Hong Kong’s Cathay Pacific has grounded around 40% of its passenger fleet and has sent aircraft into long-term storage abroad while it operates “a fraction of its services” in a desperate effort to conserve cash.
The airline is burning cash at a rate of HK$1.5 billion (US$193 million) to HK$2 billion per month and says it will continue to bleed cash until the market recovers, with a full passenger recovery not expected until 2024 according to IATA.
Ronald Lam, Cathay Pacific Group’s chief customer and commercial officer, said a restructuring of the airline was necessary to provide time to transform the business and continue to operate in the short term.
“We are weathering the storm for now, but the fact remains that we simply will not survive unless we adapt our airlines for the new travel market,” Mr Lam said.
“A restructuring will therefore be inevitable to protect the company, the Hong Kong aviation hub, and the livelihoods of as many people as possible.”
Hong Kong’s government injected Cathay Pacific with a HK$39bn rescue package in June after the carrier reported a first-half loss in FY 2020 of HK$9.87bn.
Cathay Pacific in July negotiated with Airbus to delay taking delivery of its new A350s and A321neos by up to two years. It is reportedly in negotiations with Boeing to delay its 777-9s, of which it has 21 on order.
In Q4 2020 the airline will make recommendations to the board about the future size of the company.
Lam said the airline is yet to see any solid signs of immediate improvement in terms of passenger demand.
“With no new destinations being resumed in August, we saw only minimal increase in passenger flight capacity compared to the previous month,” he said.
He added: “We did see stronger demand on certain routes, notably student traffic to the UK with flights recording load factors of up to 90%. The lifting of the ban on transit flights departing from the Chinese mainland via Hong Kong in mid-August helped to generate reasonable demand towards the end of the month.”
Cathay Pacific and Cathay Dragon carried a total of 35,773 passengers last month, a decrease of 98.8% compared to August 2019. The month’s revenue passenger kilometres (RPKs) fell 98.1% year-on-year.