Archives



Air, Freight News


Cathay Pacific Group Issues Profit Warning

[ August 12, 2020   //   ]

The Cathay Pacific Group issued a profit warning on July 17 and released combined Cathay Pacific and Cathay Dragon traffic figures for June 2020.

Profit Warning
In its 2019 annual results announcement dated 11 March 2020, the Group had disclosed that it expected to incur a substantial loss for the first half of 2020. Based on the unaudited results of the Group for the six months ended 30 June 2020, and on a basis consistent in all material respects with the accounting policies normally adopted by the Group as set out in the annual report for the year ended 31 December 2019, the Directors of Cathay Pacific Airways Limited estimate that for the six months ended 30 June 2020, the Group will record a net loss attributable to shareholders of approximately HK$9.9 billion, which compares to a net profit to shareholders of HK$1.3 billion for the same period in 2019. This includes impairment charges amounting to approximately HK$2.4 billion, which mainly relate to 16 aircraft that are unlikely to re-enter meaningful economic service again before the 2021 summer season together with certain airline service subsidiaries assets. This estimated interim net loss is in the process of being reviewed by our auditors and may be subject to adjustments.
Passenger
Lam said of the airlines’ June traffic performance: “Demand continued to be very weak in June with our airlines carrying less than 1% of the passengers we carried in the same month in 2019. We operated about 4% of our normal passenger flight capacity in June. This was slightly more than we operated in May, having resumed services to some destinations such as New York, San Francisco, Amsterdam and Melbourne in late June. Load factor remained low at 27.3%, and on average we carried approximately 900 passengers a day only.
“We observed a gradual pickup in connecting passenger demand as the ban on transit traffic through Hong Kong International Airport began being partially eased. Towards the end of the month, transit traffic reached about 32% of overall traffic, with notable demand from destinations in Southeast Asia such as the Philippines and Vietnam to North America. This change in traffic mix meant a more tapered average yield performance though.”

Cargo
Cathay Pacific continued to operate a full freighter schedule as well as chartered flights from its all-cargo subsidiary, Air Hong Kong, in June. There were fewer cargo-only passenger flights compared with May.
Lam said: “Despite a mild pickup in general airfreight movements, our cargo tonnage fell by 5% month-on-month as demand for medical supplies waned following a peak month in May. The reduction of long-haul carriage from the Chinese mainland and Hong Kong made way for movements from Southeast Asia and the Indian sub-continent as local lockdown measures eased.
“Meanwhile, the improvement in inbound Hong Kong loads and network support led to a higher load factor, which increased 11.7 percentage points year-on-year to 74.5%. Yields came down following the significant rise seen in May. “
Outlook
Earlier this week, Cathay Pacific’s shareholders passed the resolutions pertaining to the company’s HK$39 billion recapitalization plan. The management team is moving forward with a comprehensive review of all aspects of the Group’s operations and will make its recommendations to the Board on the future size and shape of the airlines by the fourth quarter.
Lam said: “While some markets are starting to relax border restrictions and quarantine requirements in July, we remain cautious and agile in our approach to resuming our passenger flight services. We have adjusted our overall capacity for July to approximately 7%, which remains subject to the potential further relaxation or tightening of government health measures. We expect that our airlines will operate up to 10% of the normal flight schedule in August and will continue to assess the potential of increasing more flights and adding destinations for our customers in the coming months.
“The one certainty facing the global aviation industry is that the landscape will be significantly changed when international air travel recovers. The Group is moving decisively to best position the business to be competitive and to secure its financial health over the long term in a new normal. What will not change is our resolute commitment to safety, to serving our customers and our dedication to contributing to the success of the Hong Kong international aviation hub. We remain absolutely confident in the long-term prospects of both the Cathay Pacific Group and our home hub.”

Tags: