Hong Kong flag carrier Cathay Pacific said Wednesday (12 August) that it lost HK$9.86 billion (US$1.26 billion) in the first half of 2020 compared to a 2019 first half profit of HK$1.34 billion as the airline continues to suffer from the COVID-19 pandemic and the political drama that have engulfed the city. The loss is in line with estimates the airline released in mid-July.
The company said airlines Cathay Pacific and Cathay Dragon reported a loss after tax of HK$7.36 billion million in the first half of 2020 compared to a 2019 first half profit of HK$675 million and the share of losses from subsidiaries and associates was HK$2.5 billion compared to a 2019 first half profit of HK$672 million. The loss for the first half of 2020 is net of the receipt of HK$1 billion of COVID-19 related government grants globally and includes impairment and related charges of HK$2.4 billion relating to 16 aircraft that are unlikely to re-enter meaningful economic service again before they retire or are returned to lessors and to certain airline service subsidiaries’ assets, the company added.
“Despite a promising start in January, with encouraging signs that passenger demand was beginning to return following the social unrest which impacted the second half of 2019, the first six months of 2020 were the most challenging that the Cathay Pacific Group has faced in its more than 70-year history,” said Cathay Chairman Patrick Healy. “The impact of COVID-19 on the group’s business and the global economy is unprecedented. The global health crisis has decimated the travel industry and the future remains highly uncertain, with most analysts suggesting that it will take years to recover to pre-crisis levels.”
In June 2020 Cathay Pacific announced a HK$39 billion recapitalisation composed of a HK$19.5 billion preference share issue, a HK$11.7 billion rights issue and a HK$7.8 billion bridging loan facility. The recapitalisation was completed on 12 August 2020.
Healy said the airline is continuing to look at ways to reorganise the business and said by the fourth quarter of 2020, Cathay Pacific’s management will recommend to the board the “optimum size and shape of the Cathay Pacific Group to meet the air travel needs of Hong Kong while meeting its responsibilities to its shareholders. Inevitably this will involve rationalisation of future planned capacity compared to pre-crisis plans, taking into account the market outlook and cost structure at that time.”
The outlook is not likely to be much better then than it is now. The International Air Transport Association (IATA) has said the COVID-19 pandemic will see global airline passenger revenues drop by US$371 billion in 2020, a 61 percent decline compared to 2019, and estimates airline industry net losses to be US$84 billion. Airlines in Asia-Pacific will see the largest share of losses (US$29 billion) and will experience a 54 percent fall in passenger demand year-on-year. Most industry analysts are forecasting very gradual recoveries over a protracted period and IATA is forecasting that it will be 2024 at the earliest before international passenger demand returns to pre-crisis levels.
“Not only that,” Healy added, “but with a global recession looming, and geopolitical tensions intensifying, trade will likely come under significant pressure, and this is expected to have a negative impact on both air travel and cargo demand. This is the biggest challenge to the aviation industry that Cathay Pacific has ever witnessed. We do not expect to see a meaningful recovery in our passenger business for some time to come. We will continue to closely monitor market demand as we work towards progressively reintroducing passenger flights as appropriate.”