Hong Kong’s Cathay Pacific Group issued a dire profit warning Friday (17 July), saying it expected to incur a “substantial loss for the first half of 2020” as the COVID-19 pandemic continues to hobble air travel. The company said it estimated that for the six months ended 30 June 2020, the group will record a net loss of approximately HK$9.9 billion (US$1.27 billion) compared to a net profit of HK$1.3 billion for the same period in 2019. “This includes impairment charges amounting to approximately HK$2.4 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 company said.
The company also released its latest traffic figures Friday that showed Cathay Pacific and affiliate Cathay Dragon carried a total of 27,106 passengers in June, a decrease of 99.1 percent compared to June 2019. The month’s revenue passenger kilometres (RPKs) fell 98.8 percent 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 percent. In the first six months of 2020, the number of passengers carried dropped by 76 percent against a 65.7 percent decrease in capacity and a 72.6 percent decrease in RPKs, as compared to the same half-year period for 2019.
The two airlines carried 93,228 tonnes of cargo and mail in June, a decrease of 43.1 percent compared to June 2019. The month’s revenue freight tonne kilometres (RFTKs) fell 35.8 percent year-on-year. The cargo and mail load factor increased by 11.7 percentage points to 74.5 percent, while capacity, measured in available freight tonne kilometres (AFTKs), was down by 45.9 percent. In the first six months of 2020, the tonnage fell by 31.9 percent against a 31 percent drop in capacity and a 24.6 percent decrease in RFTKs, as compared to the first-half period for 2019.
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. Demand continued to be very weak in June with our airlines carrying less than 1 percent of the passengers we carried in the same month in 2019. We operated about 4 percent 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 percent, and on average we carried approximately 900 passengers a day only.
“We observed a gradual pickup in connecting passenger demand as the ban on transit traffic through Hong Kong International Airport began being partially eased. Towards the end of the month, transit traffic reached about 32 percent of overall traffic, with notable demand from destinations in Southeast Asia such as the Philippines and Vietnam to North America. This change in traffic mix meant a more tapered average yield performance though.”
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. “Despite a mild pickup in general airfreight movements, our cargo tonnage fell by 5 percent 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,” Lam said. “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 percent. Yields came down following the significant rise seen in May.“
Earlier this week, Cathay Pacific’s shareholders approved the company’s HK$39 billion recapitalisation plan. “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 percent, which remains subject to the potential further relaxation or tightening of government health measures.
“We expect that our airlines will operate up to 10 percent 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,” Lam said. “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.”