Hong Kong’s Cathay Pacific Airways Ltd expects a first-half net loss of 9.9 billion Hong Kong dollars ($1.3bn), including a drop in the value of 16 planes, the airline said on Friday, as the coronavirus pandemic crushed travel demand.
Earlier, the airline had flagged a “substantial” first-half loss and that it had burned through cash of 2.5 billion Hong Kong dollars to 3 billion Hong Kong dollars ($322m-$387m) each month since February.
The estimated first-half loss would be Cathay’s biggest half-yearly loss in at least 10 years and compares to a 1.35 billion Hong Kong dollars ($174m) profit in the first half of 2019, before widespread anti-government protests and the virus decimated demand.
“The landscape of international aviation remains incredibly uncertain with border restrictions and quarantine measures still in place across the globe,” Cathay Chief Customer and Commercial Officer Ronald Lam said in a statement.
Rating agency Moody’s Investor Service said on Friday it does not expect global airline passenger demand to recover to pre-coronavirus pandemic levels until the end of 2023, and then only if effective vaccines and medicines are available.
Demand dropped by more than 90 percent within weeks of the onset of the pandemic, a slump that impacted a broad swath of the global economy given that passenger airlines supported about 3 percent of world gross domestic product in 2019, according to Moody’s latest report.
Cathay, which last month received a $5bn rescue package led by the Hong Kong government, said it planned to operate 7 percent of normal passenger capacity in July, rising to about 10 percent in August.
It will book a 2.4 billion Hong Kong dollars ($310m) reduction in the value of its assets – a so-called impairment charge – alongside its half-year results that mainly relates to 16 planes that are unlikely to re-enter meaningful service before the 2021 summer season, the company said.
Before the Friday announcement, Cathay was expected to post a 12.6 billion Hong Kong dollars ($1.6bn) full-year loss in 2020, according to the average forecast of 13 analysts polled by Refinitiv.
The airline said it would make tough decisions by the fourth quarter after reviewing all aspects of its business model, including aircraft orders.
It has accepted government employment subsidies that prevent it from cutting Hong Kong-based staff through August.
Cathay said this month it was evaluating whether to send some of its aircraft to less humid locations for storage as it reviews the size of its fleet in light of the fall in demand.
The airline is due to release its first-half results on August 12.
Meanwhile, United States-based United Airlines and its pilots’ union say they have reached an agreement on two different packages aimed at reducing involuntary furloughs in the autumn and keeping pilots at the ready once coronavirus-hit demand starts to pick up.
US airlines, grappling with a dramatic industry downturn, have warned that tens of thousands of jobs are on the line in October when a US government bailout runs out.
To minimise the number of forced cuts, large US airlines have been offering a variety of early departure packages.
United’s agreement with the Air Line Pilots Association International (ALPA) includes an early retirement deal for pilots 62 and older, as well as a slew of different options for pilots to voluntarily reduce their hours or take a leave of absence during which they would potentially receive health benefits as long as they keep up their training, covered by United.
Bryan Quigley, United’s senior vice president of flight operations, sent the terms to pilots in a memo late on Thursday which was reviewed by the Reuters news agency.
ALPA Chairman Todd Insler said the deal had “groundbreaking provisions that provide the option [for pilots] to remain qualified, allowing a faster recall once passenger demand returns”.
Airlines are generally reluctant to furlough pilots because of the timely and costly training involved in bringing them back. If a COVID-19 vaccine is developed and demand returns, airlines want to be able to respond quickly.
Airlines had hoped for recovery before $32bn in government payroll grants for the aviation industry expire in September. Now unions are lobbying lawmakers to provide another $32bn through March to prevent tens of thousands of furloughs.
Chicago-based United said last week it was sending notices of potential furloughs to 36,000 US-based front-line employees, or about 45 percent of staff, including 2,250 pilots.