HONG KONG: Cathay Pacific Airways on Wednesday revealed record losses of HK$21.6 billion (US$2.8 billion) in 2020, a year blighted by the Covid-19 pandemic – the worst crisis in commercial aviation history.
The Hong Kong flag carrier’s annual financial performance sank even lower than predicted, as it posted one of the biggest losses for a city-listed company since the public health crisis emerged more than a year ago.
Losses in the second half of 2020 increased to HK$11.8 billion, up from HK$9.9 billion in the first six months of the year, with larger-than-expected restructuring charges and a reduction in the value of assets such as aircraft piling pressure on the business.
Analysts were expecting a HK$20.4 billion loss, according to those surveyed by Bloomberg ahead of the announcement.
Only its air freight operations saved the company, one of the largest cargo airlines in the world, from recording even deeper losses, as prices soared due to the high demand for shipments and fewer planes flying during the pandemic.
Cathay chairman Patrick Healy described the past 12 months as “the most challenging” in the airline group’s 70-year history, and warned of an uncertain future.
“Market conditions remain challenging and dynamic,” he said in a statement. “It is by no means clear how the pandemic and its impact will develop over the coming months.”
He added: “All our cash preservation measures will continue unabated.”
The company earlier warned the coming months would be “extremely challenging”, with Cathay’s recovery tied directly to the vaccination roll-out it hoped would be “adopted” in key markets by this summer.
However, Hong Kong’s inoculation drive has experienced a decline in the take-up rate of bookings for jabs, which has been linked to increasing public concern over people seeking hospital treatment after taking the Sinovac vaccine. More than 110,000 people in Hong Kong have so far received a Covid-19 vaccine.
Healy reaffirmed his belief in a vaccine-led recovery but warned the “correlation” of vaccinations and the relaxation of travel restrictions remained “highly uncertain and difficult to predict”.
“Our short-term outlook continues to be challenging. However, we remain absolutely confident in the long-term future and competitive position of our airlines ... as we recover and rebuild from the impact of Covid-19,” the chairman added.
In an internal memo detailing the financial results, CEO Augustus Tang Kin-wing urged all employees to get vaccinated, saying inoculation campaigns would help bring about the lifting of travel restrictions.
Executives would continue to receive a lower wage throughout this year, while a majority of local ground staff and overseas employees had opted to take a pay cut, the company said.
The latest financial results showed the airline generated HK$46.9 billion in revenue for 2020, more than halving the 2019 figure, with 60% of that earned through its air freight business.
Hong Kong’s largest airline has suffered two years of tumult: the 2019 anti-government protests which spread to Cathay’s home – the city’s airport – and a Beijing-requested management upheaval were followed by the catastrophe of the coronavirus pandemic.
The airline turned to the government and shareholders in June 2020 for a HK$39 billion bailout to avoid going bust. Last October, the carrier jettisoned 5,900 jobs – mostly in Hong Kong – and shut down its regional airline to stem mounting losses that reached as high as HK$3 billion at the height of its pandemic woes.
During the pandemic, travel has been discouraged by sweeping border closures in the markets where Cathay operate and quarantine measures to stave off the importation of the virus into Hong Kong.
The restrictions prompted a collapse in travel demand and flight cuts, leading to many of the airline’s 200-strong fleet of passenger planes being grounded and sent abroad for storage.
The airline has endured a 99% fall in its daily number of passengers – from an average of 100,000 a day – and has been especially hard hit as it has no domestic flights to fall back on.
Challenges have continued in 2021, as the airline revealed in January it carried fewer than 1,000 passengers a day for the first time since June last year. The company in February tapped debt markets for HK$6.7 billion through convertible bonds to bolster its balance sheet.
The airline said it had a war chest of HK$28.6 billion as of the end of last year.
Luya You, BOCOM International transport analyst, said: “I think Cathay’s latest forecasts for 2021 clearly take into account the uncertainty surrounding vaccine uptake in [Hong Kong] and key markets. Improvement by the second half is looking to be more conditional on vaccine progress than ever.”
She added: “Cathay is also in a difficult situation in which it needs to monitor vaccine uptake in multiple markets, as we all know they can’t rely on any single domestic market.”