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Investing.com -- UBS analysts believe that potential U.S. government actions to revoke visas for Chinese students and tighten application reviews will have a "manageable demand impact" on Cathay Pacific’s revenue.
While the situation remains fluid, UBS notes "some signs of a change in the Trump administration’s stance on student policy."
International students from Hong Kong, mainland China, and Macau currently constitute 23% of passenger traffic between the U.S. and these regions.
However, UBS estimates their contribution to Cathay Pacific’s total revenue is "only up to 1.3%."
The bank explains that this is largely because students tend to occupy mass cabin seats, with "negligible student demand in premium cabins," which account for a significant portion of airline revenue due to higher pricing.
Specifically, student demand accounts for "c13% of passenger revenue in North America."
The bank adds that enrollment of students from Hong Kong, mainland China, and Macau in the U.S. has already declined since the pandemic, standing at approximately 283,000 in the 2023-24 academic year, which is "about 25% below the pre-pandemic level."
Furthermore, UBS highlights that "flight capacity from HK and China to the US remains extremely tight."
This tight supply, according to UBS, "provides downside support in flight price and passenger load for the US routes," suggesting that even with a reduction in student demand, flight prices between Hong Kong and the U.S. could remain elevated, supporting airline profitability.
UBS concludes that while investors anticipate Cathay Pacific may face a larger demand impact from geopolitics, the direct impact from student visa curbs is expected to be modest.