which did not transfer substantially all the risks and rewards of
ownership were treated as operating leases.
Amounts payable in respect of finance leases were apportioned between interest charges and reductions of
obligations based on the interest rates implicit in the leases.
Operating lease payments were charged to profit or loss on a straight line basis over the life of the
related lease.
(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)(i), then the Group classifies the
sub-lease as an operating lease.
Cathay Pacific Airways Limited132
7. I N TA N G I B L E A S S E T S
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. F I N A N C I A L A S S E T S
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.
The accounting policy for derivative financial assets is outlined in accounting policy 10.
Investments are recognised or derecognised by the Group on the date when the purchase or sale of the assets
occurs. The investments are initially stated at fair value plus directly attributable transaction costs, except for those
investments measured at fair value through profit or loss, for which transaction costs are recognised directly in profit
or loss. These investments are subsequently accounted for as follows:
Non-equity investments held by the Group are classified into one of the following measurement categories:
a) amortised cost, if the investment is held for the collection of contractual cash flows which represent solely
payments of principal and interest. Interest income from the investment is calculated using the effective interest
method;
b) fair value through other comprehensive income – recycling, if the contractual cash flows of the investment
comprise solely payments of principal and interest and the investment is held within a business model whose
objective is achieved by both the collection of contractual cash flows and sale. Changes in fair value are
recognised in other comprehensive income, except for the recognition in profit or loss of expected credit losses,
interest income (calculated using the effective interest method) and foreign exchange gains and losses. When
the investment is derecognised, the amount accumulated in other comprehensive income is recycled from
equity to profit or loss; or
c) fair value through profit or loss, if the investment does not meet the criteria for being measured at amortised
cost or fair value through other comprehensive income (recycling). Changes in the fair value of the investment
(including interest) are recognised in profit or loss.
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133Annual Report 2019
8. F I N A N C I A L A S S E T S (continued)
Equity investments are classified as fair value through profit or loss unless the equity investments are not held for
trading purposes and on initial recognition of the investment the Group makes an election to designate the
investment at fair value through other comprehensive income (non-recycling) such that subsequent changes in fair
value are recognised in other comprehensive income. Such elections are made on an instrument-by-instrument
basis, but may only be made if the investment meets the definition of equity from the issuer’s perspective. Where
such an election is made, the amount accumulated in other comprehensive income remains in the investment
revaluation reserve (non-recycling) until the investment is disposed of. At the time of disposal, the amount
accumulated in the investment revaluation reserve (non-recycling) is transferred to retained profit. It is not recycled
through profit or loss. Dividends from equity investments, irrespective of whether classified at fair value through
profit or loss or fair value through other comprehensive income (non-recycling), are recognised in profit or loss as
other income.
Funds with investment managers and other liquid investments which are managed and evaluated on a fair value basis
are designated at fair value through profit or loss.
Expected credit losses
The Group applies the expected credit loss model to the financial assets measured at amortised cost (including cash
and cash equivalents, trade and other receivables and loans to associates).
Financial assets measured at fair value, including equity investments measured at fair value through profit or loss,
equity investments designated at fair value through other comprehensive income (non-recycling) and derivative
financial assets, are not subject to the expected credit loss assessment.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the
present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in
accordance with the contract and the cash flows that the Group expects to receive).
In measuring expected credit losses, the Group takes into account reasonable and supportable information that is
available without undue cost or effort. This includes information about past events, current conditions and forecasts
of future economic conditions.
Expected credit losses are measured on either of the following bases:
i) 12-month expected credit losses: these are losses that are expected to result from possible default events
within 12 months after the reporting date; or
ii) lifetime expected credit losses: these are losses that are expected to result from all possible default events over
the expected lives of the items to which the expected credit loss model applies.
Loss allowances for trade debtors are always measured at an amount equal to lifetime expected credit losses.
Expected credit losses on trade debtors are estimated using a provision matrix based on the Group’s historical credit
loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and
forecast general economic conditions at the reporting date. For all other financial instruments, the Group recognises
a loss allowance equal to 12-month expected credit losses unless there has been a significant increase in credit risk
of the financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal
to lifetime expected credit losses.
Cathay Pacific Airways Limited134
8. F I N A N C I A L A S S E T S (continued)
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.
9. F I N A N C I A L L I A B I L I T I E S
Long-term loans, lease liabilities and trade and other payables are stated at amortised cost or designated at fair value
through profit or loss.
Where long-term liabilities have been defeased by funds and other investments, those liabilities 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 liability and the
deposit and the Group intends either to settle on a net basis or to realise the deposit and settle the liability
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.
P R I N C I P A L
A C C O U N T I N G P O L I C I E S
135Annual Report 2019
10. D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S
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. FA I R VA L U E M E A S U R E M E N T
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. R E T I R E M E N T B E N E F I T S
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.
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.
13. D E F E R R E D TA X AT I O N
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.
Cathay Pacific Airways Limited136
14. S T O C K
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.
15. 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.
16. M A I N T E N A N C E A N D O V E R H A U L C O S T S
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.
17. LOYA LT Y P R O G R A M M E
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.
P R I N C I P A L
A C C O U N T I N G P O L I C I E S
137Annual Report 2019
18. R E L AT E D PA R T I E S
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.
19. P R O V I S I O N S A N D C O N T I N G E N T L I A B I L I T I E S
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.
Cathay Pacific Airways Limited138
S T A T I S T I C S
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Consolidated profit or loss summary HK$M
Passenger services 73,985 73,119 66,408 66,926 73,047 75,734 71,826 70,133 67,778 59,354
Cargo services 23,810 28,316 23,903 20,063 23,122 25,400 23,663 24,555 25,980 25,901
Other services and recoveries 9,178 9,625 6,973 5,762 6,173 4,857 4,995 4,688 4,648 4,269
Revenue 106,973 111,060 97,284 92,751 102,342 105,991 100,484 99,376 98,406 89,524
Operating expenses (103, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,672)
Operating profit/(loss) 3,327 3,595 (2, XXXXXXXXXX,664 4,435 3,760 1,613 5,281 10,852
Profit on disposal of investments – – 586 – – – – – – 2,165
Gain on deemed partial disposal of associates 114 – 244 – – – – – – 868
Net finance charges (2,939) (2,114) (1,761) (1,301) (1,164) (1,158) (1, XXXXXXXXXX978)
Share of profits of associates 1,643 1,762 2,630 2,049 1, XXXXXXXXXX,708 2,577
Profit/(loss) before taxation 2,145 3, XXXXXXXXXX,465 4,049 3,579 1,483 6,245 15,484
Taxation XXXXXXXXXX497) (1, XXXXXXXXXX XXXXXXXXXX,441)
Profit/(loss) for the year 1,691 2, XXXXXXXXXX,308 3,450 2,904 1,074 5,466 14,043
Profit attributable to non-controlling interests – XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX)
Profit/(loss) attributable to the shareholders of Cathay Pacific 1,691 2,345 (1, XXXXXXXXXX,000 3,150 2, XXXXXXXXXX,297 13,858
Dividends paid (1, XXXXXXXXXX) – (1,259) (2,046) (1, XXXXXXXXXX,338) (3,777) (1,691)
Retained profit for the year 196 1,755 (1,259) (1,834) 3,954 2,128 2, XXXXXXXXXX,520 12,167
Consolidated statement of financial position summary HK$M
Property, plant and equipment and intangible assets 155,265 128,298 122,403 117,390 111,158 108,789 104,737 93,703 82,099 74,116
Long-term receivables and investments 30,878 31,585 32,212 27,902 27,947 29,290 27,449 24,776 23,393 17,512
Borrowings (97, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,629)
Liquid funds less bank overdrafts 14,864 15,296 19,094 20,290 20,647 21,098 27,736 24,182 19,597 24,194
Net borrowings (82, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,435)
Net current liabilities (excluding liquid funds, bank overdrafts and
 current portion of borrowings) (23, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,022)
Other long-term payables (4,806) (4,649) (3,502) (7, XXXXXXXXXX, XXXXXXXXXX,487) (1,318) (3,205) (3,650) (1,700)
Deferred taxation (12, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,643) (8,781) (9,263) (9,429) (8,061) (6,651) (5,842)
Net assets 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138 54,768 54,629
Financed by:
Funds attributable to the shareholders of Cathay Pacific 62,773 63,936 61,101 55,365 47,927 51,722 62,888 56,021 54,633 54,476
Non-controlling interests XXXXXXXXXX XXXXXXXXXX
Total equity 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138 54,768 54,629
Per share
Shareholders’ funds HK$ XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX85
EBITDA HK$ XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Earnings/(loss) HK cents XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Dividend HK$ XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Ratios
Profit/(loss) margin % XXXXXXXXXX XXXXXXXXXX4 15.5
Return on capital employed % XXXXXXXXXX XXXXXXXXXX7
Dividend cover Times XXXXXXXXXX XXXXXXXXXX6 3.2
Cash interest cover Times XXXXXXXXXX XXXXXXXXXX.7 35.2
Gross debt/equity ratio Times XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Net debt/equity ratio Times 1.31* XXXXXXXXXX XXXXXXXXXX 0.28
* Disregarding the effect of adopting HKFRS 16, the net debt/equity ratio increased from 0.92 to 0.96 times. Further details can be found in
accounting policy 1.
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 recognises 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.
139Annual Report 2019
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Consolidated profit or loss summary HK$M
Passenger services 73,985 73,119 66,408 66,926 73,047 75,734 71,826 70,133 67,778 59,354
Cargo services 23,810 28,316 23,903 20,063 23,122 25,400 23,663 24,555 25,980 25,901
Other services and recoveries 9,178 9,625 6,973 5,762 6,173 4,857 4,995 4,688 4,648 4,269
Revenue 106,973 111,060 97,284 92,751 102,342 105,991 100,484 99,376 98,406 89,524
Operating expenses (103, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,672)
Operating profit/(loss) 3,327 3,595 (2, XXXXXXXXXX,664 4,435 3,760 1,613 5,281 10,852
Profit on disposal of investments – – 586 – – – – – – 2,165
Gain on deemed partial disposal of associates 114 – 244 – – – – – – 868
Net finance charges (2,939) (2,114) (1,761) (1,301) (1,164) (1,158) (1, XXXXXXXXXX978)
Share of profits of associates 1,643 1,762 2,630 2,049 1, XXXXXXXXXX,708 2,577
Profit/(loss) before taxation 2,145 3, XXXXXXXXXX,465 4,049 3,579 1,483 6,245 15,484
Taxation XXXXXXXXXX497) (1, XXXXXXXXXX XXXXXXXXXX,441)
Profit/(loss) for the year 1,691 2, XXXXXXXXXX,308 3,450 2,904 1,074 5,466 14,043
Profit attributable to non-controlling interests – XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX)
Profit/(loss) attributable to the shareholders of Cathay Pacific 1,691 2,345 (1, XXXXXXXXXX,000 3,150 2, XXXXXXXXXX,297 13,858
Dividends paid (1, XXXXXXXXXX) – (1,259) (2,046) (1, XXXXXXXXXX,338) (3,777) (1,691)
Retained profit for the year 196 1,755 (1,259) (1,834) 3,954 2,128 2, XXXXXXXXXX,520 12,167
Consolidated statement of financial position summary HK$M
Property, plant and equipment and intangible assets 155,265 128,298 122,403 117,390 111,158 108,789 104,737 93,703 82,099 74,116
Long-term receivables and investments 30,878 31,585 32,212 27,902 27,947 29,290 27,449 24,776 23,393 17,512
Borrowings (97, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,629)
Liquid funds less bank overdrafts 14,864 15,296 19,094 20,290 20,647 21,098 27,736 24,182 19,597 24,194
Net borrowings (82, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,435)
Net current liabilities (excluding liquid funds, bank overdrafts and
 current portion of borrowings) (23, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,022)
Other long-term payables (4,806) (4,649) (3,502) (7, XXXXXXXXXX, XXXXXXXXXX,487) (1,318) (3,205) (3,650) (1,700)
Deferred taxation (12, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,643) (8,781) (9,263) (9,429) (8,061) (6,651) (5,842)
Net assets 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138 54,768 54,629
Financed by:
Funds attributable to the shareholders of Cathay Pacific 62,773 63,936 61,101 55,365 47,927 51,722 62,888 56,021 54,633 54,476
Non-controlling interests XXXXXXXXXX XXXXXXXXXX
Total equity 62,776 63,939 61,272 55,526 48,067 51,853 63,013 56,138 54,768 54,629
Per share
Shareholders’ funds HK$ XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX85
EBITDA HK$ XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Earnings/(loss) HK cents XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Dividend HK$ XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Ratios
Profit/(loss) margin % XXXXXXXXXX XXXXXXXXXX4 15.5
Return on capital employed % XXXXXXXXXX XXXXXXXXXX7
Dividend cover Times XXXXXXXXXX XXXXXXXXXX6 3.2
Cash interest cover Times XXXXXXXXXX XXXXXXXXXX.7 35.2
Gross debt/equity ratio Times XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Net debt/equity ratio Times 1.31* XXXXXXXXXX XXXXXXXXXX 0.28
Note:
(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 recognises 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 Limited140
S T A T I S T I C S
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Cathay Pacific and Cathay Dragon operating summary
Available tonne kilometres Million 33,077 32,387 31,439 30,462 30,048 28,440 26,259 26,250 26,383 24,461
Revenue tonne kilometres Million 24,090 24,543 23,679 22,418 22,220 20,722 18,696 18,819 19,309 19,373
Available seat kilometres Million 163,244 155,362 150,138 146,086 142,680 134,711 127,215 129,595 126,340 115,748
Revenue passengers carried ‘000 35,233 35,468 34,820 34,323 34,065 31,570 29,920 28,961 27,581 26,796
Revenue passenger kilometres Million 134,397 130,630 126,663 123,478 122,330 112,257 104,571 103,837 101,536 96,588
Revenue load factor % XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Passenger load factor % XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Cargo carried ‘000 tonnes 2,022 2,152 2,056 1,854 1,798 1,723 1,539 1,563 1,649 1,804
Cargo revenue tonne kilometres Million 11,311 12,122 11,633 10,675 10,586 10,044 8,750 8,942 9,648 10,175
Cargo load factor % XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Excess baggage carried Tonnes 2,179 2,329 2,449 2,471 2,596 2,699 2,599 2,711 3,103 4,053
Kilometres flown Million XXXXXXXXXX XXXXXXXXXX
Block hours ‘000 hours XXXXXXXXXX XXXXXXXXXX
Aircraft departures ‘ XXXXXXXXXX XXXXXXXXXX138
Length of scheduled routes network ‘000 kilometres XXXXXXXXXX XXXXXXXXXX
Number of destinations at year end Destinations XXXXXXXXXX XXXXXXXXXX
Staff number at year end Number 27,342 26,623 26,029 26,674 26,833 25,755 24,572 23,844 23,015 21,592
ATK per staff ‘000 1,256 1,217 1,208 1,142 1,120 1,104 1,069 1,101 1,146 1,133
On-time performance
Departure (within 15 minutes) % XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Average aircraft utilisation Hours per day
 A XXXXXXXXXX XXXXXXXXXX8.9 8.2
 A XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
 A XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
 A340-300 – – XXXXXXXXXX XXXXXXXXXX
 A XXXXXXXXXX.1 12.7 – – – – – –
 A XXXXXXXXXX – – – – – – – –
 747-400 – – – XXXXXXXXXX XXXXXXXXXX
 747-200F/300SF – – – – – – – – – –
 747-400F/BCF/ERF/8F XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
 777-200/ XXXXXXXXXX XXXXXXXXXX8.0
 777-300ER XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Fleet average XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Fleet profile
Aircraft operated by Cathay Pacific:
 A XXXXXXXXXX XXXXXXXXXX
 A340-300 – – – XXXXXXXXXX
 A XXXXXXXXXX – – – – – –
 A XXXXXXXXXX – – – – – – – –
 747-400 – – – – XXXXXXXXXX
 747-400F – – – – XXXXXXXXXX
 747-400BCF 1 1 – XXXXXXXXXX
 747-400ERF XXXXXXXXXX
 747-8F XXXXXXXXXX13 8 4 –
  XXXXXXXXXX5 5 5 5
  XXXXXXXXXX XXXXXXXXXX
 777-300ER XXXXXXXXXX XXXXXXXXXX
Total XXXXXXXXXX XXXXXXXXXX
Aircraft operated by Cathay Dragon:
 A XXXXXXXXXX XXXXXXXXXX
 A XXXXXXXXXX6 6 6 6
 A XXXXXXXXXX XXXXXXXXXX
Total XXXXXXXXXX XXXXXXXXXX
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 recognises 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.
141Annual Report 2019
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Cathay Pacific and Cathay Dragon operating summary
Available tonne kilometres Million 33,077 32,387 31,439 30,462 30,048 28,440 26,259 26,250 26,383 24,461
Revenue tonne kilometres Million 24,090 24,543 23,679 22,418 22,220 20,722 18,696 18,819 19,309 19,373
Available seat kilometres Million 163,244 155,362 150,138 146,086 142,680 134,711 127,215 129,595 126,340 115,748
Revenue passengers carried ‘000 35,233 35,468 34,820 34,323 34,065 31,570 29,920 28,961 27,581 26,796
Revenue passenger kilometres Million 134,397 130,630 126,663 123,478 122,330 112,257 104,571 103,837 101,536 96,588
Revenue load factor % XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Passenger load factor % XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Cargo carried ‘000 tonnes 2,022 2,152 2,056 1,854 1,798 1,723 1,539 1,563 1,649 1,804
Cargo revenue tonne kilometres Million 11,311 12,122 11,633 10,675 10,586 10,044 8,750 8,942 9,648 10,175
Cargo load factor % XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Excess baggage carried Tonnes 2,179 2,329 2,449 2,471 2,596 2,699 2,599 2,711 3,103 4,053
Kilometres flown Million XXXXXXXXXX XXXXXXXXXX
Block hours ‘000 hours XXXXXXXXXX XXXXXXXXXX
Aircraft departures ‘ XXXXXXXXXX XXXXXXXXXX138
Length of scheduled routes network ‘000 kilometres XXXXXXXXXX XXXXXXXXXX
Number of destinations at year end Destinations XXXXXXXXXX XXXXXXXXXX
Staff number at year end Number 27,342 26,623 26,029 26,674 26,833 25,755 24,572 23,844 23,015 21,592
ATK per staff ‘000 1,256 1,217 1,208 1,142 1,120 1,104 1,069 1,101 1,146 1,133
On-time performance
Departure (within 15 minutes) % XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Average aircraft utilisation Hours per day
 A XXXXXXXXXX XXXXXXXXXX8.9 8.2
 A XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
 A XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
 A340-300 – – XXXXXXXXXX XXXXXXXXXX
 A XXXXXXXXXX.1 12.7 – – – – – –
 A XXXXXXXXXX – – – – – – – –
 747-400 – – – XXXXXXXXXX XXXXXXXXXX
 747-200F/300SF – – – – – – – – – –
 747-400F/BCF/ERF/8F XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
 777-200/ XXXXXXXXXX XXXXXXXXXX8.0
 777-300ER XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Fleet average XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Fleet profile
Aircraft operated by Cathay Pacific:
 A XXXXXXXXXX XXXXXXXXXX
 A340-300 – – – XXXXXXXXXX
 A XXXXXXXXXX – – – – – –
 A XXXXXXXXXX – – – – – – – –
 747-400 – – – – XXXXXXXXXX
 747-400F – – – – XXXXXXXXXX
 747-400BCF 1 1 – XXXXXXXXXX
 747-400ERF XXXXXXXXXX
 747-8F XXXXXXXXXX13 8 4 –
  XXXXXXXXXX5 5 5 5
  XXXXXXXXXX XXXXXXXXXX
 777-300ER XXXXXXXXXX XXXXXXXXXX
Total XXXXXXXXXX XXXXXXXXXX
Aircraft operated by Cathay Dragon:
 A XXXXXXXXXX XXXXXXXXXX
 A XXXXXXXXXX6 6 6 6
 A XXXXXXXXXX XXXXXXXXXX
Total XXXXXXXXXX XXXXXXXXXX
Note:
(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 recognises 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 Limited142
S T A T I S T I C S
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Productivity
Cost per ATK
 (with fuel) HK$ XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
ATK per HK$’000
 staff cost Unit 1,879 1,801 1,775 1,730 1,764 1,750 1,720 1,785 1,936 1,905
Aircraft utilisation Hours per day XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Share prices HK$
High XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Low XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Year-end XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Price ratios (Note) Times
Price/earnings XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Market capitalisation/
 funds attributable
 to the shareholders
 of Cathay Pacific XXXXXXXXXX XXXXXXXXXX
Price/cash flows XXXXXXXXXX XXXXXXXXXX
Note: Based on year end share price, where applicable.
XXXXXXXXXX2018 XXXXXXXXXX
600
1,600
1,400
1,200
1,800
2,000
2,200
800
1,000
XXXXXXXXXX2018 XXXXXXXXXX
XXXXXXXXXX2018 XXXXXXXXXX
0
8
6
4
2
10
12
14
2.5
1.5
1.0
0.5
3.5
4.0
3.0
2.0
0
XXXXXXXXXX2018 XXXXXXXXXX
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$’000 staff costCost per ATK (with fuel)
HK$
Aircraft utilisation
Hours per day
Share price
Average share price in HK$ Average HSI
Hang Seng Index (HSI)Cathay Pacific share price
143Annual Report 2019
T E R M S
Borrowings Total borrowings (loans and lease obligations)
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.
G L O S S A R Y
R AT I O S
Earnings/(loss)
per share =
Profit/(loss) attributable to the
shareholders of Cathay Pacific
Weighted average number
of shares (by days) in issue for
the year
Profit/(loss) margin =
Profit/(loss) attributable to the
shareholders of Cathay Pacific
Revenue
Shareholders’ funds
per share =
Funds attributable to the
shareholders of Cathay Pacific
Total issued and fully paid 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
shareholders of Cathay Pacific
Dividends
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
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 Limited144
Cathay Pacific Airways Limited is incorporated in Hong Kong with limited liability.
I N V E S T O R R E L AT I O N S
For further information about Cathay Pacific Airways Limited, please contact:
Corporate Affairs Department
Cathay Pacific Airways Limited
4th Floor, Central Tower
Cathay Pacific City
Hong Kong International Airport
Hong Kong
Email: XXXXXXXXXX
Tel: XXXXXXXXXX
Fax: XXXXXXXXXX
Cathay Pacific’s main Internet address is www.cathaypacific.com
R E G I S T E R E D O F F I C E R E G I S T R A R S
33rd Floor, One Pacific Place Computershare Hong Kong Investor Services Limited
88 Queensway Rooms XXXXXXXXXX, 18th Floor, Hopewell Centre
Hong Kong 183 Queen’s Road East
Hong Kong
D E P O S I TA R Y
The Bank of New York Mellon A U D I T O R S
BNY Mellon Shareowner Services KPMG
P.O. Box XXXXXXXXXXPublic Interest Entity Auditor registered in accordance
Louisville, KY XXXXXXXXXXwith the Financial Reporting Council Ordinance
U.S.A. 8th Floor, Prince’s Building
10 Chater Road, Central
Domestic toll free hotline: Hong Kong
1(888) BNY ADRS
International hotline: F I N A N C I A L C A L E N DA R
XXXXXXXXXXYear ended 31st December 2019
Email: XXXXXXXXXX Annual report available to shareholders 8th April 2020
Website: www.mybnymdr.com Annual General Meeting 13th May 2020
S T O C K C O D E S Six months ending 30th June 2020
Hong Kong Stock Exchange 293 Interim results announcement August 2020
ADR CPCAY Interim dividend payable October 2020
C O R P O R A T E A N D
S H A R E H O L D E R I N F O R M A T I O N
D I S C L A I M E R
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 changes in the
economies and industries in which the Group operates (in particular in Hong Kong and Mainland China), 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.
mailto:ir%40cathaypacific.com?subject=
https://www.cathaypacific.com
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http://www.mybnymdr.com
© Cathay Pacific Airways Limited
國泰航空有限公司
DESIGN: FORMAT LIMITED
www.format.com.hk
Printed in Hong Kong
www.cathaypacific.com
https://www.cathaypacific.com
Cover
Contents
Financial and Operational Highlights
Chairman’s Statement
Review of Operations
Passenger services • Loyalty and reward programmes
Cargo services • Fleet
Review of other subsidiaries and associates
Financial Review
Sustainable Development Review
Directors and Officers
Directors’ Report
Corporate Governance Report
Independent Auditor’s Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Financial Statements
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Directors and Employees
Related Party Transactions
Supplementary Information
Principal Subsidiaries and Associates
Principal Accounting Policies
Statistics
Glossary
Corporate and Shareholder Information
Disclaimer
Back Cover
Answered 2 days AfterMay 14, 2021

Solution

Akshay answered on May 16 2021
28 Votes

IS
BS
December 31,
2016201720182019
(In HK$M, except share and per share data)
Assets
Current assets:
Cash and cash equivalents20290190941531514864
as...

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