Cathay warns of substantial loss in 2020 first half

Posts net profit of HK$1.69 billion for ‘turbulent’ 2019

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Cathay Pacific HK by Matt Driskill
(PHOTO: Matt Driskill)

Hong Kong flag carrier Cathay Pacific Airways said on Wednesday (11 March) it expects to report a substantial loss in the first half of this year and slash more capacity as the COVID-19 coronavirus outbreak cuts travel demand. The airline posted a net profit of HK$1.69 billion (US$217.5 million) for the year ended December 2019, down 28 percent from a HK$2.35 billion profit in 2018. (Click here to download a PDF of the full results.)

Cathay has suffered the double whammy of a COVID-19 outbreak that has killed more than 4,000 people globally as well as anti-government protests throughout much of 2019 that engulfed the airline in a political fight that cost it its CEO and other top officials as well as pilots and flight crew who supported the protests.

The airline is said it has cut capacity by 65 percent in March and April, up from earlier plans for a 40 percent cut, as travel demand has been hit globally. It expects it may have to continue those cuts in May. The airline said that at the end of February planes were flying half-full despite capacity cuts of 30 percent and air fares had also fallen significantly compared to the prior year. At any one time, at least half of Cathay’s fleet is grounded because of the plunge in demand, according to reports.

Cathay Pacific Chairman Patrick Healey. (PHOTO: Cathay Pacific)

“The outbreak of COVID-19 since January 2020 has resulted in a challenging operational environment, and will adversely impact the group’s financial performance and liquidity position,” said Patrick Healy, Cathay’s chairman. “Travel demand has dropped substantially and the group has taken a number of short-term measures in response, including aggressive reduction of passenger capacity measured in Available Seat Kilometres (ASK)…Substantial passenger capacity and frequency reduction is also likely for May as we continue to monitor and match market demand.”

Healy said Cathay is “expected to incur a substantial loss for the first half of 2020” and that with “the cost saving measures being taken, the group’s strong vendor relationships, as well as the group’s liquidity position and availability of sources of funds, the group will remain a going concern.”

Cathay’s cargo business has suffered along with the rest of the cargo industry from US-China trade wars. (PHOTO: Shutterstock)

Cathay also said its cargo demand was depressed for all of 2019 “as a result of US-China trade tensions and was noticeably below that of 2018”.  The group said its cargo business “did pick up later in 2019 during the traditional high season, reflecting new consumer product, specialist airfreight shipments and restocking ahead of holiday periods. Exports from mainland China and Hong Kong to trans-Pacific and European markets were more encouraging later in the year”.

The group and Hong Kong International Airport along with the Airport Authority of Hong Kong announced in December it would introduce a new Terminal Charge concession effective 1 April 2020. The reduction ranges from 18 percent to more than 20 percent compared with the current charge levels and is applicable to shipments from Hong Kong on all four of the Group’s airlines.

Cathay said it continues to take delivery of new aircraft, including six Airbus A350 aircraft. The group now has 24 Airbus A350-900 and 12 Airbus A350-1000 aircraft in its fleet and took delivery of three used Boeing 777-300 aircraft during the year. The airline retired three Boeing 777-200 aircraft, and returned four Airbus A330-300 and one Boeing 777-300ER leased aircraft to their lessors.

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