Hong Kong flag carrier Cathay Pacific Airways announced on Wednesday (11 August) that it posted a HK$7.57 billion (US$973 million) first-half loss, smaller than last year’s HK$9.87 billion loss thanks to higher cargo demand and cost-cutting measures. The net loss for the six months ended June 30 was in line with the company’s guidance that it would be “somewhat” lower than the prior year. Revenue fell 42.7 percent to HK$15.85 billion.
“COVID-19 continued to pose significant challenges for the Cathay Group in the first half of 2021 and this continues to be the toughest period in our history,” Chairman Patrick Healy said in a statement.
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The airline lacks a domestic market and has been flying a minimal number of passengers during the pandemic, though its large cargo business has performed strongly. Cathay has said it expects to reduce its monthly cash burn in the second half as rules are eased for vaccinated crew and passenger capacity rises to as much as 30 percent of pre-COVID levels in the fourth quarter.
Passenger revenue was severely affected by COVID-19-related travel restrictions and quarantine requirements. It decreased by 92.8 percent to HK$745 million in the first half of 2021 compared with the first half of 2020. Revenue passenger kilometres (RPK) decreased by 95.8 percent. Passenger capacity decreased by 85 percent. “We carried 157,000 passengers in the first half, an average of 868 passengers per day, 96.4 percent fewer than in the same period in 2020. The load factor was 18.9 percent, compared with 67.3 percent in the first half of 2020,” Healy said. “Our cargo performance was limited by capacity restrictions resulting from crew quarantine requirements and lower cargo capacity as a result of fewer passenger aircraft being flown. Available cargo tonne kilometres (AFTK) decreased by 31.9 percent. Total tonnage decreased by 17.7 percent to 549,000 tonnes. Revenues were HK$11.11 billion, a decrease of 0.6 percent compared to the first half of 2020. Revenues were strong considering the circumstances, sustained by cargo yield increases of 24.4 percent and record load factors of 81.4 percent.
“COVID-19 will continue to have a severe impact on our business until borders progressively open and travel constraints are lifted,” Healy said. “As governments (including HKSAR) have stated, this is only going to be possible when sufficiently high vaccination levels are achieved. There are encouraging signs of recovery in some domestic aviation markets. However, travel restrictions and quarantine requirements continue to affect cross-border travel adversely. The progress of vaccination is encouraging, but the pace and timing of recovery remain uncertain.
“We are only operating a small fraction of the passenger flights we were operating before the COVID-19 pandemic,” Healy added. “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 HK$1.0 billion per month for the remainder of the year. We remain absolutely confident in the long-term prospects of Cathay Pacific and the future of Hong Kong as a leading international aviation hub. 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. Additionally, we continue to pursue the development of Cathay as a premium travel lifestyle brand, build our digital leadership capabilities, position ourselves to capitalise on the opportunities provided by the Greater Bay Area as our extended home market, and meet our sustainability targets, most notably our commitment to net zero carbon emissions by 2050.”
Cathay said in its announcement that its low-cost carrier HK Express increased its first-half loss, going from HK$779 million in 2020 to HK$976 million because it shut down operations during the period. Cathay’s cargo unit Air Hong Kong posted a HK$374 million after-tax profit, a 3 percent year-on-year increase due to the strength of the cargo market.
Cathay ended the period with 196 aircraft in its fleet, three fewer jets than at the start of 2021, according to industry data. It took delivery of four jets during the period: two Airbus A321neos and two A350-1000s. It also removed seven aircraft: three A320ceos, one A321ceo, as well as three Boeing 777-300ERs. HK Express’ fleet remain unchanged at 28 aircraft, while Air Hong Kong took delivery of two more A330 freighters, bringing its total fleet to 14 jets.
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