This undated photo shows Cathay Pacific aircraft stored at the Asia Pacific Aircraft Storage Facility (APAS) in Alice Springs, Australia. (PHOTO/BLOOMBERG)
The chairman of beleaguered Cathay Pacific Airways said he sees no light at the end of the tunnel, and he hasn’t ruled out further job cuts or any other “feasible measures” as ongoing stringent quarantine measures in Hong Kong dampen hopes of an economic recovery anytime soon.
Hong Kong’s flagship carrier suffered a record annual loss of HK$21.65 billion ($2.79 billion) for 2020, a year it called “most challenging” in a filing to the Hong Kong Stock Exchange on Wednesday. During the period, revenue plunged 56.1 percent on year to HK$46.93 billion. The company decided not to distribute a dividend.
In October, the 74-year-old airline axed 5,900 jobs, or 17 percent of its establishment headcount, and ceased operations of its 35-year-old wholly owned regional airline, Cathay Dragon
“We remain in an extremely uncertain, dynamic environment. There are positive aspects and negative aspects to where we are today compared to where we were in October and November last year,” Cathay Pacific Chairman Patrick Healy told an online media conference on Wednesday.
On the positive side, vaccines are proving effective, and governments in Cathay’s key markets are rolling out vaccination programs that are certainly “at least in line with expectations”, he added
However, Healy warned of current operational complexity since the city required local pilots and cabin crew to be quarantined upon their return to Hong Kong beginning in February, and this added “significant costs” to Cathay’s operations.
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The company so far has gotten no indication from the Hong Kong government on how long the new quarantine rules will last.
“There are no immediate plans for further action of that time. But frankly, the situation is so dynamic and uncertain that we are not in a position where we could rule anything out,” he said.
In October, the 74-year-old airline axed 5,900 jobs, or 17 percent of its establishment headcount, and ceased operations of its 35-year-old wholly owned regional airline, Cathay Dragon. This came as part and parcel of what Cathay called the “major restructuring” that cost nearly HK$2.4 billion.
The restructuring helped the company save HK$500 million on a monthly basis and reduce monthly cash burn from HK$1.5 billion to HK$2.0 billion, to HK$1.0 billion to HK$1.5 billion.
Healy said Cathay will operate at well below a quarter of pre-pandemic passenger flight capacity in the first half of 2021. In the second half of the year, there may be some improvement provided that vaccines prove to be effective and are widely adopted in its key markets by summer.
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“Consequently, we expect to operate at well below 50 percent passenger capacity overall in 2021,” he said.
Cathay said it reached an agreement with Airbus SE to defer delivery of A350-900s and A350-1000s from to 2020-23, and A321neos to 2020-25. The airline is also in advanced negotiations with Boeing Co on the deferral of 777-9 deliveries.
Cathay took delivery of 10 new aircraft in 2020, including its first A321neo, and partially converted four Boeing 777-300ER passenger aircraft to provide additional cargo-carrying capacity. The company is transferring certain aircraft from Cathay Dragon to Cathay and low-cost unit HK Express.
On Monday, Cathay Pacific has been given approval to run 15 routes previously given up by Cathay Dragon, and is expected to relaunch those routes this summer at the earliest.
The 15 routes constitute over 60 percent of Cathay Dragon’s 22 flight routes to the Chinese mainland.
Cathay Pacific in November gave back to the Air Transport Licensing Authority Cathay Dragon’s air transport license and traffic rights, which involved 46 routes, including 22 on the mainland.
Cathay Pacific Chief Customer and Commercial Officer Ronald Lam Siu-por said on Wednesday that the airline has resumed service on five former Cathay Dragon routes. In the second quarter, more routes will be added, starting with cargo-only flights.
Greater Bay Airlines, founded by Hong Kong businessman Bill Wong Cho-bau, also applied for Dragon’s traffic rights, with a plan to operate 114 routes.
Healy said competition from rivals like Greater Bay Airlines indicates that other airlines share Cathay’s enthusiasm for Hong Kong as an aviation hub and vision for the future of a thriving Guangdong-Hong Kong-Macao Greater Bay Area.
The share price of Cathay Pacific slipped 0.56 percent on Wednesday to close at HK$7.06.
The benchmark Hang Seng Index edged up 0.47 percent, or 134.29 points, to finish at 28,907.52 points.
With inputs from Bloomberg
