News / Pandemic looks set to hit Cathay Pacific hard, after a 'challenging' 2019

Cathay Pacific is expecting a “substantial loss” in the first half of the year, due to the coronavirus pandemic.

Reporting its 2019 financial results yesterday, the carrier said it had faced “an incredibly challenging environment” because of the intensification of the US-China trade war and social unrest in Hong Kong, which drove the city into recession.

“As a result, our second-half results – traditionally stronger compared with first-half results – fell well below what we would have hoped for,” said Cathay Pacific chairman Patrick Healy.

The group’s second-half attributable profit was HK$344m (US$44.3m), compared with HK$1.3bn in the first-half, with full-year earnings plunging 28% year on year.

Mr Healy said Cathay’s cargo business performed “significantly below expectations” last year – revenue falling 14.2%, to HK$21.1bn (US$2.7bn).

Total cargo carried was down 6%, to 2m tonnes, with cargo revenue tonne km down 6.7% and load factors down 4.4%. Cargo yield decreased 7.9% to HK$1.87.

“Cargo demand was depressed all year as a result of US-China trade tensions and was noticeably below that of 2018,” Mr Healy explained.

“However, it did pick up later in 2019, during the traditional high season, reflecting new consumer product, specialist airfreight shipments and restocking ahead of holiday period.”

He said the carrier was already expecting the first half of 2020 to be “extremely challenging, financially”, but the coronavirus outbreak had exacerbated the situation.

“Cathay Pacific has been through challenging times before, but the scale we are facing in the current situation really is unprecedented,” he told investors. “It is difficult to predict when these conditions will improve.

“Travel demand has dropped substantially and we have taken a series of short-term measures in response. These have included a sharp reduction of capacity in our passenger network.

“Despite these measures, we expect to incur a substantial loss for the first half of 2020.”

While Mr Healy expects the cargo business to continue to face “headwinds”, he said the carrier was “cautiously optimistic” following the recent reduction in US-China trade tensions, and noted the airline had kept cargo capacity intact.

With the coronavirus now officially a pandemic and passenger flight cancellations continuing worldwide, Cathay Pacific Cargo said on Monday it was considering using passenger jets for cargo-only flights.

This follows the temporary suspension of flights between Hong Kong and Japan, with Cathay reportedly cutting passenger capacity by two-thirds across its network in March and April.

Similarly, Scoot, the low-cost carrier owned by Singapore Airlines, is reportedly flying pure cargo flights to China until the end of March, with operations handled by Singapore Airlines Cargo.