Cathay traffic remains depressed due to COVID-19

Hong Kong flag carrier says reduced demand and quarantines impact key markets and it faces a ‘long and uncertain road to recovery’


Use this oneHong Kong flag carrier Cathay Pacific Group said its traffic in August remained severely depressed due to the COVID-19 pandemic and its effects on international aviation. The company said traffic in August was impacted by “continued substantial capacity reductions in response to significantly reduced demand as well as travel restrictions and quarantine requirements in place in Hong Kong and other markets”.

Cathay Pacific and Cathay Dragon carried a total of 35,773 passengers last month, a decrease of 98.8 percent compared to August 2019. The month’s revenue passenger kilometres (RPKs) fell 98.1 percent year-on-year. Passenger load factor dropped by 60 percentage points to 19.9 percent, while capacity, measured in available seat kilometres (ASKs), decreased by 92.2 percent. In the first eight months of 2020, the number of passengers carried dropped by 81.7 percent against a 72.8 percent decrease in capacity and a 79.2 percent decrease in RPKs, as compared to the same period for 2019.

The two airlines carried 102,122 tonnes of cargo and mail last month, a decrease of 36.7 percent compared to August 2019. The month’s revenue freight tonne kilometres (RFTKs) fell 30.3 percent year-on-year. The cargo and mail load factor increased by 14.2 percentage points to 75 percent, while capacity, measured in available freight tonne kilometres (AFTKs), was down by 43.5 percent. In the first eight months of 2020, the tonnage fell by 33.5 percent against a 34.4 percent drop in capacity and a 26.5 percent decrease in RFTKs, as compared to the same period for 2019.

Cathay Pacific Group Chief Customer and Commercial Officer Ronald Lam. (PHOTO: Cathay Pacific)

Cathay Pacific Group Chief Customer and Commercial Officer Ronald Lam said: “It is clear that we are facing a long and uncertain road to recovery. The entire aviation industry has been hit hard by COVID-19 and the environment will continue to be extremely challenging for many years. The International Air Transport Association (IATA) has pushed back its forecast for passenger recovery by a year to 2024, demonstrating just how slow a return to pre-pandemic levels will be. “We have already taken decisive actions to reduce our costs, but despite these efforts we are burning cash at a rate of HK$1.5 billion to HK$2 billion per month (US$193.54 million-US$258 million), and will continue to experience significant cash burn until the market recovers. The recapitalisation provides us time and a platform from which to transform our business and continue to operate in the short term; however, it is an investment that we need to repay. We are weathering the storm for now, but the fact remains that we simply will not survive unless we adapt our airlines for the new travel market. A restructuring will therefore be inevitable to protect the company, the Hong Kong aviation hub, and the livelihoods of as many people as possible. We continue to move forward with our comprehensive review of all aspects of the business, and will make our recommendations to the board in the fourth quarter on the size and shape of the company to allow us to survive and thrive in this new environment.”

Passenger Traffic

Airlines like Cathay Pacific have had to ground hundreds of planes and slash capacity as international travel has ground to a virtual halt. (PHOTO: Shutterstock)

Speaking on the group’s August traffic figures, Lam said: “Passenger demand continued to be very weak as new waves of COVID-19 in our key markets dampened overall travel sentiment. With no new destinations being resumed in August, we saw only minimal increase in passenger flight capacity compared to the previous month. We operated just 7.8 percent of our normal capacity – a marginal increase from 7.1 percent in July – however our overall passenger volume was down month on month and our load factor dipped below 20 percent. We did see stronger demand on certain routes, notably student traffic to the UK with flights recording load factors of up to 90 percent. The lifting of the ban on transit flights departing from the Chinese mainland via Hong Kong in mid-August helped to generate reasonable demand towards the end of the month. We also launched a charter service from Shanghai to Tel Aviv.


(PHOTO: Shutterstock)

“Cargo remains the stronger performer in our business and we saw similar overall cargo tonnage and load factors in August as we did in July. There were greater movements of pharmaceutical products and live animal shipments across the network, while our time-sensitive product – Priority LIFT – was also in good demand,” Lam said. “We continued to introduce additional cargo capacity where possible. Our two Boeing 777-300ER aircraft introduced in July with some of their passenger seats removed continue to be well received and have been predominantly used for long-haul shipments. Overall in August we operated 436 pairs of cargo-only passenger flights – a similar number to July – of which 23 had cargo loaded into the cabins.


“Looking ahead, we are cautiously optimistic of a reasonably promising cargo peak season, having received strong pre-orders that will serve the capacity needs of our customers. Beyond the traditional peak season, however, prospects are very unclear. Regional geopolitical tensions and the ongoing China-US trade dispute could have a significant adverse effect on airfreight demand, and the situation has the potential to deteriorate rapidly,” Lam said. “On the passenger demand front, we still haven’t seen solid signs of immediate improvement. We have therefore revised our operating passenger flight capacity down to about 10 percent in September and similar levels in October, subject to the further relaxation or tightening of travel restrictions and quarantine requirements.

“We welcome and are encouraged by the efforts of the HKSAR Government to engage in discussions with 11 countries on the establishment of travel bubbles. We look forward to further relaxation measures in future that will help revitalise travel activities and ensure the continued strength and importance of Hong Kong as a global aviation hub. Given that we will be operating just a fraction of our services in the foreseeable future, we will continue to transfer some of our passenger fleet – approximately 40 percent – to locations outside of Hong Kong in keeping with prudent operational and asset management considerations.”

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