COVID-ravaged Cathay shapes up for a tough second half

August 11, 2021
Cathay - not out of the rough weather yet. Credit Richard Kreider

The Cathay Group has reduced its first-half 2021 loss to $HK7.56 billion ($US972 million) but expects to operate less than a third of pre-pandemic passenger capacity by the fourth quarter of this year.

Cathay chairman Patrick Healy warned that the airline continued to face “the toughest period in our history” as the emergence of coronavirus variants prompted tightened travel restrictions in Hong Kong and several key markets.

These included the February introduction of strict quarantine requirements for Hong Kong-based aircrew that affected the carrier’s ability to service passenger and cargo markets and saw significant reductions to schedules.

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The requirements saw Cathay introduce longer duty cycles for Hong Kong-based aircrew who worked a 21-day duty cycle followed by 14 days in quarantine.

“Throughout the closed-loop period, our aircrew remained in hotel isolation when not flying,’’ Healy said, expressing his appreciation to employees. “These arrangements placed a significant burden on our aircrew and their families.”

Healy said COVID-19 would continue to severely affect Cathy’s business until borders progressively open and travel constraints were lifted as vaccinations reached levels acceptable to governments.

“The progress of vaccination is encouraging, but the pace and timing of recovery remain uncertain,’’ he said in the results announcement.

“We are only operating a small fraction of the passenger flights we were operating before the COVID-19 pandemic.

“We hope to operate up to 30 percent of our pre-pandemic passenger capacity by the fourth quarter of 2021, but this is dependent on operational and passenger travel restrictions being lifted.

“We expect our cargo operations to continue to perform strongly in the second half of the year. We will maintain our focus on prudent cash management, targeting cash burn of less than $HK1.0 billion per month ($US128.5 million) for the remainder of the year.”

The group’s first-half attributable loss was down from $HK9.87 billion for the equivalent period of 2020 and included impairment and related charges of $HK500 million, mainly relating to 11 aircraft that are unlikely to re-enter meaningful economic service.

Cathay Pacific’s after-tax loss $HK5.03 billion compared to $HK7.36 in the first half of 2020.

With impairments stripped out, the group’s attributable first-half loss was $HK6.66 billion compared to $HK7.4 billion in the first half.

The impact of the pandemic was underscored by a 92.8 percent fall in passenger revenue compared to 2020 as passenger numbers dropped 96.4 percent to 157,000, or 868 a day.

Load factors ranged from a low of 7.3 percent in the Southwest Pacific to just under 32 percent on European routes.

Cargo traffic fell by 31.9 percent due to capacity restrictions imposed by the crew quarantine requirements while revenues remained largely flat due to an increase in yield.

The group still had $HK32.8 billion in unrestricted liquidity at June 30 and the Hong Kong Government agreed to extend until the middle of next year the drawdown period for an $HK7.8 billion loan facility made available as part of a 2020 recapitalization.

“We remain absolutely confident in the long-term prospects of Cathay Pacific and the future of Hong Kong as a leading international aviation hub,’’ Healy said.

“Our dual-brand approach, benefiting from the premium service of Cathay Pacific and the unique strengths and growth potential of HK Express, will position us well to take advantage of the recovery in the market when it happens.”