Cathay Pacific saw its cargo performance surge last year despite its overall performance taking a major hit from the wide-ranging impact of the coronavirus pandemic.
The Hong Kong-based carrier reported an HK$18.1 billion (US$2.3 billion) operating loss in 2020, reversing its HK$3.4 billion (US$438 million) profit in 2019 with the overall Group — including its low-cost unit HK Express and cargo subsidiary Air Hong Kong — revenue dropping 51.6% year on year to HK$46.9 billion (US$6 billion).
Pax, cargo performance in 2020
Cathay Pacific said due to weak passenger demand with the onset of the COVID-19 pandemic, the carrier reduced its schedule "to just a bare skeleton" operations during most of last year.
“The Cathay Pacific Group experienced the most challenging 12 months of its more than 70-year history in 2020. Since the onset of the pandemic, our passenger revenues in 2020 declined to only 2-3% of 2019 levels. With demand at an all-time low, we drastically reduced our passenger schedule to just a bare skeleton and our operating capacity remained below 10% for much of 2020,” Cathay Pacific’s group chairman Patrick Healy said.
"Our cargo business was by far the better performer, though it too was affected by the substantial contraction in capacity usually provided by the bellies of our passenger aircraft," Cathay said in its full-year 2020 financial results.
The Hong Kong flag carrier noted that its cargo revenue last year saw a 16.2% increase to HK$24,573 million compared to 2019, "reflecting the imbalance in the market between demand and available capacity."
Capacity, measured in available freight tonne km (AFTK) also dropped by 35.5%. The carrier’s cargo load factor increased 8.9 percentage points to 73.3%. while yield increased by 58.3% to HK$2.96 (US$0.38).
The carrier said its 2020 cargo results reflect the imbalance in the market between demand and available capacity.
"Yields increased and revenue improved due to the imbalance in the market between available capacity and demand," Cathay Pacific said. “We increased cargo capacity by chartering services from our all-cargo subsidiary, Air Hong Kong, operating cargo-only passenger flights and carrying select cargo in the passenger cabins of some of our aircraft, and removing some seats in the Economy Class cabins of four Boeing 777-300ERs to provide further cargo space.”
Positive long-term outlook
The airline said as the coronavirus pandemic continues to impact aviation, the short-term outlook for Cathay Pacific remains "challenging" although it remains "absolutely confident" about the carrier's long-term prospects.
"Market conditions remain challenging and dynamic. It is by no means clear how the pandemic and its impact will develop over the coming months," Cathay said, noting that the stricter quarantine requirements for its Hong Kong-based pilots and cabin crew beginning February 20 resulted in further reduction of its passenger capacity and "a reduction to our cargo capacity of about 25% compared to January 2021 levels."
The new regulations will also see an increase in the carrier's cash burn of approximately HK$300-400 million per month over the previous HK$1.0-1.5 billion range.
"We stated at the end of last year that we expected to operate at well below a quarter of pre-pandemic passenger flight capacity in the first half of 2021 with improvement in the second half of the year. This assumed that vaccines would prove to be effective and would be widely adopted in our key markets by summer 2021," it added.
"Our short-term outlook continues to be challenging. However, we remain absolutely confident in the long-term future and competitive position of our airlines," it said.
"Our important role at the centre of the Hong Kong aviation hub, and the critical role that Hong Kong will play in the Greater Bay Area and beyond, will continue to place us in good stead as we recover and rebuild from the impact of COVID-19."
In terms of cargo, the carrier said demand on the US-China trade lane is back to pre-COVID-19 levels as a result of robust e-commerce.
Cathay defers Airbus deliveries
Meanwhile, the Hong-Kong carrier announced that it pushed back deliveries for Airbus A350-900 and -1000 aircraft by up to two years, from 2020-2021 to 2020-2023.
Deliveries for A321neos — some of which were originally meant for now-shuttered regional wing Cathay Dragon — were also delayed from 2020-2023 to 2020-2025.
In the case of Boeing, Cathay said it is in “advanced negotiations” with the American planemaker for the deferral of the 777-9 widebody, which the airline has 21 on order.
Cathay Pacific also noted that it transferred 82 passenger aircraft (46% of the airlines’ passenger fleet) which had been parked at Hong Kong International Airport, to locations outside of Hong Kong, including Alice Springs in Australia and Ciudad Real in Spain for storage.