Cathay Pacific anticipates historic loss of US$1.28 billion due to virus

HONG Kong's flag carrier Cathay Pacific says it expects to incur a substantial loss of HKD9.9 billion (US$1.28 billion) in the first six months of 2020 based on its unaudited results.

The loss of HKD9.9 billion includes impairment charges amounting to approximately HKD2.4 billion, which mainly relate to 16 aircraft that are unlikely to re-enter meaningful economic service again before the 2021 summer season together with certain airline service subsidiaries assets. The airline reported a net profit of HKD1.3 billion in the first six months of 2019.

Cathay recently received HKD680 million from the government's employment subsidy scheme aimed at offering financial assistance to companies hit by the pandemic. In addition, the Hong Kong government also appointed two officials to the group's board of directors together with a HKD39 billion recapitalisation package after the airline warned it was close to collapse.

Cathay Pacific Group chief customer and commercial officer Ronald Lam said: "The landscape of international aviation remains incredibly uncertain with border restrictions and quarantine measures still in place across the globe. Although we have begun to see some initial developments, notably a slight increase in the number of transit passengers following the easing of transit restrictions through Hong Kong International Airport, we are still yet to see any significant signs of immediate improvement."

On the cargo front, Cathay Pacific and Cathay Dragon carried 93,228 tonnes of cargo and mail in June, a decrease of 43.1 per cent compared to the same month last year. The month's revenue freight tonne kilometres (RFTKs) fell 35.8 per cent year on year. The cargo and mail load factor increased by 11.7 percentage points to 74.5 per cent, while capacity, measured in available freight tonne kilometres (AFTKs), was down by 45.9 per cent. In the first six months of 2020, the tonnage fell by 31.9 per cent against a 31 per cent drop in capacity and a 24.6 per cent decrease in RFTKs, as compared to the first-half period for 2019.

Cathay Pacific continued to operate a full freighter schedule as well as chartered flights from its all-cargo subsidiary, Air Hong Kong, in June. There were fewer cargo-only passenger flights compared with May.

Mr Lam said: "Despite a mild pickup in general airfreight movements, our cargo tonnage fell by 5 per cent month on month as demand for medical supplies waned following a peak month in May. The reduction of long-haul carriage from the Chinese mainland and Hong Kong made way for movements from Southeast Asia and the Indian sub-continent as local lockdown measures eased.

"Meanwhile, the improvement in inbound Hong Kong loads and network support led to a higher load factor, which increased 11.7 percentage points year on year to 74.5 per cent. Yields came down following the significant rise seen in May."

The two airlines carried a total of 27,106 passengers last month, a decrease of 99.1 per cent compared to June 2019. The month's revenue passenger kilometres (RPKs) fell 98.8 per cent year on year. Passenger load factor dropped by 59.3 percentage points to 27.3 percent, while capacity, measured in available seat kilometres (ASKs), decreased by 96.1 per cent. In the first six months of 2020, the number of passengers carried dropped by 76 per cent against a 65.7 per cent decrease in capacity and a 72.6 per cent decrease in RPKs, as compared to the same half-year period for 2019.

Commenting on the passenger figures, Mr Lam said: "Demand continued to be very weak in June with our airlines carrying less than 1 per cent of the passengers we carried in the same month in 2019. We operated about 4 per cent of our normal passenger flight capacity in June. This was slightly more than we operated in May, having resumed services to some destinations such as New York, San Francisco, Amsterdam and Melbourne in late June. Load factor remained low at 27.3 per cent, and on average we carried approximately 900 passengers a day only.

Looking ahead, Mr Lam said: "While some markets are starting to relax border restrictions and quarantine requirements in July, we remain cautious and agile in our approach to resuming our passenger flight services. We have adjusted our overall capacity for July to approximately 7 per cent, which remains subject to the potential further relaxation or tightening of government health measures. We expect that our airlines will operate up to 10 per cent of the normal flight schedule in August and will continue to assess the potential of increasing more flights and adding destinations for our customers in the coming months.

"The one certainty facing the global aviation industry is that the landscape will be significantly changed when international air travel recovers. The Group is moving decisively to best position the business to be competitive and to secure its financial health over the long term in a new normal. What will not change is our resolute commitment to safety, to serving our customers and our dedication to contributing to the success of the Hong Kong international aviation hub. We remain absolutely confident in the long-term prospects of both the Cathay Pacific Group and our home hub."

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