Cathay Pacific loss narrows, but tough times ahead

Cathay Pacific HK by Matt Driskill Kong’s Cathay Pacific Airways aid on Wednesday that it posted an annual loss of HK$5.5 billion (US$703.45 million), narrowing from the prior year’s HK$21.65 billion, thanks to cost-cutting efforts and strong air cargo demand. In January, the airline forecast a 2021 annual loss of HK$5.6 billion to HK$6.1 billion after reporting positive cashflow generation in the second half.

The loss for 2021 includes impairment and related charges of HK$832 million, mainly relating to 12 aircraft that are unlikely to re-enter meaningful economic service before they retire or are returned to lessors, HK$385 million in restructuring costs and a HK$210 million gain on the dilution of an associate interest in Air China Cargo. This compares to impairment and related charges of HK$4 billion in 2020 relating to 34 aircraft (and to certain airline service subsidiaries’ assets) and HK$2.383 billion of restructuring costs. Adjusting for these exceptional items, the Cathay Pacific Group’s attributable loss for 2021 was HK$4.520 billion compared to 2020’s loss of HK$15.209 billion and Cathay Pacific’s loss for 2021 was HK$776 million compared to its 2020 loss of HK$12.195 billion.

Cathay said in its earnings statement that comparing 2021 with 2020 as a whole, the operating performance in 2021 was generally weaker due in large part to the first two months of 2020 being relatively strong ahead of the full impact of COVID-19. Passenger revenue decreased by 61.6% to HK$4,346 million in 2021 compared with 2020. Revenue passenger kilometres (RPK) decreased by 79.5 percent. Capacity, measured in available seat kilometres (ASK), was down by 61.8 percent. The airline carried 717,000 passengers, an average of 1,965 per day, 84.5 percent fewer than in 2020. Passenger load factor was 31.1 percent compared with 58 percent in 2020.

Cathay’s cargo business performed exceptionally well. Cargo revenue in 2021 was HK$32.377 billion, an increase of 31.8 percent compared to 2020. Cargo revenue tonne kilometres (RFTK) decreased by 1.1 percent. Capacity, measured by available cargo tonne kilometres (AFTK), decreased by 10.9 percent. Load factor increased by 8.1 percentage points to 81.4 percent. Yield increased by 33.1 percent to HK$3.94.

Cargo demand grew ahead of the traditional peak season in the second half of the year. In the months leading up to the end of 2021, Cathay said it operated its freighter fleet at peak capacity, and supplemented our cargo capacity with additional cargo-only passenger flight operations. The carrier operated six of its Boeing 777-300ER passenger aircraft that have been partially converted into “preighters” by removing some of the seats in the passenger cabins to provide additional cargo-carrying capacity. In October, the airline carried more than 136,000 tonnes of cargo – the most it has carried in a single month since the start of COVID-19.

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