Cathay Pacific is expecting a substantial loss in the first half of 2020 and its cargo business to continue to face headwinds this year due to the impact of the coronavirus disease (Covid-19).

Cathay Pacific's cargo business performed “below expectations” last year, with cargo revenues dropping 14.3% to of HK$21.1 billion (US$2.71 billion) and cargo revenue tonne-km also declined by 6.7% to 11.3 billion.

Cargo volumes also decelerated by 6% to two million tonnes and yields decreased by 7.9% compared to a year ago.

Political unrest dragged second half 2019 results

“2019 was a turbulent year for the Cathay Pacific Group ... we delivered a positive performance in the first half of 2019 notwithstanding a difficult environment brought about by geopolitical and trade tensions. However, with social unrest in Hong Kong intensifying over the second half of the year and mounting US-China trade tensions, we experienced a sharp drop in both inbound and outbound passenger traffic,” said Patrick Healy, Chairman, Cathay Pacific Group.

“We were faced with an incredibly challenging environment to operate as the Hong Kong economy slipped into recession. As a result, our second-half results – traditionally stronger compared to first-half results – fell well below what we would have hoped for,” he added.

2020 outlook 

Following the impact of social unrest in Hong Kong in the latter half of 2019, the first half of 2020 was expected to be extremely challenging financially, with an already reduced winter season capacity.

Healy said this has been exacerbated by the significant negative impact of COVID-19 

“It is difficult to predict when these conditions will improve.”

The Covid-19 outbreak, he noted caused travel demand to drop substantially — although a series of short term measures have been implemented in response.

“Despite these measures, we expect to incur a substantial loss for the first half of 2020. We expect our passenger business to be under severe pressure this year and that our cargo business will continue to face headwinds,” Healy said.

Optimism on cargo operation

However, he noted that the Cathay Pacific Group is “cautiously optimistic”  about cargo following the recent reduction in US-China trade tensions.

“We have maintained our cargo capacity intact,”  he said, noting that the US dollar is expected to remain strong in 2020, and intense competition, especially in long-haul economy class, will continue to place significant pressure on yields.

“Although there is much uncertainty, we have an incredible brand with a reputation and track record of premium service and commitment to our customers that differentiates us from our competitors. These qualities and values remain at the heart of everything we do and are what will help us through the current challenges,”  Healy further said.

As part of the Group's three-year transformation programme, the Cathay Pacific chairman said the airline will continue to take delivery of new aircraft in 2020 and, with the hope that the environment will improve, we will retain the flexibility to add capacity back to the market as soon as we are able to.

Cathay Pacific's plan to take delivery of 70 new and more fuel-efficient aircraft by 2024 also remains unchanged.