Cathay Pacific may mull over higher pay hike

It is currently 16% of operating costs.

According to Barclays Research, the company released its Nov operating stats in the afternoon trading session on 14 Dec.

Here's more from Barclays Research:

We continued to see weak passenger volumes in Nov, with RPK -4% y/y. The company cut capacities to long-haul routes aggressively in Nov, more than the decline in volumes on some routes, by reducing flight frequencies and flying smaller aircrafts.

The biggest cuts were seen in North American routes, Southwest Pacific & South African routes, India, Middle East, Pakistan & Sri Lanka routes and European routes. Passenger load factors continued the down trend and remained lower y/y, except north Asian routes.

Yield was still under pressure across all cabins, according to the management. Cargo volumes continued to strengthen and turned positive growth y/y for the first time in 8 months. However, the +3% y/y in Nov RFTK still significantly lagged behind Air China and China Southern which registered approximately +20% y/y growth in Nov RFTK.

On the wage dispute with Cathay Pacific’s union, we think the management might eventually compromise on a higher pay raise. Staff costs account for 16% of 2012E operating costs by our estimate. To keep the net margin stable y/y at 0.6% for 2013E, we estimate that the company could accommodate a maximum 15% pay raise in 2013E.