Cathay Pacific Announces 2010 Interim Results

5 August 2010

Results 1H2010 1H2009 Change

Turnover HK$ million 41,337 30,921 +33.7%
Profit attributable to owners of Cathay Pacific HK$ million 6,840 812 +724.4%
Earnings per share HK cents 173.9 20.6 +744.2%
Dividend per share HK cents 33 - N/A

The Cathay Pacific Group today announced a profit of HK$6,840 million for the first six months
of 2010. This compares to a profit of HK$812 million in the first half of 2009. Earnings per share
were up 8.4 times to HK173.9 cents. Turnover for the period increased by 33.7% to HK$41,337
million.

Cathay Pacific has committed to investing in new aircraft and other items such as the new cargo
terminal at Hong Kong International Airport and upgrades to its product in the cabin and on the
ground between now and 2013. In addition, the airline has just signed a Letter of Intent with
Airbus to buy 30 A350-900s and also intends to exercise purchase rights with Boeing to buy
another six 777-300ERs. The total catalogue price of these aircraft will be about HK$75 billion.
The new A350s will be delivered between 2016 and 2019 and will be used partly to replace
some of the airline’s older aircraft and partly to accommodate future growth.

In the first half of the year the Cathay Pacific Group experienced a continuing and significant
recovery in its core business following the extremely challenging conditions experienced for
much of the previous year. The turnround in business that began in the last quarter of 2009
continued into 2010 and gained momentum. Both the passenger and cargo businesses of
Cathay Pacific and Dragonair performed well with revenues continuing to increase despite
uncertainty over the stability of the global economy.

In recognition of the positive interim result and the great effort made by its staff, the airline will
pay an advance profit share in the form of an ex-gratia payment of 14 days salary to all eligible
members of the Cathay Pacific team. This is a down payment on the final share of profit that will
be calculated on the basis of the full-year results for 2010.

The Group’s passenger business experienced a marked improvement from the lows of 2009 with
revenues returning to almost pre-financial crisis levels. In economy class, load factors were
generally high, as they were during much of the previous year, and yields increased. In the
premium classes there was a sharp increase in demand for business travel originating in Hong
Kong although this was not matched by a comparable increase in demand for travel originating
in other major cities. The two airlines carried a total of 13.0 million passengers in the first six
months of 2010 – an increase of 8.5% year on year. The load factor increased by 5.5% points.
Capacity decreased by 0.1%. Passenger revenue for the half-year period was HK$27,411 million
– an increase of 25.7% from the first half of 2009. Yield increased by 17.5% to HK58.4 cents.

Cargo business was very robust for the whole of the first half with strong demand in all key
markets. The cargo load factor increased by 11.8% points compared with the first half of 2009,
hitting a record of 78.0%. By July the airline had brought back into service all five aircraft parked
in the desert during last year’s downturn which helped it to meet demand. In the half year the
amount of freight carried by both airlines increased by 24.4% to 872,000 tonnes. Cargo revenue
increased by 63.1% to HK$11,844 million while yield increased by 36.1% to HK$2.26.

Fuel is the airline’s most significant cost component and fuel prices once again increased in the
first half of 2010 - by 51.1% compared to the same period in 2009. Managing the risk associated
with fuel price changes is a key challenge and objective.
After the extremely challenging conditions of much of 2009 the Cathay Pacific Group welcomed
the subsequent turnround in business. In 2010 the airline has been able to restore capacity and
reinstate services, and the turnround has enabled the Group to rebuild its balance sheet and
strengthen its financial position, putting it in a better position to proceed with its core objectives
of growing its airlines and further strengthening the position of Hong Kong as one of the world’s
leading international aviation hubs.

The strategic partnership with Air China continues to go from strength to strength with an
important development in the relationship – the formation of a new cargo joint venture based in
Shanghai – announced in February. The two airlines will use an existing Air China subsidiary, Air
China Cargo, in which Cathay Pacific will take equity and economic interest of 49%, as the
platform for the joint venture, which is expected to begin operations in October. At the same time
Cathay Pacific reaffirmed its commitment to the Hong Kong hub by recommencing work in
March on its own cargo terminal at Hong Kong International Airport – a state-of-the-art HK$5.5
billion facility designed to enhance the competitiveness and efficiency of Hong Kong as an
airfreight hub.

Cathay Pacific Chairman Christopher Pratt said: “If present trends continue, we expect our
financial results to continue to be strong in the second half of 2010. That said, conditions can
change rapidly in the airline industry. Our results would be adversely affected, and very quickly
so, by a significant further increase in fuel prices or any return to the recessionary economic
conditions of 2008 and much of 2009.

“We remain confident in the long-term future of the Cathay Pacific Group and Hong Kong. We
are in a challenging and unpredictable industry and we have to be mindful of the many things –
economic fluctuations, rising fuel prices, even volcanic eruptions – that can quickly have an
impact on our business. Nevertheless, we have a number of things working in our favour,
including our capable, supportive and committed team, a superb international network, effective
management of costs, our quality service and product offering, a strong relationship with Air
China, and our position in Hong Kong – one of the world’s great cities and a premier
international aviation hub. These core strengths will, I believe, ensure the continued success of
the Company.”

http://www.cathaypacificcargo.com/usrapps/content/news/news.aspx?ID=20100805001

Boeing and Cathay Pacific Airways Sign Contract for Integrated Materials Management Parts
Solution

SEATTLE, May 29, 2008 -- Boeing [NYSE: BA] and Cathay Pacific Airways have signed an
agreement for an Integrated Materials Management (IMM) solution designed to reduce the airline's
operating costs and allow Cathay Pacific to focus its resources on core business activities. Boeing
will manage selected portions of the airline's expendable spare parts inventory, helping it achieve
consistently high service levels for parts availability, increased support for its maintenance operation
and improved cash flow.

"This program helps Cathay Pacific simplify its inventory administration and put even more focus on
keeping airplanes in the air - the airline's core competency," said Mark Owen, vice president of
Boeing Commercial Aviation Services Material Management.
Cathay Pacific Airways joins a growing number of airline customers that are integrating Boeing
products and services to help reduce operating costs and achieve greater efficiencies in their
maintenance operations. Through Integrated Materials Management, Boeing will be responsible for
purchasing Cathay Pacific's expendable spare parts at competitive pricing through its buying power
as an airframe manufacturer as well as handling the invoicing, inventory management and logistics
for the spare parts.

"To ensure high service levels to meet our maintenance needs, the Boeing IMM program will own
the expendable parts that are deployed at the Cathay's maintenance bases in Hong Kong and
China," said Bob Taylor, manager-Inventory Operations. "In addition, we will only pay for a part
when it is used, thereby significantly reducing our inventory holding costs."

IMM builds on existing materials management programs that Boeing has with several other airlines
- AirTran Airways, ANA (All Nippon Airways), Nippon Cargo Airlines (NCA), Delta Air Lines, Japan
Airlines, KLM Royal Dutch Airlines, Japan Transocean Air, Singapore Airlines, SIAEC and Thai
Airways.

The Boeing Company is the world's leading aerospace company, providing products and services
to customers in 145 countries. Boeing Commercial Aviation Services, a unit of Boeing Commercial
Airplanes, provides products, services and integrated solutions to improve fleet utilization, reduce
costs, leverage leading-edge information management, and ensure passenger well-being.

Cathay Pacific currently operates a large and expanding fleet of Boeing aircraft comprising B777-
200/300/300ER, 747-400/400F/400BCF and B747-200/300 aircraft. This program is the next
advance in expanding Boeing's supply chain services to provide value to both airline customers and
supplier partners

http://www.boeing.com/news/releases/2008/q2/080529b_nr.html

http://www.boeing.com/commercial/spares/index.html
1.- Determine los aspectos de la cadena de suministro y de las operaciones de las partes de
repuesto que Paul y Robert necesitan considerar para su recomendación.

El tema de la administración de la cadena de suministro de las partes de repuesto para una

aerolínea es muy complicado, ya que se necesita asegurar la disponibilidad oportuna de una gran
variedad de piezas en existencia y cumplir con requerimientos regulatorios y de calidad muy
exigentes. Además las piezas de repuesto constituyen un gasto considerable en los estados
financieros de las aerolíneas, el stock inactivo representa el 3% anual del valor total de las partes
de inventario y es un tema que se debe manejar con cuidado debido a la obsolescencia y a
patrones de demanda impredecibles.

Las autoridades de aviación internacional y local pueden no dejar salir un avión en caso de que no
cumpla con las reparaciones no aplazables antes de su salida ó que los operadores no cumplieran
con el plazo estipulado para realizar las reparaciones aplazables, esta situación implica un costo
por retraso de vuelos en los que se tiene que pagar una compensación a los pasajeros y existía el
riesgo de que se enojaran o incluso cambiaran de aerolínea si este retraso causaba que perdieran
sus vuelos en conexión.

Las partes de repuesto son muy caras y complejas, por ejemplo, el motor de un avión puede costar
hasta $12 millones de dólares y está compuesto de miles de componentes y ensambles. Además,
la variabilidad de partes de repuesto, junto con la naturaleza esporádica de la demanda para el
mantenimiento de las aeronaves, hacen muy difícil un pronóstico de demanda de partes y
requieren de un aumento de mano de obra, asimismo los costos de financiamiento para el
inventario de partes de repuesto son relativamente caros.

Para los operadores de las aerolíneas, los dos factores determinantes para la evaluación de los
proveedores son calidad y precio, sin embargo la selección de los mismos es limitada por las
apretadas regulaciones de la aviación. También, hay situaciones que son dominadas por solo un
proveedor, tal como partes suministradas exclusivamente por un fabricante de equipos originales
("OEM"), esta falta de opciones y la alta concentración de OEM´s limitan el poder de negociación
de los operadores de aerolíneas.

Para aliviar el exceso de dependencia de proveedores, los operadores de líneas aéreas han
empezado a explorar las oportunidades de suministro de ciertas categorías de piezas aprobadas
fabricadas de acuerdo con un programa regulado llamado "PMA" (Partes Aprobadas por el
Fabricante), estas piezas están disponibles a un precio competitivo y con un tiempo de entrega
más corto.

En resumen, las dificultades principales con las que se enfrentan los

administradores de la cadena de suministro de las partes de repuesto para una aerolínea
son: las restricciones de las autoridades de aviación, el tiempo de respuesta de los proveedores de
piezas, el tiempo de entrega, el tiempo de reparación y el precio de los componentes.
2.- Identifique el tipo de partes de repuesto que son adecuados para hacer un outsourcing
de procuración. Justifique los criterios.

Reducción de proveedores y distribuidores

Reducción de equipos para selección, monitoreo, evaluación y gestión de relaciones con

proveedores para asegurar efectividad operacional

Se eliminan las actividades de compra, almacenaje y recompra.

Pocas opciones de proveedores de partes críticas

Capacidad limitada de cambio de proveedor de partes criticas por los costos significativos
asociados con el cambio

Mayor nivel de flexibilidad para repuestos no críticos, con mas de 200 proveedores de consumibles
y reemplazables. Consumía recursos en el manejo de las relaciones con proveedores

Reducción de costos de inventario

3.- Contraste las ventajas y desventajas de utilizar un 3PL para el manejo de sus
reparaciones y logística.

Ventajas

Información disponible de talleres de reparación con la capacidad requerida para reparar toda la
gama de componentes instalados en sus aviones.

Los talleres de reparación se seleccionan en base al tipo de parte de repuesto en el que se

especializan, calidad, precio y nivel de servicio.

Facilidad de compartir e intercambiar información como la disponibilidad de partes de repuesto y

listas de proveedores

Aprovechamiento de la experiencia que tienen los socios de logística en el transporte y el manejo

de piezas frágiles, que a su vez genera ahorros en los costos de Cathay Pacific

Certeza en factores como: historial satisfactorio de envío anterior, la adecuación de las licencias y
seguros en poder de las empresas de logística, redes de transporte de las empresas de logística, y
el alcance de las revisiones de rendimiento.

Desventajas

El método carece de la habilidad de pronosticar la demanda derivada de extracciones no

programadas.

La reducción de los niveles de inventario depende de reducir el tiempo de entrega de los

proveedores y el tiempo de respuesta de los talleres de reparación.
4.- Actualización del caso.

Boeing and Cathay Pacific Airways Sign Contract for Integrated Materials Management Parts
Solution

SEATTLE, May 29, 2008 -- Boeing [NYSE: BA] and Cathay Pacific Airways have signed an
agreement for an Integrated Materials Management (IMM) solution designed to reduce the airline's
operating costs and allow Cathay Pacific to focus its resources on core business activities. Boeing
will manage selected portions of the airline's expendable spare parts inventory, helping it achieve
consistently high service levels for parts availability, increased support for its maintenance operation
and improved cash flow.

"This program helps Cathay Pacific simplify its inventory administration and put even more focus on
keeping airplanes in the air - the airline's core competency," said Mark Owen, vice president of
Boeing Commercial Aviation Services Material Management.

Cathay Pacific Airways joins a growing number of airline customers that are integrating Boeing
products and services to help reduce operating costs and achieve greater efficiencies in their
maintenance operations. Through Integrated Materials Management, Boeing will be responsible for
purchasing Cathay Pacific's expendable spare parts at competitive pricing through its buying power
as an airframe manufacturer as well as handling the invoicing, inventory management and logistics
for the spare parts.

"To ensure high service levels to meet our maintenance needs, the Boeing IMM program will own
the expendable parts that are deployed at the Cathay's maintenance bases in Hong Kong and
China," said Bob Taylor, manager-Inventory Operations. "In addition, we will only pay for a part
when it is used, thereby significantly reducing our inventory holding costs."

IMM builds on existing materials management programs that Boeing has with several other airlines
- AirTran Airways, ANA (All Nippon Airways), Nippon Cargo Airlines (NCA), Delta Air Lines, Japan
Airlines, KLM Royal Dutch Airlines, Japan Transocean Air, Singapore Airlines, SIAEC and Thai
Airways.

The Boeing Company is the world's leading aerospace company, providing products and services
to customers in 145 countries. Boeing Commercial Aviation Services, a unit of Boeing Commercial
Airplanes, provides products, services and integrated solutions to improve fleet utilization, reduce
costs, leverage leading-edge information management, and ensure passenger well-being.

Cathay Pacific currently operates a large and expanding fleet of Boeing aircraft comprising B777-
200/300/300ER, 747-400/400F/400BCF and B747-200/300 aircraft. This program is the next
advance in expanding Boeing's supply chain services to provide value to both airline customers and
supplier partners