Continued Suffering: Cathay Pacific Posts Another Huge Loss

Cathay Pacific is keeping Hong Kong connected to the world but it’s being held back by strict quarantine restrictions.

For the first half of 2022, Cathay Pacific reported a loss of HK$4.99 billion ($637 million), compared to its loss of HK$7.56 billion ($963 million) in H1 2021. Revenue rose to HK$18.55 billion ($2.36 billion) from HK$15.85 billion ($2 billion) in the same period last year.

It’s very clear what’s holding Cathay Pacific back

In its 2022 Interim Results, Cathay Pacific (Cathay), chairman Patrick Healy said, “As the home carrier of Hong Kong, we are entirely focused on resuming connectivity between Hong Kong and the world.”

“While we are fully committed to supporting our home city, our ability to operate more flight capacity continues to be severely constrained by a bottleneck on crewing resources under the existing quarantine requirements. We will only be able to operate more flight capacity when the existing stringent travel restrictions and quarantine requirements applicable to Hong-Kong based aircrew are lifted.”

It’s worth keeping in mind that strict quarantine rules, such as enforced in Hong Kong and mainland China, affect the movement of aircrews, not only passengers. Hong Kong-based crew of passenger flights must spend three nights in hotel quarantine after returning from each trip, a significant factor behind Cathay’s high pilot attrition rate. Healy made special mention of this in his report, saying that the COVID restrictions “placed a considerable burden on many of our employees, most notably our aircrew, thousands of whom spent countless nights in quarantine hotels.”

For the first half of this year, Cathay carried 335,000 passengers, at an average of 1,853 per day, a 113% increase from H1 2021. Flight capacity decreased by 26%, pushing the passenger load factor to 59%, more than three times higher than last year. Cathay Pacific had 188 aircraft at the end of June, its associate airlines HK Express had 26, and Air Hong Kong operated 14. Air Hong Kong operates fourteen freighters, including nine Airbus A300-600F, two A330-243F and three A330-300P2Fs.

HK Express has an all-Airbus fleet of narrowbodies, comprising A320-200s, A320neos, A321-200s and A321neos. Cathay’s fleet includes 16 A320-family aircraft, 51 A330s, 43 A350s, 58 Boeing B777s and 20 B747F freighters. Six of its B777-300ER passenger aircraft have been converted into “preighters” by removing some of the seats in the cabins to provide additional cargo-carrying capacity. It almost sounds like it’s time to bring back the Boeing B747 Combi. Sixty-nine aircraft remain parked outside Hong Kong, some of which are being brought back as border restrictions ease.

HK Express is facing a “very challenging” outlook

This week the Hong Kong Government announced partial relaxation of quarantine rules, following other adjustments made in May. Cathay says the changes “are expected to improve travel sentiment,” allowing the airline to progressively increase passenger flight capacity up to 25% of pre-pandemic levels by the end of 2022, compared to the 11% it operated in June. Cathay is confident that all its airlines will report stronger second-half performance, although it cautions that results from associates “will remain very challenging.” In H1 2022, HK Express reported a loss of HK$824 million ($104 million), but Air Hong Kong highlighted the value of cargo operations with a modest profit of HK$383 million ($49 million).

Cathay needs to look no further than Singapore to confirm that dropping border restrictions is the only way back. Singapore Airlines posted an operating profit of $400 million in the June quarter, the second highest quarterly profit in the airline’s history. Before the borders reopened in May, the airline lost $48 million in the April-May quarter.


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