Cathay Pacific warns of dire outlook as it posts record first-half loss

Hong Kong's carrier swung to a HK$9.87bn loss in the first six months of the year, from a HK$1.34bn profit in the year-earlier period

(FILES) This file photo taken on March 13, 2019 shows a Cathay Pacific passenger plane preparing to take off from Hong Kong's international airport. Troubled Hong Kong carrier Cathay Pacific said it lost 1.27 billion USD in the first half of this year, the latest major airline to reveal how badly the COVID-19 coronavirus pandemic has eviscerated its business. / AFP / Anthony WALLACE

Hong Kong’s Cathay Pacific said it does not expect to see a “meaningful recovery” in passenger demand for some time after swinging to a record first-half loss due to the coronavirus-induced crisis.

The airline posted a HK$9.87 billion (Dh4.67bn/US$1.27bn) loss in the first six months compared with a profit of HK$1.34bn in the same period last year as passenger traffic plunged, Cathay Pacific said in a filing to the Hong Kong stock exchange on Wednesday.

First-half revenue declined 48 per cent to HK$27.66bn.

"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. "The impact of Covid-19 on the group’s business and the global economy is unprecedented."

The airline's biggest half-year loss is in line with its forecast of a HK$9.9bn net loss, including impairment charges of HK$2.46bn on 16 planes, made in July.

In June, Cathay Pacific announced a HK$39bn rescue package from the government to help it survive the dual impact of the coronavirus crisis and social unrest in its home city.

This recapitalisation was completed on August 12.

Mr Healy said the pandemic had devastated the travel industry "and the future remains highly uncertain, with most analysts suggesting that it will take years to recover to pre-crisis levels”.

Passenger revenue declined by 72.2 per cent to HK$10.39bn in the first half after global travel restrictions, border closures and quarantines hit demand.

The airline and its Cathay Dragon unit carried 4.4 million passengers in the first six months of the year, a 76 per cent year-on-year decline.

Cathay Pacific’s load factor – a measure of how well an airline is filling available seats – dropped to 67.3 per cent in the first half, from 84.2 per cent a year ago. The airline carried an average of 500 passengers a day at the peak of virus-induced lockdowns in April and May.

The cargo business was a rare bright spot in Cathay Pacific's financial performance, having generated more revenue than passenger operations in the first half.

Cargo revenue during the period increased by 8 per cent year-on-year to HK$11.17bn.

“There was an imbalance between capacity and demand in the cargo market, which led to higher cargo revenue compared [with] the first half of 2019,” Mr Healy said.

The airline forecast a dire outlook as the number of confirmed Covid-19 cases around the world exceeded 20 million this week.

“We do not expect to see a meaningful recovery in our passenger business for some time to come,” Mr Healy said.

“We will continue to closely monitor market demand as we work towards progressively reintroducing passenger flights as appropriate.”

Global air passenger traffic is unlikely to recover to pre-crisis levels before 2024, a year later than was previously expected, according to the International Air Transport Association (Iata).

Cathay Pacific said it is reviewing its business model, with management expected to recommend to the board the "optimum size and shape" of the group by the fourth quarter amid a push to meet Hong Kong's travel needs and its responsibilities to shareholders.

“Inevitably, this will involve rationalisation of future planned capacity compared to pre-crisis plans, taking into account the market outlook and cost structure at that time,” Mr Healy said.