Cathay Pacific remains upbeat on its recovery path despite recording wider losses in 2022 as it continued to rebuild the carrier and Hong Kong's status as a major aviation hub.
The Hong Kong-based airline reported a HK$6.5 billion (US$828 million) loss for the 12 months ending December 31, 2022, which is steeper than 2021's loss of HK$5.5 billion (US$700 million). It is near the bottom of Cathay's earlier forecast for a loss of between HK$6.4 billion and HK$7 billion.
Patrick Healy, chairman of Cathay Pacific Group, described 2022 as a "year of two halves" — as he noted significant constraints in the airline operations at the beginning of 2022 due to the emergence of the Omicron variant, with much better performance seen towards the end of the year — the most significant adjustment in September when the quarantine requirements for both passengers entering Hong Kong and for Hong Kong-based aircrew were lifted.
"Cathay Pacific has experienced three challenging years due to the Covid-19 pandemic, with 2022 very much being a year of two halves," Healy said in a statement announcing the results while noting a "marked improvement" in performance later in the year.
First operating profit
This has resulted in Cathay Pacific reporting its first annual operating profit since 2019 as the airline seeks to return to pre-pandemic flight capacity both in terms of passenger and freighter.
The carrier recorded an operating profit of HK$3.55 billion (US$452 million) in 2022 but was weighed down by losses incurred mostly by its associate companies.
In terms of its air freight operations, Cathay Pacific saw cargo revenue drop 16.6% to HK$26.99 billion (US$3.44 billion) compared with 2021.
Capacity — measured in available cargo tonne kilometres (AFTKs) — also decreased by 19.0%, mainly due to the reduction in cargo capacity operated, particularly in the first part of the year, due to elevated COVID-19 crew quarantine restrictions.
Cathay noted that traffic, measured in cargo revenue tonne kilometres (RFTKs), decreased by 29.8%.
In terms of total tonnage for 2022, the Hong Kong flag carrier said volumes were down 13.4% to 1,154 thousand tonnes as the load factor was 70.6% compared with 81.4% in 2021.
On the cargo side, Cathay said it resumed operating a full freighter schedule in August, and the resumption of more passenger flights offered additional belly capacity enabling the carrier to offer more options to its cargo customers.
By the end of 2022, the Group was operating about two-thirds of pre-pandemic cargo flight capacity levels.
Meanwhile, Ronald Lam, the new chief executive officer at Cathay Pacific, said the airline is not only aiming to return to its pre-pandemic operations but is aspiring to build back better.
"As we put the past few challenging years behind us and move into a new phase, our focus is now firmly on rebuilding Cathay Pacific for Hong Kong," Lam said.
"We are reconnecting Cathay Pacific with Hong Kong, as well as reconnecting Hong Kong with the world. To achieve this, we are doing more than simply returning to where we were before the pandemic. We are rebuilding a Cathay Pacific that is better than before," he added.
Cathay was severely impacted by Covid-related border closures, flight cancellations, and stringent quarantine measures for crew members and faced record losses from 2020.
Nonetheless, executives at Cathay Pacific anticipate better performance moving forward as the airline return flight routes and rebuild much of its network.
Better 2023 prospects cited
Healy said Cathay anticipate that the Group — comprising passenger airlines Cathay Pacific and HK Express — will be operating about 70% of its pre-pandemic passenger flight capacity by the end of 2023, with an aim to return to pre-pandemic levels by the end of 2024.
"After three years of unprecedented disruption due to the Covid-19 pandemic, we are pleased to now be at the stage where we are rebuilding a new Cathay Pacific, which Hong Kong can be proud of. We have a crystal-clear strategy that we are confident will deliver long-term success," he said.
To achieve this, Healy noted that Cathay is focused on reconnecting Cathay Pacific with Hong Kong, the Greater Bay Area (GBA) and the Chinese Mainland, as well as reconnecting Hong Kong with the world.
He noted that Hong Kong's Three-Runway System — expected to be fully operational by early 2025 — "will usher in a new phase of exciting opportunities" as well as increased competition.
"We are also greatly encouraged by the potential of the GBA as our extended home market. As Hong Kong is integrated economically into the vibrant GBA, we are eager to play our role," the Cathay chairman added.
Lam, CEO of Cathay, also signalled the increasing role of the GBA — China's regional development blueprint for Guangdong, Hong Kong, and Macau — in the future prospects of the airline as he noted the airline's corporate strategy would focus on four lines of its business – Premium Travel, Low-Cost Travel, Cargo and Lifestyle.
"On the cargo side, Cathay Pacific Cargo and Cathay Pacific Services Limited became the first carrier and cargo terminal operator, respectively, to have cargo shipments accepted in Dongguan Logistics Park and transported to HKIA by ship for outbound airfreight in February 2023," Lam said.
"This also involved establishing our own upstream bonded facility – the Cathay Cargo Terminal Dongguan – located at the Bestar Logistics Centre in Dongguan."
To enable Cathay's GBA strategy, Lam added that Cathay opened a new GBA head office in Shenzhen last July, and we continue to explore opportunities for growth and investment in the region.
"We were very encouraged to see a bright light at the end of the tunnel in the second half of 2022, and the positive momentum has continued into 2023," the Cathay chief executive said.
"After three brutal years of the Covid-19 pandemic, we have finally entered into a new exciting phase, in which we will rebuild Cathay Pacific for Hong Kong," Lam added.