(ATF) Hong Kong’s Cathay Pacific Airways said it expects to operate at less than half capacity in 2021 amid uncertainty about the relaxation of travel restrictions after it announced a record loss on Wednesday (March 10).
The carrier reported a loss of HK$21.65 billion ($2.79 billion) for 2021, caused by a travel downturn, restructuring costs and fleet writedowns, compared with 2019’s profit of HK$1.69 billion. Its shares fell 0.56%, as the loss was largely in line with analyst expectations.
“The correlation between the roll-out of vaccination programmes in our key markets and the potential future relaxation of travel restrictions remains highly uncertain and difficult to predict,” Cathay Chairman Patrick Healy said in a statement.
“All our cash preservation measures will continue unabated. Executive pay cuts will remain in place throughout 2021.”
Cathay lacks a domestic market at a time when international borders are largely closed because of the coronavirus pandemic. In December, Cathay’s passenger numbers fell by 98.7% compared with a year earlier, though cargo carriage was down by a smaller 32.3%.
Nearly 60% of its 2020 revenue of HK$47.9 billion was from its cargo operations, up from around 20% in 2019.
The airline said in January it would cut passenger capacity by 60% and cargo capacity by 25% as a result of new rules that required crew to quarantine for two weeks in hotels before returning to normal life in Hong Kong that took effect on February 20.
“We expect Cathay to remain loss-making until travel/quarantine restrictions ease and international travel returns with this dependent on different governments’ border reopening strategies and global vaccine rollout,” Jefferies analyst Andrew Lee said. “It has currently parked 82 passenger planes (46% of its passenger fleet) in locations outside Hong Kong, while deferring its new plane deliveries.”
But Lee maintained a buy rating on the stock with a price target of HK$8.00, implying a 13% upside from current levels, as he estimates the airline is close to the bottom given January passenger traffic was already -99% lower year-on-year.
Cathay has put most crew on voluntary rosters of three weeks flying, two weeks in a hotel and two weeks off at home and said the quarantine rules would increase cash burn by about HK$300 million to HK$400 million per month, on top of earlier HK$1 billion to HK$1.5 billion levels.
The airline in January issued HK$6.74 billion of convertible bonds to shore up liquidity.
In its financial accounts, Cathay said it had enough liquidity to last at least 12 months even under extended downside scenarios.
Cathay in October said it would cut 5,900 jobs to help it weather the pandemic, including nearly all of the positions at its regional airline Cathay Dragon, which it shut down.
BOCOM International analyst Luya You said the prospect of further job cuts was rising, as a slower-than-expected vaccine rollout in key markets dimmed the outlook for the second half of 2021.
“As in 2020, we expect Cathay to make decisions regarding any further cuts to come in the second quarter once the second-half outlook becomes clearer,” she said.
With input from Reuters
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