HONG KONG: Troubled Hong Kong carrier Cathay Pacific warned it does not expect to make a meaningful recovery in passenger demand for some time due to the coronavirus pandemic after posting a record first-half loss, but signalled a brighter cargo market outlook.
The airline on Wednesday (Aug 12) said it lost HK$9.9 billion (US$1.27 billion) in the first half of this year, making it the latest major airline to reveal how badly the COVID-19 pandemic has eviscerated its business.
"The first six months of 2020 were the most challenging that the Cathay Pacific Group has faced in its more than 70-year history," chairman Patrick Healy said in a statement announcing the results.
"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."
The figure was in line with the HK$9.9 billion forecast it had flagged last month and included HK$2.47 billion of impairment charges.
Revenue plunged 48.3 per cent to HK$27.7 billion in the six months ended Jun 30 as it slashed passenger flying to a barebones schedule due to lower demand and border restrictions, though it added more cargo-only flights as freight yields rose 44.1 per cent.
Cathay said it did not expect a "meaningful recovery" in passenger demand for some time, with Healy citing the International Air Transport Association as saying global travel is unlikely to reach pre-pandemic levels until at least 2024.
Asia-Pacific airlines were likely to stay hit for longer given spiralling tensions between the US and China, the world's two biggest economies, Healy said.
"I don't think we are expecting the second half to be better than the first half," Healy said.
"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," he said.
The firm said it carried 4.4 million passengers in the first six months of 2020 - a 76 per cent plunge year-on-year - as the pandemic burst out of central China and then spread around the world.
At the height of the global lockdowns in April and May, its entire fleet was averaging just 500 passengers a day.
Cathay expects passenger capacity to operate at around 8 per cent of normal in August and September, down from an earlier forecast of up to 10 per cent as travel restrictions continue, CEO Augustus Tang said.
Chief customer and commercial officer Ronald Lam said the cargo business had peaked in May but yields remained high and the outlook heading into the peak Christmas season was positive.
Cargo revenue topped passenger revenue and accounted for 46 per cent of total sales in the first half, up from 21 per cent a year earlier when the freight market was depressed.
"Nonetheless, cargo is no remedy for lost passengers - at most it's like a band-aid on a knife wound. Better than nothing but won't stop the bleeding," BOCOM International analyst Luya You said.
Cathay said earlier this month it will offer a voluntary scheme to its Hong Kong-based pilots who are approaching retirement age to leave the group early, in a continued effort to cut costs amid the coronavirus pandemic.
The airline has taken other short-term measures including executive pay cuts and two rounds of voluntary special leave scheme.
In July, Cathay said it had reduced its monthly cash burn to about HK$1.5 billion from HK$2.5 billion to HK$3 billion while maintaining a minimal flying schedule.
Cathay, which received a US$5 billion rescue package from the Hong Kong government and shareholders including a rights issue, said then that it might further access equity and debt capital markets to strengthen its balance sheet.
Cathay said it has rearranged its aircraft order book with Airbus to delay deliveries and plans to accept 10 jets from the manufacturer in 2020, down from an earlier 17, and eight in 2021, versus 14 earlier.
It said it is in advanced talks with Boeing to delay 777-9 orders and has begun sending one-third of its fleet outside Hong Kong for storing in less humid conditions.