Cathay Pacific Stock: A Stronger Turnaround Potential In Asia (OTCMKTS:CPCAF)

In a previous report, I discussed the potential for Singapore Airlines as air travel demand rebounds. What I did conclude is that driven by the potential of softening yields in both the passenger and cargo business, Singapore Airlines is not a preferred airline investment to capitalize on the release of pent-up demand in the market. Obviously, I could be wrong in my assessment, but the risk profile simply does not look appealing to me. In this report, I will look at Cathay Pacific (OTCPK:CPCAY).

Risks And Opportunities For Cathay Pacific

In some sense, Cathay Pacific is not that different from Singapore. With that I mean is that similar to Singapore, Hong Kong does not have a huge population. So, Cathay Pacific also relies heavily on feeding passengers from Asia into Hong Kong. That means that largely the same set of risks and opportunities we see for Singapore Airlines also apply to Cathay Pacific. So, in Asia the risk is primarily for the Chinese market where relaxation of COVID-19 measures is likely to result in three COVID-19 infection spikes. The first one is happening at this moment with rules relaxed, the second one will happen shortly after the Lunar New Year in January which is typically a strong time for travel demand and then the third spike will come as people head back to work after the holidays. That is something that could ripple through the network of Cathay Pacific, which relies on mainland…