We are living in an era where the news of airlines making losses is understandable, occurrences of carriers making a profit is surprising, and news of aviation companies staying afloat is worth appreciating. In a recent report, Hong Kong’s flag bearer, Cathay Pacific, has said that in the first six months of the pandemic-hit year, losses are expected to mount to as high as HK$9.9 billion. This will be the largest loss in the airline’s history.
Cathay’s Chief Executive, Augustus Tang Kin-wing, blamed the coronavirus pandemic for the expected result. Airline’s staff were also told in an internal memo that the company’s restructuring procedure would focus on balancing stakeholder interests, and could impact jobs. Mr. Tang further stated:
‘The result underlines the extent of the damage being inflicted on our operations since Covid-19 started spreading across our markets, decimating the demand for air travel as customers were unable or unwilling to fly.’
Cathay Pacific was already affected last year due to the economic instability prevailing in Hong Kong. Accordingly, we can say that the pandemic hit the beleaguered airline at the worst possible time. The airline has also stated that about sixteen aircraft (belonging to Cathay Pacific and Cathay Dragon) would not enter commercial operations again before the summer of 2021. This shall lead to around HK$2.4 billion impairment charges for the airline.
The Hong Kong Government allocated HK$39 billion rescue package for the airline previously, as the airline was close to collapse without any financial help. Accordingly, the government has now appointed two state observers to Cathay’s board. This team shall oversee the rescue package for the airline. This team includes renowned names such as Rimsky Yuen Kwok-keung, the ex-justice minister and Carlson Tong Ka-shing, who was the former securities watchdog chairman.
Cathay Pacific’s Chief Customer and Commercial Officer, Ronald Lam Siu-por, stated:
‘The one certainty facing the global aviation industry is that the landscape will be significantly changed when international air travel recovers.’
Most airlines globally are struggling to stay afloat in the current times, let aside making a profit. Cathay was losing almost HK$3 billion every month since February 2020. Thus, a speculated loss of around HK$10 billion for the first six months is hardly surprising.
However, the airline is gradually planning to operate double-digit capacity from the month of August. In April and May 2020, it operated less than 3% of its normal schedule. Like most airlines, Cathay Pacific will, as well, get back on their feet down the line. What remains to be seen is the price they will have to pay for it.
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