CX reports 2020 cash burn and massive losses

HONG KONG, 12 March 2021: The Cathay Pacific Group reported an HKD21,648 million loss in 2020 compared with a profit of HKD1,691 million in 2019.

The 2020 loss occurred despite HKD2,689 million of Covid-19-related government grants globally and included impairment and related charges of HKD4,056 million relating to 34 aircraft that are unlikely to re-enter service again and HKD3,973 million of restructuring costs inclusive of an HKD1,590 million write-off of a deferred tax asset at Cathay Dragon.

Last June, the airline group announced an HKD39.0 billion recapitalisation and followed in October 2020 with a restructuring that cut 8,500 jobs. It closed Cathay Dragon operations by the end of 2020.

The cost of the restructuring was about HKD2.4 billion, while it saved the group about HKD500 million per month. This reduced monthly cash burn from HKD1.5 to 2.0 billion to HKD1.0-1.5 billion.

The business performance of Cathay Pacific and Cathay Dragon since the onset of the pandemic in March 2020, saw passenger revenue dip to only 2 to 3% of 2019 levels forcing the airline to reduce services to just a bare skeleton.

Operations remained below 10% during 2020 with small pockets of demand in the summer season with student travel from Hong Kong and the Chinese mainland to the UK and other destinations in Europe.

Passenger revenue in 2020 was HKD11,313 million, a decrease of 84.3% compared to 2019. Revenue passenger kilometre (RPK) traffic decreased by 85.1%, while available seat kilometre (ASK) capacity decreased by 78.8%. The load factor decreased by 24.3 percentage points to 58.0% and reached a low of 18.2% in October. Yield increased by 4.8% to HKD56.3 cents. 86.9% fewer passengers were carried in 2020 than in 2019.

The airline transferred 82 passenger aircraft (46% of the airlines’ passenger fleet) parked at Hong Kong International Airport to locations outside of Hong Kong, including Alice Springs in Australia and Ciudad Real in Spain, to take advantage of more favourable environmental conditions.

The airline has negotiated a deal with Airbus to delay delivery of A350-900 and A350-1000 aircraft by two years until 2023 and to defer delivery of A321neo aircraft until 2025. Similar talks are taking place with Boeing to delay the delivery of 777-9 aircraft.

Commenting on the business outlook, the airline chairman, Patrick Healy said: “Market conditions remain challenging and dynamic. It is by no means clear how the pandemic and its impact will develop over the coming months.”

Since 20 February, the Hong Kong SAR Government has implemented stricter quarantine requirements on Hong Kong-based pilots and cabin crew, resulting in a 60% reduction in passenger capacity. The airline faces an increase in cash-burn estimated at HKD300 to 400 million per month.

In comments on the 2021 outlook, the chairman forecast passenger flight capacity may level out at a quarter of the pre-pandemic performance during the first half of 2021 with an improvement in the second half of the year.

The forecast assumes that vaccines will prove effective and widely adopted in all key markets by summer 2021. But even if that occurs, the airline expects to operate at well below 50% passenger capacity during 2021.

“The correlation between the roll-out of vaccination programmes in our key markets and the potential future relaxation of travel restrictions remains highly uncertain and difficult to predict. We will remain agile and will respond according to the situation as it develops,” the chairman concluded.