Hong Kong airline Cathay Pacific posts record annual loss

Hong Kong’s Cathay Pacific Airways Ltd said on Wednesday it was focused on preserving cash after it posted a record annual loss of 21.65 billion Hong Kong dollars ($2.79bn), caused by a travel downturn, restructuring costs and fleet reductions.

It described 2020 as “the most challenging 12 months of its more than 70-year history” as the coronavirus pandemic brought unprecedented disruption to global air travel.

The 2020 loss compared with 2019 profit of 1.69 billion Hong Kong dollars ($218m) and was worse than an average forecast for a net loss of 19.9 billion Hong Kong dollars ($2.56bn) by 13 analysts, according to data provider Refinitiv.

“Market conditions remain challenging and dynamic,” Cathay Pacific Chairman Patrick Healy said in a statement. “All our cash preservation measures will continue unabated. Executive pay cuts will remain in place throughout 2021.”

Cathay lacks a domestic market at a time when international borders are largely closed because of the coronavirus pandemic. In December, Cathay’s passenger numbers fell by 98.7 percent compared with a year earlier, though cargo carriage was down by a smaller 32.3 percent.

Nearly 60 percent of its 2020 revenue of 47.9 billion Hong Kong dollars ($6.17bn) was from its cargo operations, up from approximately 20 percent in 2019.

Cash burn

The airline said in January it would cut passenger capacity by 60 percent and cargo capacity by 25 percent as a result of new rules that required crew to quarantine for two weeks in hotels before returning to normal life in Hong Kong that took effect on February 20.

As a result, Cathay has put most of its crew on voluntary rosters of three weeks flying, two weeks in a hotel and two weeks off at home.

Cathay said the quarantine rules would increase cash burn by about 300 million Hong Kong dollars ($38.6m) to 400 million Hong Kong dollars ($51.5m) per month, on top of its earlier 1-1.5 billion Hong Kong dollars ($129m-$193m) levels.

The airline in January issued 6.74 billion Hong Kong dollars ($868m) of convertible bonds to shore up liquidity.

Cathay in October said it would cut 5,900 jobs to help it weather the pandemic, including nearly all of the positions at its regional airline Cathay Dragon, which it shut down.

2020 had started fairly promisingly for Cathay after a tough second half of 2019, when anti-government protests rocked Hong Kong and affected traffic into the city. The carrier’s position worsened drastically with the onset of COVID-19 in Wuhan in late January.

At that point, on January 22, Cathay took the unusual step of issuing a press release with the first sentence all in bold, blazed across the top:

“Due to the evolving information from health authorities, we will allow crew members and front-line airport employees to wear surgical face masks when on duty at their discretion,” it said.

Strange as it might seem now that masks are ubiquitous, the policy was well ahead of its time – and an omen of the chaos about to hit global air travel. A day later, regional unit Cathay Dragon suspended flights to and from Wuhan for a month. On January 26, the suspension was pushed to the end of March, and then matters snowballed as the pandemic took hold, ripping travel plans and the aviation industry apart.