(ATF) Cathay Pacific Airways investors have been buffeted by a triple whammy of bad news with second-half losses expected to surge, an immigration crackdown threatening staff levels and data showing passenger numbers plummeting.
Adding to the gloom, Hong Kong – where the airline is based – has reported a recent surge in coronavirus infections and deaths that’s likely to lead to more curbs on economic activity.
Cathay said it expects a “significantly higher” second-half loss than its record first-half loss, driven by low demand, restructuring charges and impairments on its fleet of planes.
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It reported a HK$9.87 billion ($1.27bn) loss in H1 due to the pandemic. Analysts had on average forecast a full-year loss of HK$18.3bn before the announcement, according to 13 polled by Refinitiv.
Its previous record annual loss was HK$8.7bn in 2008, during the global financial crisis.
“We are still not seeing any meaningful improvement in our passenger business,” Cathay Chief Customer and Commercial Officer Ronald Lam said in a statement.
The airline reported a 98.6% fall in passenger numbers in November, though a smaller 26.2% decline in cargo carriage. Revenue per passenger kilometre fell 98%.
“Given the slow speed of recovery, we expect to operate about 9% of pre-Covid-19 capacity in December and slightly above 10% in January 2021,” Lam said of the passenger business.
‘Greater scrutiny’
The forecast came as a media report said Cathay’s foreign employees had come under “greater scrutiny” as immigration officials seek to ascertain if their jobs can be performed by locals.
At the same time, toughened visa checks have made it difficult for overseas pilots, and cabin staff and ground staff, to obtain work permits, the South China Morning Post reported.
Cathay cut 5,300 jobs earlier this year as the pandemic brought international travel to a halt. While most of those were accounted for by the winding down of the Dragon Air subsidiary, Cathay staffing levels have been left tight.
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Delays in hiring new staff and renewing existing work visas have left the company in a precarious position, source warned, according to the report. They warned operations would be affected at a time when the airline could ill afford anymore setbacks.
As part of a cost-curing restructuring plan that’s expected to cost HK$2.2bn, the remaining pilots and flight attendants signed new contracts that resulted in permanent pay cuts.
The airline expects to operate less than 50% of its normal passenger capacity in 2021 due to border closures. In the first half, it plans to operate well below 25%, but it forecasts a possible recovery in the second half as Covid-19 vaccines are rolled out more widely.
To help bolster its balance sheet in the meantime, Cathay received a $5bn.
Meanwhile, health authorities are battling to contain new clusters of Covid infections and an additional six deaths this week, taking its total to 123 this year. Until recently, Hong Kong had witnessed relatively few infections and deaths.
- Additional reporting by Reuters
