Annual Report 2023

MANAGEMENT DISCUSSION AND ANALYSIS

3 Financial and Operational Highlights

6 Chair’s Statement

9 Chief Executive Officer’s Review and Outlook

13 Review of Operations

33 Financial Review

CORPORATE GOVERNANCE

39 Directors and Officers

42 Directors’ Report

50 Corporate Governance Report

68 Risk Management

FINANCIAL STATEMENTS

75 Independent Auditor’s Report

79 Consolidated Statement of Profit or Loss

80 Consolidated Statement of Other Comprehensive

Income

81 Consolidated Statement of Financial Position

82 Consolidated Statement of Cash Flows

83 Consolidated Statement of Changes in Equity

84 Notes to the Financial Statements

138 Material Subsidiaries and Associates

140 Material Accounting Policies

154 Statistics

159 Glossary

160 Corporate and Shareholder Information

160 Disclaimer

CONTENTS

Traditional Chinese and Simplied Chinese translations of

this Annual Report are available upon request from the

Company’s Registrars.

本年報的中文譯本於本公司的股份登記處備索。

CATHAY PACIFIC AIRWAYS LIMITED

Cathay Pacific Airways Limited (“Cathay Pacific”, or the

“Company”) is a leading premium travel lifestyle brand

based in Hong Kong. The Cathay Group (the Company and

its subsidiaries together, also “Cathay” or the “Group”) offers

products and services across four lines of business –

Premium Travel, Cargo, Low-Cost Travel and Lifestyle.

The Cathay Group comprises premium full-service airline

Cathay Pacific, cargo business Cathay Cargo, low-cost

airline Hong Kong Express Airways Limited (“HK Express”),

express all-cargo carrier AHK Air Hong Kong Limited (“Air

Hong Kong”), and various other subsidiaries.

The Company was founded in Hong Kong in 1946. It has

been deeply committed to its home base for more than

seven decades and remains so, making substantial

investments to develop Hong Kong as one of the world’s

leading international aviation centres.

As at 31st December 2023, the Cathay Group’s passenger

and cargo airlines offered scheduled services to 92

destinations worldwide, including 18 airports in 16 cities in

the Chinese Mainland. Furthermore, the Group serves an

additional 149 destinations through codeshare agreements.

The Group had 230 aircraft as at 31st December 2023, of

which five were held at parking locations outside Hong

Kong. There are 75 new passenger and freighter aircraft

scheduled to join the Group’s fleet in the coming years.

Cathay Pacific, the premium full-service airline, had 181

passenger and cargo aircraft as at 31st December 2023. It

is a founding member of the oneworld global alliance,

whose combined network serves more than 900

destinations worldwide.

HK Express, a low-cost airline based in Hong Kong offering

scheduled services within Asia, is a wholly owned subsidiary

of the Company and had 33 aircraft as at 31st December

2023. Air Hong Kong, an express all-cargo carrier offering

scheduled and charter services in Asia, is a wholly owned

subsidiary of the Company operating 16 aircraft as at 31st

December 2023.

The Group’s other businesses include its catering, laundry,

ground-handling and cargo terminal companies, and its

corporate headquarters at Hong Kong International Airport.

As at 31st December 2023, the Company owned 16.26% of

AirChina Limited (“Air China”), the national flag carrier and

aleading provider of passenger, cargo and other

airline-related services in the Chinese Mainland.

As at 31st December 2023, the Cathay Group employed

more than 23,800 people worldwide, of whom around

19,600 were employed in Hong Kong. Shares of the

Company 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 Airways Limited Annual Report 2023

FINANCIAL AND OPERATIONAL HIGHLIGHTS

GROUP FINANCIAL STATISTICS

2023 2022

(restated)

Change

Results

Revenue

HK$ million 94,485 51,036 +85.1%

Profit/(loss) attributable to the shareholders of the Cathay Group

HK$ million 9,789 (6,623) +16,412

Earnings/(loss) per ordinary share

– basic

HK cents 140.8 (112.4) +253.2

– diluted

HK cents 125.8 (112.4) +238.2

Dividend per ordinary share

HK$ 0.43 – +0.43

Profit/(loss) margin

% 10.4 (13.0) +23.4%pt

Financial position

Funds attributable to the shareholders of the Cathay Group

HK$ million 60,026 63,803 -5.9%

Net borrowings

(a)

HK$ million 52,764 58,829 -10.3%

Available unrestricted liquidity

HK$ million 19,985 27,188 -26.5%

Ordinary shareholders’ funds per ordinary share

(b)

HK$ 7.8 6.7 +16.4%

Net debt/equity ratio

(a)

Times 0.88 0.92 -0.04 times

OPERATING STATISTICS  CATHAY PACIFIC

2023 2022 Change

Available tonne kilometres (“ATK”) Million 21,225 10,100 +110.1%

Available seat kilometres (“ASK”)

Million 85,607 20,056 +326.8%

Available cargo tonne kilometres (“AFTK”)

Million 13,069 8,181 +59.7%

Revenue tonne kilometres (“RTK”)

Million 15,090 7,190 +109.9%

Passenger revenue per ASK

HK cents 65.4 68.2 -4.1%

Revenue passenger kilometres (“RPK”)

Million 73,342 14,764 +396.8%

Revenue passengers carried

‘000 17,985 2,804 +541.4%

Passenger load factor

% 85.7 73.6 +12.1%pt

Passenger yield

HK cents 76.3 92.7 -17.7%

Cargo revenue per AFTK

HK$ 1.70 3.30 -48.5%

Cargo revenue tonne kilometres (“RFTK”)

Million 8,099 5,774 +40.3%

Cargo carried

‘000 tonnes 1,381 1,154 +19.7%

Cargo load factor

% 62.0 70.6 -8.6%pt

Cargo yield

HK$ 2.74 4.67 -41.3%

Cost per ATK (with fuel)

(c)

HK$ 3.55 4.35 -18.4%

Fuel consumption per million RTK

Barrels 1,746 1,679 +4.0%

Fuel consumption per million ATK

Barrels 1,241 1,195 +3.8%

Cost per ATK (without fuel)

(c)

HK$ 2.47 3.43 -28.0%

ATK per HK$’000 staff cost

Unit 1,793 1,153

(d)

+55.5%

ATK per employee

‘000 1,165 614 +89.7%

Aircraft utilisation (including parked aircraft)

Hours per day 7.7 3.3 +133.3%

On-time performance

% 76.2 80.1 -3.9%pt

Average age of fleet

Years 11.1 10.8 +0.3 years

GHG emissions

Million tonnes of CO

e 10.6 4.9 +116.3%

GHG emissions per ATK

Grammes of CO

e 499 481 +3.7%

Lost time injury rate

Number of injuries per 100

full-time equivalent employees

11.00 3.20 +243.8%

(a) Net borrowings and the net debt/equity ratio excluding leases without asset transfer components are HK$41,443 million (2022: HK$45,064 million) and

0.69 (2022: 0.71) respectively. Further details can be found in note 12 to the financial statements.

(b) Ordinary shareholders’ funds are arrived at after deducting preference shares reserve of HK$9,750 million (2022: preference shares capital of

HK$19,500 million) and unpaid cumulative dividends attributable to the preference shareholder of HK$191 million as at 31st December 2023 (2022:

HK$1,438 million).

(d) Restated long service payment obligation amounting to HK$75 million due to adoption of the HKICPA guidance of abolition of the MPF-LSP offsetting

mechanism in June 2022.

Cathay Pacific Airways Limited Annual Report 2023 3

FINANCIAL AND OPERATIONAL HIGHLIGHTS

FLEET PROFILE

(a)

Number at

31st December 2023

Leased

(b)

Orders

(c)

Expiry of operating leases

(b)

Aircraft type Owned Finance Operating Total

Average

age ‘24 ‘25

‘26 and

beyond Total ‘24 ‘25 ‘26 ‘27 ‘28

‘29 and

beyond

Cathay Pacific:

A321-200 2 2 20.2

A321/

A320-200neo 4 3 5 12 1.7 4 15

(d)

19 5

A330-300 37 2 4 43 15.3 2 2

A350-900 20 8 2 30 5.7 2

A350-1000 11 7 18 4.0

A350F 6 6

747-400ERF 6 6 15.0

747-8F 10 4 14 10.9

777-300 17 17 22.2

777-300ER 30 9 39 11.1 3 2 4

777-9 2 19 21

Total 137 24 20 181 11.1 4 2 40 46 3 4 6 2 5

HK Express:

A320-200 3

(e)

5 8 14.4 4 1

A320-200neo 10 10 4.8 8

(d)(f)

8 2 8

A321-200 11 11 6.2 1 2 8

A321-200neo 4

(g)

4 0.3 7

(h)

5 9

(d)(f)

Total 7 26 33 7.1 7 5 17 29 4 1 2 3 16

Air Hong Kong

(i)(j)

A300-600F 7 7 18.6 4 3

A330-243F 2 2 12.0 2

A330-300P2F 7 7 13.0 3 4

Total 16 16 15.3 4 3 5 4

Grand total 137 31 62 230 10.8 11 7 57 75 11 8 13 9 21

(a) The table does not reflect aircraft movements after 31st December 2023.

(b) Leases previously classified as operating leases are accounted for in a similar manner to finance leases under accounting standards. The majority of

operating leases in the above table are within the scope of HKFRS 16.

(c) The Group believes that based on its available unrestricted liquidity as at 31st December 2023, as well as its ready access to both loan and debt capital

markets, it will have sufficient financing capacity to fund this material investment in the fleet.

(d) Final number subject to reallocation between Cathay Pacific and HK Express.

(e) The aircraft are owned by Cathay Dragon and sub-leased to HK Express.

(f) Final split between Airbus A320-200neo and A321-200neo subject to adjustment in accordance with future operational requirements.

(g) The aircraft are finance leased by Cathay Pacific and sub-leased to HK Express.

(h) One Airbus A321-200neo was delivered in February 2024.

(i) The contractual arrangements relating to the freighters operated by Air Hong Kong do not constitute leases in accordance with HKFRS 16.

(j) We plan to return seven Airbus A300-600F freighters between 2024 and 2025 and to have them replaced with six second-hand A330F freighters. This

allows the Air Hong Kong fleet to remain at 15 at least until 2025.

4 Cathay Pacific Airways Limited Annual Report 2023

Cathay Pacific Airways Limited Annual Report 2023 5

In 2023, we finally left the Covid-19 pandemic behind us. In

welcoming this new phase, our purpose “to move people

forward in life” has been foremost in our minds. Our primary

focus has been on rebuilding Cathay for the benefit of our

customers, our people, our shareholders and the Hong

Kong international aviation hub. I am pleased to report that

we achieved our end-2023 Group target of operating 70%

of pre-pandemic passenger flights, connecting Hong Kong

with around 80 destinations around the world.

Our strong 2023 result has allowed us to announce our first

dividend payment to ordinary shareholders since 2019. The

2023 interim dividend of HK$0.43 per ordinary share will be

paid on 2nd May 2024 to shareholders registered at the

close of business on the record date, Friday 5th April 2024.

Shares in the Company will be traded ex-dividend as from

2nd April 2024.

This strong financial performance has also allowed us to

recognise and reward the efforts of our dedicated team;

make commitments regarding significant capital

investments in our fleet, products and service; and to begin

to repay the support provided by the Hong Kong SAR

Government for our recapitalisation in 2020, for which we

are deeply grateful.

FINANCIAL RESULTS

2023 was our first profitable year since 2019. The year was

characterised by a notable surge in travel demand following

three years of pandemic-related restrictions. This

imbalance between supply and demand resulted in high

yields and contributed to a strong financial performance in

both halves of the year.

The Cathay Group, including airlines, subsidiaries and

associates, reported an attributable profit of HK$9,789

million in 2023 (2022 restated: loss of HK$6,623 million).

Theearnings per ordinary share in 2023 were HK140.8

cents (2022 restated: loss per ordinary share of HK112.4

cents).

Our airlines and subsidiaries performed strongly across

both halves, reporting an attributable profit of HK$9,225

million for the full year of 2023 (2022 restated: loss of

HK$330 million). The results from associates, the majority

ofwhich are recognised three months in arrears, were a

full-year loss of HK$1,562 million (2022: loss of

HK$6,293million).

The attributable profit for 2023 included an exceptional

non-recurring non-cash gain of HK$1.9 billion as a result of

a dilution of our interest in Air China following the

completion of their A-shares offering in January 2023.

The Group was operating cash generative overall in 2023

and as at 31st December 2023, our available unrestricted

liquidity balance amounted to HK$20 billion. During the

pandemic we maintained elevated liquidity levels as a

precautionary measure to navigate the uncertainties.

However, now that this period is behind us, we anticipate

maintaining a lower yet healthy level of liquidity going

forward. This adjustment reflects our confidence in the

recovery of the industry and our ability to manage risks

effectively while continuing to meet our financial

obligations.

CHAIR’S STATEMENT

6 Cathay Pacific Airways Limited Annual Report 2023

CHAIR’S STATEMENT

During 2023 we paid a total of approximately HK$1.97 billion

in preference share dividends to the Hong Kong SAR

Government. We initiated the buyback of these preference

shares by repurchasing 50% (HK$9.75 billion) in December

and announced plans to buy back the remaining 50% by the

end of July 2024, subject to market conditions and our

business operations at that time. We did not need to utilise

the HK$7.8 billion bridge loan facility provided by the Hong

Kong SAR Government as part of our recapitalisation

financing in 2020, and the bridge loan facility expired on 8th

June 2023.

LOOKING AHEAD

We will reach 80% of our pre-pandemic passenger flights

within the second quarter of 2024. As we continue to rebuild

our flights, we expect the supply and demand imbalance

experienced in 2023 to diminish, and the normalisation of

yields seen in recent months to continue throughout 2024.

We acknowledge the significant challenges that persist in

the global aviation industry. These include recruitment and

training of customer-facing employees as well as supply

chain constraints. To address these issues, we have

benefited from the Hong Kong SAR Government’s Labour

Importation Scheme for the Aviation Industry and have

implemented targeted strategies to mitigate these

challenges to the best of our ability.

Our priority in 2024 is to ensure high-quality and

sustainable growth as we prepare for the full operation of

the Three-Runway System at Hong Kong International

Airport by the end of this year. This milestone marks an

exciting new chapter in the growth of our home hub and

opens up a wide range of opportunities. Our investments

will span our fleet, our customer experience and our people.

Hong Kong has an important role to play in the overall

development of the country, as outlined in the National 14th

Five-Year Plan. With Hong Kong and the rest of the Greater

Bay Area as our home market, we are eager to play our role

by continuing to invest in the growth and development of

Cathay and the Hong Kong international aviation hub.

APPRECIATION

The encouraging progress we have made is thanks to the

invaluable support we have received from our customers.

We are extremely grateful for their loyalty and trust, and we

eagerly look forward to sharing even more exciting

developments with them in future.

I would also like to express my heartfelt gratitude to all of

our people at Cathay. Their unwavering professionalism,

dedication and commitment have been the cornerstone of

our rebuilding efforts. I am immensely proud to be part of

such a remarkable team at Cathay. It is their hard work and

contributions that have made our achievements possible.

Patrick Healy

Chair

Hong Kong, 13th March 2024

Cathay Pacific Airways Limited Annual Report 2023 7

8 Cathay Pacific Airways Limited Annual Report 2023

As I reflect on my first year as Chief Executive Officer of the

Cathay Group in 2023, I can say good progress has been

made in our two key areas of focus: rebuilding and investing.

Throughout the year, we dedicated ourselves to rebuilding

our brand, flights and home hub, whilst also making

strategic investment decisions that will benefit our

customers, our people and Hong Kong as a whole.

REBUILDING FROM THE PANDEMIC

Our primary objective in 2023 was to reintroduce more

flights and destinations for our customers and for Hong

Kong. We are pleased to have achieved our target of 70% of

our pre-pandemic passenger flights, covering around 80

destinations by the end of 2023. The significant pent-up

demand for travel following three years of Covid-19

pandemic disruptions created a unique environment, in

which there was a global imbalance between supply and

demand that drove up yields. We expect this imbalance to

diminish and yields to continue to normalise throughout

2024 as airlines around the world continue to add capacity.

However, there will continue to be an impact from

inflationary pressure along the entire aviation supply chain,

which has persisted since the pandemic.

Our cargo business also benefitted from our increased

passenger flight schedule, with more belly space for cargo

shipments and more options for our customers. By the end

of 2023, we had restored 85% of our pre-pandemic cargo

flight capacity. The market normalised compared to the

past couple of extraordinary years. However, it remains

strong, and we enjoyed a particular bright spot in

e-commerce. Hong Kong continues to be the busiest

international air cargo hub globally, and Cathay Cargo the

largest operator out of the hub.

With our rebuild, we expanded our Group workforce by

around 15% or 3,000 people in 2023 compared with the

previous year. To date, we have welcomed back nearly

2,000 former Cathay Group employees who left during the

pandemic and, notably, in 2023 we opened recruitment for

cabin crew and cadet pilots in the Chinese Mainland for the

CHIEF EXECUTIVE OFFICER’S REVIEW AND OUTLOOK

first time. Our 2023 training activities returned to

pre-pandemic levels, which was more than double the

levelsin 2022.

The global aviation industry continues to face rebuilding

challenges and we have been similarly affected. At times

this has hindered our ability to consistently deliver the

highest service levels. Rest assured, we remain committed

to mitigating these challenges, continuously improving our

operations and meeting the expectations of our discerning

customers.

INVESTING INTO THE FUTURE

In 2023 we commenced a strategic investment programme

across various aspects of our business, focusing on

expanding our fleet, enhancing customer experience and

recognising and rewarding our people.

In terms of fleet, we announced an order of 32 additional

Airbus A321neo and A320neo aircraft, and secured the

right to acquire 32 more aircraft, complementing our

existing order of 32 A321neos. We also ordered six Airbus

A350F freighters and secured the right to acquire up to 20

more of these aircraft in the future. In total, this brings our

new aircraft on order to more than 70, with the right to

acquire an additional 52 aircraft. We are also exploring

options for a new mid-size widebody aircraft. Our fleet

investments not only strengthen Cathay, but also contribute

to the growth and success of the Hong Kong international

aviation hub.

We are focused on enhancing our customer experience at

every touch point. In 2023, we opened nearly all of our

airport lounges, providing a comfortable and inviting space

for our valued passengers. Furthermore, our first off-airport

lounge at the Shekou Cruise Home Port in Shenzhen

exemplifies our commitment to offer customers a seamless

intermodal travel experience within the Guangdong-Hong

Kong-Macao Greater Bay Area, expanding our reach and

accessibility to customers.

Cathay Pacific Airways Limited Annual Report 2023 9

CHIEF EXECUTIVE OFFICER’S REVIEW AND OUTLOOK

In addition to airport lounge enhancements, we also

prioritised inflight dining and entertainment. Collaborating

with popular Hong Kong dining brands, we have developed

special menus that showcase the culinary excellence of our

home city. Moreover, our inflight entertainment experience

was acknowledged at the Skytrax World Airline Awards,

where we were honoured with the prestigious World’s Best

Inflight Entertainment Award for 2023. This recognition

motivates us to further enhance our entertainment

offerings for our customers’ enjoyment.

Recognising our people for their support and commitment

has always been an important part of Cathay’s culture. We

provided a special appreciation reward of up to six weeks’

eligible pay that was well received by our people and

introduced a new profit-sharing scheme for 2023 equivalent

to 7.2 weeks of eligible pay.

BUSINESS PERFORMANCE OF CATHAY

Cathay Pacific’s passenger revenue increased by 308.8%

to HK$55,951 million compared with 2022. Available seat

kilometres (ASKs) increased by 326.8%, while traffic,

measured in revenue passenger kilometres (RPKs)

increased by 396.8%. We carried a total of 18.0 million

passengers in 2023, an average of 49,300 per day, which

was 541.4% more than in 2022. Load factor was 85.7%

compared with 73.6% in 2022, and yield decreased by

17.7% to HK76.3 cents.

Meanwhile, Cathay Cargo’s revenue in 2023 decreased by

17.9% to HK$22,162 million compared with 2022. Available

cargo tonne kilometres (AFTKs) increased by 59.7%, owing

to our increased passenger flight schedule providing more

belly space for cargo. Traffic, measured in cargo revenue

tonne kilometres (RFTKs), increased by 40.3%. Total

tonnage increased by 19.7% to 1,381 thousand tonnes.

Load factor was 62.0% compared with 70.6% in 2022, and

yield decreased by 41.3% to HK$2.74. It was notable,

however, that yields were still 46.5% above 2019

pre-pandemic yields.

Throughout the pandemic, we maintained a prudent

approach to cost management, and this remained a priority

in 2023. However, we faced challenges in certain areas,

including inflation in the supply chain. Non-fuel costs for

2023 increased by 51.2% to HK$52,366 million compared

with 2022. Total fuel costs for Cathay (before the effect of

fuel hedging) increased by HK$10,658 million (or 82.4%)

compared with 2022 as we operated more flights.

I am delighted to share that our efforts have not gone

unnoticed. In 2023 Cathay Pacific has regained its position

within the world’s top 10 airlines in multiple industry

rankings. Cathay Cargo was also named Cargo Airline of the

Year in Air Transport World’s (ATW) 2023 Airline Industry

Achievement Awards. These achievements serve as a

testament to the dedication and hard work of our entire

team and further reinforce our commitment as we strive

towards our vision of becoming one of the world’s greatest

service brands.

BUSINESS PERFORMANCE OF SUBSIDIARIES

AND ASSOCIATES

HK Express reported a profit of HK$433 million for 2023

(2022 restated: loss of HK$1,369 million). The airline

benefitted from robust travel demand, especially for

short-haul destinations in Asia, and by December 2023 the

airline was operating more than 130% of its pre-pandemic

passenger flights.

Air Hong Kong reported a profit of HK$778 million for 2023

(2022: profit of HK$776 million). Its results have been

consistently solid.

While the businesses of our airline services subsidiaries

improved in 2023 compared with 2022, the financial

performance of some subsidiaries declined as the benefits

of higher volumes were more than offset by higher interest

expenses.

Results from associates, recognised three months in

arrears, improved compared with 2022, but were still

loss-making for the year due to incomplete recovery of

international routes, intensified competition in the domestic

market and fluctuations in oil prices and exchange rates.

OUTLOOK

We are committed to continuing our rebuild journey in 2024.

We have seen that the magnitude of the challenge that the

aviation industry faces is truly significant. These challenges

include but are not limited to recruitment, training and

supply chain shortages. We are navigating similar

challenges and are working diligently to mitigate their

effects on our operations.

Cathay Pacific Airways Limited Annual Report 2023

CHIEF EXECUTIVE OFFICER’S REVIEW AND OUTLOOK

In terms of our travel business, comprising Cathay Pacific

and HK Express, we will reach 80% of our pre-pandemic

passenger flights within the second quarter of 2024. We are

now working towards reaching 100% within the first quarter

of 2025. We acknowledge this would be up to three months

later than our previous projections; however, we have

learned from our recent experiences and our focus

continues to be rebuilding in a measured and responsible

manner as we look ahead to the exciting opportunities

presented by the upcoming Three-Runway System at Hong

Kong International Airport.

Our strategic investment in products, services and people

will continue in 2024. We are excited to be bringing our

customers new cabin products in each of the coming three

years. In 2024, we are launching an all-new Business class

experience – Aria Suite – and Premium Economy product as

part of a redesign of our long-haul Boeing 777-300ER

cabins. In 2025, this will be followed by a new world-leading

First class experience onboard our Boeing 777-9 aircraft.

And in 2026, a new regional product on the Airbus A330

fleet will be introduced featuring flat beds in Business class.

We are committed to continuously enhancing our

customerexperience, including in our lounges, dining,

inflight entertainment and our service delivery over the

coming years.

In terms of our cargo business, we anticipate continued

strong demand from e-commerce in our home market of

Hong Kong and the wider Greater Bay Area. However, we

expect trade flow directional imbalances to persist,

impacting overall load factors. Moreover, as the air cargo

industry continues to normalise, yields will decrease in

2024, but are expected to remain above 2019 levels.

Our recruitment and training activities will continue in

earnest as we explore all options available to us. In 2024, we

plan to expand our workforce by around 20% or 5,000

people compared with 2023. Furthermore, we are

significantly increasing our training activities in 2024, more

than doubling the levels seen in 2023.

GRATITUDE

The progress that Cathay has made in rebuilding in such a

short space of time is truly remarkable and would not have

been possible without the unwavering support of our

customers and the relentless determination of our people.

To our customers, I would like to say a huge thank you for

continuing to choose Cathay when you fly, ship, spend and

shop with us. Our investments in enhancing the experience

we provide for all our customers will continue and we

eagerly look forward to sharing even more exciting new

developments with you in future.

To our people, it has been a privilege to lead such a

committed, enthusiastic and resourceful team during my

first year as Chief Executive Officer. Your incredible efforts

have been the driving force behind our rebuild journey and I

look forward to seeing all that we can achieve together in

the years ahead.

To our stakeholders, thank you for standing by us and

motivating us to be the company of choice. We are ready to

unleash the potential and innovation of our next exciting

phase of development – Cathay is back!

Ronald Lam

Chief Executive Officer

Hong Kong, 13th March 2024

Cathay Pacific Airways Limited Annual Report 2023 11

PURPOSE

WHY WE EXIST

TO MOVE PEOPLE FORWARD IN LIFE

VISION

WHAT WE WILL BECOME

ONE OF THE WORLD’S GREATEST

SERVICE BRANDS

CULTURE

HOW WE WORK TOGETHER

STRATEGY

HOW WE ACHIEVE THE VISION

THOUGHTFUL

We put customers at the

centre of everything we do

We believe that happy

employees lead to

happy customers

We act lawfully,

ethically and responsibly

PROGRESSIVE

We are forward-thinking,

encouraging experimentation

and learning

We value diversity of opinion and

a constructive exchange of views

We are agile and ready to

adapt to achieve our goals

CANDO

We overcome challenges

together with positivity and

determination

We trust and

empower our people

We relentlessly create value

and improve e ciency

OUR UNIQUE POSITION

Deep roots in Hong Kong

Proudly part of China

Connecting the world

OUR LINES OF BUSINESS OUR AREAS OF LEADERSHIP

Safety &

operational excellence

Digital

Sustainability

World’s best

premium airline

World’s best

travel lifestyle

business

Asia’s best

low cost carrier

World’s best

air cargo carrier

12 Cathay Pacific Airways Limited Annual Report 2023

PREMIUM TRAVEL

CATHAY PACIFIC PASSENGER SERVICES

Cathay Pacific is the Group’s premium, full-service airline

and the home carrier of Hong Kong. Cathay Pacific’s

strategic vision is to be the world’s best premium airline,

underpinned by our purpose to move people forward in life.

Cathay Pacific’s focus in 2023 was on rebuilding and

investing for our customers, people, stakeholders and the

Hong Kong international aviation hub. Throughout the year,

we progressively added more flights and more destinations

to our schedule to meet the significant pent-up demand for

REVIEW OF OPERATIONS

Premium Travel

passenger travel. By the end of 2023, the Cathay Group –

comprising Cathay Pacific and HK Express – operated

70%of its pre-pandemic passenger flights covering about

80 destinations.

Passenger revenue increased by 308.8% to HK$55,951

million in 2023 compared with 2022, while revenue

passenger kilometre (RPK) traffic increased by 396.8%.

Cathay Pacific carried 18.0 million passengers in 2023, an

average of 49,300 passengers per day and 541.4% more

than in 2022. Available seat kilometres (ASK), increased by

326.8%. Load factor increased by 12.1 percentage points to

85.7%, while yield decreased by 17.7% to HK76.3 cents.

5,000

10,000

15,000

25,000

20,000

30,000

35,000

40,000

0 0

100

120

140

160

20,000

40,000

100,000

80,000

60,000

100

HK$ million

Passenger capacity, load factor and eciency

HK cents

Passenger revenue and yield trend

Million HK cents

Available seat kilometres (ASK)

Load factor (as a proportion of ASK)

Passenger revenue

Passenger yield

Data in 2019-2020 included Cathay Dragon.

Passenger revenue per ASK

1H20 2H201H19 2H19 1H21 2H21 1H22 2H22 1H23 2H23 1H202H191H19 2H20 1H21 2H21 1H22 2H22 1H23 2H23

PURPOSE

WHY WE EXIST

TO MOVE PEOPLE FORWARD IN LIFE

VISION

WHAT WE WILL BECOME

ONE OF THE WORLD’S GREATEST

SERVICE BRANDS

CULTURE

HOW WE WORK TOGETHER

STRATEGY

HOW WE ACHIEVE THE VISION

THOUGHTFUL

We put customers at the

centre of everything we do

We believe that happy

employees lead to

happy customers

We act lawfully,

ethically and responsibly

PROGRESSIVE

We are forward-thinking,

encouraging experimentation

and learning

We value diversity of opinion and

a constructive exchange of views

We are agile and ready to

adapt to achieve our goals

CANDO

We overcome challenges

together with positivity and

determination

We trust and

empower our people

We relentlessly create value

and improve e ciency

OUR UNIQUE POSITION

Deep roots in Hong Kong

Proudly part of China

Connecting the world

OUR LINES OF BUSINESS OUR AREAS OF LEADERSHIP

Safety &

operational excellence

Digital

Sustainability

World’s best

premium airline

World’s best

travel lifestyle

business

Asia’s best

low cost carrier

World’s best

air cargo carrier

Cathay Pacific Airways Limited Annual Report 2023 13

REVIEW OF OPERATIONS

Premium Travel

AVAILABLE SEAT KILOMETRES ASK, LOAD FACTOR AND YIELD CHANGE BY REGION FOR

CATHAY PACIFIC PASSENGER SERVICES FOR  WERE AS FOLLOWS

ASK (million) Load factor (%) Yield

2023 2022 Change 2023 2022 Change Change

Americas 21,535 6,868 +213.6% 91.9 76.9 +15.0%pt -7.0%

Europe 19,508 4,879 +299.8% 90.3 85.1 +5.2%pt -24.6%

North Asia 17,175 2,706 +534.7% 78.4 54.8 +23.6%pt -31.6%

Southeast Asia 11,416 2,051 +456.6% 80.6 62.9 +17.7%pt -20.4%

Southwest Pacific 11,199 2,711 +313.1% 83.6 73.8 +9.8%pt -30.1%

South Asia, the Middle East and Africa 4,774 841 +467.7% 81.8 65.9 +15.9%pt -15.7%

Overall 85,607 20,056 +326.8% 85.7 73.6 +12.1%pt -17.7%

MARKETS

HOME MARKET  HONG KONG AND GREATER

BAY AREA GBA

• Pent-up travel demand was strong after the resumption

of quarantine-free travel, in particular during the 2023

Lunar New Year holiday period.

• Following the resumption of quarantine-free travel

between Hong Kong and the Chinese Mainland, we

immediately resumed outbound passenger flights from

Guangzhou and then increased the frequency to twice

daily starting from March.

• In November, we introduced our annual senior citizen

discount for Hong Kong and Macau residents aged 65

and above.

• Cathay Pacific was among the first airlines to provide

upstream check-in and ferry codeshare services for

customers in the GBA. When travelling to and from cities

in the GBA, customers can enjoy a seamless transfer

directly via Hong Kong International Airport’s (HKIA)

SkyPier using our Air+Sea service. Guangzhou Pazhou

Ferry Terminal was newly added to the network in April

with a four-times-daily service that supplements our

double-daily flights connecting Guangzhou with the world

via HKIA, altogether providing customers with a total of 26

codeshare ferry services per day from cities in the GBA.

As of December 2023, ferry destinations from the SkyPier

in operation include Shenzhen Shekou, Shenzhen Airport

Ferry Terminal, Guangzhou Pazhou, Dongguan Humen,

Zhongshan, and Macao Taipa.

• Leveraging the newly developed SkyPier Terminal, since

August we have gradually launched upstream check-in

and baggage check-through services for customers

travelling from Macao and Zhuhai when taking bonded

buses through the Hong Kong-Zhuhai-Macao Bridge

(HZMB). With this ground-breaking proposition, our

customers travelling to and from the western GBA can

enjoy great convenience with direct transfer via the

airside of HKIA, which is similar to that of a flight-to-flight

transfer.

• Cathay Pacific was the first international airline to

introduce remote check-in and baggage delivery service

at the Canton Fair Complex to provide a seamless

intermodal travel experience for buyers participating in

the China Import and Export Fair in Guangzhou, also

known as the Canton Fair. This will become a regular

service tailored for our worldwide customers travelling

into the GBA.

AMERICAS

• Cathay Pacific celebrated its 40th anniversary in the

Americas since its first flight to Vancouver, Canada

in1983.

• We resumed our Chicago service in October, receiving a

very encouraging response from customers.

• As at 31st December 2023, we were operating passenger

flights serving seven destinations in the Americas.

EUROPE

• We progressively increased flight frequencies on a

number of our Europe routes. Notably, our popular

London Heathrow service returned to up to five round-

trip flights per day.

Cathay Pacific Airways Limited Annual Report 2023

REVIEW OF OPERATIONS

Premium Travel

• In light of the situation in Israel, we temporarily suspended

all our flights between Hong Kong and Tel Aviv from

October 2023 until further notice.

• As at 31st December 2023, we were operating passenger

flights serving eight destinations in Europe.

NORTH ASIA

• Quarantine-free travel between Hong Kong and the

Chinese Mainland resumed on 8th January, and we

rapidly increased our flights serving the Chinese Mainland

to cater for the strong demand for travel, which included

traffic to and from Hong Kong, and transit traffic via the

Hong Kong hub. This was complemented by the

successful brand relaunch in the Chinese Mainland of our

“Nice to Meet You Again” campaign.

• Cathay Pacific was proud to carry a significant number of

athletes, spectators and officials to attend the Asian

Games in Hangzhou in September and October.

• We progressively added more flights and destinations

serving the Chinese Mainland for our customers,

including resuming our Xi’an, Wenzhou, Shanghai

(Hongqiao) and Haikou services. As at 31st December

2023, we were operating about 170 return flights per

week serving 16 airports in 15 cities in the

ChineseMainland.

• Our passenger flights serving other regions in North Asia

were impacted by travel restrictions in those places in the

first few months of 2023. The lifting of travel restrictions

in these places were welcomed developments, and we

saw strong pent-up demand for travel to the region from

our customers.

• We resumed our scheduled Nagoya services in March,

as well as our popular non-stop flights between Taipei

and Tokyo (Narita) in May, and between Taipei and Osaka

in June.

• As at 31st December 2023, we were operating passenger

flights serving 25 airports in 23 destinations in North Asia.

SOUTHEAST ASIA

• Our Phuket services were resumed in January.

• As at 31st December 2023, we were operating passenger

flights serving 13 destinations in Southeast Asia.

SOUTHWEST PACIFIC

• Cathay Pacific celebrated 40 years in New Zealand since

its first flight to Auckland in 1983. In December, we

resumed our seasonal Christchurch-Hong Kong service

– our first seasonal restart since the pandemic.

• As at 31st December 2023, we were operating passenger

flights serving six destinations in the Southwest Pacific.

SOUTH ASIA, THE MIDDLE EAST AND AFRICA

• We resumed our Johannesburg service in August, once

again providing a direct connection between our home

hub and the African continent.

• As at 31st December 2023, we were operating passenger

flights serving seven destinations in South Asia, the

Middle East and Africa.

CUSTOMER EXPERIENCE ENHANCEMENTS

• We brought back our First class service on selected

popular flights serving London Heathrow, Paris, Tokyo

(Haneda), Los Angeles and Beijing, and New York (JFK)

service will begin from summer 2024.

• During 2023, we doubled the average number of standard

award seats per flight compared with 2019, providing our

customers more opportunities to use their Asia Miles to

redeem flights on Cathay Pacific.

• We reopened all of our Cathay Pacific airport lounges in

our global network, with the exception of our lounge in

Paris Charles-de-Gaulle Airport due to ongoing

renovation work in the passenger terminal.

• To further redefine the premium travel experience for

intermodal customers, we inaugurated a new Cathay

Pacific lounge at Shenzhen Shekou Cruise Home Port,

with the grand opening held in January 2024. Its opening

marks our first lounge outside of an airport and the first of

its kind in the Chinese Mainland. The new Shekou lounge

underlines our commitment to innovating and enhancing

our range of services in the GBA.

• We announced an all-new Business class experience –

Aria Suite – that is launching in 2024 as part of a redesign

of our long-haul Boeing 777-300ER cabins.

• As part of our commitment to enhance the dining

experience for our customers, we partnered with

Cathay Pacific Airways Limited Annual Report 2023 15

REVIEW OF OPERATIONS

Premium Travel

renowned Hong Kong dining brands, notably Michelin-

starred restaurant Duddell’s, VEDA by Ovolo, Pirata and

Rosewood Hong Kong to introduce new menus for

ourcustomers.

• We announced that our free inflight Wi-Fi proposition will

be extended from First class to the Business class cabins

and for Cathay Diamond members progressively from

mid-2024.

• Building on our 100% seatback personal TV screen

proposition, our award-winning inflight entertainment

experience was further enhanced with Asia-Pacific’s first

collaboration with Disney+, and the launch of a new

graphical user interface on board our Airbus A350 aircraft

that will be progressively rolled out to our other

aircrafttypes.

• We continued to modernise our cathaypacific.com

homepage to provide an enhanced customer experience,

such as with the redemption availability calendar and

refund self-servicing functions, and offered exclusive

features for our members to shop and redeem

ticketsonline.

PASSENGER FLEET

• Cathay Pacific continued to take delivery of new and

more modern aircraft, including two Airbus A350 and five

A321neo aircraft. We also continued to bring back

passenger aircraft that had been parked in locations

outside of Hong Kong.

• In 2023, we announced the purchase of up to 32 new

Airbus A321neo and A320neo aircraft. These single-aisle

aircraft are expected to be delivered by 2029 and will join

the fleets of Cathay Pacific and HK Express, principally

serving destinations in the Chinese Mainland and

elsewhere in Asia. This order demonstrates our

commitment to investing in the long-term future of the

Cathay Group and the Hong Kong international aviation

hub, which is expected to grow exponentially with the

operation of the Three-Runway System.

AWARDS

• Cathay Pacific was proud to be awarded World’s Best

Inflight Entertainment at the prestigious 2023 World

Airline Awards organised by Skytrax as voted on by our

customers. We also returned to the Top 10 in the World’s

Best Airlines category, ranking number eight overall.

• Cathay Pacific returned to the Top 10 of

AirlineRatings.com’s Top Twenty Five Airlines in the

World for 2023, ranking number nine overall.

The airline appeared in the Top 10 of multiple other

industry rankings.

• Cathay Pacific was rated a 2024 Five Star Global Airline by

our passengers in the 2024 Airline Passenger Experience

Association (APEX) Five Star Airline Awards. In the APEX

Best In Airline Awards, Cathay Pacific was named Best in

Global for Seat Comfort, and Best in Greater China for

Entertainment and Food & Beverage.

• Cathay Pacific received three awards at the 11th Flyers

Preferred Award Ceremony 2023, organised by CAAC

Inflight Magazine and FlyerT, the Chinese Mainland’s

biggest frequent-flyer member social platform. Cathay

Pacific was named “Best Regional & International Airline”,

“Best Frequent Flyer Programme”, and “Best Co-Brand

Credit Card with Citic”.

• Cathay received 12 distinguished honours at the 2022

Customer Service Excellence Awards from the Hong

Kong Association for Customer Service Excellence

(HKACE). This included the highest recognition, the Grand

Award, which recognises accomplishments in all areas of

customer service, as well as excellence in service

delivery and implementation.

• Cathay Pacific was named Airline of the Year 2022 at the

Incheon Airport Awards hosted by Incheon International

Airport Corporation in South Korea. Cathay Pacific was

awarded for its high standards in the areas of safety

culture, convenient check-in, punctuality, baggage

handling, smart service (self-check-in), and recovery from

Covid-19.

• Cathay Pacific won World’s Best Airline Lounge at the

Business Traveler Awards North America 2023 for

ThePier, First and The Pier, Business.

• Cathay Pacific won the First Class Bedding Set category

at the TravelPlus Airline Amenity Awards 2023. The

airline’s plush First class bedding is part of a collaboration

with luxury UK lifestyle brand Bamford.

• Cathay Pacific was named Favorite Airline in Asia in

Trazee Travel’s The Trazees awards.

Cathay Pacific Airways Limited Annual Report 2023

CARGO

CATHAY CARGO SERVICES

The Cathay Group’s cargo services are provided by Cathay

Cargo, whose strategic vision is to be the world’s best air

cargo carrier, underpinned by our purpose to move people

forward in life by delivering cargo that matters to the world.

Cathay Cargo played a crucial role during the pandemic as

the Cathay Group navigated through the challenges and

opportunities. Cathay Cargo was focused on and

committed to meeting the specific air cargo capacity needs

of our customers throughout the pandemic.

After Hong Kong’s travel restrictions were relaxed in late

2022, the Cathay Group initiated its rebuilding efforts,

resulting in an increase in passenger flights and expanded

REVIEW OF OPERATIONS

Cargo

belly-hold capacity for cargo. In 2023, Cathay Cargo

experienced a transitional period marked by decreased

yields as supply increased and demand normalised

compared to the pandemic peak. However, despite this

adjustment, Cathay Cargo’s revenue remained historically

robust and yields continued to surpass pre-pandemic 2019

levels by 46.5%.

Cargo revenue in 2023 was HK$22,162 million, a decrease

of 17.9% compared with 2022, reflecting a weaker global

market for air cargo. Capacity, measured in available cargo

tonne kilometres (AFTK), increased by 59.7% in 2023

compared with 2022. Cargo revenue tonne kilometres

(RFTK) traffic increased by 40.3%. Total tonnage increased

by 19.7% to 1,381 thousand tonnes. Cargo yield decreased

by 41.3% to HK$2.74, while load factor averaged 62.0%

(2022: 70.6%).

4,000

2,000

6,000

8,000

10,000

6,000

9,000

12,000

15,000

24,000

21,000

18,000

Cargo capacity, load factor and eciency

Million

Cargo revenue and yield trend

HK$ million HK$HK$

Data in 2019-2020 included Cathay Dragon.

Cargo revenue

Cargo yield

Available cargo tonne kilometres (AFTK)

Load factor

Cargo revenue per AFTK

1H20 2H201H19 2H19 1H21 2H21 1H22 2H22 1H23 2H23 1H20 2H201H19 2H19 1H21 2H21 1H22 2H22 1H23 2H23

AVAILABLE CARGO TONNE KILOMETRES AFTK, LOAD FACTOR AND YIELD CHANGE FOR

 WERE AS FOLLOWS

AFTK (million) Load factor (%) Yield

2023 2022 Change 2023 2022 Change Change

Cathay Pacific 13,069 8,181 +59.7% 62.0 70.6 -8.6%pt -41.3%

Cathay Pacific Airways Limited Annual Report 2023 17

REVIEW OF OPERATIONS

Cargo

HOME MARKET  HONG KONG AND GREATER

BAY AREA GBA

• Demand from our home market of Hong Kong and the

rest of the GBA has shown resilience. Although traditional

air cargo commodities such as high-end electronics were

weaker for a large part of 2023, the e-commerce sector

from Southern China emerged as a key driver of cargo

tonnage growth from Hong Kong throughout 2023.

Demand was particularly robust during the traditional

year-end peak season in the fourth quarter.

• Cathay Cargo became the first carrier to have cargo

shipments accepted at the Hong Kong International

Airport (HKIA) Logistics Park in Dongguan and

transported to HKIA by vessel for outbound airfreight.

The HKIA Logistics Park’s pilot scheme in Dongguan

enables shipments to be security screened, built up, and

accepted as cargo for flights before being loaded onto

vessels bound for HKIA, from where pallets and

containers can be towed straight to a waiting aircraft.

Air-sea operations for imports were launched in

December. The scheme’s base will migrate to a

permanent facility from 2025.

• With our double-daily passenger belly service to

Guangzhou and trucking network between Hong Kong

and six destinations in Guangdong Province, we have

rebuilt our connectivity between Hong Kong and the GBA.

AMERICAS

• In Mexico, we moved our freighter operation from Mexico

City International Airport (MEX) to Felipe Ángeles

International Airport (NLU), effective 1st July 2023.

• Cathay Cargo suspended freighter services to Columbus

from August and added frequency to Toronto instead.

• Cathay Cargo increased freighter frequency on

transpacific routes from the end of August to cater for the

year-end air cargo peak season.

• At 31st December 2023, we were operating freighters

serving 11 destinations and passenger bellies serving six

destinations in the Americas.

EUROPE

• Overall demand from the region was steady throughout

the majority of 2023.

• As we progressively ramped up our network, we saw

notable growth on perishables and pharmaceutical

products, feeding to Hong Kong and our regional

destinations.

• Our joint venture with Lufthansa Cargo continued to

perform well.

• At 31st December 2023, we were operating freighters

serving five destinations and passenger bellies serving

eight destinations in Europe.

NORTH ASIA

• The Chinese Mainland market continued to be one of our

important strategic markets as production resumed

post-Covid.

• Demand on our long-haul routes to the Americas and

Europe remained robust throughout the year, and various

online shopping events resulted in high-end electronic

products peaking in the fourth quarter.

• From the summer season 2023, we resumed our

multi-city freighters between cities in the Chinese

Mainland after borders reopened and aircrew quarantine

restrictions were lifted.

• As we increased our passenger flights to Japan, South

Korea, and the Taiwan region, we observed an increase in

cargo tonnage to Hong Kong with notable growth in

perishables, automotives, and dangerous goods.

• At 31st December 2023, we were operating freighters

serving nine destinations and passenger bellies serving

nine destinations in North Asia.

Cathay Pacific Airways Limited Annual Report 2023

REVIEW OF OPERATIONS

Cargo

SOUTHEAST ASIA

• We observed notable growth in tonnage to Hong Kong

and North Asia as we ramped-up passenger bellies

across the region.

• We moved perishables, seafood, electronics and project-

related cargo from Southeast Asia in 2023.

• At 31st December 2023, we were operating freighters

serving five destinations and passenger bellies serving

12 destinations in Southeast Asia.

SOUTHWEST PACIFIC

• Perishable products including fresh products and chilled

meats remained dominant from the market, serving the

consumer needs in Hong Kong and the Chinese Mainland.

• Live animal traffic volume, including horses from

Melbourne and lobsters from Perth, continued to grow

and our passenger flight belly-hold capacity to Perth

progressively increased.

• We benefited from strong Cathay Fresh uplift using the

seasonal operations to Christchurch towards the end of

the year.

• At 31st December 2023, we were operating freighters

serving three destinations and passenger bellies serving

five destinations in the Southwest Pacific region.

SOUTH ASIA, THE MIDDLE EAST AND AFRICA

• We adjusted our freighter frequency to Dhaka from three

to two flights per week from 19th January 2023.

• Our freighter frequencies to Chennai and Delhi were

reduced from the winter season, with one less per week

on each of these routes.

• We discontinued our freighter operation to Bengaluru

from the winter season.

• At 31st December 2023, we were operating freighters

serving seven destinations and passenger bellies serving

six destinations in South Asia, the Middle East and Africa.

STRATEGIC AREAS OF FOCUS

BRAND AND MARKETING STRENGTH

• Cathay embarked on a rebrand of its cargo business in

2023 with the launch of Cathay Cargo, aligning with the

Group’s overarching brand design. We launched our new

brand campaign, “We Know How”, showcasing the

expertise of our people and the technology we use to

provide our industry-leading service. We also unveiled

our first freighter bearing the new Cathay Cargo livery.

CUSTOMER SOLUTIONS

• Cathay Cargo enhanced its integrated mail platform with

Cathay Mail, a digital solution that re-envisages the

mail-shipment process and provides a superior service

for post offices focused on shipment visibility, reliability,

and speed.

• Our Cathay Fresh cold chain capabilities were highlighted

as an exhibitor at the Asia Fruit Logistica 2023, including

tours of the Cathay Cargo Terminal demonstrating the

Cathay Fresh service features.

• The Cross Border Express (CBX), a custom-bonded

air-road intermodal operation by the Cathay Cargo

Terminal, has resumed acceptance of perishables

cargoes from Hong Kong to Shenzhen and Guangzhou,

strengthening support for perishables traffic into the

Greater Bay Area via the Hong Kong gateway.

• We continued to invest in digital transformation

andadvanced digital tools to enhance our

solutionscapabilities.

DIGITALISATION AND AUTOMATION

• Cathay Cargo revamped its website enabling customers

to easily access popular features such as direct digital

booking, track-and-trace, and flight availability.

• As part of our omni-channel distribution strategy, we

upgraded our online cargo booking flagship platform,

Click & Ship, to provide an enhanced customer

experience. Almost 50% of our bookings are now

received through this platform.

Cathay Pacific Airways Limited Annual Report 2023 19

REVIEW OF OPERATIONS

Cargo

• Application programming interface (API) connections

were developed to enable our customers to directly

connect with our automated booking platform, Click &

Ship, and view, access, book and get instant confirmation

(if applicable) of our inventory on their own platforms. We

are working to meet the milestone date set by the

International Air Transport Association (IATA) on setting

ONE Record API as the unified effective messaging

standard in the air cargo industry by January 2026. We

also successfully achieved a world-first ONE Record

shipment from Dongguan for export from Hong Kong in a

pilot scheme in partnership with the Airport Authority

Hong Kong.

SERVICE AND OPERATIONAL EXCELLENCE

• Both Cathay Cargo and Cathay Cargo Terminal (CCT)

achieved the IATA Center of Excellence for Independent

Validators (CEIV) accreditation for Lithium Batteries in

August 2023. This accreditation process validates our

commitment to the safe carriage of lithium battery

shipments and underscores our dedication to maintaining

exceptional operational standards.

• The availability of spare parts posed challenges for the

aviation supply chain, impacting our operations and

causing disruptions to our freighter services. To address

this, we have implemented a preventative maintenance

programme, including schedules cancellations as a

precautionary measure to ensure the long-term reliability

and safety. Through close collaboration with our

suppliers, we strive to enhance schedule integrity and

provide more reliable service for our customers.

FREIGHTER FLEET

• At the end of the year, we announced the purchase of six

new-generation Airbus A350F freighters and secured the

right to acquire 20 more aircraft. The first deliveries will be

by early 2027.

• This order demonstrates our confidence in Cathay

Cargo’s business model and in the power of Hong Kong

as the busiest air cargo hub in the world. It provides us a

range of options for continued capacity growth as the air

cargo market develops over the years ahead.

SPONSORSHIP AND CORPORATE SOCIAL

RESPONSIBILITY

• Cathay Cargo was confirmed as the host airline of the

2024 edition of the World Cargo Symposium (WCS)

sponsored by Hong Kong International Airport and

organised by the International Air Transport Association

(IATA), taking place from 12th-14th March 2024 in

HongKong.

INDUSTRY RECOGNITION AWARDS

• Cathay Cargo was named Cargo Airline of the Year at Air

Transport World’s (ATW) 49th Annual Airline Industry

Achievement Awards.

• Cathay Cargo was named Sustainable Cargo Airline

of the Year – Asia at the Freightweek Sustainability

Awards 2023.

• Cathay Cargo was named Best Green Air Cargo Carrier

at the 2023 Asian Freight, Logistics and Supply Chain

(AFLAS) Awards for implementing thoughtful and

eco-friendly practices to protect the environment and

community we operate in.

• Cathay Cargo won Best Cargo Airline – Asia at the

AirCargo News Awards 2023, recognising the opening

of Hong Kong’s largest pharma-dedicated handling

centre, the introduction of Click & Ship, and its

successful rebranding.

• Cathay Cargo’s ground-breaking digital transformation

and revamped website also earned it the Hong Kong User

Experience of the Year – Logistics category at the Asian

Experience Awards in Hong Kong presented by Asian

Business Review Magazine.

• Cathay Cargo was named Global Carrier of the Year – Top

Award at the Payload Asia Awards 2023.

Cathay Pacific Airways Limited Annual Report 2023

LIFESTYLE

Cathay’s Lifestyle strategy focuses on becoming a premium

travel lifestyle brand that is attractive to customers and

capable of creating a halo effect that cascades over our

products and services. Our vision is to become a leading

service brand by building deep, engaging relationships with

customers, offering them curated travel lifestyle products

and experiences throughout their lifetime.

Through the Lifestyle business we interact with customers

beyond their journeys, foster loyalty and leverage

relationships for additional value. This includes Asia Miles,

our established mileage business, and new product sales

businesses such as hotels, retail, experiences and

insurance. Both streams provide access to the Cathay

membership programme and Asia Miles, allowing members

to earn and use miles for full or partial payment.

MEMBERSHIP

This year, we invested significantly to enhance the flight

redemption offering and experience based on member

demands:

• Doubled available redemption seats per Cathay Pacific

flight compared to pre-pandemic levels.

• Launched a new miles-only redemption portal with HK

Express in August 2023, allowing redemption to popular

leisure destinations for as little as 3,000 miles.

• Operated Cathay Pacific Miles Flights twice in April and

June 2023, granting exclusive access to redeem every

seat on specific flights using Standard Awards.

• Implemented a new Standard Award Chart for all

redemptions ticketed on or after 1st October 2023, for

sustainable and competitive redemption bookings.

• Improved the online redemption platform for better flight

search and booking amendments.

• Encouraged membership sign-ups with exclusive

benefits, including free cancellations within 24 hours of

booking for added flexibility.

PAYMENT

• In Hong Kong, the Standard Chartered Cathay

Mastercard® regained momentum in acquisition and

spending after the pandemic. This partnership introduced

new opportunities for customers to earn Asia Miles

through time deposits and Status Points through

spending. Our miles-conversion business for

non-cobranded credit cards also expanded significantly.

• Outside of Hong Kong, we launched a new co-branded

credit card in Canada in partnership with Neo Financial,

marking our first venture in the Fintech space. In the

Taiwan region, the relaunch of our co-branded card with

Taishin was a success story of longstanding partnerships.

HOLIDAYS

• Cathay Holidays was relaunched, offering exclusive travel

packages, extraordinary travel experiences, and

exceptional hotel deals.

• We introduced Cathay’s Pick, an exclusive collection of

curated travel experiences for Cathay’s members and

customers, including luxurious glamping adventures

beneath Mount Fuji, a cruise voyage package, and a

Michelin-star dining experience in collaboration with a

renowned luxury hotel based in Hong Kong.

• In support of Cathay’s sustainable development

programme, Greener Together, a range of initiatives has

been introduced to promote eco-conscious travel.

Customers are rewarded with bonus miles or discounts

for renting electric vehicles with car rental partners and

staying at environmentally friendly hotels listed on the

Greener Together Hotel List.

SHOPPING

• Building upon on the success of Cathay Shop’s

e-commerce sales channel, an online version of the

inflight shopping experience has been introduced.

Customers on selected routes can now connect their

devices to inflight Wi-Fi, browse Cathay Shop, place

orders, pay with miles or cash, and have items delivered

to their home or collected inflight.

REVIEW OF OPERATIONS

Lifestyle

Cathay Pacific Airways Limited Annual Report 2023 21

REVIEW OF OPERATIONS

Lifestyle

• Cathay organised Cathay LIVE: Music Up Close, a private

concert series featuring local pop artists AGA, Serrini,

and Yoyo Sham. Members enjoyed live performances,

interactive games, and Q&A sessions, creating lasting,

memorable experiences.

PARTNERSHIPS

• We expanded our travel lifestyle vision by partnering with

brands in various industries, engaging members to earn

and spend Asia Miles in their daily lives.

• In the dining realm, we launched the Cathay Culinary Fest,

collaborating with members’ favourite partner restaurants

to offer limited-time menus. Members earned extra miles

when dining at three participating restaurants.

• In the shopping sector, we showcased our global partners

to encourage cross-border spending and earning of

AsiaMiles.

• In transportation, we piloted a campaign with Uber Taxi,

awarding Asia Miles for everyday rides, including double

miles for Uber Taxi trips to or from Hong Kong

International Airport.

WELLNESS

• Wellness, the latest addition to the Cathay Lifestyle

offerings, includes the innovative Wellness Journey in the

Asia Miles by Cathay mobile app and a range of Travel and

Health insurance products. Over 100,000 members have

joined the Wellness Journey since its launch.

• Travel insurance saw a robust recovery with the return of

passenger flights, surpassing pre-pandemic levels in

2023. Our renewed partnership with Chubb Insurance

ensures comprehensive protection throughout the

booking and pre-flight process, including the introduction

of the Chubb Travel Insurance Annual Plan in October

2023, offering unlimited coverage for frequent travellers.

GREATER BAY AREA

• Our objective in the Greater Bay Area is to establish a

lifestyle ecosystem and increase penetration in the

Chinese Mainland more broadly. This entails expanding

memberships, partnerships, and the strength of the Asia

Miles currency to build long-term customer relationships.

• We established a new entity in the Chinese Mainland in

2023 (Wholly Foreign Owned Enterprise), allowing us

to remit and sign-up partners in Renminbi, manage local

taxes independently, and include retail in our

business scope.

• Conducted our first livestream on Douyin in November

and opened a pop-up store in Shenzhen in December.

These channels resonate with local consumers,

enhancing our online and offline presence and attracting

quality traffic.

• Launched the “Mileage For Good” programme in 2023,

enabling members to donate their Asia Miles to charity

organisations. Initiatives include donating a basketball

court to a remote school in the region.

OTHERS

• We introduced new sub-brands, Cathay Shop and Asia

Miles by Cathay, with the goal of increasing awareness

of our shopping platform and strengthening the Asia

Miles currency.

AWARDS

• In April, our Cathay membership programme was

recognised as one of the outstanding campaigns to

attract, retain and appreciate members at the Loyalty &

Engagement Awards ceremony hosted Marketing-

Interactive in Hong Kong. Cathay was awarded silver in

“Best Loyalty Campaign” and “Best Loyalty Programme

– Lifestyle, Travel and Entertainment” and bronze in “Best

Loyalty Campaign – Launch/Rebranding” and “Best

Membership Programme”.

Cathay Pacific Airways Limited Annual Report 2023

REVIEW OF KEY SUBSIDIARIES AND

ASSOCIATES

Profits from subsidiaries in 2023 were HK$10 million (2022

restated: loss of HK$1,764 million), and the share of losses

from associates in 2023 was HK$1,562 million (2022: loss of

HK$6,293 million). Set out below is a review of the

performance and operations of material subsidiaries

and associates.

LOWCOST TRAVEL

HONG KONG EXPRESS AIRWAYS LIMITED

“HK EXPRESS”

HK Express provides low-cost travel services as Hong

Kong’s only low-cost carrier, focusing on leisure travel

destinations in Asia. At 31st December 2023, HK Express

operated scheduled flights to 23 destinations. In the

second half of 2023, Manila and Kumamoto were added to

HK Express’s network.

HK Express returned to pre-pandemic passenger flight

frequency levels in April. By the end of 2023, the airline

operated at over 130% of the pre-pandemic passenger

flight frequency levels. The average flown load factor in

2023 was 86.0%, an increase of 17.7 percentage points

compared with 2022. Available seat kilometres amounted to

9,432 million, reflecting the airline’s significantly expanded

capacity following the reopening of borders in Hong Kong,

the Chinese Mainland and the Asia region.

MARKETS

NORTH ASIA

• In the Chinese Mainland, HK Express resumed its daily

service to the city of Ningbo in March, matching its pre-

pandemic level.

• In the Japanese market, HK Express operated short-term

seasonal charter flights to Sapporo in January to cater to

peak-season demand. The airline resumed its services to

Takamatsu, operating scheduled charter flights from

January and then regular scheduled flights from April.

Regular scheduled flights to Kagoshima resumed in June,

and flights to Kumamoto resumed in November.

• For the South Korea market, HK Express resumed its

regular scheduled services to popular South Korean

destinations Busan and Jeju in March, completing the

resumption of services in South Korea in terms of the

number of destinations.

• As at 31st December 2023, HK Express operated

approximately 230 return flights per week, serving 16

airports in 15 destinations in North Asia.

SOUTHEAST ASIA

• For the Vietnam market, HK Express launched a new daily

service to Hanoi in April and resumed its Nha Trang

service in June, bringing the total number of destinations

served in Vietnam to three.

• In October, the airline expanded its network to the

Philippines with daily regular scheduled flights to Manila.

• As at 31st December 2023, HK Express operated

approximately 72 return flights per week serving seven

destinations in Southeast Asia.

CUSTOMER EXPERIENCE ENHANCEMENTS

• In October 2023, HK Express proudly launched its first

Customer Carbon Offset Programme, making it the first

low-cost carrier in Asia to partner with CHOOOSE, a

leading climate action platform. This initiative allows

customers to offset the carbon emissions generated by

their flights, addressing their carbon footprint during the

booking process, raising awareness of climate change,

and empowering them to take action.

REVIEW OF OPERATIONS

Review of Key Subsidiaries and Associates

Cathay Pacific Airways Limited Annual Report 2023 23

REVIEW OF OPERATIONS

Review of Key Subsidiaries and Associates

For the year ended

31st December

2023

HK$M

2022

HK$M Change

Revenue

Passenger services* 5,486 646 +749.2%

Cargo services 20 6 +233.3%

Other services and recoveries* 97 40 +142.5%

Total revenue 5,603 692 +709.7%

Expenses

Staff (848) (424)^ +100.0%

Inflight service and passenger expenses (42) (4) +950.0%

Landing, parking and route expenses (817) (113) +623.0%

Fuel (1,164) (128) +809.4%

Aircraft maintenance (573) (276) +107.6%

Aircraft depreciation and rentals (777) (733) +6.0%

Other depreciation, amortisation and rentals (52) (29) +79.3%

Others (480) (236) +103.4%

Operating expenses (4,753) (1,943) +144.6%

Net finance charges (360) (389) -7.5%

Total operating expenses (5,113) (2,332) +119.3%

Profit/(loss) before impairment and other gains or charges and taxation 490 (1,640) +2,130

Taxation (57) 271 -121.0%

Profit/(loss) after taxation 433 (1,369) +1,802

A portion of ancillary revenue used to calculate ancillary penetration for HK Express is captured under “Passenger services revenue” in alignment with

the Group’s presentation of revenue in accordance with HKFRS 15.

PASSENGER FLEET

• At 31st December 2023, HK Express had an all-Airbus

narrowbody fleet of 33 aircraft, including eight Airbus

A320-200 aircraft, 11 Airbus A321-200 aircraft, 10 Airbus

A320-200neo aircraft and four Airbus A321-200neo

aircraft. The fleet had an average age of 7.1 years.

• In 2023, HK Express took delivery of its first four Airbus

A321-200neo aircraft. These aircraft form part of an

order previously allocated to Cathay Dragon for 16

A321-200neo aircraft, which is the most fuel efficient of

its type.

• The modern fleet enables HK Express to seize new

opportunities within the region and contributes to

strengthening Hong Kong’s position as Asia’s leading

international aviation hub.

• In 2023, the Cathay Group announced the purchase of up

to 32 new Airbus A321neo and A320neo aircraft. These

single-aisle aircraft are expected to be delivered by 2029

and will join the fleets of Cathay Pacific and HK Express,

principally serving destinations in the Chinese Mainland

and elsewhere in Asia. This order demonstrates our

commitment to investing in the long-term future of the

Cathay Group and the Hong Kong international aviation

hub, which is expected to grow exponentially with the

operation of the Three-Runway System.

AWARDS

• In 2023, HK Express received two prestigious Transform

Awards Asia: Gold for “Best visual identity from the travel

and tourism sector” and Silver for “Best brand evolution

(business)”. These recognitions affirm the success of the

airline’s revitalised brand identity and evolved positioning

among Asia’s leading brands.

Cathay Pacific Airways Limited Annual Report 2023

REVIEW OF OPERATIONS

Review of Key Subsidiaries and Associates

For the year ended

31st December

2023 2022 Change

Operating Statistics – HK Express

Available seat kilometres (ASK)

Million 9,432 983 +859.5%

Passenger revenue per ASK

HK cents 58.1 65.8 -11.7%

Revenue passenger kilometres (RPK)

Million 8,112 671 +1,108.9%

Revenue passengers carried

‘000 4,146 314 +1,220.4%

Passenger load factor

% 86.0 68.3 +17.7%pt

Passenger yield

HK cents 67.6 96.3 -29.8%

Cost per ASK (with fuel)

HK cents 54.8 237.3^ -76.9%

Fuel consumption per million ASK

Barrels 143 134 +6.7%

Fuel consumption per million RPK

Barrels 166 197 -15.7%

Cost per ASK (without fuel)

HK cents 42.5 224.3^ -81.1%

ASK per HK$’000 staff cost

Unit 11,120 2,317^ +379.9%

ASK per employee

‘000 8,467 1,062 +697.3%

Aircraft utilisation

Hours per day 7.3 0.9 +711.1%

On-time performance

% 87.6 93.1 -5.5%pt

Average age of fleet

Years 7.1 5.7 +1.4 years

Restated due to adoption of the HKICPA guidance of abolition of the MPF-LSP offsetting mechanism in June 2022.

AHK AIR HONG KONG LIMITED

“AIR HONG KONG”

• Air Hong Kong principally operates express cargo

services for DHL Express.

• At 31st December 2023, Air Hong Kong had seven

dry-leased Airbus A300-600F freighters, two dry-leased

A330-243F freighters and seven dry-leased

A330-300P2F converted freighters.

• Air Hong Kong has been undergoing a re-fleeting plan to

replace the remaining A300-600F freighters by A330-

300P2F converted freighters which is expected to be

completed by 2025.

• Air Hong Kong operated scheduled and charter flights to

15 major cities in Asia and the Middle East, including

Bahrain, Bangkok, Beijing, Cebu (via Manila), Chengdu, Ho

Chi Minh City, Nagoya, Osaka, Penang, Seoul, Shanghai,

Singapore, Taipei and Tokyo in 2023.

• In 2023, available cargo tonne kilometres decreased by

0.8% to 881 million compared with 2022.

• On-time performance decreased by 8.9 percentage

points to 81.6% in 2023.

• Air Hong Kong recorded a profit in 2023 at a similar level

compared with 2022.

MATERIAL AIRLINE SERVICES SUBSIDIARIES

CATHAY PACIFIC CATERING SERVICES H.K.

LIMITED “CATHAY DINING” AND KITCHENS

OUTSIDE HONG KONG

• Cathay Dining, a wholly owned subsidiary, operates the

principal flight kitchen in Hong Kong.

• Cathay Dining provides flight-catering services to 49

international airlines in Hong Kong. It produced 19.4

million airline meals and handled 43,389 flights in 2023,

representing a daily average of 53,134 meals and 119

flights, an increase of 379% and 170%, respectively,

from2022.

• Cathay Dining was awarded the Gold Award in Hong Kong

Awards for Environmental Excellence 2022 under the

Manufacturing and Industrial Services sector. Cathay

Dining was also awarded the Sustainable Vision Award in

the CLP Smart Energy Award 2023.

Cathay Pacific Airways Limited Annual Report 2023 25

REVIEW OF OPERATIONS

Review of Key Subsidiaries and Associates

• Despite the higher volumes, the financial results of

Cathay Dining in 2023 declined compared with 2022 due

to high interest expenses and reduction in Covid-19

government grants and other assistance.

• The financial results of flight kitchens outside Hong Kong

in 2023 improved compared with 2022.

CATHAY PACIFIC SERVICES LIMITED “CATHAY

CARGO TERMINAL” OR “CCT”

• Cathay Pacific Services Limited (operating as Cathay

Cargo Terminal) manages and operates the Cathay Cargo

Terminal at Hong Kong International Airport (HKIA). As at

31st December 2023, CCT provided cargo-handling

services for the Cathay Group and 15 other scheduled

airlines, excluding chartered customers.

• CCT handled 1.4 million tonnes of cargo in 2023, an

increase of 17% compared with 2022.

• The financial results in 2023 declined compared with

2022 due to high interest expenses.

• To align with the Cathay Group’s overarching brand

redesign and the rebranding of Cathay Cargo, our new

marketing brand – Cathay Cargo Terminal – was launched

in April 2023.

• CCT was the first cargo terminal operator to operate

commercial services to/from the HKIA Logistics Park in

Dongguan. This enables the Group to offer our customers

seamless sea-air shipments from the Greater Bay Area

(GBA) directly into HKIA for outbound airfreight, as well as

Northbound shipments from HKIA to the GBA. CCT

established its own upstream bonded facility – Cathay

Cargo Terminal Dongguan – located at the Bestar

Logistics Centre in Dongguan.

• Reflecting our continued investment in special cargo

solutions, CCT obtained IATA Center of Excellence for

Independent Validators (CEIV) Lithium Batteries

certification in the second quarter. This further enhances

our competence in the safe handling and carriage of

lithium battery shipments by adhering to the highest

industry standards.

• Cathay Cargo Terminal also obtained IATA certification

for providing Competency-Based Training and

Assessment for Dangerous Goods in April 2023.

HONG KONG AIRPORT SERVICES LIMITED “HAS”

• HAS, a wholly owned subsidiary, provides ramp- and

passenger-handling services at Hong Kong

International Airport. At 31st December 2023, it provided

ground-handling services to 24 airlines, including

CathayPacific and HK Express.

• In 2023, HAS had 45% and 17% market shares in ramp-

and passenger-handling businesses, respectively, at

Hong Kong International Airport. The number of flights

handled under both ramp- and passenger-handling

businesses increased by 134% and 426% against 2022.

• The financial results for 2023 improved compared

with2022.

• In 2023, HAS continued to meet and exceed the Critical

Key Performance Indicators set by the Airport Authority

Hong Kong. Recognising HAS’s efforts in promoting

occupational health and safety practices, HAS received

the Merit Award in the 2022/23 Airport Safety Excellence

Scheme and also the Outstanding Award in the Joyful@

Healthy Workplace Best Practices Award under the

Occupational Safety and Health Council (OSHC).

Moreover, HAS has been awarded the Certificate of Merit

in the Hong Kong Awards for Environmental Excellence

2022 under the Transport and Logistics Sector.

VOGUE LAUNDRY SERVICE LIMITED “VLS”

• VLS, a wholly owned subsidiary, provides a

comprehensive range of professional services in

laundry and dry cleaning of commercial linen, uniform

and guest garments.

• It operates a commercial laundry plant in Yuen Long

Industrial Park and runs six valet shops in Hong Kong

serving retail customers.

• VLS processed 64 million items of laundry in 2023

compared with 30 million items in 2022. Despite the

higher volumes, the financial results for 2023 declined

compared with 2022 due to high interest expenses.

Cathay Pacific Airways Limited Annual Report 2023

REVIEW OF OPERATIONS

Review of Key Subsidiaries and Associates

MATERIAL ASSOCIATES

AIR CHINA LIMITED “AIR CHINA”

• Air China, in which the Cathay Group had a 16.26%

interest at 31st December 2023, is the national flag

carrier and leading provider of passenger, cargo and

other airline-related services in the Chinese Mainland. We

are represented on the Board of Directors of Air China

and equity account for our share of Air China’s results.

• Our share of Air China’s results is based on its financial

statements drawn up three months in arrears.

Consequently, our 2023 annual results include Air China’s

results for the 12 months ended 30th September 2023.

• On 16th January 2023, the Group’s interest in Air China

was diluted from 18.13% to 16.26% as a result of Air China

issuing 1,676 million new A shares to investors with

proceeds of the issuance totalling RMB15 billion.

Notwithstanding the dilution, the Group continues to have

significant influence over Air China and has continued to

equity account for its interest in Air China as an associate.

While we did not sell any shares, this was accounted for

as a deemed partial disposal of our interest in Air China

and a gain of HK$1,929 million was recorded.

• On 7th February 2024, the Group’s interest in Air China

was diluted from 16.26% to 15.87% as a result of Air China

issuing 393 million new H shares to a specific investor

with proceeds of the issuance totalling HK$2 billion.

Further details can be found in note 32 to the

financial statements, Non-adjusting events after the

reporting period.

• For the 12 months ended 30th September 2023, Air

China’s financial results improved compared to those for

the 12 months ended 30th September 2022.

• At 31st December 2023, the net book value and market

value of the 2,634 million shares of Air China held by the

Cathay Group was HK$10,359 million (constituting 5.9%

of Cathay Group’s total assets) and HK$13,011 million

respectively.

• No dividend was received from Air China during

theperiod.

• Additional information on Air China, including its

performance and prospects, can be found in its 2022

Annual Report and 2023 Interim Report.

AIR CHINA CARGO CO., LTD. “AIR CHINA

CARGO”

• Air China Cargo, in which the Cathay Group owns an

equity and economic interest totalling 24%, is the leading

provider of air cargo services in the Chinese Mainland. It

has its headquarters in Beijing. Its main operating base is

in Shanghai Pudong.

• Our share of Air China Cargo’s results is based on its

financial statements drawn up three months in arrears.

Consequently, our 2023 annual results include Air China

Cargo’s results for the 12 months ended 30th

September2023.

Cathay Pacific intends to continue to hold its significant

investments for the foreseeable future.

Cathay Pacific Airways Limited Annual Report 2023 27

OUR AREAS OF LEADERSHIP

Cathay has three areas of leadership that form a key part of

our corporate strategy. These three areas – safety and

operational excellence, transforming into a digital leader,

and becoming a leader in sustainability – are where we are

especially focused on building new capabilities for

thefuture.

SAFETY AND OPERATIONAL EXCELLENCE

Safety excellence is the cornerstone of our success at

Cathay and under our strategy, we aspire to achieve

world-class leadership in safety and operational excellence.

We aim to raise the bar in our quality, safety and security

standards, so that we can run a consistently safe and

efficient operation, deliver an outstanding customer

experience and optimise utilisation of our fleet

andresources.

• Our approach to operational safety – Cathay is firmly

committed to providing our customers and our people

with the highest standards of safety and security. Our

approach to safety is founded on the principle of reducing

risks to a level as low as reasonably practicable (ALARP),

and to succeed in this we have developed a corporate

safety culture and adopted a risk-driven approach in

identifying and minimising the impact of hazards in our

operations.

• Safety policy – Our safety policy clearly sets out our

commitment to prioritising and managing the safety risks

of our operations, which applies to the entire

organisation. In compliance with the ICAO Safety

Management System (SMS) framework, our policy

extends a duty of care to all businesses we work with,

including contractors or individuals under the Group’s

supervision, and shapes a corporate culture of safety.

• Operational safety – Our robust safety and risk

management systems help us maintain a high level of

safety performance that seeks to protect our employees

and customers. We adhere to global best practice in

airline safety to ensure our approach continues to be fit

for purpose.

• IATA Operational Safety Audit (IOSA) – IOSA is the

global standard for assessing the operational

management and control systems of an airline. As an IATA

member, we are IOSA registered and must remain

registered to maintain IATA membership. Last year, our

operations underwent a full on-site IOSA audit conducted

through an external third-party audit agency, and passing

the audit will ensure our registration for the subsequent

24 months. In 2025, IATA will officially transition to the

new Risk-Based IOSA (RBI) approach, marking a notable

shift in the IOSA programme. This move aims at

enhancing safety risk management in the ever-changing

aviation landscape. Cathay is committed to embracing

this change and will be opting into RBI adopting during its

next IOSA renewal in November 2024.

• Safety governance – The Cathay Group SMS has been

developed to ensure that we proactively manage risks

and have procedures in place to react appropriately

should an incident occur. Safety performance indicators

are actively monitored on a monthly basis by Safety

Action Groups (SAG) and the Airline Safety Review

Committee (ASRC), which is chaired by our Chief

Executive Officer, and all events and incidents are

investigated thoroughly. The implementation of our SMS

was evaluated and assessed by the Hong Kong Civil

Aviation Department (HKCAD) in October 2023. The

HKCAD concluded that Cathay Pacific is in compliance

with CAD712 (SMS).

• Operational Excellence – Teams from across the

business work together to deliver a highly resilient

operation. Substantial investment in digital capability is

being made to further improve the ability to reliably

deliver our flying schedule. In 2023, we started work on

the transformation of our Integrated Operations Centre,

where teams from all operational and service

departments are collocated and able to use new digital

capability to better manage issues from seven days

before a flight through to the day of operations. Digital

Twins are being developed across the operation, with the

most recent example being a model to ensure we make

full use of our training capabilities during the rebuild.

DIGITAL

Our vision is to transform Cathay into a digital leader

famous for its strong digital culture and capabilities, whilst

keeping our people and customers at the heart of how we

use technology.

In 2023, significant progress was achieved in the areas of

data analytics, technological innovation, company-wide

digital transformation, and cyber security:

REVIEW OF OPERATIONS

Our Areas of Leadership

28 Cathay Pacific Airways Limited Annual Report 2023

REVIEW OF OPERATIONS

Our Areas of Leadership

• Data analytics – To support our continuous efforts in

rebuilding our flight network, we have leveraged on our

operational data and machine-learning technology to

optimise our resource planning and operational reliability.

This also enables us to continuously enhance our

services for our customers across travel, lifestyle and

cargo. To equip our people with analytics skills and

capabilities, we launched the Digital Centre, a structured

learning and development programme to improve our

people’s digital literacy, complemented by engagement

events such as the Cathay Datathon, an internal

competition designed for our people to learn about data

analytics in an engaging way.

• Technological innovation – We continue to place great

emphasis on innovating with artificial intelligence (AI). To

improve our employee experience, we were proud to be

one of the first enterprises introducing Copilot for

Microsoft 365, which facilitates creativity and

collaboration in the workplace. Customer 360, a new

enterprise technology platform, was launched to enhance

our customer-facing teams’ understanding of customer

needs, such as seat, meal and language preferences, in

order to deliver more customised services. Meanwhile,

our efforts continue in helping employees understand

emerging technology whilst setting guiderails for

adopting it in a safe and responsible manner.

• Digital transformation – We are deeply committed to

supporting youth development in Hong Kong, particularly

in the areas of innovation and technology. This year, we

celebrated the tenth anniversary of our Digital and IT

Graduate Trainee Programme, which continues to foster

tech talent in our home city. In November, the sixth Annual

Cathay Hackathon was held, with a record-breaking

participation involving 280 tech-savvy and

entrepreneurial students who gathered at Cathay City

and over a period of 24 hours developed and pitched

innovative solutions designed to enhance customers’

travel experience, elevate Cathay’s premium lifestyle

services, and promote our cargo services.

• Cyber security – We are committed to protecting our

people’s, customers’ and partners’ information across

Cathay. In July, Cathay achieved the ISO 27001

certification for security operations, the global standard

that sets the benchmark for information security

practices for establishing, implementing, maintaining and

continually improving an information security

management system. The certification is only awarded to

organisations with a mature and comprehensive system

for managing and protecting sensitive information,

including personal data, credit card data, financial

information, and intellectual property. This demonstrates

our commitment to upholding the cyber security posture

and helps to boost confidence, demonstrate credibility

and enhance brand reputation in the eyes of customers,

partners and other stakeholders knowing that their

information is in safe hands.

AWARDS

Cathay’s continued success in digital transformation was

recognised in industry awards.

• In April, we took home the 2023 MongoDB APAC

Innovation Award for the category Industry Disruptor,

which recognises businesses reinventing industries by

transforming customer experiences through new

technologies. We won with our Flight Folder project – a

system designed to enhance the way pilots and crew

interact with data before and during flight.

• In June, we won Gold for the category Best Graduate

Training Programme at the Hong Kong edition of the 2023

Employee Experience Awards hosted by Human

Resources Online for our Digital and IT Graduate

TraineeProgramme.

• In November, Cathay and IBM were awarded the

Commendation Award for the HKIPM Project

Management Achievement Awards under the Information

Technology (IT) category for the success of our cloud

migration project and excellence in project management.

SUSTAINABILITY

Sustainability is at the core of Cathay’s purpose – to move

people forward in life. We understand that achieving this

purpose in a sustainable and responsible manner for

current and future generations requires collective efforts.

Through our “Greener Together” approach with travellers,

business partners, regulators as well as our people, we aim

to lead by example and reach new heights in building a more

sustainable future.

Cathay Pacific Airways Limited Annual Report 2023 29

REVIEW OF OPERATIONS

Our Areas of Leadership

In line with this ethos, we have introduced two new targets

in 2023:

• To improve our carbon intensity by 12% from the 2019

level by 2030, reducing it from 761 gCO

/RTK to 670

gCO

/RTK.

• To reduce the use of passenger-facing Single-use

plastics (SUP) items

(a)

from an average of 7.7 pieces per

passenger in 2019 to 1.5 pieces by 2025.

The two new targets build upon our existing sustainability

commitments, which include:

• Committed to achieving net-zero carbon emissions in our

operations by 2050.

PERFORMANCE UPDATES  CATHAY GROUP

2023 2022 Change

Environment

Total Scope 1 and 2 emissions

Million tonnes of CO

e 11.6 5.4 +114.8%

Carbon intensity

Grammes of CO

per RTK 704 677 +4.0%

Percentage of SAF in annual jet fuel consumption

% 0.03 0.03 –

Passenger-facing SUP items

(a)

Pieces per passenger 3.1 4.8 -35.4%

People

Total workforce

Number 23,801 20,923 +13.8%

By location

Hong Kong

% 85 85 –

Chinese Mainland

% 2 2 –

Others

% 13 13 –

By employment type

Flight crew

% 15 12 +3.0%pt

Cabin crew

% 31 31 –

Ground staff

% 54 57 -3.0%pt

Gender diversity

Workforce composition – female

% 49 51 -2.0%pt

Workforce composition – male

% 51 49 +2.0%pt

Female representation in senior positions

(b)

% 27 25 +2.0%pt

Female representation on the Board of Directors

% 12 6 +6.0%pt

Notes:

(a) On-board Cathay Pacific flights only. Items include passenger-facing SUP water bottles, utensils, amenity items, and packaging, but exclude those for

medical and sanitation purposes, and pre-packaged food and beverage items other than water bottles.

(b) Senior positions refer to the job levels of General Managers and Directors at the Group.

• Committed to using sustainable aviation fuel (SAF) for

10% of fuel consumption by Cathay Pacific operating

flights by 2030.

• Committed to not having more than 65% of the same

gender in senior positions

(b)

by 2025 and 70% at the

Board level by 2027.

Our Sustainability Report 2023 has been published in April

2024, detailing our efforts and progress in reaching these

commitments. It is now available at https://www.

cathaypacific.com/cx/en_HK/about-us/sustainability/

sustainability-reports.html

Cathay Pacific Airways Limited Annual Report 2023

REVIEW OF OPERATIONS

Our Areas of Leadership

ENVIRONMENT

On the environmental front, climate change and materials &

waste are our priority areas. As a pioneer and early adopter

of SAF, we continue to lead the charge in accelerating the

regional collaboration, development and deployment of

SAF, and working ambitiously towards our 2030 10% SAF

usage target. We are also dedicated to transitioning

towards more sustainable use of resources and circular

solutions by setting a clear roadmap for SUP and waste

reduction. Through these endeavours, we affirm our

unwavering commitment to sustainability leadership.

The following are some of our key initiatives and targets in

our environmental efforts:

• We have formed a strategic partnership with the State

Power Investment Corporation (SPIC) to drive further

development of the SAF supply chain in the Chinese

Mainland. Additionally, we continue to collaborate with the

Civil Aviation University of China (CAUC) to explore new

SAF technologies and the feasibility of commercialising

SAF feedstocks.

• We have expanded our partnerships through our

Corporate SAF Programme to demonstrate strong

demand for SAF along the aviation value chain.

• Cathay Pacific successfully conducted the first overseas

SAF uplift on our commercial flights in Singapore and

LosAngeles.

• Our Fly Greener voluntary carbon offset programme, first

launched in 2007, became accessible on our customer

website booking and cargo booking platforms in 2023.

• We have set a new target to reduce cabin waste to no

more than 0.63 kg per passenger by 2030, representing a

30% reduction from the 2019 baseline.

• We launched a new range of plant-based dishes

developed in collaboration with a leading Hong Kong-

based plant-forward restaurant, VEDA by Ovolo.

• Our Hong Kong headquarters, Cathay City, Cathay House,

and two of our subsidiaries’ premises, the Cathay Dining

Building and the VLS Yuen Long Plant, have achieved

certification to the ISO14001:2015 standard for

environmental management systems.

• We organised our inaugural Sustainable Development

Week, which showcased the sustainability efforts of

different teams within Cathay and raised environmental

awareness among our people.

SOCIAL

Ensuring the safety of our operations, people and

customers is of utmost importance to us. We value our

people as one of our greatest assets and are committed to

providing them with an inclusive and supportive working

environment. This enables us to attract, develop and retain

a strong talent pipeline. Cathay has a long-standing

commitment to supporting the communities in which we

operate. We engage in various community initiatives

focused on youth development, sports as well as arts

andculture.

OUR PEOPLE

• At 31st December 2023, the Group employed more than

23,800 people worldwide, with around 19,600 employed

in Hong Kong.

• Cathay Pacific launched its first-ever talent recruitment

campaign targeting cabin crew in the Chinese Mainland

and will continue to provide more job opportunities for

talent from the Chinese Mainland in various roles such as

cadet pilots, IT professionals, ground employees and

customer service officers.

• We have established new Employee Resource Groups

(ERGs) to promote equity and inclusion in the workplace,

where everyone feels respected, valued and free to bring

their whole selves to work. The existing ERGs are the

Gender Equity Network, Fly with Pride, OneCathay

Intercultural Network and Ability to Fly.

• We launched Cathay Academy, which encompasses all

learning and development functions within Cathay, to

promote a culture of continuous learning and

improvement.

• We regularly review our human resources and

remuneration policies in light of legislation, industry

practices, market conditions and individual and collective

performance to ensure that our employee remuneration

remains competitive.

Cathay Pacific Airways Limited Annual Report 2023 31

REVIEW OF OPERATIONS

Our Areas of Leadership

OUR COMMUNITY

• We strengthened the Cathay Volunteer Team, doubling

the number of our employee volunteers during the initial

recruitment period.

• We supported the Hong Kong SAR Government’s Strive

and Rise Programme, focused on youth mentoring and

development. We hosted 1,600 students and mentors

who participated in our Aviation Exploration Days,

including airline facility tours, and conducted our popular

Cathay Community Flight for students to experience the

joy of flying for the first time.

• We partnered with non-profit organisations Feeding

Hong Kong and Food Angel, donating more than 210

tonnes of food in 2023.

• We continue to support and promote the UNICEF

“Change for Good” inflight fundraising programme. Since

its introduction, over HK$200 million has been raised

through the programme. In 2022, the latest audited year,

around HK$550,000 was raised.

• Our 6th Cathay Hackathon took place in November 2023

with record-breaking applications from local and

overseas universities. The signature 24-hour event saw

280 young innovators team up to develop and share

creative tech solutions.

• Cathay has been the title sponsor of the Cathay/HSBC

Hong Kong Sevens since 1996. The event is one of the

highlights of the global rugby calendar and brings

together teams and fans from around the world.

GOVERNANCE

Cathay is committed to maintaining and developing robust

corporate governance practices and this is further

described in the section of this annual report headed

Corporate Governance Report.

SELECTED AWARDS AND RECOGNITIONS IN



• We have been a constitute of the FTSE4Good Index, the

Hang Seng Corporate Sustainability Index, the Hang Seng

ESG 50 Index, and the Hang Seng (Mainland and HK)

Corporate Sustainability Index. We have also been

included in the first edition of the S&P Sustainability

Yearbook (China) 2023. This recognition demonstrates

Cathay’s strong ESG performance and practices relative

to other companies in Hong Kong and around the world.

• We received the Hong Kong Sustainability Awards 2023

– Distinction Award from the Hong Kong Management

Association, recognising our efforts in the economic,

social, and environmental aspects of sustainability.

• We were named Sustainable Cargo Airline of the Year

– Asia by Freightweek.

• We were recognised as the Best Green Air Cargo Carrier

at the 2023 Asian Freight, Logistics and Supply Chain

(AFLAS) Awards presented by Asia Cargo News.

• We became the first airline member of the Business

Coalition for Global Plastics Treaty convened by the Ellen

MacArthur Foundation and WWF.

• We were awarded the Best Graduate and Management

Trainee Programme Award, Best Talent Acquisition &

Onboarding Strategy Award and Best Talent

ManagementStrategy Award at the CTGoodJobs Best

HR Awards 2023, recognising our efforts to develop and

attract talent.

• We have received the Caring Company recognition from

the Hong Kong Council of Social Service every year since

2003 for our good corporate citizenship.

Cathay Pacific Airways Limited Annual Report 2023

The Cathay Group’s attributable profit was HK$9,789 million for 2023 (2022 restated: loss of

HK$6,623 million). Cathay Pacific reported a profit after tax of HK$11,341 million for 2023

(2022restated: profit of HK$1,434 million). Profit from subsidiaries in 2023 were HK$10 million

(2022restated: loss of HK$1,764 million), and the share of losses from associates in 2023 was

HK$1,562 million (2022: loss of HK$6,293 million).

REVENUE

Group Cathay Pacific

2023

HK$M

2022

HK$M Change

2023

HK$M

2022

HK$M Change

Passenger services 61,437 14,333 +328.6% 55,951 13,686 +308.8%

Cargo services 25,606 30,554 -16.2% 22,162 26,990 -17.9%

Other services and recoveries 7,442 6,149 +21.0% 7,227 5,706 +26.7%

Total revenue 94,485 51,036 +85.1% 85,340 46,382 +84.0%

FINANCIAL REVIEW

20,000

40,000

60,000

80,000

100,000

120,000

5,000

15,000

10,000

20,000

300

600

900

1,200

2019 2020 2021 2022 2023

HK$ million

Revenue

Passengers in ‘000

Cargo in ‘000 tonnes

Cathay Pacic passengers and cargo carried

Cargo carried

Passengers carried

Other services and recoveries

Cargo services

Passenger services

1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23 2H23

Data in 2019-2020 included Cathay Dragon.

Cathay Pacific Airways Limited Annual Report 2023 33

FINANCIAL REVIEW

CATHAY PACIFIC

• Passenger revenue increased by 308.8% to HK$55,951

million. The number of revenue passengers carried

increased by 541.4% to 18.0 million. Revenue passenger

kilometres increased by 396.8%.

• The passenger load factor increased by 12.1 percentage

points to 85.7%. Available seat kilometres increased by

326.8%.

• Passenger yield decreased by 17.7% to HK76.3 cents.

• Cargo revenue decreased by 17.9% to HK$22,162 million

with a 59.7% increase in available freight tonne

kilometers.

• The cargo load factor decreased by 8.6 percentage

points and cargo yield decreased by 41.3% to HK$2.74.

• 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 653

+ 1 percentage point in cargo load factor 358

+ HK¢1 in passenger yield 733

+ HK¢1 in cargo yield 81

OPERATING EXPENSES

Group Cathay Pacific

2023

HK$M

2022

HK$M Change

2023

HK$M

2022

HK$M Change

Staff 14,785 10,646* +38.9% 11,839 8,759* +35.2%

Inflight service and passenger expenses 3,026 694 +336.0% 2,986 690 +332.8%

Landing, parking and route expenses 11,190 5,590 +100.2% 10,110 5,068 +99.5%

Fuel, including hedging gains 24,989 10,488 +138.3% 22,932 9,301 +146.6%

Aircraft maintenance 7,357 3,206 +129.5% 6,270 2,447 +156.2%

Aircraft depreciation and rentals 9,860 9,884 -0.2% 9,152 9,156 -0.0%

Other depreciation, amortisation and rentals 2,578 2,544 +1.3% 1,854 1,825 +1.6%

Others 7,701 4,513 +70.6% 8,609 4,689 +83.6%

Operating expenses 81,486 47,565 +71.3% 73,752 41,935 +75.9%

Net finance charges 2,733 2,909 -6.1% 1,546 1,991 -22.4%

Total operating expenses 84,219 50,474 +66.9% 75,298 43,926 +71.4%

Restated long service payment obligation amounting to HK$75 million due to adoption of the HKICPA guidance of abolition of the MPF-LSP offsetting

mechanism in June 2022.

• The cost per ATK (with fuel) of Cathay Pacific decreased

from HK$4.35 to HK$3.55, a decrease of 18.4%.

• The cost per ATK (without fuel) of Cathay Pacific

decreased from HK$3.43 to HK$2.47, a decrease of

28.0%.

• The Group’s and Cathay Pacific’s total operating

expenses increased by 66.9% and 71.4% respectively.

• Cathay Pacific’s ATK increased 110.1% from 10,100 million

to 21,225 million.

Cathay Pacific Airways Limited Annual Report 2023

FINANCIAL REVIEW

OPERATING RESULTS ANALYSIS

1st half

2023

HK$M

2nd half

2023

HK$M

Full year

2023

HK$M

1st half

2022

(restated)*

HK$M

2nd half

2022

HK$M

Full year

2022

(restated)*

HK$M

Cathay Pacific’s profit/(loss) before

exceptional items and taxation 4,890 5,152 10,042 (1,570) 4,026 2,456

Taxation (310) (517) (827) 43 (1,065) (1,022)

Cathay Pacific’s profit/(loss) after taxation and

before exceptional items 4,580 4,635 9,215 (1,527) 2,961 1,434

Subsidiaries’ results 183 (173) 10 (1,064) (700) (1,764)

Cathay Pacific and subsidiaries’ profit/(loss)

after taxation and before exceptional items 4,763 4,462 9,225 (2,591) 2,261 (330)

Share of profit/(losses) from associates (2,632) 1,070 (1,562) (2,483) (3,810) (6,293)

Underlying profit/(loss) attributable to the

shareholders of the Cathay Group (note a) 2,131 5,532 7,663 (5,074) (1,549) (6,623)

Gain on deemed partial disposal of

an associate (note b) 1,929 – 1,929 – – –

Net reversal of impairment and other gains or

charges (note c) 208 (11) 197 – – –

Profit/(loss) attributable to the shareholders of

the Cathay Group 4,268 5,521 9,789 (5,074) (1,549) (6,623)

Restated long service payment obligation amounting to HK$75 million due to adoption of the HKICPA guidance of abolition of the MPF-LSP offsetting

mechanism in June 2022.

Notes:

(a) The underlying profit/(loss) attributable to the shareholders of the Cathay Group was calculated excluding non-recurring items.

(b) Please refer note 2 to the financial statements for details.

(c) Reversal of impairment of HK$208 million under Cathay Pacific in connection with three previously impaired aircraft returning to service in the first half of

2023. Other charges in the second half of 2023 represented fair value losses on equity investments measured at fair value through profit or loss.

Net nance

charges

Others

Sta

Aircraft

maintenance

Depreciation,

amortisation

and rentals

15%

17%

Fuel, including

hedging gains

Inight service and

passenger expenses

Landing,

parking

and route

expenses

Group total operating expenses

13%

30%

120

150

90 30

2019 2020 2021 2022 2023

US$ per barrel

(jet fuel)

Barrels

in million

Group fuel price and consumption

Into wing price – before hedging

Into wing price – after hedging

Uplifted volume

Data in 2019-2020 included Cathay Dragon.

Cathay Pacific Airways Limited Annual Report 2023 35

FINANCIAL REVIEW

The movement in Cathay Pacific’s profit/(loss) before non-recurring items can be analysed as follows:

HK$M

2022 Cathay Pacific’s profit before taxation (restated) 2,456

Increase of revenue:

– Passenger and cargo revenue 37,437 – Passenger revenue increased significantly following

the full reopening of borders in Hong Kong and the

Chinese Mainland. The increase in capacity and traffic

was partially offset by a 17.7% reduction in yield.

– Cargo revenue decreased due to a 41.3% decrease

in yield. This was offset by a 40.3% increase in cargo

traffic.

– Other services and recoveries 1,521 – Increase due to higher passenger volumes and more

air ticket redemptions, partially offset by a reduction

in Covid-19 related government grants.

Increase of costs:

– Staff (3,080) – Increased due to higher capacity operated and more

headcount.

– Inflight service and passenger expenses (2,296) – Increased on higher passenger volumes.

– Landing, parking and route expenses (5,042) – Increased on operating additional capacity.

– Fuel, including hedging gains (13,631) – Increased fuel costs were mainly due to higher fuel

consumption, partially offset by lower fuel hedging

gains.

– Aircraft maintenance (3,823) – Higher due to increased aircraft flying hours.

– Owning the assets (includes aircraft and other

depreciation, rentals and net finance charges)

420 – Mainly interest rate increases.

– Other items (including commissions) (3,920) – Higher on increased operations.

2023 Cathay Pacific’s profit before taxation 10,042

FUEL EXPENDITURE AND HEDGING

A breakdown of the Group’s fuel cost is shown below:

2023

HK$M

2022

HK$M

Gross fuel cost 25,683 14,127

Fuel hedging gains (694) (3,639)

Net fuel cost 24,989 10,488

Cathay Pacific Airways Limited Annual Report 2023

FINANCIAL REVIEW

• Fuel consumption in 2023 was 28.8 million barrels (2022:

13.3 million barrels), an increase of 116.5% compared with

an increase in capacity of 110.1%.

• The Group’s fuel hedging cover at 31st December 2023 is

set out in the chart below.

• The Group’s policy is to reduce exposure to fuel price risk

by hedging a percentage of its expected fuel

consumption. The Group uses fuel derivatives which are

economically equivalent to forward contracts to achieve

its desired hedging position. The chart below indicates

the estimated percentage of projected consumption by

quarter in 2024 and 2025 covered by hedging

transactions at various Brent strike prices, as well as the

average strike price for each period.

• The Group does not speculate on oil prices but uses

hedging to manage short to medium term volatility in

oilprices and therefore its fuel costs. Hedging is not

riskfree.

DIVIDENDS

• Dividends proposed for the year are HK$2,768 million.

• Dividend per ordinary share HK$0.43 for 2023 (2022: nil).

ASSETS

• Total assets at 31st December 2023 were HK$174,115

million.

• During the year, additions to property, plant and

equipment and intangible assets were HK$8,731 million

and HK$340 million respectively. Property, plant and

equipment additions were comprised HK$8,433 million in

respect of aircraft and related equipment, HK$164 million

in respect of land and buildings and HK$134 million in

respect of other equipment.

BORROWINGS AND CAPITAL

• Borrowings (being loans and other borrowings, and lease

liabilities) decreased by 11.4% to HK$68,294 million.

Excluding lease liabilities previously classified as

operating leases, borrowings decreased by 10.1% to

HK$56,973 million, which are fully repayable by 2035, with

43% at fixed rates of interest after taking into account

derivative transactions. Borrowings are predominately

denominated in United States dollars and Hong Kong

dollars and the maturity profile of these borrowings has

not changed materially from the information set out in the

2022 Annual Report.

• Available unrestricted liquidity at 31st December 2023

totalled HK$19,985 million, comprising liquid funds of

HK$15,530 million and committed undrawn facilities of

HK$4,460 million, less pledged funds of HK$5 million.

Liquid funds are predominately denominated in United

States dollars and Hong Kong dollars.

• Net borrowings (after deducting liquid funds) decreased

by 10.3% to HK$52,764 million. Excluding lease liabilities

previously classified as operating leases, net borrowings

decreased by 8.0% to HK$41,443 million.

25.7%

25.5%

26.6%

27.6%

26.7%

20.1%

11.6%

5.7%

82.74

80.40

77.78

75.70

75.25

75.05

76.91

74.74

% US$

Projected fuel hedging cover

Hedge cover Average strike price

1Q24 2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25

Total assets

Properties

and other

equipment

Intangible

assets

Aircraft and

equipment

Current

assets

Long-term

receivables and

investment

61%

13%

12%

Cathay Pacific Airways Limited Annual Report 2023 37

FINANCIAL REVIEW

20,000

50,000

40,000

30,000

10,000

Borrowings in key currencies

HK$ million

HKD JPY USD RMB

20,000

60,000

80,000

100,000

0.6

0.8

1.2

1.4

1.6

40,000 1.0

2019 2020 2021 2022 2023

HK$ million

Net debt and equity

Funds attributable to the shareholders of the Cathay Group

Net borrowings

Net debt/equity ratio (see Borrowings and capital above)

Times

Data in 2019-2020 included Cathay Dragon.

100

2019 2020 2021 2022 2023

Interest rate prole: borrowings (after derivatives)

Fixed

Floating

Data in 2019-2020 included Cathay Dragon.

• Funds attributable to the shareholders of the Cathay

Group (being ordinary shares, preference shares and

reserves) decreased by 5.9% to HK$60,026 million. This

was due to the Group’s profit of HK$9,789 million (before

non-controlling interest), convertible bonds of HK$6

million converted into ordinary shares, partially offset by

preference shares redeemed of HK$9,750 million,

decrease in other comprehensive income of HK$1,853

million and dividends distributed to the preference

shareholder of HK$1,969 million.

• Excluding lease liabilities previously classified as

operating leases, the net debt/equity ratio decreased

from 0.71 times to 0.69 times (against borrowing

covenants of 2.0). Taking into account the effect of

adopting HKFRS 16 on net borrowings, the net debt/

equity ratio was 0.88 at 31st December 2023 (31st

December 2022: 0.92 times).

• Use of proceeds in relation to the issue of equity

securities (including securities convertible into

equitysecurities):

– HK$31.1 billion rights issue and preference shares and

warrants issue in 2020 – HK$9.6 billion unused

proceeds were brought forward on 1st January 2023

and have been fully utilised for general corporate

purposes in the first-half of 2023.

Cathay Pacific Airways Limited Annual Report 2023

EXECUTIVE DIRECTORS

HEALY, Patrick

, aged 58, has been Chair and a Director of

the Company since 6th November 2019. He is also

Chairman of Swire Coca-Cola Limited and a Director of

John Swire & Sons (H.K.) Limited, Swire Pacific Limited and

Air China Limited. He was a Director of Swire Properties

Limited from January 2015 to August 2021. He joined the

Swire group in 1988 and has worked with the group in the

Hong Kong SAR, Germany and the Chinese Mainland.

LAM, Siu Por Ronald

, aged 51, has been a Director of the

Company since 19th August 2019 and Chief Executive

Officer since 1st January 2023. He was Chief Customer and

Commercial Officer of the Company from August 2019 to

December 2022. 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 Chair of Hong Kong Express Airways

Limited since 20th August 2019 and a Director of John

Swire & Sons (H.K.) Limited since 21st March 2023. He

joined the Swire group in 1996 and has worked with the

Company in the Hong Kong SAR, Japan and Sri Lanka.

LAU, Hoi Zee Lavinia, aged 53, has been Chief Customer

and Commercial Officer and a Director of the Company

since 1st January 2023. She was Director Customer Travel

of the Company from August 2021 to December 2022. She

was Director Commercial of the Company from July 2019 to

July 2021, General Manager Planning from August 2015 to

July 2019, and General Manager Sales, Pearl River Delta and

the Hong Kong SAR from July 2012 to August 2015. She

joined the Swire group in 1992.

MCGOWAN, Alexander James John, aged 51, has been

Chief Operations and Service Delivery Officer and a

Director of the Company since 1st April 2023. He was

Director Service Delivery of the Company since 1st

September 2020. He was General Manager Aircrew, Flight

Operations of the Company from July 2018 to August 2020.

He joined the Company in 2005 and has led a number of

departments across the airline. Before joining the Company,

he had worked for an international airline based in London

and a technology start-up in Seattle.

SHARPE, Rebecca Jane

(formerly known as WALLACE,

Rebecca Jane), aged 52, has been Chief Financial Officer

and a Director of the Company since 25th January 2021.

She is also a Director of Hong Kong Express Airways

Limited with effect from 15th March 2021 and AHK Air Hong

Kong Limited with effect from 25th January 2021. She was a

Director and Group Director Finance of Hong Kong Aircraft

Engineering Company Limited from October 2017 to

January 2021, and Finance Director of The China Navigation

Company Pte. Limited (now known as Swire Shipping Pte.

Ltd.) from January 2013 to August 2017. She joined the

Swire group in 2008 and has worked with the group in the

Hong Kong SAR, the Chinese Mainland and Singapore. She

is a member of the Institute of Chartered Accountants in

England and Wales and the Hong Kong Institute of Certified

Public Accountants.

DIRECTORS AND OFFICERS

Cathay Pacific Airways Limited Annual Report 2023 39

DIRECTORS AND OFFICERS

NONEXECUTIVE DIRECTORS

BRADLEY, Guy Martin Coutts

, JP, aged 58, has been a

Director of the Company since 25th August 2021. He is also

Chairman of John Swire & Sons (H.K.) Limited, Swire Pacific

Limited and Swire Properties Limited. He was a Director of

Swire Pacific Limited from January 2015 to May 2017 and

Chief Executive of Swire Properties Limited from January

2015 to August 2021. He joined the Swire group in 1987 and

has worked with the group in the Hong Kong SAR, Papua

New Guinea, Japan, the United States, Vietnam, the Chinese

Mainland, the Taiwan region and the Middle East. He is a

chartered surveyor, a fellow of The Royal Institution of

Chartered Surveyors and a member of The Hong Kong

Institute of Surveyors. He is also Vice Chairman of General

Committee of The Hong Kong General Chamber of

Commerce and Vice-President of The Real Estate

Developers Association of Hong Kong.

MA, Chongxian, aged 58, has been a Director of the

Company since 11th June 2021 and Deputy Chair since 3rd

November 2022. He is Chairman of Air China Limited, China

National Aviation Holding Corporation Limited and China

National Aviation Corporation (Group) Limited.

MCCALLUM, Gordon Douglas

#+&

, aged 63, has been a

Director of the Company since 12th January 2023. He is

also a Director of John Swire & Sons Limited and Chairman

of its wholly-owned subsidiary, Argent Energy Holdings

Limited. He is also Chairman of Zopa Group Limited and

Zopa Bank Limited and a Director of Swire Pacific Limited.

He was previously a Director of Virgin Atlantic Airways

Limited and associated companies in the Virgin

Atlanticgroup.

SUN, Yuquan, aged 50, has been a Director of the Company

since 12th May 2022. He has served as the Chief

Accountant of China National Aviation Holding Corporation

Limited since February 2022, and the Chief Accountant of

Air China Limited since March 2023. He has also been a

Director and Chairman of China National Aviation Capital

Holding Co., Ltd., and a Director and Chairman of China

National Aviation Media Co., Ltd. since April 2022 and of

China National Aviation Finance Co., Ltd. since November

2023. He has been appointed as a Non-Executive Director

of TravelSky Technology Limited with effect from 25th

January 2024.

SWIRE, Merlin Bingham

, aged 50, has been a Director of

the Company since 1st June 2010. He is also a Director of

Swire Pacific Limited and Swire Properties Limited. He was

Chairman of Swire Pacific Limited and Swire Properties

Limited from July 2018 to August 2021. He is also Deputy

Chairman, Chief Executive Officer and a shareholder of

John Swire & Sons Limited. He joined the Swire group in

1997 and has worked with the group in the Hong Kong SAR,

Australia, the Chinese Mainland and London.

WANG, Mingyuan, aged 58, has been a Director of the

Company since 24th July 2023. He has served as Chairman

of Air China Development Corporation (Hong Kong) Limited

since April 2011. He has also served as Vice Chairman of

Tibet Airlines Co., Ltd. since June 2020 and Chairman of Air

Macau Company Limited since March 2022. He has been

serving as the President, Director and Vice Chairman of Air

China Limited since March 2023.

XIAO, Feng*

, aged 55, has been a Director of the Company

since 1st January 2017. He has been Chief Economist of Air

China Limited since March 2023.

ZHANG, Zhuo Ping

, aged 52, has been a Director of the

Company since 14th April 2020. He is also a Director of

John Swire & Sons (H.K.) Limited and Swire Pacific Limited

and Chairman of John Swire & Sons (China) Limited. He

spent his early career in investment banking. He was with

the Swire group from 2002 to 2011, spending much of his

time in the Chinese Mainland, including as Chief

Representative of John Swire & Sons (China) Limited from

2005 to 2008. He ceased to be employed by the Swire

group in 2011, when he founded a bioengineering company

in Beijing and rejoined the Swire group in 2020.

INDEPENDENT NONEXECUTIVE DIRECTORS

CHAN, Bernard Charnwut

(formerly known as CHAN, Chi

Sze Bernard), aged 59, has been a Director of the Company

since 1st December 2018. He is Chairman, President and an

Executive Director of Asia Financial Holdings Limited and

Chairman of its wholly owned subsidiary, Asia Insurance

Company, Limited and an advisor to Bangkok Bank (China)

Company Limited. He is also an Independent Non-Executive

Director of Chen Hsong Holdings Limited, China Resources

Beer (Holdings) Company Limited, CLP Holdings Limited

and Yau Lee Holdings Limited and a Director of Bumrungrad

Hospital Public Company Limited. He is a Steward of The

Hong Kong Jockey Club. He is a former Convenor of the

Non-Official Members of the Executive Council and a former

member of the Legislative Council of the Hong Kong SAR.

Cathay Pacific Airways Limited Annual Report 2023

DIRECTORS AND OFFICERS

CHENG, Lily Ka Lai

, age 45, will be appointed as a

Director of the Company with effect from 20th May 2024.

She is an Independent Non-Executive Director of Chow Tai

Fook Jewellery Group Limited, Octopus Cards Limited,

Swire Properties Limited and SUNeVision Holdings Ltd. She

is also an advisor and board observer to HBX Group, a global

council member of Herbert Smith Freehills LLP and an

Executive Director of Hubel Labs Limited. Between 2008

and 2016, she held various senior executive roles within the

online travel industry, including serving as the President of

TripAdvisor Asia Pacific between 2014 and 2016 and Senior

Director at Expedia Inc. prior to 2010. She has more than ten

years of experience as a corporate executive of listed

technology companies providing consumer-facing

software and internet services, including implementation of

artificial intelligence and cybersecurity protocols.

HARRISON, John Barrie*

, aged 67, has been a Director of

the Company since 20th May 2015. He is an Independent

Non-Executive Director of AIA Group 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. He will resign as a Director of the Company with effect

from 20th May 2024.

MUELLER, Christoph Romanus*

, aged 62, has been a

Director of the Company since 12th May 2022. He is a

Non-Executive Director of WestJet Airlines Limited and a

Director of Oman Air. He was Group Chief Financial Officer

of DHL from 2002 to 2005, and Group Chief Executive

Officer of Sabena SA from 2000 to 2001, Hapag-Lloyd

Airlines from 2006 to 2009, Aer Lingus from 2009 to 2015

and Malaysia Airlines from 2015 to 2016. He was the

Chairman of An Post, Ireland from 2014 to 2016 and

Swissport International Limited from 2020 to 2022. He was

also the President of the International Air Carrier

Association (IACA) from 2010 to 2015 and Chairman of the

Advisory Board of the European Organisation for the Safety

of Air Navigation (Eurocontrol) from 2012 to 2015. He was

the founding Chairman of Brussels Airlines and Chairman of

various airlines.

TUNG, Lieh Cheung Andrew

, aged 59, has been a

Director of the Company since 20th May 2015. He is

Managing Partner of QBN Management Limited and a

Non-Executive Director of Orient Overseas (International)

Limited. He is also an Independent Non-Executive Director

of Standard Chartered Bank (Hong Kong) Limited. He will

resign as a Director of the Company with effect from 20th

May 2024.

WANG, Xiao Bin*

, age 56, will be appointed as a Director of

the Company with effect from 20th May 2024. She is an

Independent Non-Executive Director of Hang Seng Bank

Limited and Worley Limited. She was an Executive Director

of China Resources Power Holdings Company Limited from

2006 to 2023 and held various positions including as

Director of Corporate Finance (Hong Kong) at ING

Investment Banking from 1995 to 2003. Ms. Wang had

worked at the audit and business advisory division of Price

Waterhouse (now known as PricewaterhouseCoopers) in

Australia from 1990 to 1995.

COMPANY SECRETARY

LAI, Joanna, aged 39, has been Company Secretary of the

Company since 19th April 2021. She joined the Company as

Group General Counsel and Company Secretary on 19th

April 2021 and before then, she was Head of Legal of Swire

Properties Limited. She is qualified to practise law in the

Hong Kong SAR and in the State of New York.

Directors who are employee of the John Swire & Sons Limited group

Member of the Remuneration Committee

Member of the Audit Committee

Member of the Board Risk Committee

Member of the Nomination Committee

Cathay Pacific Airways Limited Annual Report 2023 41

We submit our report and the audited financial statements

for the year ended 31st December 2023 which are on pages

79 to 153.

PRINCIPAL ACTIVITIES

Cathay Pacific Airways Limited (the “Company” or “Cathay

Pacific”) is managed and controlled in Hong Kong. As well as

operating scheduled airline services, the Company and its

subsidiaries (collectively referred to as the “Group”) are

engaged in other related areas including airline catering,

aircraft handling, cargo terminal operations and loyalty and

reward programmes. 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 material subsidiaries, their main areas of

operation and particulars of their issued capital, and details

of material associates are listed on pages 138 and 139.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements incorporate the

financial statements of the Group together with the Group’s

interests in associates. The financial performance of the

Group for the year ended 31st December 2023 and the

financial position of the Group and the Company at that

date are set out in the financial statements on pages 79 to

153. Details of the associates are provided under note 10 to

the financial statements.

DIVIDENDS

The Directors have declared an interim dividend of HK$0.43

per ordinary share for the year ended 31st December 2023.

This represents a total distribution for the year of HK$2,768

million. The interim dividend will be paid on 2nd May 2024 to

ordinary shareholders registered at the close of business

on the record date, being Friday, 5th April 2024. Ordinary

shares of the Company will be traded ex-dividend as from

Tuesday, 2nd April 2024.

DIRECTORS’ REPORT

The Company’s dividend policy for ordinary shareholders is

to distribute approximately half of its consolidated profit

after tax, excluding non-cash exceptional items. The

application of this policy and final declarations are however

subject to consideration of other factors, such as the

strength of the Company’s own statement of financial

position, the Company’s own profits, trading conditions and

the prevailing and forecast economic environment.

CLOSURE OF REGISTER OF MEMBERS

The register of members will be closed on Friday, 5th April

2024, during which day no transfer of shares will be

effected. In order to qualify for entitlement to the interim

dividend, all transfer forms accompanied by the relevant

share certificates must be lodged with the Company’s

share registrars, Computershare Hong Kong Investor

Services Limited, 17th Floor, Hopewell Centre, 183 Queen’s

Road East, Hong Kong, for registration not later than 4:30

p.m. on Wednesday, 3rd April 2024.

To facilitate the processing of proxy voting for the annual

general meeting to be held on 8th May 2024, the register of

members will be closed from Friday, 3rd May 2024 to

Wednesday, 8th May 2024, 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, 2nd May 2024.

BUSINESS REVIEW AND PERFORMANCE

A fair review of the Group’s business, 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

Cathay Pacific Airways Limited Annual Report 2023

DIRECTORS’ REPORT

business, key performance indicators) are provided in the

sections of this annual report headed Chair’s Statement,

Chief Executive Officer’s Review and Outlook, Review of

Operations, Financial Review, Risk Management and in the

notes to the financial statements. Principal risks and

uncertainties facing the Group are discussed in the Risk

Management section. 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,

a discussion of the Group’s environmental policies and

performance and an account of the Group’s key

relationships with its employees, customers and suppliers

and others that have a significant impact on the Group and

on which the Group’s success depends are provided in the

section of this annual report headed Review of Operations,

Corporate Governance Report and Directors’ Report.

RESERVES

Movements in the reserves of the Group and the Company

during the year are set out in the statement of changes in

equity on page 83 and in note 22 to the financial

statements, respectively.

ACCOUNTING POLICIES

The material accounting policies are set out on pages 140

to 153.

ENVIRONMENTAL, SOCIAL AND

GOVERNANCE

The Company has complied or will comply with all the

applicable provisions set out in the Environmental, Social

and Governance (“ESG”) Reporting Guide contained in

Appendix C2 to the Listing Rules for the year covered by the

annual report. Detailed information on the Company’s ESG

performance is provided in the Sustainability Report 2023

of the Company and Our Areas of Leadership section under

Review of Operations.

DONATIONS

During the year, the Group made charitable donations

amounting to HK$1.3 million in direct payments and a

further HK$4.6 million in the form of discounts on airline

travel, food and other in-kind donations.

PROPERTY, PLANT AND EQUIPMENT

Movements of property, plant and equipment are shown in

note 8 to the financial statements. Details of aircraft

acquisitions are set out on page 4.

BANK AND OTHER BORROWINGS

The net bank loans and other borrowings, including lease

liabilities, of the Group are shown in note 12 to the

financialstatements.

SHARE CAPITAL

On 9th August 2023, the Company announced (a) its

proposal to reduce all of the credit (being HK$19,500

million) standing in the preference shares capital account of

the Company (“Capital Reduction”), and such credit arising

from the Capital Reduction would be applied to a new

preference shares reserve account of the Company and be

used to redeem all of the 195,000,000 preference shares of

the Company (the “Preference Shares”), (b) its plan to

redeem and cancel all of the Preference Shares by the end

of July 2024, subject to market conditions and the Group’s

business operations at the relevant time, and (c) that

subject to and following the completion of the Capital

Reduction, the Company would exercise its right to first

redeem and cancel 97,500,000 Preference Shares (the

“First Redemption”) at a redemption price of HK$100 per

preference share plus any unpaid preference share

dividends before the end of 2023.

Details of the proposed redemption of the Preference

Shares are set out in the Company’s announcement dated

9th August 2023 and the circular to shareholders dated

18th September 2023.

Following the approval by shareholders of the Company

regarding the Capital Reduction at the Extraordinary

General Meeting held on 11th October 2023 (“2023 EGM”),

the Capital Reduction was completed on 16th November

2023 and the First Redemption was completed on 4th

December 2023. Details of the redemption of the

Preference Shares are set out in note 20(b) to the

financialstatements.

Save as disclosed above and in the section headed “Issue

of Convertible Bonds” below, there was no purchase, sale

or redemption by the Company, or any of its subsidiaries, of

the Company’s shares and no exercise of warrants during

the year and the Group has not adopted any share

optionscheme.

Cathay Pacific Airways Limited Annual Report 2023 43

DIRECTORS’ REPORT

At 31st December 2023, the share capital of the Company

was HK$28,828 million (31st December 2022: HK$48,322

million), and 6,437,900,319 ordinary shares, 97,500,000

preference shares and 416,666,666 warrants were in issue

(31st December 2022: 6,437,200,203 ordinary shares,

195,000,000 Preference Shares and 416,666,666 warrants).

Details of the movement of share capital are set out in note

20 to the financial statements.

ISSUE OF CONVERTIBLE BONDS

On 27th January 2021 (after trading hours), Cathay Pacific

Finance III Limited, a wholly-owned subsidiary of the

Company, as the Issuer, the Company as the Guarantor, and

BNP Paribas Securities (Asia) Limited, BOCI Asia Limited,

The Hongkong and Shanghai Banking Corporation Limited

and Morgan Stanley & Co. International plc as the Managers,

entered into the subscription agreement in relation to the

issuance of 2.75% guaranteed convertible bonds (the

“Bonds”) in a principal amount of HK$6,740,000,000.

Assuming full conversion of the Bonds at the initial

conversion price of HK$8.57 per ordinary share, the Bonds

will be convertible into 786,464,410 conversion shares,

representing approximately 12.22% of the total issued

share capital of the Company as at 28th January 2021 (the

date of the Company’s announcement), and approximately

10.89% of the enlarged total issued share capital of the

Company resulting from the full conversion of the Bonds

(assuming that there is no other change to the issued share

capital of the Company and prior to the exercise of any

detachable warrants that were issued in 2020 as part of the

recapitalisation plan).

For further details of the Bonds, please refer to the

Company’s announcements dated 28th January 2021 and

8th February 2021.

On 18th August 2023, 700,116 ordinary shares were allotted

and issued to HSBC Nominees (Hong Kong) Limited on

exercise of the conversion rights at the conversion price of

HK$8.57 per ordinary share in the principal amount of

HK$6,000,000 (the “Conversion”). The portion of the Bonds

of which the conversion rights being exercised represents

less than 0.01% of the Bonds and the enlarged total issued

share capital of the Company resulting from the

Conversion.

Details of the Conversion are set out in note 20(c) to the

financial statements.

CAPITAL COMMITMENTS AND

CONTINGENCIES

The details of capital commitments and contingent

liabilities of the Group at 31st December 2023 are set out in

note 28 to the financial statements.

AGREEMENT FOR SERVICES

The Company has an agreement for services with John

Swire & Sons (H.K.) Limited (“JS&SHK”), the particulars of

which are set out in the section on continuing connected

transactions.

As directors and/or employees of the John Swire & Sons

Limited (“Swire”) group, Patrick Healy, Guy Bradley, Ronald

Lam, Gordon McCallum, Rebecca Sharpe, Merlin Swire and

Zhang Zhuo Ping are interested in the JS&SHK Services

Agreement (as defined below). Gregory Hughes was so

interested until his resignation as a Director of the Company

with effect from 1st April 2023. Gordon McCallum and

Merlin Swire are also so interested as shareholders,

directors and employees of the Swire group. Samuel Swire

was so interested until his resignation as a Director of the

Company with effect from 12th January 2023.

Particulars of the fees paid and the expenses reimbursed

for the year ended 31st December 2023 are set out below

and also given in note 27 to the financial statements.

SIGNIFICANT CONTRACTS

Contracts between the Group and Hong Kong Aircraft

Engineering Company Limited (“HAECO”) and its subsidiary,

Taikoo (Xiamen) Aircraft Engineering Company Limited, for

the maintenance and overhaul of aircraft and related

equipment accounted for approximately 3.7% of the

Group’s operating expenses in 2023. HAECO is a wholly

owned subsidiary of Swire Pacific Limited (“Swire Pacific”);

all contracts have been concluded on normal commercial

terms in the ordinary course of the business of both parties.

MAJOR TRANSACTIONS

(a) Acquisition of 32 Airbus A321-200neo/A320-

200neo Aircraft

On 13th September 2017, Cathay Pacific Aircraft

Services Limited (“CPAS”), a wholly owned subsidiary of

the Company, entered into an agreement with Airbus

S.A.S., pursuant to which (i) CPAS agreed to purchase

Cathay Pacific Airways Limited Annual Report 2023

DIRECTORS’ REPORT

and Airbus S.A.S. agreed to sell 32 Airbus A321-200neo

aircraft; and (ii) CPAS acquired and Airbus S.A.S. granted

the purchase rights to purchase up to 32 additional

Airbus A321-200neo or A320-200neo aircraft

(“Purchase Rights”).

On 29th September 2023, CPAS exercised the Purchase

Rights to purchase 32 Airbus A321-200neo/A320-

200neo aircraft from Airbus S.A.S. This transaction

constituted a major transaction under the Listing Rules

in respect of which announcement dated 29th

September 2023 was published, and a circular dated

24th October 2023 was sent to shareholders.

(b) Acquisition of six Airbus A350F Aircraft

On 8th December 2023, CPAS entered into an

amendment agreement with Airbus S.A.S., pursuant to

which (i) CPAS agreed to purchase and Airbus S.A.S.

agreed to sell six Airbus A350F aircraft; and (ii) CPAS

secured the right to acquire 20 additional Airbus A350F

aircraft. This transaction constituted a major transaction

under the Listing Rules in respect of which

announcement dated 8th December 2023 was

published, and a circular dated 3rd January 2024 was

sent to shareholders.

CONTINUING CONNECTED TRANSACTIONS

During the year ended 31st December 2023, the Group had

the following continuing connected transactions, details of

which are set out below:

(a) Pursuant to an agreement (“JS&SHK Services

Agreement”) dated 1st December 2004, as amended

and restated on 18th September 2008 and 9th August

2019, with JS&SHK, JS&SHK provides services to the

Company and its subsidiaries. The services comprise

advice and expertise of the directors and senior officers

of the Swire group including (but not limited to)

assistance in negotiating with regulatory and other

governmental or official bodies, certain staff services

(including full or part time services of members of the

staff of the Swire group), certain central services and

such other services as may be agreed from time to time,

and procuring for the Company and its subsidiary, joint

venture and associated companies the use of relevant

trademarks owned by the Swire group. No fee is payable

in consideration of such procuration obligation or

suchuse.

In return for these services, JS&SHK receives annual

service fees calculated as 2.5% of the Group’s

consolidated profit before taxation and non-controlling

interests after certain adjustments. The fees for each

year are payable in cash in two instalments, an interim

payment by the end of October and a final payment by

the end of April of the following year, adjusted to take

account of the interim payment. The Group also

reimburses the Swire group at cost for all the expenses

incurred in the provision of the services.

The current term of the JS&SHK Services Agreement is

from 1st January 2023 to 31st December 2025 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

ordinary shares of the Company, and JS&SHK, a wholly

owned subsidiary of Swire, is therefore a connected

person of the Company under the Listing Rules. The

transactions under the JS&SHK Services Agreement

are continuing connected transactions in respect of

which announcements dated 1st December 2004, 1st

October 2007, 1st October 2010, 14th November 2013,

19th August 2016, 9th August 2019 and 11th August

2022 were published.

For the year ended 31st December 2023 and under the

JS&SHK Services Agreement, the amounts paid/

payable by the Company to JS&SHK totalled

HK$258million.

(b) Pursuant to a framework agreement dated 17th

November 2022 (“HAECO 2022 Framework Agreement”)

with HAECO, services (being maintenance and related

services in respect of aircraft, aircraft engines and

aircraft parts and components and including inventory

technical management services) are provided by

HAECO and its subsidiaries (the “HAECO group”) to the

Group. Payment is made in cash within 30 days of

receipt of invoices. The term of the HAECO 2022

Framework Agreement is for 10 years ending on 31st

December 2032.

Cathay Pacific Airways Limited Annual Report 2023 45

DIRECTORS’ REPORT

HAECO is a connected person of the Company by virtue

of it being a subsidiary of Swire Pacific, one of the

Company’s substantial shareholders. The transactions

under the HAECO 2022 Framework Agreement are

continuing connected transactions in respect of which

an announcement dated 17th November 2022 was

published, a circular dated 30th November 2022 was

sent to shareholders and an extraordinary general

meeting of the Company was held on 23rd

December2022.

For the year ended 31st December 2023 and under the

HAECO 2022 Framework Agreement, the amounts paid/

payable by the Group to the HAECO group totalled

HK$3,033 million and the amounts payable by the

HAECO group to the Group totalled HK$141 million.

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 (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 current term of the Air China Framework Agreement

is for three years ending on 31st December 2025 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, 28th August 2019 and 30th August

2022 were published.

For the year ended 31st December 2023 and under the

Air China Framework Agreement, the amounts paid/

payable by the Group to the Air China group totalled

HK$174 million; and the amounts payable by the Air

China group to the Group totalled HK$74 million.

(d) There have been written agreements between the

Group and China Aircraft Services Limited (“CASL”) for

CASL’s provision to the Group of line maintenance

services, base maintenance services, supply of

materials and tooling, stores rental and various aircraft

maintenance support services.

Air China, by virtue of its 29.99% shareholding in the

Company, is a substantial shareholder of the Company.

China National Aviation Corporation (Group) Limited

(“CNACG”) is a fellow subsidiary and therefore an

associate of Air China. CNACG is therefore a connected

person of the Company. CNACG holds more than 30%

of CASL. CASL is therefore a connected person of the

Company.

For the year ended 31st December 2023, the amounts

paid/payable by the Group to CASL for the services

described above totalled HK$130 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

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 (a) to (c) as

set out above 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 (a) to (c) as set out above disclosed

by the Group in accordance with Chapter 14A of the Listing

Rules, which states that:

Cathay Pacific Airways Limited Annual Report 2023

DIRECTORS’ REPORT

(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;

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.

MAJOR CUSTOMERS AND SUPPLIERS

9.6% of sales and 37.3% of purchases during the year were

attributable to the Group’s five largest customers and

suppliers respectively. 4.8% of sales were made to the

Group’s largest customer and 13.8% of purchases were

made from the Group’s largest supplier, Petrochina

International (Hong Kong) Corporation Limited.

No Director, any of their close associates or any shareholder

who, to the knowledge of the Directors, owns more than 5%

of the number of issued shares of the Company has an

interest in the Group’s five largest suppliers.

DIRECTORS

Augustus Tang resigned, and Lavinia Lau was appointed, as

a Director with effect from 1st January 2023. Samuel Swire

resigned, and Gordon McCallum was appointed, as a

Director with effect from 12th January 2023. Gregory

Hughes resigned, and Alexander McGowan was appointed,

as a Director with effect from 1st April 2023. Wang

Mingyuan was appointed as a Director with effect from 24th

July 2023. 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

calendar year 2023. John Harrison and Andrew Tung will

resign as Directors, and Lily Cheng and Wang Xiao Bin will

be appointed as Directors, with effect from 20th May 2024.

Carlson Tong and Rimsky Yuen have been designated by

the Hong Kong SAR Government as observers to attend

board meetings and have access to management and

information of the Company as long as Aviation 2020

Limited remains a holder of any of the preference shares of

the Company or any amount under the bridge loan provided

by it remains outstanding.

INDEPENDENCE CONFIRMATION

The Company has received from all of its Independent

Non-Executive Directors confirmation of their

independence as regards the factors in Rule 3.13 of the

Listing Rule 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.

TERM OF APPOINTMENT

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, Rebecca Sharpe retires this year

and, being eligible, offer herself for re-election. Wang

Mingyuan having been appointed as a Director of the

Company under Article 91 since the last annual general

meeting, also retires and, being eligible, offer himself

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).

Cathay Pacific Airways Limited Annual Report 2023 47

DIRECTORS’ REPORT

FEES AND EMOLUMENTS

Full details of Directors’ fees and emoluments are set out in

note 25 to the financial statements.

Directors’ fees paid to the Independent Non-Executive

Directors during the year totalled HK$3.7 million. They

received no other emoluments from the Group.

DIRECTORS’ INTERESTS

At 31st December 2023, the register maintained under

Section 352 of the Securities and Futures Ordinance (“SFO”)

showed that no Director or chief executive of the Company

had any interest or short position, whether beneficial or

non-beneficial, in the shares or underlying shares (including

options) and debentures of the Company or any of its

associated corporations (within the meaning of Part XV of

the SFO).

Neither during nor prior to the year under review has any

right been granted to, or exercised by, any Director of the

Company, or to or by the spouse or minor child of any

Director, to subscribe for shares, warrants or debentures of

the Company.

Other than as stated in this annual report, no transaction,

arrangement or contract of significance to which the Group

was a party and in which a Director or an entity connected

with a Director is or was materially interested, either directly

or indirectly, subsisted during or at the end of the year.

At no time during the year was the Company, or any of its

associated corporations, a party to any arrangements to

enable the Directors of the Company to acquire benefits by

means of the acquisition of shares in or debentures of the

Company or any other body corporate.

DIRECTORS’ INTERESTS IN COMPETING

BUSINESS

Pursuant to Rule 8.10 of the Listing Rules, Patrick Healy, Ma

Chongxian and Wang Mingyuan disclosed that they were

directors of Air China, and Xiao Feng and Sun Yuquan

disclosed that they held positions in Air China during the

year. Air China competes or is likely to compete, either

directly or indirectly, with the businesses of the Company as

it operates airline services to certain destinations which are

also served by the Company.

DIRECTORS OF SUBSIDIARIES

The names of all directors who have served on the boards

of the subsidiaries of the Company during the year ended

31st December 2023 or during the period from 1st January

2024 to the date of this annual report are kept at the

Company’s registered office and are available for inspection

by members of the Company in accordance with Section

390(6) of the Companies Ordinance (Cap. 622 of the Laws

of Hong Kong).

PERMITTED INDEMNITY

Subject to the Companies Ordinance (Cap. 622 of the Laws

of Hong Kong), every Director is entitled under the

Company’s Articles of Association to be indemnified out of

the assets of the Company against all costs, charges,

expenses, losses and liabilities which he or she may sustain

or incur in or about the execution or discharge of his or her

duties and/or the exercise of his or her powers and/or

otherwise in relation to or in connection with his or her

duties, powers or office. To the extent permitted by such

Ordinance, the Company has taken out insurance against

the liability and costs associated with defending any

proceedings which may be brought against directors of

companies in the Group.

SUBSTANTIAL SHAREHOLDERS

The register of interests in shares and short positions

maintained under Section 336 of the SFO shows that at 31st

December 2023 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 Limited Annual Report 2023

DIRECTORS’ REPORT

No. of shares

Percentage of voting

shares (%) Type of interest (Note)

Long position

1. Air China Limited 4,827,269,423 74.98 Attributable interest (a)

2. China National Aviation Holding Corporation Limited 4,827,269,423 74.98 Attributable interest (b)

3. Swire Pacific Limited 4,827,269,423 74.98 Attributable interest (a)

4. John Swire & Sons Limited 4,827,269,423 74.98 Attributable interest (c)

5. Qatar Airways Group Q.C.S.C. 643,076,181 9.99 Beneficial interest (d)

6. The Financial Secretary Incorporated 416,666,666 6.47 Interest in controlled

corporation (e)

7. HSBC Holdings plc 341,373,467 5.30 Interest in controlled

corporation (f)

Short position

1. HSBC Holdings plc 195,987,714 3.04 Interest in controlled

corporation (f)

Note: At 31st December 2023:

(a) Under Section 317 of the SFO, each of Air China, China National Aviation Company Limited (“CNAC”) and Swire Pacific, being a party to the shareholders’

agreement in relation to the Company dated 8th June 2006, was deemed to be interested in a total of 4,827,269,423 shares of the Company,

comprising:

(i) 2,896,753,089 shares directly held by Swire Pacific;

(ii) 1,930,516,334 shares indirectly held by Air China and its subsidiaries CNAC, Super Supreme Company Limited and Total Transform Group Limited,

comprising the following shares held by their wholly owned subsidiaries: 472,248,545 shares held by Angel Paradise Ltd., 351,574,615 shares held

by Custain Limited, 314,054,626 shares held by Easerich Investments Inc., 310,870,873 shares held by Grand Link Investments Holdings Ltd.,

339,343,616 shares held by Motive Link Holdings Inc. and 142,424,059 shares held by Perfect Match Assets Holdings Ltd.

(b) China National Aviation Holding Corporation Limited was deemed to be interested in a total of 4,827,269,423 shares of the Company, in which its

subsidiary Air China was deemed interested.

(c) Swire and its wholly owned subsidiary JS&SHK were deemed to be interested in a total of 4,827,269,423 shares of the Company by virtue of the Swire

group being interested in 60.31% of the equity of Swire Pacific and controlling 68.13% of the voting rights attached to shares in Swire Pacific.

(d) Qatar Airways Group Q.C.S.C. held a total of 643,076,181 shares of the Company as beneficial owner.

(e) (i) Aviation 2020 Limited, a limited company wholly owned by the Financial Secretary Incorporated, did not hold any ordinary shares of the Company; (ii)

pursuant to a subscription agreement dated 9th June 2020 entered into between the Company and Aviation 2020 Limited in relation to the issue of

preference shares and warrants, the Company issued 416,666,666 warrants to Aviation 2020 Limited on 12th August 2020, which entitle Aviation 2020

Limited to subscribe for up to 416,666,666 ordinary shares of the Company; (iii) if Aviation 2020 Limited chooses to exercise all warrants, it would hold

approximately 6.08% of the ordinary shares of the Company as enlarged by the issue of such shares.

(f) These shares were held by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”), a corporation controlled by HSBC Holdings plc, as

borrower under the Global Master Securities Lending Agreement dated 27th January 2021 entered into between HSBC and Swire Pacific. The interests

were disclosed based on the disclosure of interest filing made by HSBC Holdings plc on 20th July 2023.

PUBLIC FLOAT

From information that is publicly available to the Company

and within the knowledge of its Directors at the date of this

annual report, at least 25% of the Company’s total number

of issued shares were held by the public.

AUDITORS

KPMG retire and, being eligible, offer themselves for re-

appointment. A resolution for the re-appointment of KPMG

as Auditors to the Company is to be proposed at the

forthcoming annual general meeting.

By order of the Board

Patrick Healy

Chair

Hong Kong, 13th March 2024

Cathay Pacific Airways Limited Annual Report 2023 49

CORPORATE STRATEGY, GOVERNANCE AND

CULTURE

Cathay is committed to ensuring that its affairs are

conducted in accordance with its corporate and

governance culture and values of integrity, originality,

excellence, humility, teamwork, continuity and high ethical

standards, which form a coherent set of principles that are

relevant across the Company’s business and underpin

everything it does. 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 value will be

maximised in the long term and that its employees, those

with whom it does business and the communities in which it

operates will all benefit.

Corporate governance is the process by which the Board

instructs management of the Group to conduct its affairs

with a view to ensure that its objectives are met. The Board

is committed to maintaining and developing robust

corporate governance practices that are intended

toensure:

• satisfactory and sustainable returns to shareholders

• that the interests of those who deal with the Company

are safeguarded

• that overall business risk is understood and managed

appropriately

• the delivery of high-quality products and services to the

satisfaction of customers

• that high standards of ethics are maintained

• a commitment to sustainable development which

supports long-term growth.

The Board provides guidance to management by defining

the purpose, values and strategic direction of the Group,

and plays an important role in establishing and instilling a

culture that reinforces the values of acting lawfully, ethically

and responsibly. The Group’s Code of Conduct ensures that

CORPORATE GOVERNANCE REPORT

the corporate culture and expected behaviours are clearly

communicated to everyone in the Group. Appropriate

policies and procedures are in place to promote and

reinforce the need for employees and others who deal with

the Company to act with honesty and integrity and to raise

concerns about actual or suspected cases of impropriety.

Indicators used for assessing and monitoring ESG related

data are set out in the Sustainability Report 2023 of the

Company. The Group offers competitive remuneration and

benefits designed to attract, motivate and retain talented

people at all levels. Having regard to the corporate culture

reflected in the policies and practices of the Group, the

Board is satisfied that the purpose, values and strategic

directions of the Group are aligned with its culture.

Further information on the Company’s strategy and culture

is provided in the section of this annual report headed Chief

Executive Officer’s Review and Outlook.

CORPORATE GOVERNANCE STATEMENT

The Corporate Governance Code (the “CG Code”) as

published by The Stock Exchange of Hong Kong Limited

(the “Stock Exchange”) sets out the principles of good

corporate governance and are broken down into two parts:

(a) mandatory disclosure requirements: the mandatory

requirements for disclosure in an issuer’s Corporate

Governance Report; and

(b) principles of good corporate governance (the

“Principles”), code provisions and recommended best

practices: The Principles set the overarching direction

to achieving good corporate governance. The code

provisions are aimed to help issuers apply the

Principles. Issuers must state whether they have

complied with the code provisions for the relevant

accounting period in their annual reports (and summary

financial reports, if any) and interim reports (and

summary interim reports, if any). If an issuer considers

that it can adopt the Principles without applying the

code provisions, it may deviate from the code provisions

but any deviation must be provided with considered

Cathay Pacific Airways Limited Annual Report 2023

CORPORATE GOVERNANCE REPORT

reasons (including how good corporate governance was

achieved by means other than strict compliance with

the code provision). The recommended best practices

are for guidance only, and issuers are encouraged, but

not required, to state whether they have complied with

the recommended best practices.

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 and it evolves with each

business and operating environment. The Company is

always ready to learn and adopt best practices.

The Company complied with all the code provisions set out

in the CG Code contained in Part 2 of Appendix C1 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.

THE BOARD OF DIRECTORS

ROLE OF THE BOARD

The Company is governed by a Board of Directors, which

has responsibility for strategic leadership and control of the

Group designed to maximise shareholder value, while taking

due account of the interests of those with whom the Group

does business and others.

Responsibility for achieving the Company’s objectives and

running the business on a day-to-day basis is delegated to

management. The Board exercises a number of reserved

powers which include:

• maintaining and promoting the culture of the Company

• formulation of long-term strategy

• approving public announcements, including financial

statements

• committing to major acquisitions, divestments and

capital projects

• authorising significant changes to the capital structure

and material borrowings

• any issue, or buy-back, of equity securities under the

relevant general mandates

• approving treasury policy

• setting dividend policy

• approving appointments to the Board

• reviewing the board diversity policy with a view to the

Board having a balance of skills, experience and diversity

of perspectives appropriate to the Company’s

businesses

• ensuring that appropriate management development and

succession plans are in place

• setting the Group remuneration policy

• approving annual budgets and forecasts

• reviewing operational and financial performance

• reviewing the effectiveness of the Group’s risk

management and internal control systems

• ensuring the adequacy of the resources, staff

qualifications and experience, training programmes and

budget of the Company’s accounting, internal audit,

financial reporting functions, as well as those relating to

the Company’s ESG performance and reporting

• overseeing ESG matters.

To assist it in fulfilling its duties, the Board has established

the Audit Committee, Board Risk Committee, Board Safety

Review Committee, Executive Committee, Finance

Committee, Investment Committee, Management

Committee, Nomination Committee, Remuneration

Committee and Sustainability Leadership Group.

CHAIR AND CHIEF EXECUTIVE OFFICER

The CG Code requires that the roles of Chair and Chief

Executive Officer 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.

The Chair of the Board 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

Cathay Pacific Airways Limited Annual Report 2023 51

CORPORATE GOVERNANCE REPORT

• ensuring that all Directors are properly briefed on issues

arising at Board meetings and that they receive in a timely

manner, adequate information which is accurate, clear,

complete and reliable

• encouraging directors to voice their concerns, allowing

time for discussion the issues and ensuring that Board

decisions fairly reflect Board consensus

• ensuring, through the Board, that good corporate

governance practices and procedures are followed.

The Chief Executive Officer of the Company 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 Chair and the Chief

Executive Officer.

BOARD COMPOSITION

The Board is structured with a view to ensure it is of a high

calibre and has a balance of skills, experience and diversity

of perspectives appropriate to the Company’s business so

that it works effectively as a team and that individuals or

groups do not dominate any decision-making.

At the date of this annual report, the Board comprised the

Chair (Patrick Healy), four other Executive Directors (Ronald

Lam, Lavinia Lau, Alexander McGowan, Rebecca Sharpe),

eight Non-Executive Directors (Ma Chongxian (Deputy

Chair), Guy Bradley, Gordon McCallum, Sun Yuquan, Merlin

Swire, Wang Mingyuan, Xiao Feng and Zhang Zhuo Ping) and

four Independent Non-Executive Directors (Bernard Chan,

John Harrison (who will resign as a Director with effect from

20th May 2024), Christoph Mueller and Andrew Tung (who

will resign as a Director with effect from 20th May 2024)).

Lily Cheng and Wang Xiao Bin will be appointed as

Independent Non-Executive Directors, with effect from

20th May 2024. Their biographical details are set out in the

section of this annual report headed Directors and Officers

and are posted on the Company’s website.

Patrick Healy, Guy Bradley, Ronald Lam, Rebecca Sharpe

and Zhang Zhuo Ping are directors and/or employees of the

Swire group. Gordon McCallum and Merlin Swire are

shareholders, directors and employees of the Swire group.

The Non-Executive Directors and Independent Non-

Executive Directors bring independent advice, judgement

and, through constructive challenge, scrutiny of executives

and review of performance and risks. The Audit, Board Risk,

Board Safety Review, Nomination and Remuneration

Committees of the Board comprise Non-Executive

Directors and Independent Non-Executive Directors.

The Board considers that four Independent Non-Executive

Directors are independent in character and judgement and

fulfil the independence guidelines set out in Rule 3.13 of the

Listing Rules. Confirmation has been received by the

Company 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.

Taking into account all of the circumstances described in

this section, the Company considers all of the Independent

Non-Executive Directors to be independent.

APPOINTMENT AND REELECTION

The Nomination Committee will identify and consider

potential new candidates for directorships, and any suitably

qualified candidates will be nominated by the Nomination

Committee. The Nomination Committee will also select or

make recommendations to the Board on the selection of

individuals nominated for directorships. Directors (including

Executive Directors, Non-Executive Directors and

Independent Non-Executive Directors) appointed by the

Board are subject to election by shareholders at the first

annual general meeting after their appointment, and all

Directors are subject to re-election by shareholders every

three years.

Cathay Pacific Airways Limited Annual Report 2023

CORPORATE GOVERNANCE REPORT

Potential new Directors are identified on the basis of

relevant skills, knowledge, experience and diversity of

perspectives which, in the opinion of the Nomination

Committee and the Directors, will enable them to make a

positive contribution to the performance of the Board.

John Harrison and Andrew Tung have been Independent

Non-Executive Directors since 20th May 2015. They will

have served as Directors of the Company for nine years by

20th May 2024 and will resign as Directors of the Company

with effect from 20th May 2024. The Nomination

Committee, interviewed and identified Lily Cheng and Wang

Xiao Bin as potential new candidates for directorships.

On 27th February 2024, having regard to the merit of the

candidates and the benefits of diversity on the Board, the

Nomination Committee nominated Lily Cheng and Wang

Xiao Bin as Independent Non-Executive Directors. The

Nomination Committee is satisfied with the independence

of Lily Cheng and Wang Xiao Bin having regard to the criteria

set out in the Listing Rules. Having also reviewed the

Board’s composition and after taking into account the

requirement that all Directors are subject to election or

re-election (as the case may be) in accordance with the

Company’s Articles of Association, the Nomination

Committee nominated Rebecca Sharpe and Wang

Mingyuan for recommendation to shareholders for election

or re-election (as the case may be) at the 2024 Annual

General Meeting.

The nominations of Lily Cheng, Wang Xiao Bin, Rebecca

Sharpe and Wang Mingyuan were made in accordance with

objective criteria (including gender, age, cultural and

educational background, ethnicity, professional experience,

skills, knowledge, length of service, number of directorships

of listed companies and the legitimate interests of the

Company’s principal shareholders), with due regard for the

benefits of diversity, as set out in the Board Diversity Policy.

On 4th March 2024, the Board, having considered the

recommendation of the Nomination Committee and having

taken into account the perspectives, skills, experience and

diversity that Lily Cheng and Wang Xiao Bin can bring and

contribute to the Board, appointed them as Independent

Non-Executive Directors, with effect from 20th May 2024.

On 13th March 2024, having also considered the respective

contributions of Rebecca Sharpe and Wang Mingyuan to

the Board and their firm commitment to their roles, the

Board recommended all of them for election or re-election

(as the case may be) at the 2024 Annual General Meeting.

The particulars of the Directors standing for election or

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 annual report are provided in the section of

this annual report headed Directors’ Report.

INDEPENDENT VIEW MECHANISMS

The Company has established mechanisms to ensure

independent views and input are available to the Board from

(a) Independent Non-Executive Directors; (b) independent

professional advisors; and (c) the Company’s shareholders

(the “Mechanisms”). The Audit Committee has been

delegated with the responsibilities of overseeing the

implementation and reviewing the effectiveness of the

Mechanisms at least annually. The Audit Committee has

reviewed the implementation and effectiveness of the

Mechanisms in 2023. The Mechanisms currently in

place include:

(a) Communication channels

Formal and informal communication channels have

been established whereby Independent Non-Executive

Directors can express their views in an open and candid

manner, and in a confidential manner, should

circumstances require. These channels include periodic

formal meeting sessions with the Chair, informal

briefings provided by the Chair and interaction with

management and other Board members including the

Chair outside the boardroom. Board meetings are

structured so as to encourage open discussion, frank

debate and active participation by Directors.

(b) Independence of Independent Non-Executive

Directors

The Nomination Committee identifies and reviews

biographies of potential candidates for directorships

(including potential candidates for independent non-

executive directorships) and may conduct interviews

with such candidates.

The Nomination Committee also reviews and assesses

the independence of the Independent Non-Executive

Directors as regards the factors in Rule 3.13 of the

Listing Rules.

Cathay Pacific Airways Limited Annual Report 2023 53

CORPORATE GOVERNANCE REPORT

advisors

Occasions may arise when Directors consider that they

need professional advice in the furtherance of their

duties as a director. Circumstances may occur when it

will be appropriate for Directors to seek advice from

independent professional advisors. Directors may seek

such advice at the Company’s expense upon

reasonable request to the Chair.

(d) Communication with Company’s shareholders

The Chief Financial Officer of the Company makes

herself available for meetings with major shareholders

and conducts investors and analysts briefings

immediately after the announcement of the interim and

annual results. In addition, the Chief Financial Officer

attended meetings with analysts and investors during

the year.

41-50 12%

51-60 70%

61-70 18%

Non-Chinese 47%

Chinese 53%

5 years or below 76%

6-10 years 18%

over 10 years 6%

M 88%

F 12%

Age

Ethnicity

Gender

Years of

Service as

Directors

The Company has adopted a shareholders’

communication policy (available on the Company’s

website) to encourage shareholders to provide their

views on various matters affecting the Group through

various channels, including through attending general

meetings and/or sending enquiries and concerns to the

Company. For further information, please see the

section headed Communication with Shareholders

andInvestors and Shareholders’ Communication

Policybelow.

BOARD DIVERSITY

The Board has adopted a board diversity policy (available on

the Company’s website) and the Nomination Committee

reviews its implementation and effectiveness at least on an

annual basis. The Board’s composition reflects a balance of

skills, experience and diversity of perspectives among its

members that are relevant to the Company’s strategy,

governance and business and contributes to the Board’s

effectiveness. A summary is set out below:

Skills, Expertise and Experience

Aviation and Logistics ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● 17

Executive Leadership and Strategy ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● 17

Relevant Market Experience ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● 17

Accounting / Finance and Risk Management ● ● ● ● ● ● ● ● ● ● 10

Digital ● ● ● ● ● 5

ESG ● ● ● ● ● ● 6

● Executive Directors

● Non-Executive Directors (out of 17 Directors, who are present Directors of the Company at the date of this annual report)

Cathay Pacific Airways Limited Annual Report 2023

CORPORATE GOVERNANCE REPORT

The Company’s target for gender diversity on the Board is

to have not more than 70% of Directors of the same gender

by the end of 2027. In order to achieve such target and 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.

The Company has adopted the following measures to

develop a pipeline of potential successors to the Board:

• The Company keeps track of the tenure of Directors and

the need for new or replacement directors to be

appointed (as the case may be), and maintains a running

list of candidates comprising internal and external

candidates as may be identified from time to time

• Principles and key criteria for evaluating candidates for

directorship are set out in the Nomination Committee’s

terms of reference and the Company’s Board Diversity

Policy

• The skills and experience of existing Directors helps set

the criteria for internal and external candidate search

• Executive search agencies may be engaged as

appropriate to identify external candidates with the

desirable skillsets.

For the gender ratio in the Group’s workforce (including

senior positions, which refer to the job levels of general

managers or above at the Group but excluding the

Directors), please refer to paragraph headed Performance

Updates – Cathay Pacific under section headed Our Areas

of Leadership section under Review of Operations in this

annual report. In 2022, the Group has set a new and more

ambitious goal to not have more than 65% of the same

gender at senior positions by 2025.

RESPONSIBILITIES OF DIRECTORS

On appointment, the Directors receive information about

the Group including:

• the role of the Board and the matters reserved for its

attention

• the role and terms of reference of Board Committees

• the Group’s corporate governance practices and

procedures

• the powers delegated to management

• the latest financial information.

Directors update their skills, knowledge and familiarity with

the Group through their participation at meetings of the

Board and its committees and through regular meetings

with management. Directors are regularly updated by the

Company Secretary on their legal and other duties as

Directors of a listed company.

Through the Company Secretary, Directors are able to

obtain appropriate professional training and advice.

Each Director ensures that he/she can give sufficient time

and attention to the affairs of the Group. All Directors

disclose to the Board on their first appointment their

interests as a Director or otherwise in other companies or

organisations and such declarations of interests are

updated regularly.

Details of Directors’ other appointments are shown in their

biographies in the section of this annual report headed

Directors and Officers.

BOARD PROCESSES

All committees of the Board follow the same processes as

the full Board.

The dates of the 2023 Board meetings were determined in

2022 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 2023. The attendance of

individual Directors at meetings of the Board and its

committees is set out in the table on pages 56 and 57.

Average attendance at Board meetings was 89%. 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.

Cathay Pacific Airways Limited Annual Report 2023 55

CORPORATE GOVERNANCE REPORT

The Chair encourages all directors to make a full and active

contribution to the Board’s affairs and 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 and kept 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

• review of reports by the Chair of each of the Audit

Committee, Board Risk Committee, Board Safety Review

Committee, Nomination Committee and Remuneration

Committee

• the raising of new initiatives and ideas

• presentation of papers to support decisions requiring

Board approval

• any declarations of interest.

The executive management provides the Board with such

complete and reliable information and explanations as are

necessary in a timely manner to enable Directors to make

an informed assessment of the financial and other

information put before the Board. The Board and individual

directors have separate and independent access to

executive management and 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 Chair meets at least annually with the Independent

Non-Executive Directors without the presence of other

Directors. The table below sets out the attendance record

of individual Directors at meetings of the Board and its

committees (with Independent Non-Executive Directors as

members) and of the shareholders in 2023.

Meetings Attended/Held

Board

Audit

Committee

Board Risk

Committee

Nomination

Committee

Remuneration

Committee

Board

Safety

Review

Committee

2023

Annual

General

Meeting

2023

EGM

Training

(Note)

Executive Directors

Patrick Healy – Chair 6/6 4/4 3/4 4/4 √ √ √

Gregory Hughes (resigned with effect

from 1st April 2023) 2/2 1/1

Ronald Lam 6/6 4/4 4/4 3/4 √ √ √

Lavinia Lau 6/6 2/2 1/2 √ √ √

Alexander McGowan (appointed with

effect from 1st April 2023) 4/4 2/2 3/3 √ √ √

Rebecca Sharpe 5/6 4/4 4/4 √ √ √

Cathay Pacific Airways Limited Annual Report 2023

CORPORATE GOVERNANCE REPORT

Meetings Attended/Held

Board

Audit

Committee

Board Risk

Committee

Nomination

Committee

Remuneration

Committee

Board

Safety

Review

Committee

2023

Annual

General

Meeting

2023

EGM

Training

(Note)

Non-Executive Directors

Ma Chongxian – Deputy Chair 2/6 0/4 x x √

Guy Bradley 6/6 √ x √

Gordon McCallum (appointed with

effect from 12th January 2023) 5/5 1/1 2/2 3/4 √ x √

Sun Yuquan 4/6 0/4 x x √

Merlin Swire 6/6 √ x √

Samuel Swire (resigned with effect

from 12th January 2023) 1/1

Wang Mingyuan (appointed with effect

from 24th July 2023) 1/3 x √

Xiao Feng 4/6 2/4 1/4 x x √

Zhang Zhuo Ping 6/6 √ √ √

Independent Non-Executive Directors

Bernard Chan 6/6 1/1 2/2 √ √ √

John Harrison 6/6 4/4 4/4 √ √ √

Christoph Mueller 6/6 4/4 4/4 4/4 √ √ √

Andrew Tung 6/6 4/4 1/1 2/2 3/4 √ √ √

Average attendance 89% 81% 86% 100% 100% 73% 81% 59%

Note: Directors who had attended training sessions and/or received training materials about financial, commercial, economic, risk management, legal

regulatory and/or business affairs.

CONTINUOUS PROFESSIONAL DEVELOPMENT

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.

All Directors have been provided with training materials on

various topics, including regulatory updates, corporate

governance and ESG, issued by The Stock Exchange of

Hong Kong Limited and external advisors. They were invited

to attend seminars and conferences about financial,

commercial, economic, risk management, legal, regulatory

and/or business affairs.

DIRECTORS’ AND OFFICERS’ INSURANCE

The Company has arranged appropriate insurance cover

inrespect of potential legal actions against its Directors

andOfficers.

CONFLICTS OF INTEREST

If a Director has a material conflict of interest in relation to a

transaction or proposal to be considered by the Board, the

individual is required to declare such interest and abstains

from voting. The matter is considered at a Board meeting

and voted on by Directors who have no material interest in

the transaction.

DELEGATION BY THE BOARD

Responsibility for delivering the Company’s strategies and

objectives, as established by the Board, and responsibility

for day-to-day management is delegated to the Chief

Executive Officer. The Chief Executive Officer has been

given clear guidelines and directions as to his powers and,

in particular, the circumstances under which he should

report back to, and obtain prior approval from, the Board

before making commitments on behalf of the Company.

The Board monitors management’s performance against

the achievement of financial and non-financial measures,

the principal items monitored being:

• detailed monthly management accounts consisting of

statements of profit or loss, financial position and cash

flows compared to budget, together with forecasts

• internal and external audit reports

Cathay Pacific Airways Limited Annual Report 2023 57

CORPORATE GOVERNANCE REPORT

• feedback from external parties such as customers,

others with whom the Group does business, trade

associations and service providers.

SECURITIES TRANSACTIONS

The Company has adopted a code of conduct regarding

securities transactions by Directors (the “Securities Code”)

on terms no less exacting than the required standard set

out in the Model Code for Securities Transactions by

Directors of Listed Issuers (the “Model Code”) contained in

Appendix C3 to the Listing Rules. The Securities Code is

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 Directors cannot deal in the

securities and derivatives of the Company during the

blackout period before the Group’s interim and annual

results have been published, and that all their dealings must

be conducted in accordance with the Securities Code.

Under the Securities Code, Directors of the Company are

required to notify the Chair and receive a dated written

acknowledgement before dealing in the securities and

derivatives of the Company and, in the case of the Chair

himself, he must notify the Chair 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 Model Code and the

Securities Code.

Directors’ interests at 31st December 2023 in the shares of

the Company and its associated corporations (within the

meaning of Part XV of the Securities and Futures Ordinance)

are set out in the section of this annual report headed

Directors’ Report.

The following committees have been established to assist

the Board in discharging its responsibilities:

AUDIT COMMITTEE – see pages 62 and 63.

BOARD RISK COMMITTEE

The Board Risk Committee meets quarterly to review the

Company’s corporate risks which are not related to safety

and security arising from the Group’s flight operations. It

comprises three Non-Executive Directors John Harrison

(until his resignation with effect from 20th May 2024),

Christoph Mueller, and Xiao Feng. Wang Xiao Bin will

become a Board Risk Committee member with effect from

20th May 2024. Two of the Board Risk Committee members

are Independent Non-Executive Directors, one of whom,

Christoph Mueller, is Chair. Regular attendees at the

meetings were the Chief Executive Officer, the Chief

Financial Officer, the Chief Customer and Commercial

Officer, the Chief Operations and Service Delivery Officer,

the Chief Risk Officer, the Group General Counsel, and the

General Manager Group Internal Audit.

BOARD SAFETY REVIEW COMMITTEE

The Board Safety Review Committee reviews and reports to

the Board on safety issues. It met four times during 2023

and comprised its Chair (Captain Timothy Jenkins), the

Chief Executive Officer (Ronald Lam), two Independent

Non-Executive Directors (Christoph Mueller, Chair of the

Board Risk Committee, and Andrew Tung (until his

resignation with effect from 20th May 2024)), and two

Non-Executive Directors (Ma Chongxian, and Gordon

McCallum). Lily Cheng will become a Board Safety Review

Committee member with effect from 20th May 2024.

Regular attendees at the meetings included the Chair of the

Board, the Chief Operations and Service Delivery Officer,

the Director Service Delivery and the General Manager

Group Safety and Operational Risk Management of the

Company, the Chief Executive Officer of Hong Kong

Express Airways Limited and the Chief Operating Officer of

AHK Air Hong Kong Limited.

EXECUTIVE COMMITTEE

The Executive Committee comprises the Chief Executive

Officer (Ronald Lam (Committee Chair)), three other

Executive Directors (Lavinia Lau, Alexander McGowan and

Rebecca Sharpe) and five Non-Executive Directors (Ma

Chongxian, Sun Yuquan, Wang Mingyuan, Xiao Feng, and

Zhang Zhuo Ping). It is responsible for bringing matters

which it considers to be of strategic importance to the

attention of the Board.

FINANCE COMMITTEE

The Finance Committee met monthly during 2023 to review

the financial position of the Company. It is responsible for

establishing the financial risk management policies. It

comprises the Chief Executive Officer (Ronald Lam

(Committee Chair)), three other Executive Directors (Lavinia

Lau, Alexander McGowan and Rebecca Sharpe), two

Cathay Pacific Airways Limited Annual Report 2023

CORPORATE GOVERNANCE REPORT

Non-Executive Directors (Xiao Feng and Sun Yuquan),

General Manager Financial Services, Head of Treasury

and an independent representative from the

financial community.

INVESTMENT COMMITTEE

The Investment Committee comprises the Chief Financial

Officer (Rebecca Sharpe (Committee Chair)) and two other

Executive Directors (Lavinia Lau and Alexander McGowan).

It is responsible for evaluating and approving certain capital

expenditure, investments and asset disposals (excluding

aircraft purchases and leasing) in accordance with the

Delegations of Authority as approved by the Board.

MANAGEMENT COMMITTEE

The Management Committee meets monthly and is

established to assist the Chief Executive Officer in

delivering the Company’s strategies and objectives. It

comprises the Chief Executive Officer (Committee Chair),

Chief Customer and Commercial Officer, Chief Financial

Officer, Chief Operations and Service Delivery Officer,

Director Cargo, Director Customer Lifestyle, Director

Customer Travel, Director Digital and IT, Director

Engineering, Director Flight Operations, Director People,

Director Service Delivery, Chief Executive Officer of Hong

Kong Express Airways Limited, Group General Counsel and

Chief Risk Officer.

NOMINATION COMMITTEE

The Nomination Committee comprises three Non-

Executive Directors, Bernard Chan, Gordon McCallum and

Andrew Tung (until his resignation with effect from 20th May

2024). Two of the Nomination Committee members are

Independent Non-Executive Directors, one of whom,

Andrew Tung, is the Chair (until his resignation with effect

from 20th May 2024). Bernard Chan will succeed Andrew

Tung as the Chair of the Nomination Committee, and Lily

Cheng will become a member of the Nomination

Committee, with effect from 20th May 2024. Its terms of

reference comply with the CG Code and are posted on the

Company’s website and the Stock Exchange’s website.

The Nomination Committee met once in 2023 and once in

2024 up to the date of this annual report. A summary of its

work is as follows:

• it conducted (i) an annual review of the structure, size and

composition (including the skills, knowledge and

experience) of the Board and considered that 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 contributes to the Board’s effectiveness;

(ii) an annual assessment of the independence of each

Independent Non-Executive Director and considered all

of the Independent Non-Executive Directors to be

independent; and (iii) an annual review of the

implementation and effectiveness of the Company’s

Board Diversity Policy and considered it to

be appropriate;

• it made recommendations to the Board in respect of the

appointment of two Non-Executive Directors and two

Independent Non-Executive Directors; and

• it made recommendations to the Board in respect of the

proposed election and re-election of the Directors

retiring at the 2024 Annual General Meeting.

REMUNERATION COMMITTEE

The Remuneration Committee comprises one Non-

Executive Director (Gordon McCallum) and two Independent

Non-Executive Directors (Andrew Tung (Committee Chair,

until his resignation with effect from 20th May 2024) and

Bernard Chan). Lily Cheng will succeed Andrew Tung as the

Chair of the Remuneration Committee with effect from 20th

May 2024.

The Remuneration Committee reviews and approves

remuneration proposals with respect to Executive Directors

and senior management of the Company with reference to

the Board’s corporate goals and objectives and the Group’s

remuneration policy (which is available on the Company’s

website) (see further under the paragraph headed

Remuneration Policy). Fees (if any) payable to Non-

Executive Directors are subject to an annual cap approved

by shareholders at general meetings. The Remuneration

Committee assesses the performance of Executive

Directors and considers market data and peer comparison

based on reports prepared by independent external

consultants, which would review and confirm that the

remuneration of the Company’s Executive Directors and

senior management is comparable with that paid to

equivalent directors and senior executives in peer

companies. Neither the Directors nor senior management

of the Company takes part in any discussion about his or

her own remuneration.

The Remuneration Committee exercises the powers of the

Board to determine the remuneration packages of individual

Cathay Pacific Airways Limited Annual Report 2023 59

CORPORATE GOVERNANCE REPORT

Executive Directors (including salaries, bonuses, benefits in

kind and the terms on which they participate in any

provident fund or other retirement benefit scheme), taking

into consideration salaries paid by comparable companies,

time commitments and responsibilities and employment

conditions elsewhere in the group. Full details of the

remuneration of the Directors are provided in note 25 to the

financial statements.

The terms of reference of the Remuneration Committee

have been reviewed with reference to the CG Code and are

posted on the Company’s website and the Stock

Exchange’s website.

A services agreement exists between the Company and

JS&SHK, a wholly-owned subsidiary of John Swire & Sons

Limited, which is the parent company of the Swire group.

This agreement has been considered in detail and approved

by the Independent Non-Executive Directors of the

Company. Under the terms of the agreement, staff at

various levels, including Executive Directors, are seconded

to the Company. These staff report to and take instructions

from the Board of the Company but remain employees of

the Swire group.

In order to be able to attract and retain staff with the

appropriate skills, experience and of suitable calibre, the

Swire group provides a competitive remuneration package

to be commensurate, overall, with those of its peer group.

This typically comprises salary, housing, retirement

benefits, leave passage and education allowances and,

after three years’ service, a discretionary bonus related to

the overall profit of the Swire Pacific group. The provision of

housing facilitates relocation either within Hong Kong or

elsewhere in accordance with the needs of the business

and as part of the training process whereby managers gain

practical experience in various businesses within the Swire

group, and payment of bonuses on a group-wide basis

enables postings to be made to group companies with very

different profitability profiles. Whilst bonuses are calculated

by reference to the profits of Swire Pacific overall, those

profits are influenced to a significant extent by the results of

the Company.

Although the remuneration of these executives is not

entirely linked to the profits of the Company, it is considered

that, given the volatility of the aviation business, this has

contributed considerably to the maintenance of a stable,

motivated and high-calibre management team in the

Company. Furthermore, given its substantial equity interest

in the Company, it is in the best interest of Swire to see that

executives of high quality are seconded to and retained

within the Company.

A number of Executive 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 November 2023. At the meeting held in

November 2023, the Remuneration Committee considered

a report prepared for it by Mercer Limited, an independent

firm of consultants, which confirmed that the remuneration

of the Company’s Executive Directors, as disclosed in note

25 to the financial statements, was comparable with that

paid to equivalent executives in peer group companies.

No Director takes part in any discussion about his or her

own remuneration.

The following table sets out the fees paid to the

Independent Non-Executive Directors and certain Non-

Executive Directors (Ma Chongxian, Sun Yuquan, Wang

Mingyuan and Xiao Feng), which were approved by the

Board and were below the total maximum amount approved

by the shareholders at the general meeting held on 18th

May 2011:

Fee

2023

HK$

2022

HK$

Director’s Fee 575,000 575,000

Fee for Audit Committee Chair 268,000 268,000

Fee for Audit

Committee Member 186,000 186,000

Fee for Board Risk

Committee Chair 268,000 268,000

Fee for Board Risk

Committee Member 186,000 186,000

Fee for Remuneration

Committee Chair 83,000 83,000

Fee for Remuneration

Committee Member 60,000 60,000

Fee for Nomination

Committee Chair 83,000 83,000

Fee for Nomination

Committee Member 60,000 60,000

SUSTAINABILITY LEADERSHIP GROUP

The Sustainability Leadership Group (previously known as

“Sustainable Development Committee”) meets at least four

Cathay Pacific Airways Limited Annual Report 2023

CORPORATE GOVERNANCE REPORT

times a year to review, evaluate and make

recommendations to the Board on the strategy, policy,

target and investment in major initiatives related to the

sustainable and ESG development of the Group. It

comprises five Executive Directors (Chair of the Board,

Chief Executive Officer (Committee Chair), Chief Customer

and Commercial Officer, Chief Operations and Service

Delivery Officer and Chief Financial Officer).

ACCOUNTABILITY AND AUDIT

(a) Financial Reporting

The Board acknowledges its responsibility for:

• the proper stewardship of the Company’s affairs, to

ensure the integrity of financial information

• preparing annual and interim financial statements and

other related information that give a true and fair view

of the Group’s affairs and of its results and cash flows

for the relevant periods, in accordance with Hong

Kong Financial Reporting Standards and the Hong

Kong Companies Ordinance

• selecting appropriate accounting policies and

ensuring that these are consistently applied

• making judgements and estimates that are prudent

and reasonable; and

• ensuring that the application of the going concern

assumption is appropriate.

(b) Risk Management

The Board acknowledges its responsibility to establish,

maintain and review the effectiveness of the risk

management systems. Details of the Group’s Risk

Governance and Risk Management Framework, Risk

Management Processes, Areas of Focus in 2023 and

Principal Risks and Uncertainties facing the Group are

included in the Risk Management section.

The Board acknowledges its responsibility to establish,

maintain and review the effectiveness of the Group’s

internal control systems. This responsibility is primarily

fulfilled on its behalf by the Audit Committee as

discussed on pages 62 and 63.

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 corporate

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 (CSA)

process requires management in each material

business unit to assess, through the use of detailed

questionnaires, the adequacy and effectiveness of risk

management and internal controls over financial and

other areas, the effectiveness and efficiency of

operations and compliance with applicable laws and

regulations. The results are reviewed by the Audit

Committee annually as part of their assessment of

overall control environment.

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,

Cathay Pacific Airways Limited Annual Report 2023 61

CORPORATE GOVERNANCE REPORT

safeguarding of assets and segregation of duties.

Control activities can be catagorised into operational,

financial and compliance, although there may, on

occasion, be some overlap between them. The typical

control activities include:

• analytical reviews: for example, conducting reviews of

actual performance versus budgets, forecasts, prior

periods and competitors

• direct functional or activity management: reviews of

performance reports, conducted by managers in

charge of functions or activities

• information-processing: performing controls

intended to check the authorisation of transactions

and the accuracy and completeness of their

reporting, for example, exception reports

• physical controls: ensuring equipment, inventories,

securities and other assets are safeguarded and

subjected to periodic checks

• performance indicators: carrying out analyses of

different sets of data, operational and financial,

examining the relationships between them, and taking

corrective action where necessary

• segregation of duties: dividing and segregating duties

among different people, with a view to strengthening

checks and minimising the risk of errors and abuse.

The Group has in place effective processes and

systems for the identification, capture and reporting of

operational, financial and compliance-related

information in a form and time-frame intended to ensure

that staff carry out their designated responsibilities.

Detailed control guidelines have been set and made

available to all relevant employees of the Company

about the handling of corporate data which may be 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

management.

Group Internal Audit Department

The Group Internal Audit Department assists the Audit

Committee in carrying out the independent assessment

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 the Group’s financial, operational and

compliance procedures. The Group’s internal audit plan,

which is prepared using a risk based 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, Board Risk Committee

and the Chief Executive Officer. Audit reports are sent to

the Chief Executive Officer, the Chief Financial Officer,

the Chief Customer and Commercial Officer, the Chief

Operations and Service Delivery Officer, the Chief Risk

Officer and the external auditors and the relevant

management of audited departments. A summary of

major audit findings and recommendations aimed at

resolving material internal control deficiencies is

reported regularly to the Audit Committee, and the Chair

of the Audit Committee regularly reports any such

material audit findings to the Board. As a key criterion of

assessing the adequacy and effectiveness of the

Group’s risk management and internal control systems,

the Board and the Audit Committee actively monitor the

number and seriousness of findings raised by the Group

Internal Audit Department and also the corrective

actions taken by relevant departments.

Audit Committee

The Audit Committee, consisting of one Non-Executive

Director (Xiao Feng) and three Independent Non-

Executive Directors (John Harrison (Committee Chair,

until his resignation with effect from 20th May 2024),

Christoph Mueller and Andrew Tung (until his resignation

with effect from 20th May 2024)), assists the Board in

discharging its responsibilities for internal control and

other matters. Wang Xiao Bin will succeed John

Harrison as the Chair of the Audit Committee, and Lily

Cheng will become a member of the Audit Committee

respectively, with effect from 20th May 2024.

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 and

the Stock Exchange’s website.

Cathay Pacific Airways Limited Annual Report 2023

CORPORATE GOVERNANCE REPORT

The Audit Committee met four times in 2023. 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 and the General Manager Group Internal Audit

separately without the presence of management. Each

meeting receives written reports from the external

auditors and Group Internal Audit.

Minutes of Audit Committee meetings are kept by the

Company Secretary. Draft and final versions of the

minutes are sent to all committee members for their

comment and records, within reasonable time after

themeeting.

The work of the Audit Committee during 2023 included

reviews of the following matters:

• the completeness, accuracy and integrity of formal

announcements relating to the Group’s performance

including the 2022 annual and 2023 interim reports

and announcements, with recommendations to the

Board for approval

• the plans, cash flows and liquidity, going concern and

2024 Budget of the Group

• the Group’s compliance with certain regulatory and

statutory requirements

• the Group’s internal control systems

• the review of progress on the 2023 internal audit

programme

• periodic reports from Group Internal Audit and

progress in resolving any matters identified in them

• the approval of the Group Internal Audit Charter

• 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 pages 64 and 65

• the effectiveness of the independent views

mechanisms

• the adequacy and effectiveness of the accounting,

financial reporting and internal audit functions

• the proposal for redemption of preference shares

• the Company’s compliance with the CG Code

• the Company’s fuel hedging policy, foreign currency

policy, data incident escalation matrix, external

auditor non-assurance services policy, anti-bribery,

corruption, anti-money laundering and terrorist

financing policy, and privacy and data

protectionpolicy.

In 2024, the Audit Committee has reviewed, and

recommended to the Board for approval, the 2023

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)

oversee the Group’s risk management and internal

control systems on an ongoing basis and 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. The risk management and internal control

systems are designed to manage rather than eliminate

the risk of failure to achieve business objectives, and

can only provide reasonable and not absolute

assurance against material misstatement of loss.

This assessment considers:

• the scope and quality of management’s ongoing

monitoring of risks (including ESG risks) and of the risk

management and internal control systems, the work

and effectiveness of Group Internal Audit and the

Group Corporate Risk functions

• the changes in the nature and extent of significant

risks (including ESG 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

Cathay Pacific Airways Limited Annual Report 2023 63

CORPORATE GOVERNANCE REPORT

• the incidence of any significant control failings or

weaknesses that have been identified at any time

during the period and the extent to which they have

resulted in unforeseen outcomes or contingencies

that have had, could have had, or may in the future

have, a material impact on the Company’s financial

performance or condition

• the effectiveness of the Group’s processes in relation

to financial reporting and statutory and regulatory

compliance

• areas of risk identified by management

• significant risks reported by Group Internal Audit and

Group Corporate Risk

• 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 the key representative

body, independent from management, for overseeing

the Company’s relations with the external auditors (the

“auditors”). The auditors have direct access to the Chair

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 in accordance with 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 services and the nature of the non-audit

services) 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.

The Non-Assurance Services (NAS) Pre-approval Policy

was adopted by the Audit Committee on 7th November

2022 for complying with the new requirement of the

Hong Kong Institute of Certified Public Accountants

Code of Ethics. The NAS Pre-approval Policy was

Cathay Pacific Airways Limited Annual Report 2023

CORPORATE GOVERNANCE REPORT

revised and adopted by the Audit Committee on 28th

February 2023. The External Auditor Non-Assurance

Services Policy (the merger of the NAS Pre-approval

Policy and the 2016 Auditor Services Policy) was

adopted by the Audit Committee on 5th May 2023,

which was revised on 2nd August 2023, and has been

further revised and adopted by the Audit Committee on

6th November 2023. Pursuant to the External Auditor

Non-Assurance Services Policy, pre-approval of non-

audit services to be provided by the auditor for the

following year should be sought annually at the last

Audit Committee meeting of the calendar year. The

pre-approval would then apply up until the end of the

following calendar year, unless an alternative timeline is

approved by the Audit Committee. Services not

approved through the annual process would be subject

to pre-approval from the Audit Committee Chair and be

ratified at the next Audit Committee meeting.

Auditors’ Remuneration

In 2023, the total remuneration paid to the external

auditors was HK$20 million, being HK$16 million for

audit, HK$2 million for tax advice and HK$2 million for

other professional services.

OTHER MATTERS

COMPANY SECRETARY

The Company Secretary is an employee of the Company

and is appointed by the Board. The Company Secretary

reports to the Chair and is responsible for facilitating the

Board’s processes and communications among Board

members, with shareholders and with management. The

Company Secretary undertakes at least 15 hours of

relevant professional training annually to update her skills

and knowledge.

INSIDE INFORMATION

With respect to procedures and internal controls for the

handling and dissemination of inside information, the

Company:

• is required to disclose inside information as soon as

reasonably practicable in accordance with the Securities

and Futures Ordinance and the Listing Rules

• conducts its affairs with close regard to the “Guidelines

on Disclosure of Inside Information” issued by the

Securities and Futures Commission

• has included in the Group’s 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 staff,

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.

REMUNERATION POLICY

The Group has adopted the remuneration policy for

employees at all levels of the Group with the following key

principles:

• total compensation should be competitive with the

market – market competitiveness is assessed by

benchmarking against a predetermined target market

positioning for comparable jobs on total compensation,

including base salary, allowances, bonus and retirement

benefits

• differentiation of pay based on individual performance –

all staff will have performance goals that are agreed with

their direct appraiser each year and their performance will

be assessed against these goals and how they measure

up to the required competencies for each role. The

performance rating will be a key factor in determining

their pay

• internal equity – the Company ensures that its staff are

paid equitably and fairly, in line with the size of the job,

their individual skills match and performance, and free

from gender bias, racism or other forms of bias

• transparency – all staff will be given honest and

comprehensive feedback on their performance and how

they are viewed by the Company

• affordability – the Company’s ability to pay will be taken

into account in the annual pay review

• bonus – the award of a bonus is made at the Company’s

discretion. The amount of bonus awarded each year will

vary depending on the Company’s financial performance

and individual performance

Cathay Pacific Airways Limited Annual Report 2023 65

CORPORATE GOVERNANCE REPORT

• retirement benefit – all staff are offered the opportunity to

participate in a suitable pension scheme to provide for

their retirement. There are a range of schemes applicable

depending on the employee’s terms and conditions

ofemployment.

WHISTLEBLOWING POLICY

The Group has adopted a whistleblowing policy (which is

available on the Company’s website) for employees and

those who deal with the Group (e.g. customers and

suppliers) to raise concerns (which will be escalated to Audit

Committee where appropriate), in confidence and

anonymity, about possible improprieties in any matter

related to the Group. The whistleblowing policy sets out a

reporting mechanism which is designed to help mitigate

legal, financial, operational and reputational risks to the

Group. The primary objectives of this policy are (i) to

encourage employees, third parties who deal with the

Group (e.g. customers and suppliers), as well as individuals

and entities acting for or on behalf of the Group, to report

suspected wrongdoing with confidence that their concerns

will be given serious, prompt and appropriate attention; (ii) to

provide guidance on how to report suspected wrongdoing;

(iii) to provide assurance to anyone who makes a report in

good faith that they will not be subjected to retaliation of any

kind. Any reporting under this policy can be done

confidentially through multiple channels as stated in

thispolicy.

ANTIBRIBERY, CORRUPTION, ANTIMONEY

LAUNDERING AND TERRORIST FINANCING

POLICY

The Group has adopted anti-bribery, corruption, anti-money

laundering and terrorist financing policy to reaffirm its

commitment as part of a comprehensive and robust anti-

corruption and anti-bribery compliance programme to

provide guidance to all relevant parties about compliance

with global anti-bribery laws. The Group takes a zero-

tolerance approach to bribery and corruption and is

committed to acting professionally, fairly and with integrity

in our business dealings and relationships wherever it

operates. Its personnel must comply with applicable anti-

bribery and anti-corruption laws of all countries in which the

Group does business.

SHAREHOLDERS

COMMUNICATION WITH SHAREHOLDERS AND

INVESTORS AND SHAREHOLDERS’

COMMUNICATION POLICY

The Board and 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 Company shall maintain

regular dialogue with shareholders and reviews the

Shareholders’ Communication Policy (available on the

Company’s website) at least annually to ensure its

effectiveness. The Audit Committee has reviewed the

implementation and effectiveness of the Shareholders’

Communication Policy for the year 2023.

The methods used to communicate with shareholders

include the following:

• the Chief Financial Officer makes herself available for

meetings with major shareholders and conducts

investors and analysts briefings immediately after the

announcement of the interim and annual results. In

addition, the Chief Financial Officer attended meetings

with analysts and investors during the year

• through financial reports (interim and annual reports),

sustainability reports, circulars or other regulatory

disclosures as may be required through the websites of

the Company and/or the Stock Exchange

• through audio webcasts of analyst presentations,

slidesof presentations given at investor conferences,

latest news, public announcements and general

information about the Group’s businesses through the

Company’s website

• through the Annual General Meeting as discussed below

and other general meetings that may be convened.

Shareholders may send their enquiries and concerns to the

Board by post or email at ir@cathaypacific.com, and such

letter should be marked “Shareholders’ Communications”).

The relevant contact details are set out in the section of this

annual report headed Corporate and Shareholder

Information. In addition, there are different engagement

channels to solicit and understand the views of the

Company’s shareholders and stakeholders. Details of the

channels can be found on the Company’s website:

https://www.cathaypacific.com/cx/en_HK/contact-us.html.

Cathay Pacific Airways Limited Annual Report 2023

CORPORATE GOVERNANCE REPORT

THE ANNUAL GENERAL MEETING

The Annual General Meeting is an important forum in which

to engage with shareholders. The most recent Annual

General Meeting was held on 10th May 2023. The meeting

was open to all shareholders. The Directors who attended

the meeting are shown in the table on pages 56 and 57.

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 and

questions from shareholders on voting by poll were

answered 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2022

• 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.

Minutes of the meeting together with voting results are

available on the Company’s website.

DIVIDEND POLICY

Cathay Pacific has a policy on the payment of dividends,

which is set out in the section of this annual report headed

Directors’ Report.

SHAREHOLDER ENGAGEMENT

Pursuant to Article 95 of the Company’s Articles of

Association, if a shareholder wishes to propose a person

other than a retiring Director for election as a Director at a

general meeting, he or she should deposit a written notice

of nomination at the registered office of the Company within

the 7-day period commencing on and including the day

after the despatch of the notice of the meeting. The

procedures for nominating candidates to stand for election

as Directors at general meetings are set out in the

Company’s Corporate Governance Code which is available

on the Company’s website.

If they wish to propose a resolution or put forward a

proposal relating to other matters to be considered at a

general meeting, shareholders are requested to follow the

requirements and procedures set out in the Company’s

Corporate Governance Code which is available on the

Company’s website.

Shareholder(s) representing at least 5% of the total voting

rights of all members may request the Board to convene a

general meeting. The objects of the meeting must be stated

in the related requisition deposited at the Company’s

registered office. Detailed requirements and procedures

are set out in the Corporate Governance Section of the

Company’s website.

OTHER INFORMATION FOR SHAREHOLDERS

Key shareholder dates for 2024 are set out in the

section of this annual report headed Corporate and

Shareholder Information.

Cathay Pacific Airways Limited Annual Report 2023 67

RISK GOVERNANCE AND RISK MANAGEMENT

FRAMEWORK

It is the responsibility of the Board to ensure that the Cathay

Group establishes, maintains and reviews the effectiveness

of the risk management and internal control systems. In this

endeavour it is supported and advised by the Board Risk

Committee, the Board Safety Review Committee and the

Audit Committee. The Group Risk Management Policy

outlines the Group’s approach to risk management, the key

roles and responsibilities and the main reporting

procedures.

The Group’s risk management framework is founded on the

principle of “three lines of defence”, a commonly used

model, and one that is designed to avoid conflict of interest

whereby managers review or oversee their own activities.

The three lines of defence operate 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 independent and

objective assurance and advice to the Board as to the

effectiveness of the Group’s risk management and

internal controls, is classified as Third Line.

The two core principles of the risk management framework

are:

(a) 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; reasonable steps have been

taken or plans are in place to mitigate these risks and

their impacts to an acceptable level; and that a sound

risk culture is in place.

(b) The First Line is responsible for managing risks. The risk

management function is expected to engage fully to

support them, providing ideas, expertise and advice and

in particular, to ensure that the First Line takes decisions

objectively and in full possession of all relevant

information.

The application of the three lines of defence model

within the Group’s risk governance framework is shown

in Fig. 1 below.

RISK MANAGEMENT

FIG.  RISK GOVERNANCE OVERVIEW

FIRST LINE ”Management” SECOND LINE ”Oversight” THIRD LINE ”Assurance”

Group Internal Audit

Board Risk

Committee

Audit Committee

Management

Committee

Group

Corporate Risk

Group Safety &

Ops Risk Mgmt

Airline

Safety Review

Committees

Board Safety

Review

Committee

Executive Team

Business Units

Functions including People,

Legal and Compliance, Finance,

IT Security, Procurement, etc.

Board

Level

Executive

Level

Operational

Level

Board of Directors

Note: It is recognised that Legal and Compliance sits between first and second lines; for practical purposes they are included in the first line.

68 Cathay Pacific Airways Limited Annual Report 2023

RISK MANAGEMENT

The Group’s risk management function sits in the Second Line and comprises two parallel pillars focusing on safety and

security risks in operations, and corporate risks.

Safety and Security Risks Corporate Risks

• Board Safety Review Committee (BSRC) is charged

with keeping under review all matters concerned with the

safe operation, in the aircraft and on the ground, of any

aircraft of which Cathay Pacific or an airline subsidiary is

the operator.

The BSRC considers reports of significant incidents

concerning safety (including people safety) or security.

They also make sure that appropriate remedial action is

taken or appropriate recommendations implemented

where required.

Each quarter, the Chair of the BSRC provides the Board

with a report on the state of the safety management

systems operating across the Group.

• Airline Safety Review Committee (ASRC), chaired by

the Chief Executive Officer, convenes each month and

reports to the BSRC. The ASRC reviews the airline’s

safety performance for the purposes of directing both

reactive and proactive safety actions to be undertaken

by its members. The ASRC is responsible to the Chief

Executive Officer for ensuring that appropriate group-

wide safety, health and security related risk management

strategies, systems, policies, processes and controls are

implemented, managed, monitored and maintained at

alltimes.

• Group Safety & Operational Risk Management

(GSORM) department is headed by the General

Manager GSORM, who reports directly to the Chief

Executive Officer. GSORM is responsible for maintaining

an effective Safety Management System (“SMS”),

facilitating operational and people safety risk

identification and analysis activities, and monitoring

mitigation actions. GSORM provides oversight of the

safety, security, and audit programmes of Cathay Pacific.

• Board Risk Committee (BRC) is charged with

supporting the Board in its responsibility for risk

management within the Group, focusing on risks not

related to safety and security arising from the operations

of the Group. In particular, the BRC is responsible for

overseeing the ongoing implementation and

development of the Group’s risk management framework

and assessing its effectiveness.

Each quarter, the Chair of the BRC provides the Board

with a report on the state of the risk management

framework and the general activities of the BRC.

• Management Committee (MANCOM), an executive

committee, is established to assist the Chief Executive

Officer in delivering the Company’s strategies and

objectives. It oversees and manages the implementation

of the Company’s risk management framework and

consider top risks to achieving the Company’s goals. At

the monthly MANCOM meetings the Chief Risk Officer

reports on the risk profile and mitigation of the Group’s

top risks. In addition, MANCOM has a periodic focus on

the management of key emerging risks.

• Group Corporate Risk (GCR) department is headed by

the Chief Risk Officer reporting to the Chief Executive

Officer. GCR’s function is to facilitate the implementation

of the Group Risk Management Policy and acts as an

independent oversight function on its effectiveness. It

has specific responsibility for developing, maintaining

and ensuring the effectiveness of the risk management

framework.

Cathay Pacific Airways Limited Annual Report 2023 69

RISK MANAGEMENT

RISK MANAGEMENT PROCESSES

(a) Safety and Security Risks

The safety risk management process involves the

identification of hazards or threats (including risk

associated with changes to the organisation or

operations), the adverse events they may lead to, their

potential consequences (expressed as risk, in terms of

severity and likelihood), and the implementation of risk

controls or mitigations to reduce risk to as low as

reasonably practicable. This process includes input

from various stakeholders and a plan or schedule for the

implementation of further risk controls, mitigations and/

or monitoring intervals to assess ongoing efficacy.

A risk rating is assigned to identified risks, signalling the

degree of urgency required to address the risk and the

subsequent level of management or governance

responsibility.

A fundamental component of the SMS are the eight

Safety Actions Groups (including Review Committees)

which meet on a monthly basis. They report to the ASRC

on matters regarding operational and people safety,

including identified risks and escalation items. During

regular operational safety risk reviews, each operational

Safety Action Group conducts a full risk review of their

respective areas and presents these risks directly to the

ASRC. In addition to this continuous review, a

consolidated operational & occupational safety risk

summary is presented to the BSRC on a quarterly basis,

this summary details top safety and security risks, their

mitigation actions, ownership and governance

processes.

This ensures that significant hazards and risks arising

from the Safety Action Groups and the SMS are subject

to regular review by senior operations and airline

management. Such reviews ensure that appropriate

corrective and preventive actions are implemented and

monitored for effectiveness in preventing safety

occurrences from taking place.

(b) Corporate Risks

The management of corporate risks is conducted in

three stages: identification, assessment and mitigation.

Identification: Risk identification is undertaken through

a combination of top-down and bottom-up

assessments. To assist with the risk identification

process, a risk taxonomy, which is a generic set of risk

categories, is developed to act as foundation for a

holistic review of the different corporate risks that may

occur.

Top-down assessment seeks to identify the biggest

risks facing the Group and normally takes the form of

cross-departmental risk identification workshops and

regular discussions with management of the business.

Through the top-down assessment, with the support of

and oversight from GCR, the Group’s risk register for its

top 30 risks is drawn up which is used by management

to prioritise risk management activities. The risk register

is regularly monitored by GCR, and is updated and

reported to the MANCOM monthly and BRC quarterly.

Bottom-up assessment seeks to identify risks facing

each of Cathay Pacific’s lines of business, operational

and service delivery departments, corporate functions,

regions and subsidiaries that may impact the ability of

the business units to achieve their goals and targets.

With GCR’s facilitation, bottom-up risk registers are

developed and monitored by the respective business

units, and oversight of these risk registers lies with the

respective business units and are only reported to the

BRC and/or MANCOM as necessary.

Assessment: Each of the top 30 corporate risks are

evaluated and assessed by subject matter experts

within the First Line business units through risk deep

dives supported by GCR. The deep dive process

includes determining the root causes and

consequences of the risk, its impact on the Group’s

strategic objectives, the Group’s vulnerability to the risk,

existing controls in place to manage the risk and

management’s assessment over their effectiveness.

Each top corporate risk has a “risk owner” from the First

Line who has overall accountability for managing the

risk. GCR monitors the top corporate risks regularly and

engages with the risk owners as appropriate to ensure

the risks are reviewed and assessed dynamically.

Mitigation: As part of the risk deep dive 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

BRC. Through this approach the Board and

management can see tangible improvements in

systems and processes resulting from this process.

Cathay Pacific Airways Limited Annual Report 2023

RISK MANAGEMENT

Improvements are also reflected in risk scores as action

plans are delivered.

Areas of the business particularly susceptible to top

corporate risks, and controls which are considered

critical to the mitigation of these major risks, are also

prioritised for review as part of the Group’s internal audit

plan which is prepared in conjunction with the Group’s

risk management activities.

Environmental Social and Governance (“ESG”) risks:

A specific taxonomy has been developed to holistically

identify and manage ESG risks across the Group. The

assessment of ESG risks is integrated with the wider

top-down and bottom-up risk identification and

management processes as described above. A formal

assessment on ESG risks is reported at least annually to

the BRC.

Oversight and Reporting of the Risk Management

Framework

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 MANCOM and BRC. The Chair of the BRC reports on

these activities to the Board as a standing agenda item.

AREAS OF FOCUS IN 

(a) Safety and Security Risks

During this year the focus remained on the continuous

improvement of risk identification, analysis and

mitigation strategies. Post-pandemic, ensuring a safe

airline recovery also remained a significant focus of the

Safety Management System, this included thorough

safety and security risk assessments of port restarts as

well as a strong audit focus to ensure external suppliers

and other agencies were adequately resourced and

functioning to Cathay Pacific’s high standards.

The increasing instability in geopolitics, such as the

ongoing military actions in Ukraine and more recently

escalations in conflict in the Middle East, remains an

area of constant vigilance – both from an airport and

people security perspective, as well as in ensuring our

global route networks overflight security is not

compromised.

(b) Corporate Risks

In 2023, focus was on continuous monitoring the top

corporate risks and tracking of risk mitigation actions to

ensure timely completion. During this post-pandemic

period, a review was undertaken on the Group’s

preparedness to deliver capacity commitments and

maintain service levels expected of a premium carrier. A

refresh was also conducted on the top financial risks

facing the business.

As the regulatory landscape continues to evolve quickly,

including the various sanctions regimes and China’s

Personal Information Protection Law, assessments were

conducted to understand the potential implications of

these new regulations on the Group’s operations and

the Group’s preparedness in complying with them.

The year of 2023 had seen rapid developments and

innovation in the technology sector, with artificial

intelligence dominating the scene. With Cathay’s vision

to become a digital leader, deep dives were conducted

to improve the adequacy of Cathay’s governance over

the responsible and ethical use of artificial intelligence

and other advanced technologies. In addition, the

management of cybersecurity and resilience of IT

systems were also reviewed.

Progress has been made to enhance the supplier and

third party risk management framework and develop a

holistic third party risk universe for assessing and

monitoring third party risks. Processes for third party

due diligence, onboarding and ongoing monitoring

processes continue to be enhanced to improve the

robustness of these processes and the Company’s

overall resilience against third party risks.

To improve risk awareness across the organisation, the

Risk Master Class series was introduced and made

available on the Company’s intranet. These Risk Master

Classes cover topics from basic risk methodologies to

key emerging risk matters, to help the business

understand the risks and opportunities involved in their

day to day activities.

A risk tool had been rolled out to facilitate management

and monitoring of the top risks. In addition, a network of

Risk Champions, with representatives from different

business units and regions across the organisation,

was also established, so as to better embed risk

management and strengthen risk culture within

thebusiness.

Cathay Pacific Airways Limited Annual Report 2023 71

RISK MANAGEMENT

KEY RISK MANAGEMENT AREAS

The Group is exposed to a broad range of risks. The

following deals with the principal risks facing the Group.

(a) Risks arising from the rapid ramp-up of operations

As the business emerges from the Covid-19 pandemic,

it is subject to risks relating to the ramp-up of

operations in Hong Kong and around the world. These

stem from sources such as workforce capacity in view

of global labour shortage in the aviation sector, timely

reactivation of aircraft, and management of third parties

across the supply chain globally to deliver services.

The Group closely monitors market demand and

capacity it is able to offer as the external business

environment evolves. Safety assessment continues

toremain the cornerstone of the ramp-up and

rebuildefforts.

(b) Risks arising from workforce capacity and

capability

Aviation is a very specialised industry. The Group

requires experts and highly-trained professionals, both

in the front line and in the back office, to support the

airlines’ business and operations. Fierce competition for

talent, especially with global labour shortage in the

aviation and travel sector, could negatively impact the

Group’s long term growth plans.

The Group monitors its workforce capacity and

capability requirements on an ongoing basis.

Established workforce and succession plans and

employee wellbeing strategies are in place.

Workforce-related issues are being monitored by the

management team.

conditions

The Group’s business is dependent on global economic

conditions. Periods of significantly reduced economic

activity, increased unemployment and reduced

consumer spending could result in passengers

choosing to reduce travel. The economic environment

could also create volatility in foreign exchange and

interest rates.

The Group maintains a diverse portfolio of businesses

which includes premium service Cathay Pacific, low-

cost carrier HK Express, Cargo and Lifestyle, each with

specialised teams to maximise business opportunities

at any given time. Global economic conditions and their

potential impact on demand are considered by the

management team in determining future plans for

thebusiness.

For financial and market risks relating to currency and

interest rates, please refer to the Financial Risk

Management section under the Notes to the

FinancialStatements.

(d) Risks arising from the geopolitical, legal and

regulatory environment

As an international airline, the business is subject to risk

from any actual or potential political events (including

war, terrorism, social unrest etc.). These may lead to

closure or restriction of access to airspace or airports,

and cause a reduction in passenger and cargo traffic.

For example, the conflicts between Russia and Ukraine

and in the Middle East contribute to an increase in the

price of commodities and volatility in the global

economy and financial markets. The Group’s operations

are also affected by tensions between major

economies, the ongoing trade discussions, and

imposition of sanctions and other trade restrictions.

This in turn affects revenue and may adversely affect

financial performance, and also increases the cost

ofcompliance.

The aviation industry is highly regulated. Failure to

comply with applicable laws or regulations may result in

loss, penalty and reputational damage to the Group.

The geopolitical environment and its potential impacts

on the business continues to be closely monitored by

the management team. Overflying risk is closely

monitored across all regions in which the Group flies

and conservative safety margins are factored into

day-to-day flight planning.

Changes in the legal and regulatory environment

withinwhich the business operates are tracked and

programmes are in place to comply with

relevantobligations.

(e) Risks arising from the competitive environment

The airline business is highly competitive, especially in

Cathay Pacific’s home base of Hong Kong. Competition

for passengers and cargo impacts yields, puts pressure

on revenues and may adversely affect financial

Cathay Pacific Airways Limited Annual Report 2023

RISK MANAGEMENT

performance. As an aviation hub, Hong Kong

International Airport competes for traffic with other

airports, particularly in the Greater Bay Area, the wider

Asia region and the Middle East, and the loss of

traffic to those airports may adversely affect the

Group’s business.

The Group continues to invest in all its lines of business

to differentiate itself as one of the world’s greatest

service brands. These include initiatives to invest in

products to enhance customer experience, manage the

cost base to remain competitive, and improve

agility in responding to changes in the external

businessenvironment.

(f) Risks arising from climate change

Airlines are more exposed to transition risk, which refers

to the potential financial impacts on companies as a

result of the shift towards a low-carbon economy and

the implementation of policies and regulations to

address climate change. Impact of physical risk to

airlines is mainly related to effect on its operation as a

result of potential damage to property and infrastructure

or personal injury from extreme weather events and sea

level rise caused by climate change.

At Cathay Group, a sustainable development strategy is

in place and climate change considerations are

incorporated in key business decisions. The Group has

committed to achieve net zero carbon emissions by

2050, supported with a near term target to use 10%

Sustainable Aviation Fuel by 2030. Meeting these

targets would help reduce our impact on the

environment while mitigating our transition risk. The

Group also conducts an ongoing review on climate

resilience to understand and manage the associated

physical risks.

(g) Risks arising from a significant movement in jet fuel

prices

Higher jet fuel prices would result in a higher overall cost

base as fuel is one of the key components of the

operating expenses for the Group. As such, a spike in

the cost of fuel could translate into higher airfares which

would impact travel and cargo demand. Further details

about fuel price risk and the Group’s approach to

monitoring and mitigating the risk can be found in the

Financial Risk Management section under the Notes to

the Financial Statements.

(h) Risks arising from disruption of IT services

Reliance on IT services for core operational and

customer processes continues to increase throughout

the business. As such, core business operations

couldbe at risk of disruption if IT services are not

adequately resilient.

Programmes are in place to continually review and

improve the IT infrastructure. Business Continuity and

Disaster Recovery plans are in place to make sure

resilience controls continue to operate effectively. The

business also works closely with third party suppliers

who provide infrastructure that are critical to the

business to make sure resilience arrangements

areadequate.

(i) Risks arising from unauthorised access to IT

systems

Risks from cyberattacks continue to be on the increase

globally and across all industries as malicious actors

seek to exploit any weaknesses in the IT security

environment. The Group’s operations rely on

sophisticated IT systems, and its business carries a

significant volume of customer and employee data

within its systems. Any unauthorised access to these

systems could cause disruptions to operations or put

such personal data at risk.

The Group continues to enhance its cyber security

maturity by investing in people, processes and

technologies that strengthens its detection and

response capabilities to these new threats from cyber

criminals, third parties and hackers. A robust Privacy &

Data Protection programme is in place that includes

policies, procedures, manuals, guides and controls to

protect personal data.

(j) Risks arising from emerging technologies

Technological advancements such as artificial

intelligence (AI), machine learning and robotic process

automation present valuable opportunities for

innovation, thereby enhancing customer and employee

experience and also operational efficiency to improve

business performance. Lagging behind in adopting new

technologies may hinder Cathay’s vision to become

oneof the world’s greatest service brands and a

digitalleader.

Cathay Pacific Airways Limited Annual Report 2023 73

RISK MANAGEMENT

The Digital Leadership Group, chaired by the Chief

Executive Officer, has been established to define the

overall vision and strategy for the deployment of AI and

advanced technologies and continuously monitor the

market to identify opportunities suitable for the

Company. A governance mechanism has been

established to oversee the responsible and ethical use

of AI and other advanced technologies.

(k) Risks arising from prolonged disruption events

Prolonged global or regional disruption events have the

potential to create operational challenges and put strain

on the balance sheet. An effective risk management

framework has been established to respond to

disruption events and sustain operations in the event of

a significant drop in revenue over a prolonged period.

The Group maintains and adheres strictly to an

established Cash Management Policy, which includes a

target liquidity balance. The Group has continued to

maintain a healthy cash position. This is continuously

monitored by the Finance Committee and the Board.

Cathay Pacific Airways Limited Annual Report 2023

Cathay Pacific Airways Limited Annual Report 2023 75

To the members of

Cathay Pacific Airways Limited

(Incorporated in Hong Kong with

limited liability)

REPORT ON THE AUDIT OF THE

CONSOLIDATED FINANCIAL STATEMENTS

OPINION

We have audited the consolidated financial statements of

Cathay Pacific Airways Limited and its subsidiaries

(together “the Group”) set out on pages 79 to 153, which

comprise the consolidated statement of financial position

as at 31st December 2023, the consolidated statement of

profit or loss, the consolidated statement of other

comprehensive income, the consolidated statement of

changes in equity and the consolidated statement of cash

flows for the year then ended and notes, comprising

material accounting policy information and other

explanatory information.

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 2023 and of its

consolidated financial performance and its consolidated

cash flows for the year then ended in accordance with Hong

Kong Financial Reporting Standards (“HKFRSs”) issued by

the Hong Kong Institute of Certified Public Accountants

(“HKICPA”) and have been properly prepared in compliance

with the Hong Kong Companies Ordinance.

BASIS OF OPINION

We conducted our audit in accordance with Hong Kong

Standards on Auditing (“HKSAs”) issued by the HKICPA. Our

responsibilities under those standards are further

described in the Auditor’s responsibilities for the audit of

the consolidated financial statements section of our report.

We are independent of the Group in accordance with the

HKICPA’s Code of Ethics for Professional Accountants (“the

Code”) and we have fulfilled our other ethical responsibilities

in accordance with the Code. We believe that the audit

evidence we have obtained is sufficient and appropriate to

provide a basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional

judgement, were of most significance in our audit of the

consolidated financial statements for the current period.

These matters were addressed in the context of our audit of

the consolidated financial statements as a whole, and in

forming our opinion thereon, and we do not provide a

separate opinion on these matters.

INDEPENDENT AUDITOR’S REPORT

76 Cathay Pacific Airways Limited Annual Report 2023

INDEPENDENT AUDITOR’S REPORT

ASSESSING IMPAIRMENT OF GOODWILL

Refer to accounting policies 2 and 7 and note 9 to the consolidated financial statements

The Key Audit Matter How the matter was addressed in our audit

The carrying values of the Group’s goodwill arising from business

combinations amounted to HK$11,615 million as at 31st

December 2023.

Where indicators of impairment of the Group’s cash-generating

units (“CGUs”) are identified, management performs an

impairment assessment of the CGU by comparing the carrying

value of each CGU with its recoverable amount, which is the

higher of its fair value less costs of disposal and value in use

based on discounted cash flow forecasts. The preparation of

discounted cash flow forecasts involves estimating future cash

flows and discount rates. In addition, for CGUs containing

goodwill, an impairment assessment is performed at least

annually even if there is no indicator of impairment.

We identified the assessment of impairment of goodwill as a key

audit matter because of the significance of the carrying value of

such assets to the consolidated financial statements and

because the preparation of discounted cash flow forecasts

involves estimating future cash flows and discount rates which

are subject to a significant degree of judgement and could be

subject to management bias.

Our audit procedures to assess the impairment of goodwill

included the following:

• meeting with management and reviewing board minutes and

other papers to understand the Group’s latest operating plans;

• assessing management’s identification of the Group’s CGUs

and the allocation of assets to the CGUs for the purpose of

impairment assessment;

• assessing whether management had performed impairment

testing in accordance with the requirements of the prevailing

accounting standards;

• involving our internal valuation specialists to assess the

methodology and significant assumptions including discount

rates adopted by management in its impairment assessments;

• evaluating the assumptions adopted in the preparation of the

discounted cash flow forecasts, including projected future

growth rates for income and expenses and discount rates;

• performing sensitivity analyses on the key assumptions,

including projected profitability, expected growth rates and

discount rates adopted in the discounted cash flow forecasts

and assessing whether there were any indicators of

management bias in the selection of these assumptions.

REVENUE RECOGNITION

Refer to accounting policies 18 and 19 and notes 1 and 19 to the consolidated financial statements

The Key Audit Matter How the matter was addressed in our audit

Passenger and cargo sales are recognised as revenue when the

related transportation service is provided. The value of the sales

for which the related transportation service has not yet been

provided at the end of the reporting period, adjusted for

breakage, is recorded as a contract liability.

The value attributed to programme awards under the Group’s

customer loyalty programme, Asia Miles, is recognised as a

contract liability. This arises as members of the programme

accumulate Asia Miles by travelling on the Group’s flights or

when the Group sells Asia Miles to participating partners in the

programme. The amount is subsequently recognised as income

when the related goods or services are provided subsequent to

the redemption of the Asia Miles. Management allocates the

amount received in relation to mileage earning flights, based on

stand-alone selling price, between the flight and Asia Miles

earned by members of the programme.

The Group maintains sophisticated information technology (“IT”)

systems in order to track the point of service provision for each

sale and also to track the issuance and subsequent redemption

and utilisation of Asia Miles.

We identified revenue recognition as a key audit matter because

revenue is one of the Group’s key performance indicators and it

involves complicated IT systems and allocation of revenue

between flights and Asia Miles, all of which give rise to an

inherent risk that revenue could be recorded in the incorrect

period or could be subject to manipulation to meet targets or

expectations.

Our audit procedures to assess revenue recognition included

the following:

• assessing the design, implementation and operating

effectiveness of management’s general IT controls and key

application controls over the Group’s IT systems which

govern revenue recognition, including access controls,

controls over programme changes, interfaces between

different systems and key manual internal controls over

revenue recognition;

• performing substantive 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 revenue related

journal entries which met specified risk-based criteria;

• assessing management’s estimate of the unit stand-alone

selling price of Asia Miles and the allocation of the amount

received in relation to mileage earning flights between the

flight and contract liability attributable to Asia Miles earned by

members;

• inspecting 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.

Cathay Pacific Airways Limited Annual Report 2023 77

INDEPENDENT AUDITOR’S REPORT

HEDGE ACCOUNTING

Refer to accounting policy 10 and notes 11, 13, 16, 18, 22 and 29 to the consolidated financial statements

The Key Audit Matter How the matter was addressed in our audit

The Group enters into derivative financial instrument contracts in

order to manage its exposure to fuel price risk, foreign currency

risk and interest rate risk, which arise during the normal course of

its business. Hedge accounting under HKFRS 9 is applied to a

majority of these arrangements, and related contracts gave rise

to derivative financial assets of HK$298 million and derivative

financial liabilities of HK$626 million as at 31st December 2023.

We identified hedge accounting (including the valuation of

hedging instruments) as a key audit matter because hedge

accounting can be complex and the Group has entered into a

large number of derivative contracts and designated them as

hedging instruments, necessitating a sophisticated system to

record and track each hedging relationship. In addition, the

valuation of hedging instruments can involve a significant degree

of both complexity and management judgement, and hence is

subject to an inherent risk of error.

Our audit procedures to assess hedge accounting included the

following:

• assessing the design, implementation and operating

effectiveness of management’s key internal controls over

derivative financial instruments and the application of hedge

accounting;

• obtaining written confirmations from contract counterparties

for derivative financial instruments that existed at the

reporting date on a sample basis;

• inspecting management’s hedge documentation and

contracts, on a sample basis, for the purpose of assessing

whether the designation of hedging relationships was in

accordance with the requirements of 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.

INFORMATION OTHER THAN THE

CONSOLIDATED FINANCIAL STATEMENTS

AND AUDITOR’S REPORT THEREON

The Directors are responsible for the other information. The

other information comprises all the information included in

the annual report other than the consolidated financial

statements and our auditor’s report thereon. Our opinion on

the consolidated financial statements does not cover the

other information and we do not express any form of

assurance conclusion thereon.

In connection with our audit of the consolidated financial

statements, our responsibility is to read the other

information and, in doing so, consider whether the other

information is materially inconsistent with the consolidated

financial statements or our knowledge obtained in the audit

or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that

there is a material misstatement of this other information,

we are required to report that fact. We have nothing to

report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR

THE CONSOLIDATED FINANCIAL STATEMENTS

The Directors are responsible for the preparation of the

consolidated financial statements that give a true and fair

view in accordance with HKFRSs issued by the HKICPA and

the Hong Kong Companies Ordinance and for such internal

control as the Directors determine is necessary to enable

the preparation of consolidated financial statements that

are free from material misstatement, whether due to fraud

or error.

In preparing the consolidated financial statements, the

Directors are responsible for assessing the Group’s ability

to continue as a going concern, disclosing, as applicable,

matters related to going concern and using the going

concern basis of accounting unless the Directors either

intend to liquidate the Group or to cease operations, or have

no realistic alternative but to do so.

The Directors are assisted by the Audit Committee in

discharging their responsibilities for overseeing the Group’s

financial reporting process.

AUDITOR’S RESPONSIBILITIES FOR THE

AUDIT OF THE CONSOLIDATED FINANCIAL

STATEMENTS

Our objectives are to obtain reasonable assurance about

whether the consolidated financial statements as a whole

are free from material misstatement, whether due to fraud

or error, and to issue an auditor’s report that includes our

opinion. This report is made solely to you, as a body, in

accordance with section 405 of the Hong Kong Companies

Ordinance, and for no other purpose. We do not assume

responsibility towards or accept liability to any other person

for the contents of this report.

78 Cathay Pacific Airways Limited Annual Report 2023

INDEPENDENT AUDITOR’S REPORT

Reasonable assurance is a high level of assurance, but is

not a guarantee that an audit conducted in accordance with

HKSAs will always detect a material misstatement when it

exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they

could reasonably be expected to influence the economic

decisions of users taken on the basis of these consolidated

financial statements.

As part of an audit in accordance with HKSAs, we exercise

professional judgement and maintain professional

scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of

the consolidated financial statements, whether due to

fraud or error, design and perform audit procedures

responsive to those risks and obtain audit evidence that

is sufficient and appropriate to provide a basis for our

opinion. The risk of not detecting a material misstatement

resulting from fraud is higher than for one resulting from

error, as fraud may involve collusion, forgery, intentional

omissions, misrepresentations or the override of

internalcontrol.

• Obtain an understanding of internal control relevant to

the audit in order to design audit procedures that are

appropriate in the circumstances but not for the purpose

of expressing an opinion on the effectiveness of the

Group’s internal control.

• Evaluate the appropriateness of accounting policies used

and the reasonableness of accounting estimates and

related disclosures made by the Directors.

• Conclude on the appropriateness of the Directors’ use of

the going concern basis of accounting and, based on the

audit evidence obtained, whether a material uncertainty

exists related to events or conditions that may cast

significant doubt on the Group’s ability to continue as a

going concern. If we conclude that a material uncertainty

exists, we are required to draw attention in our auditor’s

report to the related disclosures in the consolidated

financial statements or, if such disclosures are

inadequate, to modify our opinion. Our conclusions are

based on the audit evidence obtained up to the date of

our auditor’s report. However, future events or conditions

may cause the Group to cease to continue as a

goingconcern.

• Evaluate the overall presentation, structure and content

of the consolidated financial statements, including the

disclosures, and whether the consolidated financial

statements represent the underlying transactions and

events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding

the financial information of the entities or business

activities within the Group to express an opinion on the

consolidated financial statements. We are responsible for

the direction, supervision and performance of the Group

audit. We remain solely responsible for our audit opinion.

We communicate with the Audit Committee regarding,

among other matters, the planned scope and timing of the

audit and significant audit findings, including any significant

deficiencies in internal control that we identify during

ouraudit.

We also provide the Audit Committee with a statement that

we have complied with relevant ethical requirements

regarding independence and communicate with them all

relationships and other matters that may reasonably be

thought to bear on our independence and, where

applicable, actions taken to eliminate threats or

safeguardsapplied.

From the matters communicated with the Audit Committee,

we determine those matters that were of most significance

in the audit of the consolidated financial statements of the

current period and are therefore the key audit matters. We

describe these matters in our auditor’s report unless law or

regulation precludes public disclosure about the matter or

when, in extremely rare circumstances, we determine that a

matter should not be communicated in our report because

the adverse consequences of doing so would reasonably

be expected to outweigh the public interest benefits of

such communication.

The engagement partner on the audit resulting in this

independent auditor’s report is Leung Sze Kit Roy.

KPMG

Certified Public Accountants

8th Floor, Prince’s Building

10 Chater Road

Central, Hong Kong

13th March 2024

Cathay Pacific Airways Limited Annual Report 2023 79

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

for the year ended 31st December 2023

Note

2023

HK$M

2022

(restated)*

HK$M

2023

US$M

2022

(restated)*

US$M

Revenue

Passenger services 61,437 14,333 7,876 1,838

Cargo services 25,606 30,554 3,283 3,917

Other services and recoveries 7,442 6,149 954 788

Total revenue 94,485 51,036 12,113 6,543

Expenses

Staff (14,785) (10,646) (1,896) (1,365)

Inflight service and passenger expenses (3,026) (694) (388) (89)

Landing, parking and route expenses (11,190) (5,590) (1,435) (717)

Fuel, including hedging gains (24,989) (10,488) (3,204) (1,345)

Aircraft maintenance (7,357) (3,206) (943) (411)

Aircraft depreciation and rentals (9,860) (9,884) (1,264) (1,267)

Other depreciation, amortisation and rentals (2,578) (2,544) (331) (326)

Others (7,701) (4,513) (986) (578)

Operating expenses (81,486) (47,565) (10,447) (6,098)

Operating profit before non-recurring items 12,999 3,471 1,666 445

Gain on deemed partial disposal of an associate 2 1,929 – 247 –

Net reversal of impairment and other gains or charges 197 – 26 –

Operating profit 3 15,125 3,471 1,939 445

Finance charges (3,961) (3,074) (507) (394)

Finance income 1,228 165 157 21

Net finance charges 4 (2,733) (2,909) (350) (373)

Share of losses of associates (1,534) (6,677) (197) (856)

Profit/(loss) before taxation 10,858 (6,115) 1,392 (784)

Taxation 5 (1,068) (507) (137) (65)

Profit/(loss) for the year 9,790 (6,622) 1,255 (849)

Profit/(loss) for the year attributable to

Ordinary shareholders of the Cathay Group 9,067 (7,237) 1,162 (928)

Preference shareholder of the Cathay Group 21 722 614 93 79

Non-controlling interests 1 1 – –

Profit/(loss) for the year 9,790 (6,622) 1,255 (849)

Underlying profit/(loss) attributable to shareholders of

the Cathay Group^ 7,663 (6,623) 982 (849)

Earnings/(loss) per ordinary share

Basic 6 140.8¢ (112.4)¢ 18.1¢ (14.4)¢

Diluted 6 125.8¢ (112.4)¢ 16.1¢ (14.4)¢

Background and details of 2022 restatement can be found in material accounting policy 1(b).

The underlying profit/(loss) was calculated excluding non-recurring items, which included a deemed partial disposal gain of HK$1,929 million and a

total of HK$197 million in net reversal of impairment loss and other gains or charges.

The financial statements are prepared and presented in HK$, the functional currency of Cathay Pacific. The US$ figures are

shown only as supplementary information and are translated at US$1:HK$7.8.

The notes on pages 84 to 139 and the material accounting policies on pages 140 to 153 form part of these financial

statements.

80 Cathay Pacific Airways Limited Annual Report 2023

CONSOLIDATED STATEMENT OF

OTHER COMPREHENSIVE INCOME

for the year ended 31st December 2023

Note

2023

HK$M

2022

(restated)*

HK$M

2023

US$M

2022

(restated)*

US$M

Profit/(loss) for the year 9,790 (6,622) 1,255 (849)

Other comprehensive income

Items that are or may be reclassified subsequently to profit or loss:

Cash flow hedges (1,201) (707) (154) (90)

Share of other comprehensive income of associates (252) 227 (32) 29

Exchange differences on translation of foreign operations (555) (1,442) (71) (185)

Items that are or may not be reclassified subsequently to profit

or loss:

Defined benefit plans 157 108 20 14

Revaluation of equity investments designated at fair value through

other comprehensive income (non-recycling) (2) (4) – (1)

Other comprehensive loss for the year, net of taxation 7 (1,853) (1,818) (237) (233)

Total comprehensive income/(loss) for the year 7,937 (8,440) 1,018 (1,082)

Total comprehensive income attributable to

Ordinary shareholders of the Cathay Group 7,214 (9,055) 925 (1,161)

Preference shareholder of the Cathay Group 21 722 614 93 79

Non-controlling interests 1 1 – –

7,937 (8,440) 1,018 (1,082)

Background and details of 2022 restatement can be found in material accounting policy 1(b).

The financial statements are prepared and presented in HK$, the functional currency of Cathay Pacific. The US$ figures are

shown only as supplementary information and are translated at US$1:HK$7.8.

The notes on pages 84 to 139 and the material accounting policies on pages 140 to 153 form part of these financial

statements.

Cathay Pacific Airways Limited Annual Report 2023 81

Note

2023

HK$M

2022

(restated)*

HK$M

2023

US$M

2022

(restated)*

US$M

ASSETS AND LIABILITIES

Non-current assets and liabilities

Property, plant and equipment

8 116,088 118,855 14,883 15,238

Intangible assets

9 14,539 14,800 1,864 1,898

Investments in associates

10 16,046 16,492 2,057 2,114

Other long-term receivables and investments

11 3,608 3,297 463 423

Deferred tax assets

15 1,085 1,134 139 145

151,366 154,578 19,406 19,818

Interest-bearing liabilities

12 (57,771) (62,463) (7,407) (8,008)

Other long-term payables

13 (2,810) (2,841) (360) (365)

Other long-term contract liabilities

19 (252) (282) (33) (36)

Deferred tax liabilities

15 (7,756) (8,117) (994) (1,041)

(68,589) (73,703) (8,794) (9,450)

Net non-current assets 82,777 80,875 10,612 10,368

Current assets and liabilities

Stock 967 1,137 124 146

Trade and other receivables

16 6,252 6,921 801 887

Assets held for sale – 1 – –

Liquid funds

17 15,530 18,277 1,991 2,343

22,749 26,336 2,916 3,376

Interest-bearing liabilities

12 (10,523) (14,643) (1,349) (1,877)

Trade and other payables

18 (17,238) (11,199) (2,210) (1,436)

Contract liabilities

19 (15,223) (13,537) (1,951) (1,735)

Taxation (2,509) (4,023) (322) (516)

(45,493) (43,402) (5,832) (5,564)

Net current liabilities (22,744) (17,066) (2,916) (2,188)

Total assets less current liabilities 128,622 137,512 16,490 17,630

Net assets 60,033 63,809 7,696 8,180

CAPITAL AND RESERVES

Share capital

20 28,828 48,322 3,696 6,195

Reserves

22 31,198 15,481 3,999 1,984

Funds attributable to the shareholders of the Cathay Group 60,026 63,803 7,695 8,179

Non-controlling interests 7 6 1 1

Total equity 60,033 63,809 7,696 8,180

Background and details of 2022 restatement can be found in material accounting policy 1(b).

The financial statements are prepared and presented in HK$, the functional currency of Cathay Pacific. The US$ figures are

shown only as supplementary information and are translated at US$1:HK$7.8.

The notes on pages 84 to 139 and the material accounting policies on pages 140 to 153 form part of these financial

statements.

Patrick Healy John Harrison

Director Director

Hong Kong, 13th March 2024

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 31st December 2023

82 Cathay Pacific Airways Limited Annual Report 2023

Note

2023

HK$M

2022

HK$M

2023

US$M

2022

US$M

Operating activities

Cash generated from operations

23 32,148 21,386 4,122 2,742

Interest received 737 129 94 17

Interest paid (3,364) (2,432) (431) (313)

Tax paid (3,113) (1,247) (399) (160)

Net cash inflow from operating activities 26,408 17,836 3,386 2,286

Investing activities

Net decrease/(increase) in liquid funds other than cash

and cash equivalents 3,873 (183) 497 (23)

Proceeds from sales of property, plant and equipment 222 50 28 6

Net increase in other long-term receivables

and investments (57) (17) (7) (2)

Payments for property, plant and equipment

and intangible assets (6,801) (3,729) (872) (478)

Dividends received 66 1,096 8 140

Repayment of loan to associates 29 23 4 3

Net cash outflow from investing activities (2,668) (2,760) (342) (354)

Financing activities

New financing

12 4,654 6,115 596 784

Loan and lease repayments

12 (16,386) (22,351) (2,101) (2,865)

Initial cash benefit from lease arrangements 273 – 35 –

Preference shares redemption

20 (9,750) – (1,250) –

Dividends paid – preference shares (1,969) – (252) –

Net cash outflow from financing activities (23,178) (16,236) (2,972) (2,081)

Net increase/(decrease) in cash and cash equivalents 562 (1,160) 72 (149)

Cash and cash equivalents at 1st January 7,340 8,573 941 1,099

Effect of exchange differences (8) (73) (1) (9)

Cash and cash equivalents at 31st December

17 7,894 7,340 1,012 941

The financial statements are prepared and presented in HK$, the functional currency of Cathay Pacific. The US$ figures are

shown only as supplementary information and are translated at US$1:HK$7.8.

The notes on pages 84 to 139 and the material accounting policies on pages 140 to 153 form part of these financial

statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31st December 2023

Cathay Pacific Airways Limited Annual Report 2023 83

Attributable to the shareholders of the Cathay Group

capital

HK$M

Preference

reserve

HK$M

Convertible

bond

reserve

HK$M

Retained

profit

HK$M

Investment

revaluation

reserve

(non-

recycling)

HK$M

Cash flow

hedge

reserve

HK$M

Others

HK$M

Total

HK$M

Non-

controlling

interests

HK$M

Total

equity

HK$M

At 1st January 2023

(restated)* 48,322 – 526 13,209 (157) 1,467 436 63,803 6 63,809

Profit for the year – – – 9,789 – – – 9,789 1 9,790

Other comprehensive income – – – 157 (2) (1,201) (807) (1,853) – (1,853)

Total comprehensive

income for the year – – – 9,946 (2) (1,201) (807) 7,936 1 7,937

Convertible bond conversion 6 – – – – – – 6 – 6

Proposed capital reduction (19,500) 19,500 – – – – – – – –

Redeemed preference shares – (9,750) – – – – – (9,750) – (9,750)

Dividend – preference shares – – – (1,969) – – – (1,969) – (1,969)

At 31st December 2023 28,828 9,750 526 21,186 (159) 266 (371) 60,026 7 60,033

At 1st January 2022 48,322 – 526 19,724 (153) 2,174 1,651 72,244 5 72,249

Loss for the year (restated)* – – – (6,623) – – – (6,623) 1 (6,622)

Other comprehensive income – – – 108 (4) (707) (1,215) (1,818) – (1,818)

Total comprehensive

income for the year

(restated) – – – (6,515) (4) (707) (1,215) (8,441) 1 (8,440)

At 31st December 2022

(restated)* 48,322 – 526 13,209 (157) 1,467 436 63,803 6 63,809

Background and details of 2022 restatement can be found in material accounting policy 1(b).

The notes on pages 84 to 139 and the material accounting policies on pages 140 to 153 form part of these financial

statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31st December 2023

84 Cathay Pacific Airways Limited Annual Report 2023

1. SEGMENT INFORMATION

(a) Segment results

2023

Cathay Pacific

HK$M

HK Express

HK$M

Air Hong

Kong

HK$M

Airline

services

HK$M

Associates

HK$M

Total

HK$M

Profit or loss

Sales to external customers 84,687 5,603 3,447 748 94,485

Inter-segment sales 653 – 7 3,110 3,770

Segment revenue 85,340 5,603 3,454 3,858 98,255

Segment profit/(loss), before

non-recurring items 11,588 850 924 (363) – 12,999

Gain on deemed partial disposal of

an associate 1,929 – – – – 1,929

Net reversal of impairment and

other gains or charges 197 – – – – 197

Segment profit/(loss) 13,714 850 924 (363) – 15,125

Net finance (charges)/income (1,546) (360) 8 (835) – (2,733)

12,168 490 932 (1,198) – 12,392

Share of losses of associates – – – – (1,534) (1,534)

Profit/(loss) before taxation 12,168 490 932 (1,198) (1,534) 10,858

Taxation (827) (57) (154) (2) (28) (1,068)

Profit/(loss) for the year 11,341 433 778 (1,200) (1,562) 9,790

Non-controlling interests – – – (1) – (1)

Profit/(loss) attributable to the shareholders

of the Cathay Group 11,341 433 778 (1,201) (1,562) 9,789

Other segment information

Depreciation and amortisation 10,931 745 6 642 12,324

Purchase of property, plant and equipment

and intangible assets 8,893 121 – 57 9,071

NOTES TO THE FINANCIAL STATEMENTS

Statement of Profit or Loss and Other Comprehensive Income

Cathay Pacific Airways Limited Annual Report 2023 85

NOTES TO THE FINANCIAL STATEMENTS

Statement of Profit or Loss and Other Comprehensive Income

1. SEGMENT INFORMATION (continued)

2022

Cathay Pacific

HK$M

HK Express

HK$M

Air Hong

Kong

HK$M

Airline

services

HK$M

Associates

HK$M

Total

HK$M

Profit or loss

Sales to external customers 45,899 692 3,541 904 51,036

Inter-segment sales 483 – 5 1,545 2,033

Segment revenue 46,382 692 3,546 2,449 53,069

Segment profit/(loss) (restated) 4,447 (1,251) 927 (652) – 3,471

Net finance (charges)/income (1,991) (389) 2 (531) – (2,909)

2,456 (1,640) 929 (1,183) – 562

Share of losses of associates – – – – (6,677) (6,677)

Profit/(loss) before taxation (restated) 2,456 (1,640) 929 (1,183) (6,677) (6,115)

Taxation (1,022) 271 (153) 13 384 (507)

Profit/(loss) for the year (restated) 1,434 (1,369) 776 (1,170) (6,293) (6,622)

Non-controlling interests – – – (1) – (1)

Profit/(loss) attributable to the shareholders

of the Cathay Group (restated) 1,434 (1,369) 776 (1,171) (6,293) (6,623)

Other segment information

Depreciation and amortisation 10,755 744 5 685 12,189

Purchase of property, plant and equipment

and intangible assets 6,958 64 2 60 7,084

(i) Cathay Pacific provides full service international passenger and cargo air transportation. Management

considers that there is no suitable basis for allocating operating results between passenger and cargo

operations. Accordingly these operations 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 represent our supporting airline operations including catering, cargo terminal operations,

ground handling services and commercial laundry operations.

(v) Associates represent the share of results from associates held by the Group under the equity method.

The composition of reportable segments of the Group is determined according to the nature of the business, and is

aligned with financial information provided regularly to the Group’s executive management.

Inter-segment sales are based on prices set on an arm’s length basis.

The Group has applied the practical expedient in paragraph 121 of HKFRS 15 “Revenue from Contracts with

Customers” to its sales contracts such that the Group does not disclose the amount of the transaction price

allocated to the remaining performance obligations when the performance obligation is part of a contract that has

an original expected duration of one year or less.

86 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Profit or Loss and Other Comprehensive Income

1. SEGMENT INFORMATION (continued)

(b) Geographical information

2023

HK$M

2022

HK$M

Revenue by origin of sale:

North Asia

– Chinese Mainland, Hong Kong and Taiwan 57,435 34,456

– Japan and Korea 3,841 2,538

Americas 12,458 4,476

Europe 8,248 2,836

Southeast Asia 5,758 4,135

Southwest Pacific 4,310 1,218

South Asia, Middle East and Africa 2,435 1,377

94,485 51,036

Analysis of net assets by geographical segment:

The major revenue earning asset is the aircraft fleet, which is registered in Hong Kong and is employed across the

Group’s worldwide route network. Management considers that there is no suitable basis for allocating such assets

and related liabilities to geographical segments. Accordingly, analysis of the Group’s assets by geographical

regions is not disclosed.

2. GAIN ON DEEMED PARTIAL DISPOSAL OF AN ASSOCIATE

On 16th January 2023, the Group’s interest in Air China was diluted from 18.13% to 16.26% as a result of Air China

issuing 1,676 million new A shares to investors with proceeds of the issuance totalling RMB15 billion. Notwithstanding

the dilution, the Group continues to have significant influence over Air China and has continued to equity account for its

interest in Air China as an associate.

A gain on this deemed partial disposal of HK$1,929 million was recorded, principally reflecting the change in the Group’s

share of net assets in Air China immediately before and after the share issuance.

3. OPERATING PROFIT

2023

HK$M

2022

HK$M

Operating profit has been arrived at after charging/(crediting):

Depreciation of property, plant and equipment

– right-of-use assets 4,266 4,798

– owned 7,464 6,761

Amortisation of intangible assets 594 630

Reversal of impairment on non-financial assets

– property, plant and equipment (208) –

Expenses relating to short-term leases and leases of low-value assets 9 16

Covid-19-related rent concessions recognised – (108)

Loss on disposal of property, plant and equipment, net 33 143

Loss on disposal of intangible assets 1 9

Cost of stock expensed 1,300 662

Exchange differences, net 162 293

Auditors’ remuneration 16 16

Government grants (563) (1,454)

Dividend income from unlisted equity investments (58) (90)

Cathay Pacific Airways Limited Annual Report 2023 87

NOTES TO THE FINANCIAL STATEMENTS

Statement of Profit or Loss and Other Comprehensive Income

4. NET FINANCE CHARGES

2023

HK$M

2022

HK$M

Net interest charges comprise:

– lease liabilities stated at amortised cost 1,497 1,084

– bank loans and overdrafts

– wholly repayable within five years 928 622

– not wholly repayable within five years 611 342

– other borrowings

– wholly repayable within five years 594 666

– not wholly repayable within five years 331 315

3,961 3,029

Income from liquid funds:

– funds with investment managers and other liquid investments at fair value

through profit or loss (565) (30)

– bank deposits and others (571) (135)

(1,136) (165)

Fair value change:

– (gains)/losses on financial derivatives (92) 45

2,733 2,909

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 losses from derivatives that are classified as fair

value through profit or loss of HK$17 million (2022: net gains of HK$74 million).

5. TAXATION

2023

HK$M

2022

HK$M

Current tax expenses

– Hong Kong profits tax 142 143

– overseas tax 133 463

– (over)/under provisions for prior years (166) 384

Deferred tax

– origination and reversal of temporary differences (note 15) 959 (483)

1,068 507

Hong Kong profits tax is calculated at 16.5% (2022: 16.5%) on the estimated assessable profits for the year. Overseas

tax is calculated at rates of tax applicable in countries in which the Group is assessable for tax. Tax provisions are

reviewed regularly to take into account changes in legislation, practice, and the status of negotiations (see note 28(c) to

the financial statements).

88 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Profit or Loss and Other Comprehensive Income

5. TAXATION (continued)

A reconciliation between tax charge and accounting profit/(loss) at applicable tax rates is as follows:

2023

HK$M

2022

(restated)

HK$M

Profit/(loss) before taxation 10,858 (6,115)

Notional tax charge/(credit) calculated at Hong Kong profits tax rate of 16.5% (2022: 16.5%) 1,792 (1,009)

Expenses not deductible for tax purposes 332 420

Income not subject to tax (259) (73)

Effect of changes in effective tax rate and jurisdictional differences (542) 849

Tax (over)/under provisions arising from prior years (166) 384

Recognition of tax losses previously not recognised (89) (64)

Tax charge 1,068 507

Further information on deferred taxation is shown in note 15 to the financial statements.

Pillar Two income taxes

The Group is within the scope of the Organisation for Economic Co-operation and Development (“OECD”) Pillar Two

model rules. However, there were no new tax laws implementing the Pillar Two model rules that were enacted or

substantively enacted by 31st December 2023 in the jurisdictions where the Group operates and has Pillar Two

reporting obligations. Since the Pillar Two legislation was not effective at the reporting date, the Group has no related

current tax exposure. The Group applies the exception to recognising and disclosing information about deferred tax

assets and liabilities related to Pillar Two income taxes, as provided in the amendments to HKAS 12 issued in July 2023.

Under the legislation, the Group will be liable to pay a top-up tax for the difference between its Global Anti-Base Erosion

(“GloBE”) effective tax rate per jurisdiction and the 15% minimum rate. The basis of GloBE Income calculation for the

aviation industry is subject to further guidance from the OECD. As a result, the quantitative impact of the enacted or

substantively enacted legislation cannot yet be reasonably estimated due to the complexities in applying the legislation

and calculating GloBE Income. The Group is in the process of assessing its exposure to the Pillar Two legislation for

when it comes into effect.

Cathay Pacific Airways Limited Annual Report 2023 89

NOTES TO THE FINANCIAL STATEMENTS

Statement of Profit or Loss and Other Comprehensive Income

6. EARNINGS/LOSS PER ORDINARY SHARE

2023 2022

Profit

(a)

HK$M

Weighted average

number of ordinary

Per share

amount

HK cents

Loss

(a)

(restated)

HK$M

Weighted average

number of ordinary

Per share

amount

(restated)

HK cents

Basic earnings/(loss) per

ordinary share 9,067 6,437,462,747 140.8 (7,237) 6,437,200,203 (112.4)

Effect of dilutive potential

ordinary shares

(b)

– Deemed issue of ordinary

shares from the exercise of

warrants – 171,574,435 – –

– Convertible bonds and its

after tax effect of effective

interest 235 786,201,867 – –

Diluted earnings/(loss) per

ordinary share 9,302 7,395,239,049 125.8 (7,237) 6,437,200,203 (112.4)

(a) The amounts represent the profit/(loss) attributable to the ordinary shareholders of the Cathay Group, which is the

profit/(loss) for the year after non-controlling interests and dividends attributable to the holder of the cumulative

preference shares classified as equity.

(b) On 12th August 2020, the Company issued warrants which entitle the holder to subscribe for up to 416,666,666

ordinary shares. On 5th February 2021, the Company issued convertible bonds which entitle the holder to convert

up to 786,464,410 ordinary shares. During the year, convertible bonds with a principal amount of HK$6,000,000

were converted into 700,116 ordinary shares. The Company’s warrants and convertible bonds as at 31st December

2023 have a dilutive effect on the earnings per ordinary share. The dilutive impact for the year ended 31st

December 2023 is presented above.

90 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Profit or Loss and Other Comprehensive Income

7. OTHER COMPREHENSIVE LOSS

2023

HK$M

2022

HK$M

Cash flow hedges

– gains recognised during the year 4 3,011

– gains transferred to profit or loss (note 22) (1,326) (3,792)

– deferred taxation (note 15) 121 74

Share of other comprehensive income of associates

– recognised during the year (252) 227

Exchange differences on translation of foreign operations

– losses recognised during the year (479) (1,442)

– reclassified to profit or loss upon deemed partial disposal (76) –

Defined benefit plans

– remeasurement gains/(losses) recognised during the year (note 14)

– defined benefit retirement schemes 161 105

– long service payment obligation (6) –

– deferred taxation (note 15) 2 3

Revaluation of equity investments designated at fair value through other comprehensive

income (non-recycling)

– loss recognised during the year (2) (4)

Other comprehensive loss for the year (1,853) (1,818)

Cathay Pacific Airways Limited Annual Report 2023 91

8. PROPERTY, PLANT AND EQUIPMENT

Aircraft and related

equipment Other equipment Land and buildings

Owned

HK$M

Right-of-

use

assets

HK$M

Owned

HK$M

Right-of-

use

assets

HK$M

Owned

HK$M

Right-of-

use

assets

HK$M

Under

construction

HK$M

Total

HK$M

Cost

At 1st January 2023 139,032 58,524 5,339 259 15,206 7,505 – 225,865

Additions 5,581 2,852 134 – 89 75 – 8,731

Disposals (1,605) (563) (93) (23) – (55) – (2,339)

Transfers 15,380 (15,383) 3 – – – – –

Other right-of-use asset

adjustments – 89 – 9 – 213 – 311

At 31st December 2023 158,388 45,519 5,383 245 15,295 7,738 – 232,568

At 1st January 2022 139,822 60,543 5,359 315 15,191 7,463 20 228,713

Additions 3,275 3,145 47 1 72 137 1 6,678

Disposals (8,103) (1,242) (60) (60) (78) (151) – (9,694)

Reclassification to assets

held for sale – – (7) – – – – (7)

Transfers 4,038 (4,038) – – 21 – (21) –

Other right-of-use asset

adjustments – 116 – 3 – 56 – 175

At 31st December 2022 139,032 58,524 5,339 259 15,206 7,505 – 225,865

Accumulated depreciation

and impairment

At 1st January 2023 68,246 21,444 4,217 157 9,004 3,942 – 107,010

Charge for the year 6,672 3,518 188 39 604 709 – 11,730

Disposals (1,322) (562) (92) (23) – (53) – (2,052)

Reversal of impairment (208) – – – – – – (208)

Transfers 7,943 (7,943) – – – – – –

At 31st December 2023 81,331 16,457 4,313 173 9,608 4,598 – 116,480

At 1st January 2022 67,688 21,094 4,095 143 8,441 3,262 – 104,723

Charge for the year 5,937 3,930 186 46 638 822 – 11,559

Disposals (7,717) (1,242) (57) (32) (75) (142) – (9,265)

Reclassification to assets

held for sale – – (7) – – – – (7)

Transfers 2,338 (2,338) – – – – – –

At 31st December 2022 68,246 21,444 4,217 157 9,004 3,942 – 107,010

Net book value

At 31st December 2023 77,057 29,062 1,070 72 5,687 3,140 – 116,088

At 31st December 2022 70,786 37,080 1,122 102 6,202 3,563 – 118,855

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

92 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

8. PROPERTY, PLANT AND EQUIPMENT (continued)

(a) Right-of-use assets

The Group is the lessee in respect of a number of aircraft and related equipment, land and buildings and other

equipment held under leases. Future lease payments are recognised as right-of-use assets and lease liabilities in

the consolidated statement of financial position in accordance with accounting policies 6 and 9 respectively.

During the year, additions to right-of-use assets were HK$2,927 million (2022: HK$3,283 million), a significant

proportion of which is related to the delivery of leased aircraft.

Details of cash outflows and significant non-cash transactions for leases, and the maturity analysis of lease

liabilities are set out in notes 24 and 12 to the financial statements, respectively.

The Group previously applied the practical expedient in HKFRS 16 such that as lessee it was not required to assess

whether rent concessions occurring as a direct consequence of the Covid-19 pandemic were lease modifications, if

the eligibility conditions were met. One of these conditions requires that the reduction in lease payments affect only

payments due before 30th June 2022. The eligible rent concessions were accounted for as negative variable lease

payments, and were recognised in profit or loss in 2022 in which the event or condition that triggers those

payments occurred. There was no such event in 2023.

(i) Aircraft and related equipment

The Group has obtained the right to use aircraft and related equipment through lease arrangements.

The Group held 28 aircraft at 31st December 2023 (2022: 37) 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 one month to 11 years.

The Group also held 46 aircraft at 31st December 2023 (2022: 49) of which 46 (2022: 48) 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 three months to 10 years. The lease of one aircraft was terminated but

remained in the fleet profile as it had not been de-registered in 2022.

Some of the lease payments are partially fixed and partially floating that are generally linked to market rates of

interest. The amounts of fixed and floating lease payments are included in the measurement of lease liabilities.

There are no other variable lease payments that do not depend on an index or a rate.

Some leases include an option to renew the lease for an additional period after the end of the contract term.

Where practicable, the Group seeks to include such extension options exercisable by the Group to provide

operational flexibility. The Group assesses whether it is reasonably certain to exercise the extension options. If

the Group is not reasonably certain to exercise the extension options, the future lease payments during the

extension periods are not included in the measurement of lease liabilities. The potential exposure to these

future lease payments is summarised below:

Lease liabilities recognised

(discounted)

Potential future lease payments

under extension options not

included in lease liabilities

(undiscounted)

2023

HK$M

2022

HK$M

2023

HK$M

2022

HK$M

Aircraft and related equipment 26,146 28,683 4,375 5,228

(ii) Other equipment

The Group leases other equipment under leases expiring from one to three years. Some leases include an

option to renew the lease and none of the leases includes variable lease payments.

Cathay Pacific Airways Limited Annual Report 2023 93

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

8. PROPERTY, PLANT AND EQUIPMENT (continued)

(iii) Ownership interests in leasehold land held for own use

The Group holds several leasehold land interests 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 24 years.

(iv) Properties leased for own use

The Group leases other properties under leases expiring from one to 10 years. Some leases include an option

to renew the lease and some of the leases include insignificant amounts of variable lease payments.

(b) Advance payments are made to manufacturers for aircraft and related equipment to be delivered in future years. At

31st December 2023 advance payments included in owned aircraft and related equipment amounted to HK$3,231

million (2022: HK$2,964 million). No depreciation is provided on these advance payments.

provide the underlying finance. Further information is provided in note 12 to the financial statements.

(d) During the year ended 31st December 2023, no impairment was recognised for the Group’s cash generating units

and non-financial assets. A reversal of impairment of HK$208 million under Cathay Pacific in connection with three

previously impaired aircraft returned to service.

9. INTANGIBLE ASSETS

Goodwill

HK$M

Computer

software

HK$M

Others

HK$M

Total – Intangible

assets

HK$M

Prepayments

HK$M

Total – Intangible

assets and related

prepayments

HK$M

Cost

At 1st January 2023 11,654 8,751 39 20,444 24 20,468

Additions – 334 – 334 6 340

Disposals – (3) – (3) – (3)

At 31st December 2023 11,654 9,082 39 20,775 30 20,805

At 1st January 2022 11,654 8,425 39 20,118 8 20,126

Additions – 390 – 390 16 406

Disposals – (64) – (64) – (64)

At 31st December 2022 11,654 8,751 39 20,444 24 20,468

Accumulated amortisation

and impairment

At 1st January 2023 39 5,595 32 5,666 2 5,668

Charge for the year – 590 4 594 6 600

Disposal – (2) – (2) – (2)

At 31st December 2023 39 6,183 36 6,258 8 6,266

At 1st January 2022 39 5,024 28 5,091 – 5,091

Charge for the year – 626 4 630 2 632

Disposal – (55) – (55) – (55)

At 31st December 2022 39 5,595 32 5,666 2 5,668

Net book value

At 31st December 2023 11,615 2,899 3 14,517 22 14,539

At 31st December 2022 11,615 3,156 7 14,778 22 14,800

94 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

9. INTANGIBLE ASSETS (continued)

Goodwill is allocated to the Group’s Cash Generating Units (“CGUs”) as follows:

2023

HK$M

2022

HK$M

Cathay Pacific 7,884 7,884

HK Express 3,616 3,616

Others 115 115

11,615 11,615

The recoverable amount of each of the Group’s CGUs was based on the higher of its fair value less costs of disposal and

its value in use (“VIU”). The VIUs of the Group’s two principal operating CGUs (Cathay Pacific and HK Express) were

estimated using a discounted cash flow analysis.

The calculations use cash flow projections that are based on business plans prepared by management and supported

by the Board of Directors. The business plans reflect the most recent developments as at the reporting date.

Management’s expectations reflect performance to date and are consistent with the assumptions that it considers a

market participant would make.

For the Cathay Pacific CGU the assessment assumes a strong recovery in passenger travel in the near term with a

steadily growing momentum of passenger traffic in the longer term. However, the revenue efficiency in the long-term

forecast is considered weaker than historical levels owing to increased competition associated with the new Three

Runway System at Hong Kong International Airport. Cash flows beyond the forecast period are extrapolated with an

estimated general annual growth rate of 3.0% (2022: 3.0%) which does not exceed the long-term average growth rate

for the industry (IATA’s most recent 20-year global forecast is 3.4%). Cash outflows include capital and maintenance

expenditure including the purchase of aircraft and other property, plant and equipment. The discount rate used of 9.6%

(2022: 9.5%) is pre-tax and reflects the specific risks related to the relevant segment. The assessment results in

headroom over the carrying values of the CGU as at 31st December 2023 and consequently no impairment has

beenmade.

For the HK Express CGU, the assessment reflects stronger growth than Cathay Pacific in the near term, due to strong

demand as a low cost carrier, particularly with the opening of the Three Runway System, and improved capacity from the

expansion in its fleet profile. Like Cathay Pacific, a long-term forecast is considered appropriate. Cash flows beyond the

forecast period are extrapolated with an estimated general annual growth rate of 3.0% (2022: 3.0%). The discount rate

used of 12.1% (2022: 11.3%) is pre-tax and reflects the specific risks related to the HK Express segment. The

assessment results in headroom over the carrying values of the CGU as at 31st December 2023 and consequently no

impairment has been made.

Management believes that any reasonably foreseeable change in any of the above key assumptions would not

causethe carrying amounts of the CGUs including related goodwill to exceed the recoverable amounts of the

respective CGUs.

Cathay Pacific Airways Limited Annual Report 2023 95

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

10. INVESTMENTS IN ASSOCIATES

2023

HK$M

2022

HK$M

Share of net assets

– listed in Hong Kong 7,472 7,718

– unlisted 5,694 5,435

Goodwill 2,887 3,317

16,053 16,470

Less: impairment loss (56) (56)

15,997 16,414

Loans due from associates 49 78

16,046 16,492

Material associates are listed on page 139.

(a) Air China

At 31st December 2023, the market value of the shares in an associate, Air China, based on the quoted market price

of its shares listed in Hong Kong, is HK$13,011 million (2022: HK$18,304 million).

The Group accounts for Air China three months in arrears. The Group’s 2023 results included Air China’s results for

the 12 months ended 30th September 2023.

Air China is considered material to the Group and the share of assets and liabilities and results are summarised

asbelow:

2023

HK$M

2022

HK$M

Gross amounts of the associate’s

– current assets 42,370 30,308

– non-current assets 330,401 305,869

– current liabilities (124,440) (102,810)

– non-current liabilities (206,527) (193,397)

Revenue 132,282 70,470

Loss from continuing operations (12,727) (44,663)

Other comprehensive income (1,212) 1,810

Total comprehensive income (13,939) (42,853)

Dividend received from the associate – –

Reconciled to the Group’s interests in the associate

– gross amounts of net assets of the associate 41,804 39,970

– Group’s share of net assets of the associate at effective interest

(2023: 16.26%; 2022: 18.13%) 6,797 7,247

– effect of cross shareholding and others 675 471

– goodwill 2,887 3,317

10,359 11,035

96 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

10. INVESTMENTS IN ASSOCIATES (continued)

Air China is a strategic partner for the Group and the national flag carrier and a leading provider of passenger, cargo

and other airline-related services in the Chinese Mainland.

Cathay Pacific held 2,634 million shares of Air China, representing a 16.26% interest at 31st December 2023 (2022:

18.13%) and had significant influence through its representation on the Board of Directors of Air China and therefore

equity accounted for its share of Air China’s results.

(b) Air China Cargo

The Group accounts for Air China Cargo three months in arrears. The Group’s 2023 results included Air China

Cargo’s results for the 12 months ended 30th September 2023.

Aggregate information of associates that are not individually material, which includes Air China Cargo, is

summarised as below:

2023

HK$M

2022

HK$M

Aggregate carrying amount of individually immaterial associates 5,687 5,457

Aggregate amounts of the Group’s share of those associates

– profit from continuing operations 427 1,249

– other comprehensive income (159) (402)

– total comprehensive income 268 847

11. OTHER LONGTERM RECEIVABLES AND INVESTMENTS

2023

HK$M

2022

HK$M

Unlisted equity investments

– designated at fair value through other comprehensive income (non-recycling) 45 47

– measured at fair value through profit or loss 782 793

Other long-term receivables measured at amortised cost 1,148 934

Derivative financial assets – long-term portion 45 100

Retirement benefit assets (note 14) 1,588 1,423

3,608 3,297

Cathay Pacific Airways Limited Annual Report 2023 97

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

12. INTERESTBEARING LIABILITIES

The Group’s net debt/equity ratio and adjusted net debt/equity ratio at the end of the current and previous reporting

periods are summarised below:

2023

HK$M

2022

(restated)

HK$M

Non-current liabilities:

Loans and other borrowings 33,576 36,676

Lease liabilities 24,195 25,787

57,771 62,463

Current liabilities:

Loans and other borrowings 5,719 8,490

Lease liabilities 4,804 6,153

10,523 14,643

Total borrowings 68,294 77,106

Liquid funds (15,530) (18,277)

Net borrowings 52,764 58,829

Funds attributable to the shareholders of the Cathay Group 60,026 63,803

Net debt/equity ratio 0.88 0.92

To allow for comparability of gearing ratios against group borrowing covenants, the Group has chosen to present a

subset of net borrowings and the net debt/equity ratio which exclude leases without asset transfer components. Only

lease liabilities which transfer ownership of the underlying asset to the Group by the end of the lease term or contain a

purchase option that the Group is reasonably certain to exercise are included.

2023

HK$M

2022

HK$M

Net borrowings 52,764 58,829

Less: lease liabilities without asset transfer components (11,321) (13,765)

Adjusted net borrowings, excluding leases without asset transfer components 41,443 45,064

Adjusted net debt/equity ratio, excluding leases without asset transfer components 0.69 0.71

98 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

12. INTERESTBEARING LIABILITIES (continued)

(a) Loans and other borrowings

2023

HK$M

2022

HK$M

Bank loans

– secured 20,233 23,821

– unsecured 500 2,210

Other borrowings

– secured 6,277 5,534

– unsecured 12,285 13,601

39,295 45,166

Amount due within one year included in current liabilities (5,719) (8,490)

33,576 36,676

Repayable as follows:

Bank loans

– within one year 3,924 6,297

– after one year but within two years 5,704 5,076

– after two years but within five years 8,225 11,168

– after five years 2,880 3,490

20,733 26,031

Other borrowings

– within one year 1,795 2,193

– after one year but within two years 1,452 2,002

– after two years but within five years 13,080 13,048

– after five years 2,235 1,892

18,562 19,135

Amount due within one year included in current liabilities (5,719) (8,490)

33,576 36,676

At 31st December 2023, aircraft and related equipment of HK$47,562 million and land and building of HK$2,044

million (2022: aircraft and related equipment of HK$48,137 million and land and building of HK$2,130 million) are

pledged as security for the secured loans and other borrowings.

Loans and other borrowings are repayable up to 2035 (2022: 2035).

Loans and other borrowings of the Group not wholly repayable within five years amounted to HK$15,145 million

(2022: HK$16,406 million).

Save as disclosed in note 20 and below, there were no purchase, sale or redemption by the Company, or any of its

subsidiaries, of the Company’s listed debt securities for both years.

At 31st December 2023, the Group had loans totalling HK$21,844 million (2022: HK$26,038 million) which were

defeased by funds and other investments. Accordingly, these loans and the related funds, as well as related

expenses and income, have been defeased in the financial statements.

Cathay Pacific Airways Limited Annual Report 2023 99

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

12. INTERESTBEARING LIABILITIES (continued)

On 5th February 2021, the Group completed the issuance of HK$6,740 million guaranteed convertible bonds at a

rate of 2.75%, with maturity in 2026. The bonds are convertible at a conversion price of HK$8.57 per share and

entitle the holder to convert up to 786,464,410 ordinary shares of Cathay Pacific Airways Limited. The conversion

price of HK$8.57 per share is subject to adjustment to reflect dilutive effects of dividends distributed after the

record date.

The bonds are accounted for as compound financial instruments, with both a liability component and an equity

component. On 18th August 2023, 700,116 ordinary shares were allotted and issued on exercise of the conversion

rights at the conversion price of HK$8.57 per ordinary share in the principal amount of HK$6,000,000.

As at 31st December 2023, the liability component had a carrying value of HK$6,476 million (2022: HK$6,366

million).

During the year ended 31st December 2023, the following transactions have taken place under the Group’s US$2.5

billion Medium Term Note Programme:

– the Group did not issue any listed or unlisted notes (2022: issued HK$288 million of unlisted notes)

– the Group redeemed SG$175 million (HK$1.0 billion) of listed notes listed on the Singapore Exchange and

HK$400 million of unlisted notes (2022: redeemed HK$500 million of unlisted notes).

(b) Lease liabilities

The Group has commitments under lease agreements in respect of aircraft and related equipment, other equipment

and buildings. Lease liabilities are repayable on various dates up to 2033. The reconciliation of future lease

payments and their carrying values at the end of the current and previous reporting periods is as follows:

2023

HK$M

2022

HK$M

Future payments 35,663 37,819

Interest charges relating to future periods (6,664) (5,879)

Present value of future payments 28,999 31,940

Amount due within one year included in current liabilities (4,804) (6,153)

24,195 25,787

The present value of future payments is repayable as follows:

2023

HK$M

2022

HK$M

Within one year 4,804 6,153

After one year but within two years 3,793 5,085

After two years but within five years 9,639 9,938

After five years 10,763 10,764

28,999 31,940

The undiscounted future payments are repayable as follows:

2023

HK$M

2022

HK$M

Within one year 6,302 7,417

After one year but within two years 4,944 6,153

After two years but within five years 12,002 12,079

After five years 12,415 12,170

35,663 37,819

100 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

12. INTERESTBEARING LIABILITIES (continued)

Loans and other

borrowings

HK$M

Lease

liabilities

HK$M

Total

HK$M

At 1st January 2023 45,166 31,940 77,106

Changes from financing cash flows

– new financing 3,348 1,306 4,654

– repayments (9,693) (6,693) (16,386)

Other changes

– exchange gains (25) (243) (268)

– changes resulting from new leases – 2,264 2,264

– changes resulting from lease modification – 311 311

– changes resulting from lease termination – (2) (2)

– conversion of bonds (6) – (6)

– others 505 116 621

At 31st December 2023 39,295 28,999 68,294

At 1st January 2022 55,122 34,732 89,854

Changes from financing cash flows

– new financing 5,771 344 6,115

– repayments (16,189) (6,162) (22,351)

Other changes

– exchange gains (45) (464) (509)

– changes resulting from new leases – 3,350 3,350

– changes resulting from lease modification – 175 175

– changes resulting from lease termination – (40) (40)

– Covid-19-related rent concessions received – (108) (108)

– others 507 113 620

At 31st December 2022 45,166 31,940 77,106

13. OTHER LONGTERM PAYABLES

2023

HK$M

2022

(restated)

HK$M

Deferred liabilities 2,516 2,625

Long service payments obligations (note 14(c)) 90 75

Derivative financial liabilities – long-term portion 204 141

2,810 2,841

There are no derivative financial liabilities of the Group which did not qualify for hedge accounting (2022: nil).

Cathay Pacific Airways Limited Annual Report 2023 101

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

13. OTHER LONGTERM PAYABLES (continued)

The Group had a maintenance provision of HK$3,239 million (2022: HK$3,069 million) for returning the aircraft to lessors

to certain maintenance conditions. The movements during the year are as follows:

2023

HK$M

2022

HK$M

At 1st January 3,069 4,187

Additional provision made 571 446

Reversals (81) (916)

Provision utilised (320) (648)

At 31st December 3,239 3,069

Amount expected to be utilised within one year included in trade and other payables (852) (499)

Included in deferred liabilities above 2,387 2,570

14. POSTEMPLOYMENT BENEFITS

The Group operates various defined benefit and defined contribution retirement schemes for its employees in Hong

Kong and in certain overseas locations. The assets of these schemes are held in separate trustee-administered funds.

The retirement schemes in Hong Kong are registered under and comply with the Occupational Retirement Schemes

Ordinance and the Mandatory Provident Fund Schemes Ordinance (“MPFSO”). In addition, the employees employed

under the Hong Kong Employment Ordinance are also entitled to long service payment if the eligibility criteria are met.

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 principal schemes in Hong Kong comprise The Swire Group Retirement Benefits Scheme (“SGRBS”), the Cathay

Pacific Airways Group Retirement Benefits Scheme (“CPAGRBS”) and the Cathay Pacific Airways Limited Retirement

Scheme (“CPALRS”).

SGRBS, in which the Company, Cathay Pacific Catering Services (H.K.) Limited (“CPCS”) and Vogue Laundry Service

Limited (“VLS”) are participating employers, and CPAGRBS in which Hong Kong Airport Services Limited (“HAS”) is a

participating employer, provide resignation and retirement benefits to its members, which include the Company’s

cabin attendants who joined before September 1996 and other locally engaged employees who joined before June

1997, upon their cessation of service. The Company, CPCS, VLS and HAS meet the full cost of all benefits due by

SGRBS or CPAGRBS to their employee members, who are not required to contribute to the scheme.

Staff employed by the Company in Hong Kong on expatriate terms before April 1993 were eligible to join another

scheme, the CPALRS. Both members and the Company contribute to CPALRS.

The majority of the Group’s schemes are final salary guarantee lump sum defined benefit plans.

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 for the principal schemes in Hong Kong 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.

Such schemes in Hong Kong are valued annually by qualified actuaries for funding purposes.

102 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

14. POSTEMPLOYMENT BENEFITS (continued)

The disclosures for schemes in Hong Kong are based on actuarial valuations prepared by an independent firm of

actuaries, Mercer (Hong Kong) Limited (“Mercer”), every three years and as needed in accordance with Hong Kong’s

Occupational Retirement Schemes Ordinance. The disclosures and valuations are updated annually in the

intervening years by Cannon Trustees Limited, the main administration manager of the Group’s defined benefit

schemes. The most recent valuations prepared by Mercer for schemes in Hong Kong were for the period ended

31st December 2023.

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. A committee

monitors the overall market risk position of the Group’s principal schemes in Hong Kong on a quarterly basis.

The Group’s obligations are 142.6% (2022: 136.5%) covered by the plan assets held by the trustees at 31st

December 2023.

2023

HK$M

2022

HK$M

Net expenses recognised in the profit or loss:

Current service cost 125 122

Net interest income (79) (15)

Total included in staff costs 46 107

Actual return/(loss) on plan assets 625 (57)

2023

HK$M

2022

HK$M

Net assets recognised in the consolidated statement of financial position:

Present value of funded obligations 3,730 3,900

Fair value of plan assets (5,318) (5,323)

Retirement benefit assets (note 11) (1,588) (1,423)

2023

HK$M

2022

HK$M

Movements in present value of funded obligations comprise:

At 1st January 3,900 4,002

Remeasurements

– actuarial losses/(gains) arising from changes in financial assumptions 135 (294)

– experience losses 52 27

Movements for the year

– current service cost 125 122

– interest expense 198 90

– employee contributions 2 2

– benefits paid (682) (846)

– transfer – 797

At 31st December 3,730 3,900

Cathay Pacific Airways Limited Annual Report 2023 103

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

14. POSTEMPLOYMENT BENEFITS (continued)

The weighted average duration of the defined benefit obligations is seven years (2022: seven years).

2023

HK$M

2022

HK$M

Movements in fair value of plan assets comprise:

At 1st January 5,323 5,424

Movements for the year

– return/(loss) on plan assets excluding interest income 348 (162)

– interest income 277 105

– employee contributions 2 2

– employer contributions 50 3

– benefits paid (682) (846)

– transfer – 797

At 31st December 5,318 5,323

No curtailment gain/loss was incurred in the year ended 31st December 2023 and 2022.

There were no plan amendments during the year.

2023

HK$M %

2022

HK$M %

Fair value of plan assets comprises:

Equities

– Asia Pacific 415 8 355 7

– Europe 239 4 238 4

– Americas 754 14 715 13

– Emerging markets 556 10 535 10

Bonds

– Global 1,334 26 1,602 30

– Emerging markets 187 4 118 2

Absolute return funds 913 17 896 17

Cash 920 17 864 17

5,318 100 5,323 100

At 31st December 2023, the prices of 87% of equities and 75% of bonds were quoted on active markets (31st

December 2022: 90% and 43% respectively). The remainder of the prices were not quoted on active markets.

The majority of 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 a 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 committee to a number of reputable

investment managers.

104 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

14. POSTEMPLOYMENT BENEFITS (continued)

The contributions are calculated based upon funding recommendations arising from actuarial valuations. The

Group expects to make contributions of HK$77 million to the schemes in 2024.

2023 2022

The significant actuarial assumptions (expressed as weighted averages) are:

Discount rate 4.36% 5.00%

Expected rate of future salary increases 2.61% 2.62%

The sensitivity of the defined benefit obligations to changes in the significant actuarial assumptions is set out

below. This shows how the defined benefit obligations at 31st December 2023 would have (increased)/decreased

as a result of 0.5% change in the actuarial assumptions:

Increase by 0.5% Decrease by 0.5%

2023

HK$M

2022

HK$M

2023

HK$M

2022

HK$M

Discount rate 126 135 (133) (141)

Expected rate of future salary increases (85) (94) 84 96

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant.

In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating

the sensitivity of the defined benefit obligations to changes in the significant actuarial assumptions, the same

method has been applied as when calculating the retirement benefit liabilities recognised in the consolidated

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. Forfeited contributions by the Group on behalf of employees who leave the

scheme prior to vesting fully in such contributions may be used to reduce existing level of contributions. The

amounts utilised in the course of the year amounted to HK$44 million (2022: HK$88 million). Amounts available at

the year end for such use in future years amounted to HK$4 million (2022: HK$50 million).

A Mandatory Provident Fund (“MPF”) scheme was established under the MPFSO in December 2000. Where staff

elect to join the MPF scheme, both the Company and staff are required to contribute 5% of the employees’ relevant

income (capped at HK$30,000). Staff may elect to contribute more than the minimum as a voluntary contribution.

Contributions to defined contribution retirement schemes charged to profit or loss were HK$587 million (2022:

HK$455 million).

Hong Kong employees that have been employed continuously for at least five years are entitled to long service

payment in accordance with the Hong Kong Employment Ordinance under certain circumstances. These

circumstances include where an employee is dismissed for reasons other than serious misconduct or redundancy,

that employee resigns at the age of 65 or above, or the employment contract is of fixed term and expires without

renewal. The amount of LSP payable is determined with reference to the employee’s final salary capped at

HK$390,000 and the years of service, reduced by the amount of any accrued benefits derived from the Group’s

contributions to MPF scheme. Currently, the Group does not have any separate funding arrangement in place to

meet its LSP obligation.

Cathay Pacific Airways Limited Annual Report 2023 105

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

14. POSTEMPLOYMENT BENEFITS (continued)

In June 2022, the Government gazetted the Amendment Ordinance, which will eventually abolish the statutory right

of an employer to reduce its LSP payable to a Hong Kong employee by drawing on its mandatory contributions to

the MPF scheme. The Government has subsequently announced that the Amendment Ordinance will come into

effect from the Transition Date i.e. 1st May 2025.

Among other things, once the abolition of the offsetting mechanism takes effect, an employer can no longer use

any of the accrued benefits derived from its mandatory MPF contributions (irrespective of the contributions made

before, on or after the Transition Date) to reduce the LSP obligations in respect of an employee’s service from the

Transition Date. However, where an employee’s employment commenced before the Transition Date, the employer

can continue to use the above accrued benefits to reduce the LSP obligations in respect of the employee’s service

up to that date; in addition, the LSP obligations in respect of the service before the Transition Date will be calculated

based on the employee’s monthly salary immediately before the Transition Date and the years of service up to

thatdate.

The Group has accounted for the offsetting mechanism and its abolition as disclosed in material accounting

policies 1 and 14.

2023

HK$M

At 1st January (restated) 75

Remeasurements recognised in other comprehensive income:

Actuarial losses arising from changes in financial assumptions 6

Expenses recognised in profit or loss:

Current service cost 9

Interest cost 2

Benefits paid directly by the employer (2)

At 31st December 90

The LSP obligations as at 31st December 2022 amounting to HK$75 million are mainly related to past service from

employees.

The weighted average duration of the defined benefit obligation is 11.5 (2022: 12.3) years.

Actuarial assumptions (expressed as weighted averages) are as follows:

2023 2022

Discount rate 3.5-3.8% 3.4-3.8%

Future salary increases 2.5-3.3% 2.5-3.3%

Expected investment return on offsettable MPF accrued benefits 2.5-4.0% 2.5-4.0%

The Group’s LSP obligations are not sensitive to these actuarial assumptions, thus a sensitivity analysis is not

presented.

106 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

15. DEFERRED TAXATION

2023

HK$M

2022

(restated)

HK$M

Deferred tax assets:

– provisions (69) (3)

– tax losses (4,917) (5,313)

– lease liabilities (1,172) (1,459)

Deferred tax liabilities:

– accelerated tax depreciation 5,786 5,214

– investments in associates 197 169

– right-of-use assets 1,023 1,277

– cash flow hedges 28 149

– retirement benefits 125 131

Provision in respect of certain lease arrangements 5,670 6,818

6,671 6,983

The following amounts, determined after appropriate offsetting, are shown separately on the consolidated statement of

financial position:

2023

HK$M

2022

HK$M

Net deferred tax asset recognised in the consolidated statement of financial position (1,085) (1,134)

Net deferred tax liability recognised in the consolidated statement of financial position 7,756 8,117

6,671 6,983

2023

HK$M

2022

HK$M

Movements in deferred taxation comprise:

At 1st January 6,983 8,974

Movements for the year

– charged/(credited) to profit or loss

– deferred tax charge/(credit) (note 5) 959 (483)

– operating expenses 69 84

– credited to other comprehensive income

– transferred to cash flow hedge reserve (note 7) (121) (74)

– transferred to retained profit (note 7) (2) (3)

– initial cash benefit from lease arrangements 273 –

Current portion of provision in respect of certain lease arrangements

included in current liabilities – taxation (1,490) (1,515)

At 31st December 6,671 6,983

Cathay Pacific Airways Limited Annual Report 2023 107

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

15. DEFERRED TAXATION (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$30,000 million

(2022: HK$30,125 million) to carry forward against future taxable profits. These amounts are analysed as follows:

2023

HK$M

2022

HK$M

No expiry date 21,032 20,692

Expiring in 2024 to 2037 (2022: 2023 to 2037) 8,968 9,433

30,000 30,125

The provision in respect of certain lease arrangements equates to payments which are expected to be made during the

years 2024 to 2034 (2022: 2023 to 2030) as follows:

2023

HK$M

2022

HK$M

After one year but within five years 3,796 3,778

After five years but within 10 years 1,661 3,040

After 10 years 213 –

5,670 6,818

16. TRADE AND OTHER RECEIVABLES

2023

HK$M

2022

HK$M

Trade debtors, net of loss allowances 4,323 4,010

Derivative financial assets – current portion 253 1,085

Other receivables and prepayments 1,512 1,819

Due from associates and other related companies 164 7

6,252 6,921

At 31st December 2023, derivative financial assets – current portion which did not qualify for hedge accounting

amounted to nil (2022: HK$28 million).

2023

HK$M

2022

HK$M

Analysis of trade debtors (net of loss allowances) by invoice date:

Within one month 3,850 3,502

One to three months 467 485

More than three months 6 23

4,323 4,010

2023

HK$M

2022

HK$M

Analysis of trade debtors (net of loss allowances) by age:

Current 4,076 3,754

Within three months overdue 244 233

More than three months overdue 3 23

4,323 4,010

108 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

16. TRADE AND OTHER RECEIVABLES (continued)

The movements in the expected credit loss allowance in respect of trade debtors during the year are as follows:

2023

HK$M

2022

HK$M

At 1st January 36 100

Expected credit loss recognised/(reversal) 5 (64)

At 31st December 41 36

17. LIQUID FUNDS

2023

HK$M

2022

HK$M

Cash and cash equivalents

Short-term deposits and bank balances 7,894 7,340

Other liquid funds

Short-term deposits maturing beyond three months when placed 385 215

Funds with investment managers

– debt securities listed outside Hong Kong 7,208 10,572

– bank deposits 38 31

Other liquid investments

– debt securities listed outside Hong Kong 5 5

– bank deposits – 114

Liquid funds 15,530 18,277

Included in other liquid investments are bank deposits of nil (2022: HK$114 million) and debt securities of HK$5 million

(2022: 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:

2023

HK$M

2022

HK$M

Liquid funds 15,530 18,277

Less: amounts pledged as part of long-term financing

– debt securities listed outside Hong Kong (5) (5)

– bank deposits – (114)

Committed undrawn facilities 4,460 9,030

Available unrestricted liquidity to the Group 19,985 27,188

Committed undrawn facilities may be drawn at any time in either Hong Kong dollar or United States dollar.

Cathay Pacific Airways Limited Annual Report 2023 109

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

18. TRADE AND OTHER PAYABLES

2023

HK$M

2022

HK$M

Trade creditors 7,397 5,380

Derivative financial liabilities – current portion 422 217

Other payables 8,879 5,272

Due to associates 139 135

Due to other related companies 401 195

17,238 11,199

2023

HK$M

2022

HK$M

Analysis of trade creditors by invoice date:

Within one month 7,047 4,895

One to three months 291 332

More than three months 59 153

7,397 5,380

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$657 million (2022: HK$324 million) for possible or

actual taxation (other than income tax), litigation and claims. The movements during the year are as follows:

2023

HK$M

2022

HK$M

At 1st January 324 702

Addition/(reversal) of provision, net 400 (288)

Provision utilised (67) (90)

At 31st December 657 324

19. CONTRACT LIABILITIES

2023

HK$M

2022

HK$M

Non-current 252 282

Current 15,223 13,537

15,475 13,819

The Group had the following contract liabilities recognised in the consolidated statement of financial position:

2023

HK$M

2022

HK$M

Passenger revenue, fuel and insurance surcharge (a) 10,528 9,028

Loyalty programme

(b) 4,839 4,584

Cargo revenue

15,475 13,819

110 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

19. CONTRACT LIABILITIES (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:

2023

HK$M

2022

HK$M

Passenger revenue, fuel and insurance surcharge (a) 5,987 249

Cargo revenue

(a) The Group typically receives ticket fares from passengers in advance of carriage. The value of unflown passenger

sales is recognised as a contract liability until the transportation service is provided.

(b) The value attributable to the award of programme miles as a part of an initial sales transaction is deferred until such

time as the members redeem their programme miles or when they expire. Programme miles can be redeemed at

any point prior to expiry. If miles are classified as activity based expiry (those issued from 1st January 2020), they do

not expire as long as the member has any type of qualifying activity within any 18-month period. If miles are

classified as time based expiry (those issued on or before 31st December 2019), they expire after three years of

being issued. Programme miles are combined in one homogenous pool and are not separately identifiable. As such,

the revenue is comprised of programme miles that were part of the loyalty programme deferred revenue balance at

the beginning of the period, as well as miles that were issued during the period.

Changes in loyalty programme contract liabilities are as follows:

2023

HK$M

2022

HK$M

At 1st January 4,584 5,779

Deferral of revenue – mileage credits issued through travel or sold

to co-branded credit card and other partners 3,684 2,089

Recognition of revenue – mileage credits redeemed or expired (3,429) (3,284)

At 31st December 4,839 4,584

isprovided.

Cathay Pacific Airways Limited Annual Report 2023 111

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

20. SHARE CAPITAL

2023 2022

Number of shares HK$M Number of shares HK$M

Issued and fully paid

Ordinary shares

At 1st January 6,437,200,203 28,822 6,437,200,203 28,822

Conversion of bonds (notes 12(a) and 20(c)) 700,116 6 – –

At 31st December 6,437,900,319 28,828 6,437,200,203 28,822

Preference shares

At 1st January (note 20(a)) 195,000,000 19,500 195,000,000 19,500

Reduction (97,500,000) (9,750) – –

Redemption (note 20(b)) (97,500,000) (9,750) – –

At 31st December – – 195,000,000 19,500

28,828 48,322

Save as disclosed below, there was no purchase, sale or redemption by the Company, or any of its subsidiaries, of the

Company’s shares and no exercise of warrants during the years ended 2023 and 2022.

(a) In 2020, the Company issued preference shares and warrants to Aviation 2020 Limited, a limited company wholly

owned by the Financial Secretary Incorporated, of (a) 195,000,000 preference shares and (b) 416,666,666 warrants

which will entitle Aviation 2020 Limited to subscribe for up to 416,666,666 fully paid ordinary shares at the warrant

exercise price of HK$4.68 per share (subject to adjustment to reflect dilutive effects of dividends distributed after

the record date).

The preference shares are not redeemable at the option of Aviation 2020 Limited. The Company may redeem all or

some of the preference shares, in an aggregate amount equal to the issue price of the preference share of HK$100

each plus any unpaid dividends (including any Arrears of Dividend or any Additional Dividend Amount). The holder of

the preference shares is not entitled to convene, attend or vote at any general meeting, except where the business

of a general meeting is the consideration of resolutions for amendments to the articles that directly and adversely

modify or abrogate any of the special rights and privileges attached to the preference shares.

The expiry date of the warrants is five years from the warrants issue date of 12th August 2020.

For further details of the preference shares and warrants issue, please refer to the Company’s announcement dated

9th June 2020, the circular to shareholders dated 19th June 2020 and the announcement dated 12th August 2020.

(b) On 9th August 2023, the Company announced (a) its proposal to reduce all of the credit (being HK$19,500 million)

standing in the preference shares capital account of the Company (“Capital Reduction”), and such credit arising

from the Capital Reduction would be applied to a new preference shares reserve account of the Company and be

used to redeem all of the 195,000,000 preference shares of the Company (the “Preference Shares”), (b) its plan to

redeem and cancel all of the Preference Shares by the end of July 2024, subject to market conditions and the

Group’s business operations at the relevant time, and (c) that subject to and following the completion of the Capital

Reduction, the Company would exercise its right to first redeem and cancel 97,500,000 Preference Shares (the

“First Redemption”) at a redemption price of HK$100 per preference share plus any unpaid preference share

dividends before the end of 2023.

Following the approval by shareholders of the Company regarding the Capital Reduction at the Extraordinary

General Meeting held on 11th October 2023 (“2023 EGM”), the Capital Reduction was completed on 16th November

2023 and the First Redemption was completed on 4th December 2023. As at 31st December 2023, 97,500,000

Preference Shares remain outstanding, and the Company’s preference shares reserve amounted to

HK$9,750million.

112 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

20. SHARE CAPITAL (continued)

For further details of the redemption of the Preference Shares, please refer to the Company’s announcement dated

9th August 2023 and the circular to shareholders dated 18th September 2023.

exercise of the conversion rights at the conversion price of HK$8.57 per ordinary share in the principal amount of

HK$6,000,000 (the “Conversion”). The portion of the Bonds of which the conversion rights being exercised

represents less than 0.01% of the Bonds and the enlarged total issued share capital of the Company resulting from

the Conversion.

For further details of the Bonds, please refer to the Company’s announcements dated 28th January 2021 and 8th

February 2021.

21. DIVIDENDS

(a) Dividends on cumulative preference shares issued by the Company

The preference shares will accrue dividends at the rate of:

(i) 3% per annum from and including the Issue Date (i.e. 12th August 2020) to but excluding the date falling three

years from the Issue Date (the “First Step-up Date”);

(ii) 5% per annum from and including the First Step-up Date to but excluding the date falling four years from the

Issue Date (the “Second Step-up Date”);

(iii) 7% per annum from and including the Second Step-up Date to but excluding the date falling five years from the

Issue Date (the “Third Step-up Date”); and

(iv) 9% per annum from and including the Third Step-up Date

Dividends on cumulative preference shares are paid semi-annually in arrears at the current rate of 5% per annum,

compounding, and can be deferred in whole or in part at the Company’s discretion.

Any deferred or unpaid dividends on cumulative preference shares shall accumulate and constitute “Arrears of

Dividend”. On 30th June 2023, the Company paid its accumulated Arrears of Dividend of HK$1,524 million to the

preference shareholder, bringing its dividend payments on the preference shares up to date.

On 14th August 2023, the Company paid dividend of HK$292.5 million on the 195,000,000 preference shares to the

preference shareholder.

The Company redeemed 97,500,000 preference shares at a redemption price of HK$100 per preference share on

4th December 2023. On 14th February 2024, the Company paid dividend of HK$243.75 million on the remaining

97,500,000 preference shares to the preference shareholder.

(b) Dividends payable to ordinary shareholders

The Articles of Association of the Company require that any deferred or unpaid dividends on cumulative preference

shares shall accumulate and constitute “Arrears of Dividend” and that the Company shall not make any

discretionary distribution or dividend in cash or otherwise on any ordinary shares until all outstanding Arrears of

Dividend have been paid in full.

There were no Arrears of Dividend as at 31st December 2023.

Dividends payable to ordinary shareholders attributable to the year are as follows:

2023

HK$M

2022

HK$M

Interim dividend proposed after the end of the reporting period of HK$0.43 per

ordinary share (2022: nil) 2,768 –

The interim dividend proposed has not been recognised as a liability at the end of the reporting period.

Cathay Pacific Airways Limited Annual Report 2023 113

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

21. DIVIDENDS (continued)

The interim dividend will be paid on 2nd May 2024 to ordinary shareholders registered at the close of business on the

record date, being Friday, 5th April 2024. Ordinary shares of the Company will be traded ex-dividend as from Tuesday,

2nd April 2024.

The register of members will be closed on Friday, 5th April 2024, during which day no transfer of shares will be effected.

In order to qualify for entitlement to the interim dividend, all transfer forms accompanied by the relevant share

certificates must be lodged with the Company’s share registrars, Computershare Hong Kong Investor Services Limited,

17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, for registration not later than 4:30 p.m. on Wednesday,

3rd April 2024.

22. RESERVES

2023

HK$M

2022

(restated)

HK$M

Retained profit 21,186 13,209

Investment revaluation reserve (non-recycling) (159) (157)

Preference shares reserve (note 20(b)) 9,750 –

Cash flow hedge reserve 266 1,467

Equity component of convertible bonds issued (note 12(a)) 526 526

Others (371) 436

31,198 15,481

Investment revaluation reserve (non-recycling) of the Group comprises the cumulative net change in the fair values of

equity investments designated at fair value through other comprehensive income that are held at the end of the

reporting period.

Cash flow hedge reserve of the Group relates to the effective portion of the cumulative net change in the fair values of

hedging instruments. Refer to note 29 to the financial statements for details of the Group’s hedging instruments.

Other reserves of the Group comprise exchange losses arising from revaluation of foreign investments which amounted

to HK$94 million (2022: gains of HK$461 million) and share of associates’ other negative reserves of HK$277 million

(2022: HK$25 million).

The gains transferred from cash flow hedge reserve of the Group to profit or loss items was as follows:

2023

HK$M

2022

HK$M

Revenue 524 457

Fuel 655 3,444

Net finance credit/(charges) 109 (119)

Other expenses 38 10

Net gains transferred to profit or loss (note 7) 1,326 3,792

114 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Statement of Financial Position

22. RESERVES (continued)

The cash flow hedge reserve of the Group is expected to be 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

2024 (62)

2025 98

2026 (9)

2027 (179)

2028 (54)

Beyond 2028 (60)

(266)

The actual amount ultimately recognised in profit or loss or transferred to relevant assets will depend upon the fair

values of the hedging instruments at the time that the hedged transactions affect profit or loss or the relevant assets

are recognised.

Retained

profit

HK$M

Preference

reserve

HK$M

Convertible

bond

reserve

HK$M

Investment

revaluation

reserve (non-

recycling)

HK$M

Cash flow

hedge

reserve

HK$M

Total

HK$M

Company

At 1st January 2023 (restated) 18,929 – 526 (109) 1,468 20,814

Profit for the year 10,140 – – – – 10,140

Other comprehensive income 167 – – – (1,202) (1,035)

Total comprehensive income

for the year 10,307 – – – (1,202) 9,105

Transfer from share capital – 9,750 – – – 9,750

Dividend – preference shares (1,969) – – – – (1,969)

At 31st December 2023 27,267 9,750 526 (109) 266 37,700

At 1st January 2022 14,648 – 526 (109) 2,181 17,246

Profit for the year (restated) 4,189 – – – – 4,189

Other comprehensive income 92 – – – (713) (621)

Total comprehensive income

for the year (restated) 4,281 – – – (713) 3,568

At 31st December 2022 (restated) 18,929 – 526 (109) 1,468 20,814

Distributable reserves of the Company at 31st December 2023 amounted to HK$27,267 million (2022 restated:

HK$18,929 million), as calculated under the provisions of Part 6 of the Hong Kong Companies Ordinance (Cap. 622).

Cathay Pacific Airways Limited Annual Report 2023 115

23. RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS

2023

HK$M

2022

(restated)

HK$M

Operating profit 15,125 3,471

Depreciation of property, plant and equipment 11,730 11,559

Amortisation of intangible assets 594 630

Reversal of impairment of property, plant and equipment (208) –

Loss on disposal of property, plant and equipment, net 33 143

Loss on disposal of intangible assets 1 9

Gain on deemed partial disposal of an associate (1,929) –

Fair value losses/(gains) on equity investments measured at fair value through profit or loss 11 (88)

Covid-19-related rent concessions received – (108)

Gains from financial derivatives, cash flow hedge reserve and other items not involving

cash flows (375) (88)

Decrease in stock 170 132

(Increase)/decrease in trade debtors and other receivables (6) 705

Increase in net amounts due to associates and other related companies 53 55

Increase in trade creditors, other payables and deferred liabilities 5,515 382

Increase in contract liabilities 1,656 5,416

Non-operating movements in debtors and creditors (164) (742)

Dividend income from unlisted equity investments (58) (90)

Cash generated from operations 32,148 21,386

24. TOTAL CASH OUTFLOW FOR LEASES

Cash outflows for leases included in the consolidated statement of cash flows comprise the following:

2023

HK$M

2022

HK$M

Within operating cash flows 525 585

Within investing cash flows 658 9

Within financing cash flows 5,387 5,818

6,570 6,412

Significant non-cash transactions for leases:

During the year ended 31st December 2023, the Group entered into new lease arrangements in respect of property,

plant and equipment with a total capitalised value at the inception of HK$2,264 million (2022: HK$3,269 million), a

significant proportion of which is related to the delivery of leased aircraft.

NOTES TO THE FINANCIAL STATEMENTS

Statement of Cash Flows

116 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Directors and Employees

25. DIRECTORS’ REMUNERATION

(a) Directors’ remuneration disclosed pursuant to section 383(1) of the Hong Kong Companies Ordinance and part 2 of

the Companies (Disclosure of Information about Benefit of Directors) Regulation are:

Cash Non-cash

Basic

salary/

Fees

(note i)

HK$’000

Bonus (in

respect of

2022)

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

2023

Total

HK$’000

2022

Total

HK$’000

Executive Directors

Healy, Patrick 2,765 1,940 944 833 1,940 – 247 8,669 6,251

Hughes, Gregory

(up to March 2023) 1,497 1,789 1,516 451 1,789 – 1,365 8,407 8,777

Lam, Ronald 3,654 3,069 1,974 1,551 – – 207 10,455 7,914

Lau, Lavinia

(from January 2023) 2,700 1,092 1,446 159 – 37 – 5,434 –

McGowan, Alexander

(from April 2023) 1,890 1,021 1,364 284 – 76 – 4,635 –

Sharpe, Rebecca 2,954 1,776 2,241 889 1,776 – 78 9,714 7,157

Tang, Augustus

(up to December 2022) – 7,276 – – – – – 7,276 13,516

Non-Executive Directors

Bradley, Guy – – – – – – – – –

Ma, Chongxian 575 – – – – – – 575 575

McCallum, Gordon

(from January 2023) – – – – – – – – –

Song, Zhiyong

(up to November 2022) – – – – – – – – 482

Sun, Yuquan

(from May 2022) 575 – – – – – – 575 369

Swire, Merlin – – – – – – – – –

Swire, Samuel

(up to January 2023) – – – – – – – – –

Wang, Mingyuan

(from July 2023) 254 – – – – – – 254 –

Xiao, Feng 947 – – – – – – 947 947

Zhang, Zhuo Ping – – – – – – – – –

Zhao, Xiaohang

(up to May 2022) – – – – – – – – 206

Independent Non-

Executive Directors

Chan, Bernard 695 – – – – – – 695 684

Harrison, John 1,029 – – – – – – 1,029 1,029

Milton, Robert

(up to May 2022) – – – – – – – – 369

Mueller, Christoph

(from May 2022) 1,029 – – – – – – 1,029 660

Tung, Andrew 927 – – – – – – 927 912

2023 Total 21,491 17,963 9,485 4,167 5,505 113 1,897 60,621

2022 Total 22,113 8,517 9,925 4,198 1,680 650 2,765 49,848

Cathay Pacific Airways Limited Annual Report 2023 117

NOTES TO THE FINANCIAL STATEMENTS

Directors and Employees

25. DIRECTORS’ REMUNERATION (continued)

(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) The total emoluments of Executive Directors are charged to the Group in accordance with the amount of time

spent on its affairs.

(b) The five individuals whose emoluments were the highest in the Group for the year ended 31st December 2023 and

2022 are as follows:

2023 2022

Number of individuals:

Executive Directors 4 4

Senior staff 1 1

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

2023

Total

HK$’000

2022

Total

HK$’000

2023 Total 13,332 10,254 9,019 4,466 6,506 118 2,039 45,734

2022 Total 14,973 8,136 12,768 3,999 1,187 850 2,765 44,678

The bonuses disclosed above are related to services for the previous year.

The number of the above executive directors and senior staff whose emoluments fell within the following bands:

HK$ 2023 2022

7,000,001 – 7,500,000 – 2

7,500,001 – 8,000,000 – 1

8,000,001 – 8,500,000 1 –

8,500,001 – 9,000,000 2 1

9,500,001 – 10,000,000 1 –

10,000,001 – 10,500,000 1 –

13,500,001 – 14,000,000 – 1

5 5

118 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Directors and Employees

26. EMPLOYEE INFORMATION  CATHAY PACIFIC

The table below sets out the number of individuals, including those who have retired or resigned during the year, in each

employment category whose total remuneration for the year fell into the following ranges:

2023 2022

HK$ Director Flight staff Other staff Director Flight staff Other staff

0 – 1,000,000 11 8,414 8,798 13 8,297 7,980

1,000,001 – 1,500,000 2 561 367 1 743 288

1,500,001 – 2,000,000 – 586 170 – 338 130

2,000,001 – 2,500,000 – 252 36 – 315 37

2,500,001 – 3,000,000 – 231 20 – 181 19

3,000,001 – 3,500,000 – 112 14 – 71 9

3,500,001 – 4,000,000 – 37 5 – 26 4

4,000,001 – 4,500,000 – 26 3 – 8 3

4,500,001 – 5,000,000 1 24 4 – 4 3

5,000,001 – 5,500,000 1 6 – – 5 1

5,500,001 – 6,000,000 – 2 – – 2 –

6,000,001 – 6,500,000 – – – 1 1 –

7,000,001 – 7,500,000 1 – – 1 – 2

7,500,001 – 8,000,000 – – – 1 – –

8,000,001 – 8,500,000 1 – 1 – – –

8,500,001 – 9,000,000 1 – 1 1 – –

9,500,001 – 10,000,000 1 – – – – –

10,000,001 – 10,500,000 1 – – – – –

13,500,001 – 14,000,000 – – – 1 – –

20 10,251 9,419 19 9,991 8,476

Cathay Pacific Airways Limited Annual Report 2023 119

27. RELATED PARTY TRANSACTIONS

(a) Material transactions between the Group and associates and other related parties which were carried out in the

normal course of business on commercial terms are summarised below:

2023 2022

Associates

HK$M

Other related

parties

HK$M

Associates

HK$M

Other related

parties

HK$M

Revenue 214 7 44 17

Aircraft maintenance 1,149 1,896 779 1,318

Other operating expenses 266 528 159 268

Dividend income 8 57 133 89

Finance income 5 – 3 –

Fixed asset purchased 5 – – –

Lease payments 1 49 1 40

Other related parties are companies under control of a company which has significant influence on the Group.

(i) The Group entered into four leases expiring from two months to four years in respect of certain leasehold

properties from a related party of the Group for storage of engines and inventories. Monthly rental is HK$4

million as at 31st December 2023 (2022: HK$4 million), which was determined with reference to amounts

charged by the related party to third parties. For the year ended 31st December 2023, lease payments of

HK$49 million (2022: HK$40 million) were paid. The balances of right-of-use assets and lease liabilities as at

31st December 2023 were HK$128 million and HK$143 million respectively (2022: HK$103 million and HK$117

million respectively).

The lease payments are included in continuing connected transactions in note 27(a)(ii) below.

(ii) Continuing connected transactions

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.

HAECO

Under the HAECO 2022 Framework Agreement with HAECO, the Group paid fees to, and received fees from, the

HAECO group in respect of aircraft maintenance and related services. Such transactions constitute continuing

connected transactions. The amounts paid/payable to the HAECO group for the year ended 31st December

2023 totalled HK$3,033 million (2022: HK$2,082 million). The amounts received/receivable from the HAECO

group for the year ended 31st December 2023 totalled HK$141 million (2022: HK$26 million).

As a director of HAECO, Guy Bradley is interested in the HAECO 2022 Framework Agreement.

Air China

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. Such transactions constitute continuing connected transactions. The amounts paid/payable to the

Air China group for the year ended 31st December 2023 totalled HK$174 million (2022: HK$35 million). The

amounts received/receivable from the Air China group for the year ended 31st December 2023 totalled HK$74

million (2022: HK$26 million).

NOTES TO THE FINANCIAL STATEMENTS

Related Party Transactions

120 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Related Party Transactions

27. RELATED PARTY TRANSACTIONS (continued)

As directors or employees of Air China, Patrick Healy, Ma Chongxian, Sun Yuquan, Xiao Feng and Wang

Mingyuan are interested in the Air China Framework Agreement.

JS&SHK

The Company has an agreement for services with JS&SHK (“JS&SHK Services Agreement”). Under the JS&SHK

Services Agreement, the Group paid fees and reimbursed costs to JS&SHK in exchange for services provided.

Service fees calculated at 2.5% of the Group’s profit before taxation, results of associates, non-controlling

interests, and any profits or losses on disposal of property, plant and equipment are paid annually. Such

transactions constitute continuing connected transactions. For the year ended 31st December 2023, service

fee paid/payable amounted to HK$258 million (2022: HK$23 million).

As directors and/or employees of the Swire group, Patrick Healy, Guy Bradley, Ronald Lam, Gordon McCallum,

Rebecca Sharpe, Merlin Swire, and Zhang Zhuo Ping are interested in the JS&SHK Services Agreement. Gordon

McCallum and Merlin Swire are also so interested as shareholders, directors and employees of the Swire group.

Gregory Hughes was interested as a Director of the Swire group until his resignation with effect from 1st April

2023. Samuel Swire was also so interested as a shareholder, a director and an employee of the Swire group until

his resignation with effect from 12th January 2023.

(b) Amounts due from and due to associates and other related companies at 31st December 2023 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.

disclosed in note 28(b) to the financial statements.

(d) There were no material transactions with Directors except for those relating to shareholdings (as disclosed in the

Directors’ Report and the Corporate Governance Report). Remuneration of Directors is disclosed in note 25 to the

financial statements.

Cathay Pacific Airways Limited Annual Report 2023 121

28. CAPITAL COMMITMENTS AND CONTINGENCIES

(a) Outstanding capital commitments authorised at the year end but not provided for in the financial statements:

2023

HK$M

2022

HK$M

Authorised and contracted for

– aircraft and related equipment 65,358 47,914

– others 30 37

Authorised but not contracted for

– aircraft and related equipment 6,725 5,899

– others 366 117

72,479 53,967

(b) Performance and financial guarantees outstanding at the year end:

2023

HK$M

2022

HK$M

Associates 206 209

Provisions have been made to cover the expected outcome of the disputes to the extent that outcomes are likely

and reliable estimates can be made. However, the final outcomes are subject to uncertainties and resulting liabilities

may exceed provisions.

(d) The Company remains the subject of antitrust proceedings in various jurisdictions. The proceedings are focused

onissues relating to pricing and competition. The Company is represented by legal counsel in connection with

these matters.

The proceedings and civil actions are ongoing and the outcomes are subject to uncertainties. The Company is not

in a position to assess the full potential liabilities but makes provisions based on facts and circumstances in line with

accounting policy 22.

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. The same 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 to the General Court against

this decision, and on 30th March 2022 the General Court partially annulled the decision, and a refund of a portion of

the fine, Euros 10 million, was paid to the Company in June 2022. The Company filed an appeal to the European

Court of Justice (“ECJ”) in early June 2022 and a final ECJ judgment is expected by mid-2024.

The Company is a defendant in a number of civil claims, including class litigation and third party contribution claims,

in a number of countries including Germany, the Netherlands and Norway alleging violations of applicable

competition laws arising from the Company’s alleged conduct relating to its air cargo operations. The Company is

represented by legal counsel and is defending these actions.

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

122 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT

In the normal course of business, the Group is exposed to credit, liquidity, currency, interest rate and fuel price volatility

risks. These exposures are managed, sometimes with the use of derivative financial instruments, by the Group treasury

function in accordance with the policies approved by the Board.

Derivative financial instruments are used solely for financial risk management purposes and the Group does not use

derivative financial instruments for proprietary trading purposes. Derivative financial instruments which constitute an

effective hedge do not expose the Group to market risk since any change in their market value will be offset by a

compensating change in the market value of the hedged items. Exposure to foreign exchange rates, interest rates and

jet fuel prices movements are regularly reviewed and positions are amended in compliance with internal guidelines

andlimits.

(a) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss

to the Group. Credit risk for the Group arises from activities with treasury counterparties and trade debtors.

The Group’s exposure to credit risk arising from treasury activities is limited. To manage credit risk in respect of

treasury activities, derivative financial transactions, deposit placements and fund transactions are only carried out

with financial institutions which have high credit ratings and all counterparties are subject to prescribed trading

limits which are regularly reviewed. Risk exposures are monitored regularly by reference to market values.

The credit risk with regard to trade debtors is relatively low. Trade debtors mainly represent passenger and freight

sales due from agents and amounts due from airlines for interline services provided. The majority of the agents are

connected to the settlement systems operated by the International Air Transport Association (“IATA”) which is

responsible for assessing the credit worthiness of such agents and collecting bank guarantees or other monetary

collateral according to local industry practice. In most cases amounts due from airlines are settled on net basis via

an IATA clearing house.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The

Group normally grants a credit term of 30 days to customers or follows the local industry standard with the debt in

certain circumstances being partially protected by bank guarantees or other monetary collateral.

The Group measures loss allowances for trade debtors at an amount equal to lifetime expected credit losses, which

is calculated using a provision matrix based on the Group’s historical credit loss experience. As the Group’s

historical credit loss experience does not indicate significantly different loss patterns for different customer bases,

the loss allowance based on past due status is assessed on a collective basis.

Expected loss rates are based on historical credit loss experience, adjusted for factors that are specific to the

debtors and an assessment of both the current and forecast general economic conditions at the reporting date.

At the reporting date there was no significant concentration of credit risk. The maximum exposure to credit risk is

represented by the carrying amount of each financial asset, including derivative financial instruments, in the

consolidated statement of financial position and the amount of guarantees granted as disclosed in note 28(b) to the

financial statements. Collateral and guarantees received in respect of credit terms granted at 31st December 2023

totalled HK$424 million (2022: HK$452 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.

Cathay Pacific Airways Limited Annual Report 2023 123

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

(b) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient liquid funds and the availability of an adequate

amount of committed undrawn credit facilities to meet obligations when due.

The Group will fund its committed contractual maturities through cash flows earned and financing available under

its credit lines.

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.

Management has assessed cash flow forecasts under various scenarios. Management is of the opinion that the

Group has sufficient unrestricted liquidity for at least the next 12 months from the date of approval of the

consolidated financial statements. Accordingly management concludes that it is appropriate to prepare the

financial statements on a going concern basis.

At the end of the reporting period, the Group held liquid funds (note 17 to the financial statements) of HK$15,530

million (2022: HK$18,277 million) that is available for managing liquidity risk.

(i) Financial arrangements

The Group had access to the following liquid funds and undrawn facilities at the end of the reporting period:

2023

HK$M

2022

HK$M

Liquid funds (note 17) 15,530 18,277

Less: amounts pledged as part of long-term financing

– debt securities listed outside Hong Kong (5) (5)

– bank deposits – (114)

Committed undrawn facilities 4,460 9,030

Available unrestricted liquidity to the Group 19,985 27,188

2023

HK$M

2022

HK$M

Uncommitted bank overdraft facilities 438 431

Due to the dynamic nature of the underlying businesses, the Group treasury function also maintains funding

flexibility through available committed and uncommitted credit facilities. Committed undrawn facilities may be

drawn at any time in either Japanese yen, Hong Kong dollar or United States dollar. Uncommitted bank

overdraft facilities may be drawn at any time and may be terminated by the bank without notice.

124 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

(ii) Payment profile of financial liabilities

The undiscounted payment profile of financial liabilities is outlined as follows:

2023

Within

one year

HK$M

After one

year but

within two

years

HK$M

After two

years but

within five

years

HK$M

After five

years

HK$M

Total

HK$M

Group

Loans and other borrowings (7,651) (8,746) (23,697) (6,386) (46,480)

Lease liabilities (6,302) (4,944) (12,002) (12,415) (35,663)

Other long-term payables – (561) (1,399) (556) (2,516)

Trade and other payables (16,816) – – – (16,816)

Derivative financial liabilities, net (393) (169) – – (562)

Total (31,162) (14,420) (37,098) (19,357) (102,037)

2022

Within

one year

HK$M

After one

year but

within two

years

HK$M

After two

years but

within five

years

HK$M

After five

years

HK$M

Total

HK$M

Group

Loans and other borrowings (10,421) (8,900) (27,104) (6,683) (53,108)

Lease liabilities (7,417) (6,153) (12,079) (12,170) (37,819)

Other long-term payables – (793) (1,222) (610) (2,625)

Trade and other payables (10,982) – – – (10,982)

Derivative financial liabilities, net (198) (139) – – (337)

Total (29,018) (15,985) (40,405) (19,463) (104,871)

(i) Foreign currency risk

The Group’s revenue streams are denominated in a number of currencies other than the functional currency of

the revenue-generating entity resulting in exposure to foreign exchange rate fluctuations. The Group’s policy is

to reduce foreign currency exposure on foreign currencies. To manage this exposure, assets are, where

possible, financed in those foreign currencies in which sales transactions are anticipated, thus establishing a

natural hedge. In addition, the Group uses currency derivatives to reduce foreign currency exposure from highly

probable forecast sales transactions in foreign currencies. The use of foreign currency borrowings and

currency derivatives to hedge highly probable forecast sales transactions in foreign currencies is a key

component of the financial risk management process, as the change in value of the highly probable forecast

sales transactions in foreign currencies is effectively mitigated by the exchange differences realised on the

repayment of foreign currency borrowings and the settlement of currency derivatives.

Cathay Pacific Airways Limited Annual Report 2023 125

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

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 and fair value hedges of the fair value change of the Group’s United States dollars

denominated medium term notes at the end of the reporting period:

2023

HK$M

2022

HK$M

Currency derivative contracts – outgoing currencies

Renminbi 3,934 2,409

Euros 1,671 743

Australian dollars 1,381 554

New Taiwan dollars 960 431

Pound sterling 904 344

Indian rupee 892 477

Canadian dollars 578 223

Japanese yen 461 42

Indonesian Rupiah 438 58

Others 1,021 149

Foreign currency borrowings

Japanese yen 1,817 2,573

Renminbi 253 260

Cross currency interest rate swaps – incoming currency

United States dollars (5,076) –

2023 2022

Assets

HK$M

Liabilities

HK$M

Assets

HK$M

Liabilities

HK$M

Cash flow hedges

Carrying amount of currency derivative contracts 133 (151) 46 (91)

Fair value hedges

Carrying amount of cross currency interest rate swaps – (21) – –

Currency derivative assets are included in the “Other long-term receivables and investments” (note 11) and

“Trade and other receivables” (note 16), and currency derivative liabilities are included in the “Other long-term

payables” (note 13) and “Trade and other payables” (note 18) line items in the consolidated statement of

financial position respectively.

The foreign currency borrowings designated as hedging instruments to hedge forecast sales transactions will

mature over the next six years (2022: seven years).

126 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

The Group uses currency forward contracts to manage the fluctuation in exchange rates arising from the

Group’s highly probable forecast sales transactions. The currency forward contracts have a maturity of less

than two years (2022: two years) from the reporting date and have a weighted average forward exchange rate

between the respective foreign currencies and United States dollars as follows:

2023

USD to

2022

USD to

Renminbi 6.91 6.80

Euros 0.91 0.96

Australian dollars 1.49 1.49

New Taiwan dollars 29.69 29.87

Indian rupee 84.62 83.35

Pound sterling 0.80 0.85

Canadian dollars 1.34 1.33

Japanese yen 130.63 126.26

Indonesian Rupiah 15,480.09 15,839.44

The Group designates currency forward contracts as hedging instruments in cash flow hedges of the Group’s

highly probable forecast sales transactions and does not separate the forward and spot element of a currency

forward contract but instead designates the currency forward contract in its entirety in a hedging relationship.

The Group uses cross currency interest rate swaps to manage the fluctuation of exchange rates between Hong

Kong dollars and United States dollars arising from United States dollars denominated medium term notes. The

cross currency interest rate swaps have a maturity of less than three years (2022: nil) from the reporting date

and have a weighted average forward exchange rate between Hong Kong dollars and United State dollars

asfollows:

2023

USD to

2022

USD to

Hong Kong dollars 7.82 –

The Group designates cross currency interest rate swaps relating to United States dollars denominated

medium term notes as hedging instruments in fair value hedges and does not separate the forward and spot

element and foreign currency basis spread of a cross currency interest rate swaps but instead designates the

cross currency interest rate swaps in its entirety in a hedging relationship.

For cash flow hedges, 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. For fair value hedges, the Group applies a hedge ratio of 1:1 and determines the

existence of an economic relationship between the change in fair value of the United States dollars

denominated medium term notes and the cross currency interest rate swaps.

The main sources of ineffectiveness in these hedging relationships are:

– the effect of the counterparty’s and the Group’s own credit risk on the fair value of the currency forward

contracts which is not reflected in the fair value of the hedged cash flows attributable to the change in

forward rates; and

– changes in the timing of the hedged transactions.

Cathay Pacific Airways Limited Annual Report 2023 127

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

The following table provides a reconciliation of the hedging reserve in respect of foreign currency risk and

shows the effectiveness of the hedging relationships:

2023

HK$M

2022

HK$M

Balance at 1st January 716 665

Effective portion of the cash flow hedge recognised in other

comprehensive income 333 523

Amounts reclassified to profit or loss* (524) (467)

Related tax 16 (5)

Balance at 31st December** 541 716

Change in fair value of the derivative instruments during the year 333 523

Hedge ineffectiveness recognised in profit or loss – –

Effective portion of the cash flow hedge recognised in other

comprehensive income 333 523

Amounts reclassified to profit or loss are recognised in “Passenger services revenue” and “Cargo services revenue” in the

consolidated statement of profit or loss.

At 31st December 2023, the Group had HK$22 million (net of deferred tax) in the hedging reserve from discontinued hedges (2022:

HK$127 million, net of deferred tax).

Exposure to currency risk

The currencies giving rise to a risk of translation of financial assets or liabilities denominated in a currency other

than the functional currency of the entity at end of the reporting period in the Group’s financial statements in

2023 and 2022 are primarily 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:

2023

USD

HK$M

EUR

HK$M

AUD

HK$M

SGD

HK$M

RMB

HK$M

JPY

HK$M

Group

Trade debtors and other receivables 3,295 250 144 41 691 137

Liquid funds 14,006 58 47 34 218 30

Loans and other borrowings (26,863) – – – (252) (199)

Lease liabilities (21,656) (48) (43) (14) (82) (2,793)

Trade creditors and other payables (5,258) (260) (174) (59) (415) (109)

Net exposure (36,476) – (26) 2 160 (2,934)

128 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

2022

USD

HK$M

EUR

HK$M

AUD

HK$M

SGD

HK$M

RMB

HK$M

JPY

HK$M

Group

Loans due from an associate 34 – – – – –

Trade debtors and other receivables 3,517 298 106 26 671 149

Liquid funds 13,416 86 19 27 248 38

Loans and other borrowings (31,174) – – (1,020) (259) (319)

Lease liabilities (25,185) (40) (44) (16) (105) (3,450)

Trade creditors and other payables (3,713) (155) (82) (62) (309) (109)

Net exposure (43,105) 189 (1) (1,045) 246 (3,691)

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 denominated in a currency other than the functional

currency of the entity at end of the reporting period 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 2022.

2023

Net increase/(decrease)

in profit or loss

HK$M

Net increase/(decrease) in

other equity components

HK$M

United States dollars* 1,903 (532)

Euros (10) 1,461

Australian dollars (3) 1,215

Singapore dollars 1 282

Renminbi (26) 3,348

Japanese yen 56 471

Net increase 1,921 6,245

2022

Net increase/(decrease)

in profit or loss

HK$M

Net increase/(decrease) in

other equity components

HK$M

United States dollars* 2,264 (275)

Euros (10) 33

Australian dollars (3) 24

Singapore dollars 34 2

Renminbi (25) 102

Japanese yen 57 131

Net increase 2,317 17

Hong Kong dollars are 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.

Cathay Pacific Airways Limited Annual Report 2023 129

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

(ii) Interest rate risk

The Group’s exposure to interest rate risk arises primarily from long-term borrowings. Interest rate swaps are

used to achieve an appropriate mix of fixed rate and floating rate exposure consistent with the Group’s policy.

Interest rate risk is measured by using sensitivity analysis on variable rate financial instruments.

Managing interest rate benchmark reform and associated risks

A fundamental reform of major interest rate benchmarks was undertaken globally, including the replacement of

some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as “IBOR reform”). Prior

to the IBOR reform, the Group had financial instruments referenced to USD London Interbank Offered Rate

(USD LIBOR), Hong Kong Interbank Offered Rate (HIBOR) and JPY Tokyo Interbank Offered Rate (Tokyo TIBOR).

In March 2021, the UK Financial Conduct Authority formally announced the cessation or non-

representativeness of the following LIBOR benchmark settings:

– all Sterling, Euro, Swiss Franc, Japanese yen LIBOR after 31st December 2021;

– 1-week and 2-month USD LIBOR after 31st December 2021; and

– overnight, 1-month, 3-month, 6-month and 12-month USD LIBOR after 30th June 2023.

In Hong Kong, the Hong Kong Monetary Authority still recognises HIBOR as a credible and reliable benchmark

and confirms that there is no plan to discontinue HIBOR although an alternative, the Hong Kong Dollar

Overnight Index Average (HONIA) has already been identified.

In Japan, the JPY TIBOR which has been reformed since 2017 continues to retain its importance as an

alternative benchmark for JPY LIBOR, particularly in the loan market.

The Group did not hold any financial instruments referenced to 1-week and 2-month USD LIBOR prior to the

IBOR reform and as such there were no contracts replaced. The Group’s financial instruments referenced to

HIBOR and JPY TIBOR were not impacted by the IBOR reform.

The Finance Committee monitors the Group’s transition to alternative benchmark rates. The Group has

transitioned its USD LIBOR loans and lease contracts to new Secured Overnight Financing Rate (SOFR).

Derivatives

The Group holds interest rate swaps for risk management purposes which are designated in cash flow hedging

relationships. The interest rate swaps have variable rate cash flows that are referenced to SOFR. The Group’s

derivative instruments are governed by contracts based on the International Swaps and Derivatives

Association’s (ISDA) master agreements. The Group and all its contracted derivatives counterparties have

adhered to the ISDA 2020 IBOR Fallbacks Protocol.

As of 31st December 2023, the Group has transitioned all USD LIBOR-linked financial instruments to new SOFR.

Hedge accounting

The Group has USD LIBOR cash flow hedging relationships which are referenced to 1-month, 3-month and

6-month LIBOR with maturities over the next five years, hence beyond the cessation date of 30th June 2023.

For changes made to the hedged risk, hedged item or hedging instrument required by interest rate benchmark

reform, the Group amends the formal designation of a hedging relationship to reflect the changes by the end of

the reporting period during which the relevant changes were made. Such an amendment to the formal

designation of the hedging relationship constitutes neither the discontinuation of the hedging relationship nor

the designation of a new hedging relationship.

130 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

Hedges of interest rate risk

The following table details the interest rate swaps that have been designated as cash flow hedges of the

interest rate risk inherent in the Group’s variable rate financing liabilities at the end of the reporting period:

2023

HK$M

2022

HK$M

Notional amount

United States dollars 2,823 5,149

Hong Kong dollars – 48

2023

HK$M

2022

HK$M

Carrying amount

Asset 77 163

Liability (11) –

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 four years (2022: five years) matching the maturity of the related financing

liabilities and have fixed swap rates ranging from 2.69% to 4.22% (2022: 2.68% to 4.22%).

The Group seeks to hedge the benchmark interest rate component only and applies a hedge ratio of 1:1. The

existence of an economic relationship between the interest rate swaps and the variable rate borrowings is

determined by matching their critical contract terms, including the reference interest rates, tenors, interest

repricing dates, maturity dates, interest payment dates, the notional amounts of the swaps and the outstanding

principal amounts of the financing liabilities.

The main source of ineffectiveness in these hedging relationships is the effect of the counterparty’s and the

Group’s own credit risk on the fair value of the swaps which is not reflected in the fair value of the hedged cash

flows attributable to the change in interest rates, and differences in repricing dates between the swaps and the

borrowings. The Group considers the ineffectiveness to be immaterial.

Cathay Pacific Airways Limited Annual Report 2023 131

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

The following table provides a reconciliation of the hedging reserve in respect of interest rate risk and shows

the effectiveness of the hedging relationships:

2023

HK$M

2022

HK$M

Balance at 1st January 118 (292)

Effective portion of the cash flow hedge recognised in other

comprehensive income 26 334

Amounts reclassified to profit or loss* (109) 119

Related tax 8 (43)

Balance at 31st December** 43 118

Change in fair value of the derivative instruments during the year 26 334

Hedge ineffectiveness recognised in profit or loss – –

Effective portion of the cash flow hedge recognised in other

comprehensive income 26 334

Amounts reclassified to profit or loss are recognised in “Finance charges” 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:

2023

HK$M

2022

HK$M

Fixed rate instruments

Loan due from an associate 45 40

Loans and other borrowings (18,064) (18,638)

Lease liabilities (14,550) (16,500)

Interest rate and cross currency interest rate swaps (3,058) (6,306)

Net exposure (35,627) (41,404)

2023

HK$M

2022

HK$M

Variable rate instruments

Loan due from an associate – 34

Liquid funds 15,530 18,277

Loans and other borrowings (21,231) (26,528)

Lease liabilities (14,449) (15,440)

Interest rate and cross currency interest rate swaps 3,047 6,289

Net exposure (17,103) (17,368)

132 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

Sensitivity analysis for interest rate exposure

An increase of 25 basis points in interest rates at the reporting date would have decreased profit or loss and

increased other equity components by the amounts shown below. It represents the change in fair value of

interest rate swaps 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 2022.

2023 2022

Net decrease

in profit

or loss

HK$M

Net decrease 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 (46) (5) (50) 15

(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:

2023 2022

Notional amount Barrel (million) 16.5 14.2

Carrying amount

Asset

HK$M 88 932

Liability

HK$M (443) (267)

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 (2022: two years) from the reporting date

and have a weighted average strike price (Brent, US$/barrel) as follows:

2023

US$/barrel

2022

US$/barrel

Within one year 78.92 73.30

After one year but within two years 75.46 81.74

The price risk of jet fuel purchases includes a crude oil price risk component, even though crude oil is not

specified in any contractual arrangement. The Group considers the crude oil component to be a separately

identifiable and reliably measureable component of jet fuel price. As such, crude oil forward contracts are

designated as a hedge of the crude oil risk component of highly probable forecast fuel purchase transactions.

The Group seeks to hedge the crude oil price risk component only and applies a hedge ratio of 1:1. The main

source of ineffectiveness in these hedging relationships is the effect of the counterparty’s and the Group’s own

credit risk on the fair value of the crude oil forward contracts which is not reflected in the fair value of the

hedged cash flows attributable to the change in crude oil price.

Cathay Pacific Airways Limited Annual Report 2023 133

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

The following table provides a reconciliation of the hedging reserve in respect of fuel price risk and shows the

effectiveness of the hedging relationships:

2023

HK$M

2022

HK$M

Balance at 1st January 633 1,801

Effective portion of the cash flow hedge recognised in other

comprehensive income (355) 2,154

Amounts reclassified to profit or loss* (693) (3,444)

Related tax 97 122

Balance at 31st December** (318) 633

Change in fair value of the derivative instruments during the year (355) 2,154

Hedge ineffectiveness recognised in profit or loss – –

Effective portion of the cash flow hedge recognised in other

comprehensive income (355) 2,154

Amounts reclassified to profit or loss are recognised in “Fuel, including hedging gains” in the consolidated statement of profit or

loss.

As at 31st December 2023, the Group had nil (net of deferred tax) in the hedging reserve from discontinued hedges (2022: HK$26

million, net of deferred tax).

Sensitivity analysis for fuel price exposures

An increase/(decrease) of five percent in the crude oil price at the reporting date would have resulted in a

change in profit or loss and other equity components by the amounts shown below. It represents the change in

fair value of crude oil forward contracts at the reporting date. The analysis assumes that all other variables

remain constant and it has been performed on the same basis as for 2022.

2023 2022

Net

increase

in profit or

loss

HK$M

Net increase/

(decrease) in

other equity

components

HK$M

Net

increase

in profit or

loss

HK$M

Net increase/

(decrease) in

other equity

components

HK$M

Increase in crude oil price by 5% – 434 – 414

Decrease in crude oil price by 5% – (434) – (414)

(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 2023 and 2022 except for the following financial instruments, for

which their carrying amounts and fair values are shown below:

2023 2022

Carrying

amount

HK$M

Fair value

HK$M

Carrying

amount

HK$M

Fair value

HK$M

Loans and other borrowings (39,295) (41,138) (45,166) (47,189)

The fair value of these financial instruments are measured using valuation techniques in which all significant inputs

are based on observable market data. The most significant inputs are market interest rates.

134 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

(e) Financial instruments carried at fair value

The following table presents the carrying value of financial instruments measured at fair value at 31st December

2023 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.

2023 2022

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 – – 827 827 – – 840 840

Liquid funds

– funds with investment managers – 7,208 – 7,208 – 10,572 – 10,572

– other liquid investments – 5 – 5 – 5 – 5

Derivative financial assets – 298 – 298 – 1,185 – 1,185

– 7,511 827 8,338 – 11,762 840 12,602

Liabilities

Derivative financial liabilities – (626) – (626) – (358) – (358)

– (626) – (626) – (358) – (358)

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 2023 and 2022, 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 2023: 8.3-11.0%

(2022: 8.0-11.0%)

The higher the discount rate,

the lower the fair value

2023: +/- 0.5%

(2022: +/- 0.5%)

2023: (23)/25

(2022: (29)/32)

The movement during the year in the balance of Level 3 fair value measurements is as follows:

2023

HK$M

2022

HK$M

Unlisted equity investments at fair value

At 1st January 840 756

Unrealised loss recognised in other comprehensive income during the year (2) (4)

Fair value (losses)/gains recognised in profit or loss during the year (11) 88

At 31st December 827 840

Cathay Pacific Airways Limited Annual Report 2023 135

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

29. FINANCIAL RISK MANAGEMENT (continued)

Any gain or loss arising from the remeasurement of the Group’s equity investments held for strategic purposes are

recognised in the investment revaluation reserve (non-recycling) in other comprehensive income. Upon disposal

ofthe equity investments, the amount accumulated in other comprehensive income is transferred directly to

retained profit.

Any gain or loss arising from the remeasurement of the Group’s equity investments held for trading purposes are

recognised in profit or loss as “Others”.

(f) Offsetting financial assets and financial liabilities

The Group enters into derivative transactions under ISDA master agreements, providing offsetting in the event of

default. The ISDA agreements do not meet the criteria for offsetting in the consolidated statement of financial

position. This is because the Group does not currently have any legally enforceable right to offset recognised

amounts, as the right to offset is enforceable only on the occurrence of future events such as default on the bank

loans or other credit events.

The table below illustrates the net amounts of financial instruments with the same counterparty:

2023

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 298 (235) 63

Derivative financial liabilities (626) 235 (391)

(328) – (328)

2022

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 1,185 (312) 873

Derivative financial liabilities (358) 312 (46)

827 – 827

30. CAPITAL RISK MANAGEMENT

The Group’s objectives when managing capital are to maintain an efficient mix of debt and equity in order to achieve a

low cost of capital, whilst taking into account the desirability of retaining financial flexibility to pursue business

opportunities and adequate access to liquidity to mitigate the effect of unforeseen events on cash flows.

The Group regards the net debt/equity ratio and adjusted net debt/equity ratio (excluding leases without assets transfer

components) as the key measurements of capital risk management. The components and calculation of the net debt/

equity ratio and adjusted net debt/equity ratio are shown in note 12 to the financial statements and a ten year history of

net debt/equity ratio is included on pages 154 and 155 of the annual report. The Group’s strategy is to maintain the

adjusted net debt/equity ratio within its debt covenants of 2.

The Group is not subject to externally imposed capital requirements.

During the year ended 31st December 2023, no significant changes were made in the objectives, policies or processes

relating to the management of the Group’s capital risk management.

136 Cathay Pacific Airways Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

31. COMPANYLEVEL STATEMENT OF FINANCIAL POSITION

Note

2023

HK$M

2022

(restated)

HK$M

2023

US$M

2022

(restated)

US$M

ASSETS AND LIABILITIES

Non-current assets and liabilities

Property, plant and equipment 100,074 101,357 12,830 12,994

Intangible assets 10,394 10,647 1,332 1,365

Investments in subsidiaries 26,867 31,204 3,444 4,001

Investments in associates 10,505 10,540 1,347 1,351

Other long-term receivables and investments 2,773 2,519 356 323

150,613 156,267 19,309 20,034

Interest-bearing liabilities (50,570) (54,035) (6,483) (6,928)

Other long-term payables (1,498) (1,507) (192) (193)

Other long-term contract liabilities (252) (282) (32) (36)

Deferred tax liabilities (7,335) (7,723) (941) (990)

(59,655) (63,547) (7,648) (8,147)

Net non-current assets 90,958 92,720 11,661 11,887

Current assets and liabilities

Stock 924 1,093 118 140

Trade and other receivables 5,591 6,308 717 809

Liquid funds 8,012 7,435 1,027 953

14,527 14,836 1,862 1,902

Interest-bearing liabilities (9,252) (13,798) (1,186) (1,769)

Trade and other payables (13,671) (8,681) (1,753) (1,113)

Contract liabilities (14,095) (12,510) (1,807) (1,603)

Taxation (1,939) (3,431) (248) (440)

(38,957) (38,420) (4,994) (4,925)

Net current liabilities (24,430) (23,584) (3,132) (3,023)

Total assets less current liabilities 126,183 132,683 16,177 17,011

Net assets 66,528 69,136 8,529 8,864

CAPITAL AND RESERVES

Share capital

20 28,828 48,322 3,696 6,195

Reserves

22 37,700 20,814 4,833 2,669

Total equity 66,528 69,136 8,529 8,864

The financial statements are prepared and presented in HK$, the functional currency. The US$ figures are shown only as

supplementary information and are translated at US$1:HK$7.8.

Patrick Healy John Harrison

Director Director

Hong Kong, 13th March 2024

Cathay Pacific Airways Limited Annual Report 2023 137

NOTES TO THE FINANCIAL STATEMENTS

Supplementary Information

32. NONADJUSTING EVENTS AFTER THE REPORTING PERIOD

On 7th February 2024, the Group’s interest in Air China was diluted from 16.26% to 15.87% as a result of Air China

issuing 393 million new H shares to a specific investor with proceeds of the issuance totalling HK$2 billion.

Notwithstanding the dilution, the Group continues to have significant influence over Air China and would continue to

equity account for its interest in Air China as an associate. This transaction had no impact on the results of the Group for

the year ended 31st December 2023, but is expected to result in a gain from deemed partial disposal in 2024.

As the Group applies the equity method to its interest in Air China three months in arrears and the financial information

of Air China as at and up to 7th February 2024 is not available, the gain from deemed partial disposal cannot be

determined on the date these financial statements are issued. The gain will primarily arise from the Group’s share of

proceeds from the share subscription (i.e. HK$317 million) less the carrying value of interest deemed to be disposed,

which represents approximately 2.4% of the carrying value of the Group’s interest in Air China. The carrying value of the

Group’s interest in Air China as at 31st December 2023, which has accounted for Air China’s results up to 30th

September 2023, was HK$10.4 billion. The amount of the gain from deemed partial disposal will be finalised once Air

China’s financial information for relevant subsequent period is made available to the Group and recognised in the

Group’s first half results for 2024.

138 Cathay Pacific Airways Limited Annual Report 2023

SUBSIDIARIES

Place of

incorporation/

establishment

and operation Principal activities

Percentage of

issued capital

owned

Issued and paid up share

capital and

debt securities

AHK Air Hong Kong Limited Hong Kong Cargo airline 100 1,000,000 shares

Airline Property Limited Hong Kong Property investment 100 2 shares

Airline Stores Property Limited Hong Kong Property investment 100 2 shares

Airline Training Property Limited Hong Kong Property investment 100 2 shares

Asia Miles Limited Hong Kong Travel reward programme 100 2 shares

Cathay Holidays Limited Hong Kong Travel tour operator 100 40,000 shares

Cathay Pacific Aircraft Leasing

(H.K.) Limited

Hong Kong Aircraft financing facilitator 100 1 share

Cathay Pacific Aircraft Services

Limited

Isle of Man Aircraft acquisition

facilitator

100 10,000 shares of US$1 each

Cathay Pacific Catering Services

(H.K.) Limited

Hong Kong Airline catering 100 600 shares

Cathay Pacific Finance Limited Hong Kong Aircraft financing facilitator 100 1 share

Cathay Pacific Finance III Limited Cayman

Islands

Financial services 100 1 share of US$1, and

HK$6,740 million of

convertible bonds in issue

Cathay Pacific MTN Financing (HK)

Limited

Hong Kong Financial services 100 1 share, and HK$888 million,

US$650 million, RMB230

million and SGD175 million of

medium term notes in issue

Cathay Pacific Services Limited Hong Kong Cargo terminal 100 1 share

Connaught Network Services

Private Limited

India Information processing 100* 90,000 shares

Guangzhou Guo Tai Information

Processing Company Limited

People’s

Republic of

China

Information processing 100* Registered capital of

HK$8,000,000 (wholly

foreign owned enterprise)

Hong Kong Airport Services

Limited

Hong Kong Aircraft ramp handling 100 100 shares

Hong Kong Aviation and Airport

Services Limited

Hong Kong Property investment 100* 2 shares

Hong Kong Express Airways

Limited

Hong Kong Operation of scheduled

airline services

100 1,000,000 shares

Troon Limited Bermuda Financial services 100 12,000 shares of US$1 each

Vogue Laundry Service Limited Hong Kong Laundry and dry cleaning 100 3,700 shares

Material 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.

MATERIAL SUBSIDIARIES AND ASSOCIATES

at 31st December 2023

Cathay Pacific Airways Limited Annual Report 2023 139

MATERIAL SUBSIDIARIES AND ASSOCIATES

ASSOCIATES

Place of

incorporation/

establishment and

operation Principal activities

Percentage

of issued

capital owned

Air China Cargo Co., Ltd. People’s Republic

of China

Cargo carriage service 24*

Air China Limited People’s Republic

of China

Airline 16.26

Shareholding held through subsidiaries.

140 Cathay Pacific Airways Limited Annual Report 2023

1. BASIS OF ACCOUNTING

The financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting

Standards (“HKFRSs”) (which include all applicable Hong Kong Accounting Standards (“HKAS”), Hong Kong Financial

Reporting Standards and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”),

accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance.

These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of

Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The measurement basis used is historical cost modified by the use of fair value for certain financial assets and liabilities

and post-employment benefits as explained in accounting policies 8, 9, 10, 11 and 14 below.

The preparation of the financial statements in conformity with HKFRSs requires management to make certain estimates

and assumptions which affect the amounts of property, plant and equipment, intangible assets, long-term investments,

post-employment benefits obligations and taxation included in the financial statements. These estimates and

assumptions are continually re-evaluated and are based on management’s expectations of future events which are

considered to be reasonable. Further details on these estimates and assumptions are disclosed in notes 8, 9, 29(e), 14

and 15 to the financial statements, respectively.

The HKICPA has issued the following amendments to HKFRSs for the current accounting period of the Group.

(a) New and amended HKFRSs

The Group has applied the following new and amended HKFRSs issued by the HKICPA to these financial statements

for the current accounting period:

• HKFRS 17 “Insurance contracts”

• Amendments to HKAS 8 “Accounting policies, changes in accounting estimates and errors: Definition of

accounting estimates”

• Amendments to HKAS 1 “Presentation of financial statements” and HKFRS Practice Statement 2 “Making

materiality judgements: Disclosure of accounting policies”

• Amendments to HKAS 12 “Income taxes: Deferred tax related to assets and liabilities arising from a single

transaction”

• Amendments to HKAS 12 “Income taxes: International tax reform – Pillar Two model rules”

The Group has not applied any new standard or interpretation that is not yet effective for the current

accountingperiod.

The standard and the amendments do not have a material impact on these financial statements except as

described below.

Amendments to HKAS 12 “Income taxes: Deferred tax related to assets and liabilities arising from a single

transaction”

The amendments narrow the scope of the initial recognition exemption such that it does not apply to transactions

that give rise to equal and offsetting temporary differences on initial recognition such as leases and

decommissioning liabilities. For leases and decommissioning liabilities, the associated deferred tax assets and

liabilities are required to be recognised from the beginning of the earliest comparative period presented, with any

cumulative effect recognised as an adjustment to retained earnings or other components of equity at that date. For

all other transactions, the amendments are applied to those transactions that occur after the beginning of the

earliest period presented.

Prior to the amendments, the Group did not apply the initial recognition exemption to lease transactions and had

recognised the related deferred tax, except that the Group previously determined the temporary difference arising

from a right-of-use asset and the related lease liability on a net basis on the basis they arise from a single

transaction. Following the amendments, the Group has determined the temporary differences in relation to right-of-

use assets and lease liabilities separately. The change primarily impacts disclosures of components of deferred tax

assets and liabilities in the annual financial statements, but does not impact the overall deferred tax balances

presented in the consolidated statement of financial position as the related deferred tax balances qualify for

offsetting under HKAS 12.

MATERIAL ACCOUNTING POLICIES

Cathay Pacific Airways Limited Annual Report 2023 141

MATERIAL ACCOUNTING POLICIES

1. BASIS OF ACCOUNTING (continued)

(b) New HKICPA guidance on the accounting implications of the abolition of the MPF-LSP offsetting mechanism

As disclosed in note 14 to the financial statements, the Hong Kong SAR Government (the “Government”) gazetted

the Hong Kong Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment)

Ordinance 2022 (the “Amendment Ordinance”) in June 2022, which will eventually abolish the statutory right of an

employer to reduce its long service payment (“LSP”) and severance payment payable to a Hong Kong employee by

drawing on its mandatory contributions to the Mandatory Provident Fund (“MPF”) scheme (also known as the

“offsetting mechanism”). The Government has subsequently announced that the Amendment Ordinance will come

into effect from 1st May 2025 (the “Transition Date”). Separately, the Government is also expected to introduce a

subsidy scheme to assist employers after the abolition.

Among other things, once the abolition of the offsetting mechanism takes effect, an employer can no longer use

any of the accrued benefits derived from its mandatory MPF contributions (irrespective of the contributions made

before, on or after the Transition Date) to reduce the LSP in respect of an employee’s service from the Transition

Date. However, where an employee’s employment commenced before the Transition Date, the employer can

continue to use the above accrued benefits to reduce the LSP in respect of the employee’s service up to that date;

in addition, the LSP in respect of the service before the Transition Date will be calculated based on the employee’s

monthly salary immediately before the Transition Date and the years of service up to that date.

In July 2023, the HKICPA published “Accounting implications of the abolition of the MPF-LSP offsetting mechanism

in Hong Kong” that provides guidance on the accounting considerations relating to the offsetting mechanism and

the abolition of the mechanism. In particular, the guidance indicates that entities may account for the accrued

benefits derived from its mandatory MPF contributions that are expected to be used to reduce the LSP payable to

an employee as deemed contributions by that employee towards the LSP; however, upon the enactment of the

Amendment Ordinance in June 2022, entities can no longer apply the practical expedient in paragraph 93(b) of

HKAS 19 to recognise such deemed contributions as reduction of current service cost in the period the related

service is rendered instead these deemed contributions should be attributed to periods of service in the same

manner as the gross LSP benefit.

To better reflect the substance of the abolition of the offsetting mechanism, the Group has changed its accounting

policy in connection with its LSP liability and has applied the above HKICPA guidance retrospectively. The cessation

of applying the practical expedient in paragraph 93(b) of HKAS 19 in conjunction with the enactment of the

Amendment Ordinance resulted in a catch-up profit or loss adjustment for the service cost up to that date and

consequential impacts on current service cost, interest expense and remeasurement effects from changes in

actuarial assumptions for the rest of 2022 (see note 14 to the financial statements), with the corresponding

adjustment to the comparative carrying amount of the LSP obligations. This change in accounting policy did not

have any impact on the opening balance of equity at 1st January 2022 and the cash flows for the year ended 31st

December 2022.

142 Cathay Pacific Airways Limited Annual Report 2023

MATERIAL ACCOUNTING POLICIES

1. BASIS OF ACCOUNTING (continued)

The following table summarises the impacts of the change in accounting policy and adoption of the HKICPA

guidance (“Impacts”) on the comparatives presented in the Group’s consolidated statement of profit or loss,

consolidated statement of other comprehensive income and consolidated statement of financial position:

As previously

reported

HK$M

Impacts

HK$M

restated

HK$M

Consolidated statement of profit or loss for the year ended

31st December 2022:

Staff expenses (10,571) (75) (10,646)

Operating expenses (47,490) (75) (47,565)

Operating profit before non-recurring items and operating profit 3,546 (75) 3,471

Loss before taxation (6,040) (75) (6,115)

Loss for the year (6,547) (75) (6,622)

Loss attributable to ordinary shareholders of the Cathay Group (7,162) (75) (7,237)

Loss per ordinary share

– Basic and diluted (111.3)¢ (112.4)¢

Consolidated statement of other comprehensive income

for the year ended 31st December 2022:

Total comprehensive loss for the year (8,365) (75) (8,440)

Total comprehensive loss attributable to ordinary shareholders of

the Cathay Group (8,980) (75) (9,055)

Consolidated statement of financial position at

31st December 2022:

Other long-term payables (2,766) (75) (2,841)

Total non-current liabilities (73,628) (75) (73,703)

Net non-current assets 80,950 (75) 80,875

Net assets 63,884 (75) 63,809

Reserves 15,556 (75) 15,481

Funds attributable to the shareholders of the Cathay Group 63,878 (75) 63,803

Total equity 63,884 (75) 63,809

Reconciliation of operating profit to cash generated from

operations for the year ended 31st December 2022

Operating profit 3,546 (75) 3,471

Gains from financial derivatives, cash flow hedge reserve and other

items not involving cash flows (163) 75 (88)

Cathay Pacific Airways Limited Annual Report 2023 143

MATERIAL ACCOUNTING POLICIES

1. BASIS OF ACCOUNTING (continued)

If the Group had not changed its accounting policy as noted above and had continued to apply the practical

expedient in paragraph 93(b) of HKAS 19, in the Group’s consolidated statement of profit or loss for the year ended

31st December 2023, staff expenses would decrease by HK$9 million, profit for the year would increase by HK$9

million while the other comprehensive income for the year and attributable to the Cathay Group would increase by

HK$6 million. In the Group’s consolidated statement of financial position as at same date, other long-term payables

would be reduced by HK$90 million, resulting in a corresponding increase in net assets and reserves.

Up to the date of issue of these financial statements, the HKICPA has issued a number of new or amended

standards, which are not yet effective for the year ended 31st December 2023 and which have not been adopted in

these financial statements. These developments include the following which may be relevant to the Group.

• Amendments to HKFRS 10 and HKAS 28 “Sale or Contribution of Assets between an Investor and its Associate

or Joint Venture”

• Amendments to HKFRS 16 “Lease Liability in a Sale and Leaseback”

• Amendments to HKAS 1 “Classification of Liabilities as Current or Non-current and related amendments” to

Hong Kong Interpretation 5 (2020)

• Amendments to HKAS 1 “Non-current Liabilities with Covenants”

• Amendments to HKAS 7 and HKFRS 7 “Supplier Finance Arrangements”

• Amendments to HKAS 21 “Lack of Exchangeability”

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.

2. BASIS OF CONSOLIDATION

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made

up to 31st December together with the Group’s share of the results and net assets of its associates. Subsidiaries are

entities controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable

returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The results of subsidiaries are included in the consolidated statement of profit or loss and the consolidated statement

of 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 the consolidated statement of 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.

144 Cathay Pacific Airways Limited Annual Report 2023

MATERIAL ACCOUNTING POLICIES

3. ASSOCIATES

Associates are those companies, not being subsidiaries, in which the Group holds a substantial long-term interest in the

equity share capital and over which the Group is in a position to exercise significant influence.

The consolidated statement of profit or loss and the consolidated statement of other comprehensive income includes

the Group’s share of results of associates as reported in their financial statements made up to dates not earlier than

three months prior to 31st December. In the consolidated statement of financial position, investments in associates

represent the Group’s share of net assets, goodwill arising on acquisition of the associates (less any impairment) and

loans to those companies.

In the Company’s statement of financial position, investments in associates are stated at cost less any impairment loss

recognised and loans to those companies. The results of associates are accounted for by the Company on the basis of

dividends received and receivable.

4. FOREIGN CURRENCIES

Foreign currency transactions entered into during the year are translated into Hong Kong dollars at the market rates

ruling at the relevant transaction dates whilst the following items are translated at the rates ruling at the reporting date:

(a) foreign currency denominated financial assets and liabilities.

(b) assets and liabilities of foreign subsidiaries and associates.

Exchange differences arising on the translation of foreign currencies into Hong Kong dollars are reflected in profit or

loss except that:

(a) unrealised exchange differences on foreign currency denominated financial assets and liabilities, as described in

accounting policies 8, 9 and 10 below, that qualify as effective cash flow hedge instruments under HKFRS 9

“Financial Instruments” are recognised in other comprehensive income and accumulated separately in equity via

the statement of changes in equity. These exchange differences are included in profit or loss as an adjustment to

the hedged item in the same period or periods during which the hedged item affects profit or loss.

(b) unrealised exchange differences on net investments in foreign subsidiaries and associates (including intra-Group

balances of an equity nature) and related long-term liabilities are recognised in other comprehensive income and

accumulated separately in equity via the statement of changes in equity.

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost less accumulated depreciation and impairment.

The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of

bringing the asset to working condition for its intended use. The cost relating to an acquired (owned or leased) aircraft

reflects all components in its full service potential excluding the maintenance condition of its landing gear, airframe and

engines. The cost relating to the maintenance element is identified on acquisition as a separate component and

depreciated till its next major maintenance event. Expenditure for heavy maintenance visits on aircraft, engine overhauls

and landing gear overhauls, is capitalised at cost and depreciated over the average expected life between major

overhauls, estimated to be 4 to 10 years. Expenditure for engine overhaul costs covered by power-by-hour (fixed rate

charged per hour) maintenance agreements is expensed by hours flown. Expenditure for other maintenance and repairs

is charged to profit or loss.

Depreciation of owned property, plant and equipment is calculated on a straight line basis to write down cost over their

anticipated useful lives to their estimated residual values as follows:

Aircraft over 20-23 years to residual value of the lower of 1% of cost or expected realisable value

Aircraft product over 5-10 years to nil residual value

Other equipment over 3-25 years to nil residual value

Buildings over the lease term of the leasehold land to nil residual value

Cathay Pacific Airways Limited Annual Report 2023 145

MATERIAL ACCOUNTING POLICIES

5. PROPERTY, PLANT AND EQUIPMENT (continued)

Depreciation of right-of-use assets is calculated on a straight line basis to write down cost over the underlying lease

term to nil residual value. However, if the lease transfers ownership of the underlying asset to the Group by the end of the

lease term or if the cost of the right-of-use asset reflects that the Group will exercise a purchase option, depreciation is

calculated on a straight line basis to write down cost over the anticipated useful life of the underlying asset to its

estimated residual value in a similar manner as for an item of owned property, plant and equipment.

Major modifications to aircraft and reconfiguration costs are capitalised as part of aircraft cost and are depreciated over

periods of up to 10 years.

The depreciation policy and the carrying amount of property, plant and equipment are reviewed annually taking into

consideration factors such as changes in fleet composition, current and forecast market values and technical factors

which affect the life expectancy of the assets. Any impairment in value is recognised by writing down the carrying

amount to estimated recoverable amount which is the higher of the value in use (the present value of future cash flows)

and the fair value less costs of disposal.

6. LEASED ASSETS

The Group leases various aircraft, property facilities and offices and other equipment. Lease contracts are typically

made for fixed periods of one to 50 years but may have extension and early termination options. Lease terms are

negotiated on an individual basis and contain a wide range of different terms and conditions.

At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains a

lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for

consideration. Control is conveyed where the customer has both the right to direct the use of the identified asset and to

obtain substantially all of the economic benefits from that use.

(a) As a lessee

Where the contract contains lease component(s) and non-lease component(s), the Group has elected not to

separate non-lease components and accounts for each lease component and any associated non-lease

components as a single lease component for all leases.

The initial fair value of refundable rental deposits is accounted for separately from the right-of-use assets in

accordance with the accounting policy applicable to investments in debt securities carried at amortised cost. Any

difference between the initial fair value and the nominal value of the deposits is accounted for as additional lease

payments made and is included in the cost of right-of-use assets.

At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except for short-

term leases with a lease term of 12 months or less and leases of low-value assets. Payments associated with short-

term leases and leases of low-value assets are recognised as an expense on a systematic basis over the lease term.

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.

146 Cathay Pacific Airways Limited Annual Report 2023

MATERIAL ACCOUNTING POLICIES

6. LEASED ASSETS (continued)

After initial recognition, the lease liability is measured at amortised cost and interest expense is calculated using the

effective interest method. Variable lease payments that do not depend on an index or a rate are not included in the

measurement of the lease liability and hence are charged to profit or loss in the accounting period in which they

areincurred.

With respect to lease agreements, where the Group is required to return the aircraft with adherence to certain

maintenance conditions, a provision is made during the lease term. The provision is based on the present value of

the expected future cost of meeting the maintenance and non-maintenance return condition, having regard to the

current fleet plan and long-term maintenance schedules.

Where the lease is capitalised, the right-of-use asset recognised is initially measured at cost comprising

thefollowing:

• the amount of the initial measurement of lease liability;

• any lease payments made at or before the commencement date less any lease incentives received;

• any initial direct costs; and

• restoration costs.

The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses

outlined in accounting policy 5.

The lease liability is remeasured under the following circumstances:

• a change in future lease payments arising from a change in an index or a rate;

• a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee;

• a change arising from the reassessment of whether the Group will be reasonably certain to exercise a purchase,

extension or termination option; or

• a change in the scope of a lease or the consideration for a lease that is not originally provided for in the lease

contract (“lease modification”).

When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-

use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The only exceptions are any rent concessions which arose as a direct consequence of the Covid-19 pandemic and

which satisfied the conditions set out in paragraph 46B of HKFRS 16 “Leases”. In such cases, the Group took

advantage of the practical expedient set out in paragraph 46A of HKFRS 16 and recognised the change in

consideration as if it were not a lease modification. Consequently, rent concessions received before 30th June

2022 have been accounted for as negative variable lease payments recognised in profit or loss in the period in

which the event or condition that triggers those payments occurred. Rent concessions received after 30th June

2022 have been accounted for as lease modifications.

In the consolidated statement of financial position, the current portion of long-term lease liabilities is determined

asthe present value of contractual payments that are due to be settled within twelve months after the

reportingperiod.

(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.

Cathay Pacific Airways Limited Annual Report 2023 147

MATERIAL ACCOUNTING POLICIES

6. LEASED ASSETS (continued)

When the Group is an intermediate lessor, the sub-leases are classified as a finance lease or as an operating lease

with reference to the right-of-use asset arising from the head lease. If the head lease is a short-term lease to which

the Group applies the exemption described in accounting policy 6(a), then the Group classifies the sub-lease as an

operating lease.

7. INTANGIBLE ASSETS

Intangible assets comprise mainly goodwill arising on consolidation and computer software licences. The accounting

policy for goodwill is outlined in accounting policy 2.

Expenditure on computer software licences and others which gives rise to economic benefits is capitalised as part of

intangible assets and is amortised on a straight line basis. The useful life of expenditure on computer software licences

and others is four to twenty years.

8. FINANCIAL ASSETS

Other long-term receivables, bank and security deposits, trade and other short-term receivables are stated at

amortised cost less allowance for credit losses.

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial

institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which

are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Cash

and cash equivalents are assessed for expected credit losses in accordance with the policy set out below.

The accounting policy for derivative financial assets is outlined in accounting policy 10.

Investments are recognised or derecognised by the Group on the date when the purchase or sale of the assets occurs.

The investments are initially stated at fair value plus directly attributable transaction costs, except for those investments

measured at fair value through profit or loss, for which transaction costs are recognised directly in profit or loss. These

investments are subsequently accounted for as follows:

Non-equity investments held by the Group are classified into one of the following measurement categories:

(a) amortised cost, if the investment is held for the collection of contractual cash flows which represent solely

payments of principal and interest. Interest income from the investment is calculated using the effective

interestmethod;

(b) fair value through other comprehensive income – recycling, if the contractual cash flows of the investment

comprise solely payments of principal and interest and the investment is held within a business model whose

objective is achieved by both the collection of contractual cash flows and sale. Changes in fair value are recognised

in other comprehensive income, except for the recognition in profit or loss of expected credit losses, interest

income (calculated using the effective interest method) and foreign exchange gains and losses. When the

investment is derecognised, the amount accumulated in other comprehensive income is recycled from equity to

profit or loss; or

(c) fair value through profit or loss, if the investment does not meet the criteria for being measured at amortised cost or

fair value through other comprehensive income (recycling). Changes in the fair value of the investment (including

interest) are recognised in profit or loss.

Equity investments are classified as fair value through profit or loss unless the equity investments are not held for

trading purposes and on initial recognition of the investment the Group makes an election to designate the investment

at fair value through other comprehensive income (non-recycling) such that subsequent changes in fair value are

recognised in other comprehensive income. Such elections are made on an instrument-by-instrument basis, but may

only be made if the investment meets the definition of equity from the issuer’s perspective. Where such an election is

made, the amount accumulated in other comprehensive income remains in the investment revaluation reserve (non-

recycling) until the investment is disposed of. At the time of disposal, the amount accumulated in the investment

revaluation reserve (non-recycling) is transferred to retained profit. It is not recycled through profit or loss. Dividends

from equity investments, irrespective of whether classified at fair value through profit or loss or fair value through other

comprehensive income (non-recycling), are recognised in profit or loss as other income.

148 Cathay Pacific Airways Limited Annual Report 2023

MATERIAL ACCOUNTING POLICIES

8. FINANCIAL ASSETS (continued)

Funds with investment managers and other liquid investments which are managed and evaluated on a fair value basis

are designated at fair value through profit or loss.

Expected credit losses

The Group applies the expected credit loss model to the financial assets measured at amortised cost (including cash

and cash equivalents, trade and other receivables and loans to associates).

Financial assets measured at fair value, including equity investments measured at fair value through profit or loss, equity

investments designated at fair value through other comprehensive income (non-recycling) and derivative financial

assets, are not subject to the expected credit loss assessment.

Measurement of expected credit losses

Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present

value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the

contract and the cash flows that the Group expects to receive).

In measuring expected credit losses, the Group takes into account reasonable and supportable information that is

available without undue cost or effort. This includes information about past events, current conditions and forecasts of

future economic conditions.

Expected credit losses are measured on either of the following bases:

(i) 12-month expected credit losses: these are losses that are expected to result from possible default events within

12 months after the reporting date; or

(ii) lifetime expected credit losses: these are losses that are expected to result from all possible default events over the

expected lives of the items to which the expected credit loss model applies.

Loss allowances for trade debtors are always measured at an amount equal to lifetime expected credit losses. Expected

credit losses on trade debtors are estimated using a provision matrix based on the Group’s historical credit loss

experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast

general economic conditions at the reporting date. For all other financial instruments, the Group recognises a loss

allowance equal to 12-month expected credit losses unless there has been a significant increase in credit risk of the

financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime

expected credit losses.

In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the

Group compares the risk of default occurring on the financial instrument assessed at the reporting date with that

assessed at the date of initial recognition. In making this reassessment, the Group considers that a default event occurs

when the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions

such as realising security (if any is held). The Group considers both quantitative and qualitative information that is

reasonable and supportable, including historical experience and forward-looking information that is available without

undue cost or effort.

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.

Cathay Pacific Airways Limited Annual Report 2023 149

MATERIAL ACCOUNTING POLICIES

8. FINANCIAL ASSETS (continued)

Expected credit losses are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk

since initial recognition. Any change in the expected credit losses amount is recognised as an impairment gain or loss in

profit or loss. The Group recognises an impairment gain or loss for the financial instrument with a corresponding

adjustment to its carrying amount through a loss allowance account.

Write-off policy

The gross carrying amount of a financial instrument is written off (either partially or in full) to the extent that there is no

realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have

assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

Subsequent recoveries of the financial instrument that was previously written off are recognised as a reversal of

impairment in profit or loss in the periods in which the recoveries occur.

9. FINANCIAL LIABILITIES

Loans and other borrowings, lease liabilities and trade and other payables are stated at amortised cost.

Where long-term loans have been defeased by funds and other investments, those loans and deposits (and income and

charge arising therefrom) are netted off, in order to reflect the overall commercial effect of the arrangements. Such

netting off occurs where there is a current legally enforceable right to set off the loan and the deposit and the Group

intends either to settle on a net basis or to realise the deposit and settle the loans simultaneously.

The accounting policy for derivative financial liabilities is outlined in accounting policy 10.

Financial liabilities are recognised or derecognised when the contracted obligations are incurred or extinguished.

Interest expenses incurred under financial liabilities are calculated and recognised using the effective interest method.

10. DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments are used solely to manage exposures to fluctuations in foreign currency rates, interest

rates and jet fuel prices in accordance with the Group’s risk management policies. The Group does not hold or issue

derivative financial instruments for proprietary trading purposes.

All derivative financial instruments are recognised at fair value in the statement of financial position.

Cash flow hedges

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.

Fair value hedges

When a derivative is designated as the hedging instrument in a hedge of the change in fair value of a recognised asset or

liability or a firm commitment that could affect profit or loss, changes in the fair value of the derivative are recognised

immediately in profit or loss. The change in fair value of the hedged item attributable to the hedged risk is recognised in

profit or loss. If the hedged item would otherwise be measured at cost or amortised cost, then its carrying amount is

adjusted accordingly.

If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for fair

value hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively.

150 Cathay Pacific Airways Limited Annual Report 2023

MATERIAL ACCOUNTING POLICIES

11. FAIR VALUE MEASUREMENT

Fair value of financial assets and financial liabilities is determined either by reference to quoted market values or by

using discounted cash flow valuation techniques in which the significant inputs are based on observable market data

where available.

12. PREFERENCE SHARE CAPITAL

Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Company’s option, and

any dividends are discretionary. Dividends on preference share capital classified as equity are recognised as

distributions within equity.

13. WARRANTS

Warrants in issue fulfill a fixed-for fixed criterion and are accounted for as equity instruments, with no subsequent fair

value remeasurement. Upon the exercise of the warrants, the resulting ordinary shares issued are recorded as additional

share capital.

14. POSTEMPLOYMENT BENEFITS

The Group has the three categories of defined benefit plans including defined benefit scheme, defined contribution

scheme and long service payment obligations under the Hong Kong Employment Ordinance.

For defined benefit schemes and long service payment obligations, retirement benefit costs are assessed using the

projected unit credit method. Under this method, the cost of providing retirement benefits is charged to the

consolidated statement of profit or loss and the consolidated statement of 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 by independent actuaries and are determined by discounting the estimated

future cash flows using interest rates of high quality corporate bonds. The plan assets are valued on a bid price basis.

When the benefits of a plan are changed, or when a plan is curtailed, current service cost for the portion of the changed

benefit related to past service by employees, or the gain or loss on curtailment, is recognised as an expense in profit or

loss at the earlier of when the plan amendment or curtailment occurs and when related restructuring costs or

termination benefits are recognised.

Actuarial gains and losses arising from experience adjustments, changes in financial assumptions and return on plan

assets excluding interest income are charged or credited to other comprehensive income in the period in which they

arise. Past service costs are recognised in profit or loss immediately.

For defined contribution schemes, the Group’s contributions are charged to profit or loss immediately in the period to

which the contributions relate.

15. DEFERRED TAXATION

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases

of assets and liabilities and their carrying amounts in the financial statements. However, if the deferred tax arises from

initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the

recognition, has no impact on taxable nor accounting profit or loss, it is not recognised.

Deferred tax assets relating to unused tax losses and deductible temporary differences are recognised to the extent

that it is probable that future taxable profits will be available against which these unused tax losses and deductible

temporary differences can be utilised.

In addition, where initial cash benefits have been received in respect of certain lease arrangements, provision is made

for the future obligation to make tax payments.

The Group recognised deferred tax assets and deferred tax liabilities separately in relation to its lease liabilities and

right-of-use assets.

Cathay Pacific Airways Limited Annual Report 2023 151

MATERIAL ACCOUNTING POLICIES

16. STOCK

Stock held for consumption is valued either at cost or weighted average cost less any applicable allowance for

obsolescence. Stock held for sales is stated at the lower of cost and net realisable value. Net realisable value represents

estimated resale price less any estimated costs necessary to make the sale.

17. ASSETS HELD FOR SALE

Non-current assets are classified as assets held for sale when their carrying amounts are to be recovered principally

through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and

fair value less costs to sell.

18. REVENUE RECOGNITION

Passenger and cargo sales are recognised as revenue when the transportation service is provided. Revenue is allocated

between passenger services revenue and loyalty programme revenue based on their relative stand-alone selling prices.

Revenue from catering and other services is recognised when the services are rendered. Interest income is recognised

as it accrues while dividend income is recognised when the right to receive payment is established.

The Group takes advantage of the practical expedient in paragraph 63 of HKFRS 15 and does not adjust the

consideration for any effects of a significant financing component as it is expected at contract inception that the period

between the transfer of goods and services and customer payments will be one year or less.

Breakage on passenger revenue is recognised in proportion to the pattern of rights exercised by the customer as

reflected by the point of flown to match the timing of revenue recognition with the underlying ticket performance

obligations. This is based on historical experience. This estimation is made such that the revenue recognised from

passenger ticket breakage is not expected to result in a significant reversal of cumulative revenue in the future.

The value of unflown passenger sales is recognised as a contract liability in the statement of financial position.

It is expected to be recognised as passenger services revenue within 12 months when the transportation service

isprovided.

Contract costs

Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer

that it would not have incurred if the contract had not been obtained e.g. an incremental sales commission.

The Group recognises the incremental costs of obtaining contracts as an expense when incurred as the amortisation

period of the asset that the Group otherwise would have recognised is one year or less from the initial recognition of

theasset.

19. LOYALTY PROGRAMME

The Company operates a customer loyalty programme called Asia Miles (the “programme”). As members accumulate

miles by travelling on Cathay Pacific 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.

152 Cathay Pacific Airways Limited Annual Report 2023

MATERIAL ACCOUNTING POLICIES

20. GOVERNMENT GRANTS

Government grants are recognised when there is reasonable assurance that they will be received and that the Group will

comply with the conditions attaching to them.

Income grants are presented as revenue from other services and recoveries.

Cost waivers or cost reductions are disclosed net of respective cost categories and recognised in profit or loss over the

period necessary to match them with the costs that they are intended to compensate.

Grants that compensate for the cost of an asset are deducted from the carrying amount of the asset and consequently

are effectively recognised in profit or loss over the useful life of the asset by way of reduced depreciation expense.

21. MAINTENANCE AND OVERHAUL COSTS

Replacement spares and labour costs for maintenance and overhaul of aircraft are charged to profit or loss on

consumption and as incurred respectively unless they are capitalised according to the accounting policy 5.

22. PROVISIONS AND CONTINGENT LIABILITIES

Provisions are recognised when the Group has a legal or constructive obligation arising as a result of a past event, it is

probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can 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.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, a

separate asset is recognised for any expected reimbursement that would be virtually certain. The amount recognised

for the reimbursement is limited to the carrying amount of the provision.

23. ONEROUS CONTRACTS

An onerous contract exists when the Group has a contract under which the unavoidable costs of meeting the

obligations under the contract exceed the economic benefits expected to be received from the contract. Provisions for

onerous contracts are measured at the present value of the lower of the expected cost of terminating the contract and

the net cost of fulfilling the contract. The cost of fulfilling the contract includes both the incremental costs of fulfilling

that contract and an allocation of other costs that relate directly to fulfilling that contract.

24. RELATED PARTIES

Related parties are individuals and companies, including subsidiary, fellow subsidiary, jointly controlled and associated

companies and key management (including close members of their families), where the individual, Company or Group

has the ability, directly or indirectly, to control the other party or exercise significant influence or joint control over the

other party in making financial and operating decisions.

Cathay Pacific Airways Limited Annual Report 2023 153

MATERIAL ACCOUNTING POLICIES

25. CONVERTIBLE BONDS

Convertible bonds that can be converted into ordinary shares at the option of the holder, where a fixed number of shares

are issued for a fixed amount of financial assets, are accounted for as compound financial instruments, i.e. they contain

both a liability component and an equity component.

At initial recognition the liability component of the convertible bonds is measured at the fair value based on the future

interest and principal payments, discounted at the prevailing market rate of interest for similar non-convertible

instruments. The equity component is the difference between the initial fair value of the convertible bonds as a whole

and the initial fair value of the liability component. Transaction costs that relate to the issue of a compound financial

instrument are allocated to the liability and equity components in proportion to the allocation of proceeds.

The liability component is subsequently carried at amortised cost. Interest expense recognised in profit or loss on the

liability component is calculated using the effective interest method. The equity component is not remeasured and is

recognised in the convertible bond reserve until the bonds are converted.

154 Cathay Pacific Airways Limited Annual Report 2023

STATISTICS

2023 2022

(restated)

2021 2020 2019 2018 2017 2016 2015 2014

Consolidated profit or loss summary HK$M

Passenger services 61,437 14,333 4,357 11,950 73,985 73,119 66,408 66,926 73,047 75,734

Cargo services 25,606 30,554 35,814 27,890 23,810 28,316 23,903 20,063 23,122 25,400

Other services and recoveries 7,442 6,149 5,416 7,094 9,178 9,625 6,973 5,762 6,173 4,857

Revenue 94,485 51,036 45,587 46,934 106,973 111,060 97,284 92,751 102,342 105,991

Operating expenses (81,486) (47,565) (46,037) (58,639) (103,646) (107,465) (99,563) (93,276) (95,678) (101,556)

Operating gain/(loss) before non-recurring items 12,999 3,471 (450) (11,705) 3,327 3,595 (2,279) (525) 6,664 4,435

Profit on disposal of investments – – – – – – 586 – – –

Gain on deemed partial disposal of associates 1,929 – 210 – 114 – 244 – – –

Restructuring costs – – (385) (2,383) – – – – – –

Net reversal of/(impairment) and other gains or charges 197 – (818) (4,056) – – – – – –

Net finance charges (2,733) (2,909) (2,629) (2,895) (2,939) (2,114) (1,761) (1,301) (1,164) (1,158)

Share of (losses)/profits of associates (1,534) (6,677) (1,985) (1,282) 1,643 1,762 2,630 2,049 1,965 772

Profit/(loss) before taxation 10,858 (6,115) (6,057) (22,321) 2,145 3,243 (580) 223 7,465 4,049

Taxation (1,068) (507) 531 674 (454) (466) (308) (497) (1,157) (599)

Profit/(loss) for the year 9,790 (6,622) (5,526) (21,647) 1,691 2,777 (888) (274) 6,308 3,450

Attributable to

Ordinary shareholders of the Cathay Group 9,067 (7,237)

(6,123) (21,876) 1,691 2,345 (1,259) (575) 6,000 3,150

Preference shareholder of the Cathay Group 722 614 596 228 – – – – – –

Non-controlling interests 1 1 1 1 – 432 371 301 308 300

Profit/(loss) for the year 9,790 (6,622) (5,526) (21,647) 1,691 2,777 (888) (274) 6,308 3,450

Dividends paid to ordinary shareholders – – – – (1,495) (590) – (1,259) (2,046) (1,022)

Consolidated statement of financial position summary HK$M

Property, plant and equipment and intangible assets 130,627 133,655 139,025 146,986 155,265 128,298 122,403 117,390 111,158 108,789

Long-term receivables and investments 19,654 19,789 27,859 29,394 30,878 31,585 32,212 27,902 27,947 29,290

Borrowings (68,294) (77,106) (89,854) (93,129) (97,260)** (73,877) (78,394) (70,169) (63,105) (65,096)

Liquid funds less bank overdrafts 15,530 18,277 19,284 19,341 14,864 15,296 19,094 20,290 20,647 21,098

Net borrowings (52,764) (58,829) (70,570) (73,788) (82,396)** (58,581) (59,300) (49,879) (42,458) (43,998)

Net current liabilities (excluding liquid funds, bank overdrafts and

current portion of borrowings) (27,751) (20,700) (11,172) (14,249) (23,690) (20,329) (18,649) (21,727) (23,961) (22,478)

Other long-term payables and long-term contract liabilities (3,062) (3,123) (3,919) (4,210) (4,806) (4,649) (3,502) (7,517) (15,838) (10,487)

Deferred taxation (6,671) (6,983) (8,974) (10,872) (12,475) (12,385) (11,892) (10,643) (8,781) (9,263)

Net assets 60,033 63,809 72,249 73,261 62,776 63,939 61,272 55,526 48,067 51,853

Financed by:

Funds attributable to the ordinary shareholders of the Cathay Group* 50,085 42,865

51,920 53,529 62,773 63,936 61,101 55,365 47,927 51,722

Funds attributable to the preference shareholder of the Cathay Group 9,941 20,938 20,324 19,728 – – – – – –

Funds attributable to the shareholders of the Cathay Group 60,026 63,803 72,244 73,257 62,773 63,936 61,101 55,365 47,927 51,722

Non-controlling interests 7 6 5 4 3 3 171 161 140 131

Total equity 60,033 63,809 72,249 73,261 62,776 63,939 61,272 55,526 48,067 51,853

Per ordinary share

Ordinary shareholders’ funds

HK$ 7.78 6.66 8.07 8.32 15.96 16.25 15.53 14.07 12.18 13.15

EBITDA HK$ 4.03 1.40 1.45 (0.97) 4.91 3.85 2.68 2.56 4.45 3.44

Profit/(loss)/earnings – basic HK cents 140.8 (112.4) (95.1) (424.3) 39.1 54.2 (29.1) (13.3) 138.7 72.8

– diluted HK cents 125.8 (112.4) (95.1) (424.3) 39.1 54.2 (29.1) (13.3) 138.7 72.8

Dividend HK$ 0.43 – – – 0.18 0.30 0.05 0.05 0.53 0.36

Ratios

Profit/(loss) margin

% 10.4 (13.0) (12.1) (46.1) 1.6 2.1 (1.3) (0.6) 5.9 3.0

Return on capital employed % 10.6 (2.8) (2.0) (12.8) 3.5 4.0 0.8 1.0 8.0 4.7

Dividend cover Times 3.3 – – – 2.4 2.0 (6.4) (2.9) 2.9 2.2

Cash interest cover Times 12.2 9.3 6.2 (5.3) 6.5 10.4 4.9 9.1 25.5 20.7

Gross debt/equity ratio Times 1.14 1.21 1.24 1.27 1.55 1.16 1.28 1.27 1.32 1.26

Net debt/equity ratio Times 0.88 0.92 0.98 1.01 1.31** 0.92 0.97 0.90 0.89 0.85

Adjusted net debt/equity ratio (excludes leases without asset

transfer components)** Times 0.69 0.71 0.75 0.75 0.99 0.92 0.97 0.90 0.89 0.85

Funds attributable to the ordinary shareholders are arrived at after deducting preference shares reserve (2022: capital) and unpaid cumulative dividends attributable to

the preference shareholder as at 31st December of the respective reporting period.

On adoption of HKFRS 16 with effect from 1st January 2019, the Group recognised lease liabilities in relation to leases without asset transfer components. This resulted in

a significant increase in the Group’s total and net borrowings, and hence the Group’s net debt/equity ratio. To allow for comparability of gearing ratios over time and

against group borrowing covenants, the Group has chosen to present the adjusted net debt/equity ratio which excludes leases without asset transfer components.

Cathay Pacific Airways Limited Annual Report 2023 155