Aviation
CATHAY PACIFIC EXPECTS FURTHER CASH BURN AS TIGHTER CREW QUARANTINE RULES BITE
January 24, 2022
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Cathay Pacific expects a "cash burn" of HK$1 billion - HK$1.5 billion per month from February amid tighter crew quarantine rules in Hong Kong which is expected to impact both its passenger and cargo operations. 

 

The airline made the announcement as it released its traffic figures for December 2021 together with an update on its performance for 2021 which it said continued to reflect the airline’s substantial capacity reductions in response to significantly reduced demand as well as travel restrictions and quarantine requirements in Hong Kong and other markets amid the ongoing Covid-19 pandemic.

 

Chief Executive Officer Augustus Tang said passenger numbers "continued to be acutely affected" by extremely subdued travel throughout 2021 amid ongoing travel restrictions and strict quarantine requirements but cargo boosted the airline's performance for the year.

 

Cathay flew 717,059 passengers in 2021 compared to the 4.6 million passengers that the airline flew in 2020 and 35.2 million passengers in 2019 before the pandemic hit. 

 

Meanwhile, the Hong Kong-based carrier transported approximately 1.3 million tonnes of cargo last year, which compares to around 1.3 million tonnes in 2020 and 2 million tonnes in 2019. 

 

Tang noted that throughout 2021, Cathay deployed "all available capacity" to meet the consistently high demand, achieving strong yield and high load factors and transporting a wide range of goods including daily necessities, fresh produce, electrical items and pharmaceutical products. 

 

Reduced 'cash burn' in 2021

 

As a result, Cathay said based on a preliminary review of the unaudited consolidated management accounts of the Cathay Pacific Group for the year ended December 31, 2021 it expects the Group to record a consolidated loss attributable to shareholders of approximately HK$5.6-6.1 billion.

 

While the expected loss is substantial, Cathay's chief executive noted that it "compares favourably" to the attributable loss to shareholders of HK$21.6 billion for the year ended December 31, 2020. 

 

"The improvement was primarily driven by strong cargo demand, high cargo yield and load factors, together with continued focus on effective cash and cost management.  In addition, the full-year 2020 result included the recognition of one-off items such as impairment charges and restructuring, which were significantly reduced in 2021," Tang said.

 

Despite quarantine restrictions and operational challenges, Cathay Pacific said it also surpassed the milestone of 120 million Covid-19 vaccines carried in 2021 as the airline carried more than 13.3 million doses in a single day.

 

As a group, its airlines have carried more than 165 million doses of different Covid-19 vaccines around the world since the pandemic began.

 

"Having worked hard to tackle the challenges presented by the Covid-19 pandemic, taken decisive actions to create a more focused, efficient and competitive business and responded to strong cargo demand, we have reduced operating cash burn from the HK$2.5-3.0 billion range in the first half of 2020 down to marginally cash generative in the second half of 2021," Tang added.

 

Cash burn expectations in 2022

 

Meanwhile, despite improved performance last year, Cathay Pacific expects challenges to remain as 2022 began — citing Hong Kong's stricter crew quarantine measures as a further drag to both its passenger and cargo services.

 

 

"In late December and then early January, the Hong Kong SAR Government further tightened aircrew quarantine requirements and travel restrictions. These measures will have a significant impact on our passenger and cargo flight capacity," Tang continued.

 

"While we are fully committed to increasing our cargo capacity when conditions allow and to upholding Hong Kong’s international aviation hub status, for the month of January 2022, cargo has reduced to 20% of its pre-pandemic capacity and passenger flights have reduced to around 2% of their pre-pandemic capacity," he added.

 

 

"Regrettably, the capacity reduction will have an impact on Cathay Pacific's business and we have been evaluating the potential impact of these measures on our operations and cost base. According to our preliminary assessment, we expect these capacity levels to result in an operating cash burn of HK$1.0-1.5 billion per month from February."

 

Until conditions improve, the Cathay CEO noted that the airline is "doing everything in our power to maximise capacity."

 

"[We] estimate that mitigation measures to increase crew resources will enable us to operate approximately an additional 5% more cargo flight capacity than we are currently operating," Tang added.

 

Meanwhile, Cathay Pacific continue to operate freighter services to the Chinese Mainland and regional destinations, as well as a daily freighter operation to North America. 

 

The Cathay chief said the shipment of goods to and from Europe and the Southwest Pacific is being served by passenger aircraft carrying only cargo.