Category Archives: Cathay Pacific Airways

Cathay Pacific to cut seven loss-making routes

Cathay Pacific Airways, according to South China Morning Post, is planning to drop seven loss-making routes.

The seven routes to be cut are to Brussels, Dublin, London (Gatwick), Male (Maldives), Newark, Seattle/Tacoma, Washington (Dulles).

Cathay Pacific aircraft photo gallery:

 

Cathay Pacific Group will cease Cathay Dragon operations, and reduce workforce and passenger capacity

Cathay Pacific Group has made it official:

The Cathay Pacific Group has announced a corporate restructuring in response to the continued impact of the COVID-19 pandemic on the aviation market.

The restructuring will enable the Company to secure its future, so it can protect as many jobs as possible, whilst meeting its responsibilities to the Hong Kong aviation hub and its customers.

The Group will create a more focused, efficient and competitive business. It will do this by harnessing Cathay Pacific’s strengths and unparalleled customer experience, while leveraging the potential of its low-cost carrier, HK Express.

Major elements of the restructuring include:

  • Reducing approximately 8,500 positions across the entire Group, which accounts for around 24% of its established headcount. Through a recruitment freeze and natural attrition, the Group has been able to reduce this to 5,900 actual jobs (or 17% of its established headcount). This means some 5,300 Hong Kong-based employees being made redundant, and approximately 600 employees based outside of Hong Kong also possibly being affected subject to local regulatory requirements.
  • Cathay Dragon, the Group’s wholly owned regional subsidiary, will cease operations with immediate effect. It is intended that regulatory approval will be sought for a majority of Cathay Dragon’s routes to be operated by Cathay Pacific and HK Express, a wholly-owned subsidiary.
  • Hong Kong-based cabin and cockpit crew members of Cathay Pacific will be asked to agree to changes in their conditions of service which are designed to match remuneration more closely to productivity and to enhance market competitiveness.
  • Executive pay cuts will continue throughout 2021 and a third voluntary Special Leave Scheme for non-flying employees will be introduced for the first half of next year. There will be no salary increases for 2021 nor the payment of the annual discretionary bonus for 2020 across the board for all employees. Outport colleagues will be subject to local arrangements.

 

Cathay Pacific Chief Executive Officer Augustus Tang said: “The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the Group to survive. We have to do this to protect as many jobs as possible, and meet our responsibilities to the Hong Kong aviation hub and our customers.

“Our immediate priority is to support those affected by today’s announcement. We are deeply saddened to part ways with our talented and respected colleagues, and I want to thank them for their hard work, achievements and dedication.”

Cathay Pacific will be offering severance packages that go well beyond statutory requirements. It will also be extending medical benefits and staff travel entitlements, as well as providing counselling and job transition support services. There will be no offset against pension contributions.

Mr Tang said: “We have taken every possible action to avoid job losses up to this point. We have scaled back capacity to match demand, deferred new aircraft deliveries, suspended non-essential spend, implemented a recruitment freeze, executive pay cuts and two rounds of Special Leave Schemes.

“But in spite of these efforts, we continue to burn HK$1.5-2 billion cash per month. This is simply unsustainable. The changes announced today will reduce our cash burn by about HK$500 million per month.

“We have studied multiple scenarios and have adopted the most responsible approach to retain as many jobs as possible. Even so, it is quite clear now recovery is going to be slow. We expect to operate well under 25% of 2019 passenger capacity in the first half of 2021 and below 50% for the entire year.”

On Cathay Dragon, Mr Tang said: “Over its 35 years, Cathay Dragon has earned a well-deserved reputation for excellence, thanks to its outstanding service and distinct hospitality, delivered by a remarkable team.

“Whilst this is a difficult time, we are a resilient Group and a proud Hong Kong brand. I believe in this plan and I know we will prevail. We remain absolutely confident in the long-term future of Cathay Pacific, the Hong Kong aviation hub and the critical role Hong Kong will play in the Greater Bay Area and beyond.”

Cathay Pacific Group reports a drop of 98.1% in traffic in September

Cathay Pacific issued this report for September 2020:

 

The Cathay Pacific Group has released its combined traffic figures for September 2020 that continued to reflect the airlines’ substantial capacity reductions in response to significantly reduced demand as well as travel restrictions and quarantine requirements in place in Hong Kong and other markets amid the ongoing global COVID-19 pandemic. 

Cathay Pacific and Cathay Dragon carried a total of 47,061 passengers last month, a decrease of 98.1% compared to September 2019. The month’s revenue passenger kilometres (RPKs) fell 97% year-on-year. Passenger load factor dropped by 48.8 percentage points to 24.9%, while capacity, measured in available seat kilometres (ASKs), decreased by 91%. In the first nine months of 2020, the number of passengers carried dropped by 83.2% against a 74.8% decrease in capacity and an 81% decrease in RPKs, as compared to the same period for 2019.

The two airlines carried 109,453 tons of cargo and mail last month, a decrease of 36.6% compared to September 2019. The month’s revenue freight tonne kilometres (RFTKs) fell 30.4% year-on-year. The cargo and mail load factor increased by 9.8 percentage points to 75.3%, while capacity, measured in available freight tonne kilometres (AFTKs), was down by 39.5%. In the first nine months of 2020, the tonnage fell by 33.9% against a 34.9% drop in capacity and a 26.9% decrease in RFTKs, as compared to the same period for 2019.

Passenger

Cathay Pacific Group Chief Customer and Commercial Officer Ronald Lam said: “September rounded off what has been an incredibly difficult summer, traditionally the peak passenger travel season of the year. We continued to operate minimal capacity – just 9% in September – a marginal month-on-month increase from about 8% in August. This was despite the resumption of some services, notably Cebu and Perth. Daily passenger numbers remained low, averaging just 1,568, while load factor sat at about 25%.

“In September, we continued to rely heavily on student traffic to the UK. We launched three charter services from Hong Kong to London to cater to demand from transit passengers from the Chinese mainland, and another from Hong Kong to Tel Aviv for transit passengers from Shanghai. Demand from the Chinese mainland has gradually increased since the lifting of the ban in Hong Kong of ex-Chinese mainland transit travel in mid-August. Overall, transit passengers accounted for about 33% of our total traffic in September.

Cargo

“Cargo demand has begun to ramp up across the network as we entered into the traditional peak season. Tonnage carried improved about 7% month-on-month, though this was still substantially below pre-COVID-19 levels. Our freighter fleet schedule has been stepped up and is now operating at peak season levels, with services notably increased on Trans-Pacific routes. We also operated a greater number of cargo-only passenger flights compared to August – 525 pairs in total – and continued to charter Air Hong Kong flights to complement our freighter and passenger schedules.

“In September, we began uplifting mail for Hongkong Post in our passenger cabins using our reconfigured Boeing 777-300ER “preighters”, which have had some of the Economy Class seats removed to provide additional cargo space. This aircraft was also deployed to run a new, temporary service to Pittsburgh serving the seasonal upsurge in demand.”

Outlook

The 2020 summer season has been an especially difficult one for the entire aviation industry. The International Air Transport Association (IATA) has since downgraded its full-year 2020 passenger traffic forecast to reflect a drop of 66% and does not anticipate passenger travel will return to pre-COVID-19 levels until 2024. Meanwhile, cargo demand remains depressed and is only recovering at a slower-than-expected pace due to capacity constraints.

Lam said: “After carefully studying numerous scenarios facing the industry and our airlines, we expect we will be operating approximately 10% of our pre-pandemic passenger flight capacity for the rest of 2020 and under 50% for overall 2021.

“Among the multiple scenarios studied, this one is already the most optimistic that we can responsibly adopt at this moment. We assume we will be operating well below a quarter of pre-pandemic capacity in the first half of next year but will see a recovery in the second half of the year – only assuming the vaccines currently under development prove to be effective and are widely adopted in our key markets by summer 2021.

CATHAY PACIFIC /

CATHAY DRAGON COMBINED TRAFFIC

SEP % Change Cumulative %

Change

  2020 VS SEP 2019

 

SEP 2020 YTD

 

RPK (000)        
 – Chinese mainland 9,481 -98.2% 779,314 -88.1%
 – North East Asia 5,276 -99.5% 2,024,924 -83.5%
 – South East Asia 17,796 -98.4% 2,367,748 -81.9%
– South Asia, Middle East  & Africa -100.0% 1,449,874 -81.4%
 – South West Pacific 22,819 -98.1% 3,176,943 -73.1%
 – North America 88,558 -96.4% 5,585,296 -79.8%
 – Europe 157,768 -94.3% 4,051,129 -82.4%
RPK Total (000) 301,698 -97.0% 19,435,228 -81.0%
Passengers carried 47,061 -98.1% 4,514,910 -83.2%
Cargo and mail revenue tonne km (000) 668,278 -30.4% 6,077,220 -26.9%
Cargo and mail carried (000kg) 109,453 -36.6% 980,228 -33.9%
Number of flights 1,283 -80.3% 19,292 -68.6%

 

CATHAY PACIFIC /

CATHAY DRAGON COMBINED CAPACITY

SEP % Change Cumulative %

Change

  2020 VS SEP 2019

 

SEP 2020 YTD

 

ASK (000)        
 – Chinese mainland 41,256 -95.4% 1,350,587 -84.5%
 – North East Asia 34,534 -97.9% 3,071,749 -80.3%
 – South East Asia 91,329 -94.5% 3,960,314 -75.3%
– South Asia, Middle East  & Africa -100.0% 2,278,996 -75.8%
 – South West Pacific 153,259 -89.4% 4,761,427 -65.7%
 – North America 516,497 -85.7% 9,304,983 -72.0%
 – Europe 377,102 -88.1% 6,373,892 -75.9%
ASK Total (000) 1,213,977 -91.0% 31,101,948 -74.8%
Passenger load factor 24.9% -48.8pt 62.5% -20.3pt
Available cargo/mail tonne km (000) 887,471 -39.5% 8,542,575 -34.9%
Cargo and mail load factor 75.3% 9.8pt 71.1% 7.8pt
ATK (000) 1,003,011 -63.5% 11,499,933 -53.7%

Cathay Pacific aircraft photo library:

Cathay Pacific Airways launches 12-week cargo service to Pittsburgh

Cathay Pacific Airways today launched a temporary expansion of its operations in the Americas, with a 12-week cargo service linking Pittsburgh International Airport (PIT) with Southeast Asia, to supplement the airline’s existing network of 19 cargo stations throughout the Americas, including East Coast cargo services to Boston, Newark, and Washington, Dulles, and a dedicated freighter port at New York (JFK). The first arrival touched down in Pittsburgh today at 10:30am local time, carrying consumer goods from Asia.

The temporary service  will originate in Ho Chi Minh (SGN), stopping at Cathay Pacific’s Cargo Terminal at Hong Kong International Airport, landing in PIT every Monday and Thursday until November 26, 2020.

Notably, flight CX8800 will be operated by a reconfigured Boeing 777-300ER passenger aircraft instead of Cathay Pacific’s go-to ultra-long-haul freighter, the Boeing 747-8, of which there are currently 14 in its fleet.

In an effort to introduce additional cargo capacity where possible and help support global supply chains, Cathay Pacific reconfigured two Boeing 777-300ER passenger aircraft into ‘preighters,’ with seats removed in the Economy and Premium Economy cabins to enable the airline to carry 12 tons of additional cargo under extra safety and security measures.

Cargo is currently the stronger performer for Cathay Pacific, operating over 436 pairs of cargo-only passenger flights and carrying over 102,122 tons of cargo and mail in August 2020.

Cathay Pacific Group issues profit warning, carried only 900 passengers a day in June

The Cathay Pacific Group issued a profit warning and released combined Cathay Pacific and Cathay Dragon traffic figures for June 2020.

 

Profit Warning

In its 2019 annual results announcement dated 11 March 2020, the Group had disclosed that it expected to incur a substantial loss for the first half of 2020. Based on the unaudited results of the Group for the six months ended 30 June 2020, and on a basis consistent in all material respects with the accounting policies normally adopted by the Group as set out in the annual report for the year ended 31 December 2019, the Directors of Cathay Pacific Airways Limited estimate that for the six months ended 30 June 2020, the Group will record a net loss attributable to shareholders of approximately HK$9.9 billion, which compares to a net profit to shareholders of HK$1.3 billion for the same period in 2019. This includes impairment charges amounting to approximately HK$2.4 billion, which mainly relate to 16 aircraft that are unlikely to re-enter meaningful economic service again before the 2021 summer season together with certain airline service subsidiaries assets. This estimated interim net loss is in the process of being reviewed by our auditors and may be subject to adjustments.

Traffic Figures for June 2020

Cathay Pacific and Cathay Dragon carried a total of 27,106 passengers last month, a decrease of 99.1% compared to June 2019. The month’s revenue passenger kilometres (RPKs) fell 98.8% year-on-year. Passenger load factor dropped by 59.3 percentage points to 27.3%, while capacity, measured in available seat kilometres (ASKs), decreased by 96.1%. In the first six months of 2020, the number of passengers carried dropped by 76% against a 65.7% decrease in capacity and a 72.6% decrease in RPKs, as compared to the same half-year period for 2019.

The two airlines carried 93,228 tons of cargo and mail last month, a decrease of 43.1% compared to June 2019. The month’s revenue freight tonne kilometres (RFTKs) fell 35.8% year-on-year. The cargo and mail load factor increased by 11.7 percentage points to 74.5%, while capacity, measured in available freight tonne kilometres (AFTKs), was down by 45.9%. In the first six months of 2020, the tonnage fell by 31.9% against a 31% drop in capacity and a 24.6% decrease in RFTKs, as compared to the first-half period for 2019.

Cathay Pacific Group Chief Customer and Commercial Officer Ronald Lam said: “The landscape of international aviation remains incredibly uncertain with border restrictions and quarantine measures still in place across the globe. Although we have begun to see some initial developments, notably a slight increase in the number of transit passengers following the easing of transit restrictions through Hong Kong International Airport, we are still yet to see any significant signs of immediate improvement.”

Passenger

Mr Lam said of the airlines’ June traffic performance: “Demand continued to be very weak in June with our airlines carrying less than 1% of the passengers we carried in the same month in 2019. We operated about 4% of our normal passenger flight capacity in June. This was slightly more than we operated in May, having resumed services to some destinations such as New York, San Francisco, Amsterdam and Melbourne in late June. Load factor remained low at 27.3%, and on average we carried approximately 900 passengers a day only.

“We observed a gradual pickup in connecting passenger demand as the ban on transit traffic through Hong Kong International Airport began being partially eased. Towards the end of the month, transit traffic reached about 32% of overall traffic, with notable demand from destinations in Southeast Asia such as the Philippines and Vietnam to North America. This change in traffic mix meant a more tapered average yield performance though.”

Cargo

Cathay Pacific continued to operate a full freighter schedule as well as chartered flights from its all-cargo subsidiary, Air Hong Kong, in June. There were fewer cargo-only passenger flights compared with May.

Mr Lam said: “Despite a mild pickup in general airfreight movements, our cargo tonnage fell by 5% month-on-month as demand for medical supplies waned following a peak month in May. The reduction of long-haul carriage from the Chinese mainland and Hong Kong made way for movements from Southeast Asia and the Indian sub-continent as local lockdown measures eased.

“Meanwhile, the improvement in inbound Hong Kong loads and network support led to a higher load factor, which increased 11.7 percentage points year-on-year to 74.5%. Yields came down following the significant rise seen in May.“

 

Outlook

Earlier this week, Cathay Pacific’s shareholders passed the resolutions pertaining to the company’s HK$39 billion recapitalisation plan. The management team is moving forward with a comprehensive review of all aspects of the Group’s operations and will make its recommendations to the Board on the future size and shape of the airlines by the fourth quarter.

Mr Lam said: “While some markets are starting to relax border restrictions and quarantine requirements in July, we remain cautious and agile in our approach to resuming our passenger flight services. We have adjusted our overall capacity for July to approximately 7%, which remains subject to the potential further relaxation or tightening of government health measures. We expect that our airlines will operate up to 10% of the normal flight schedule in August and will continue to assess the potential of increasing more flights and adding destinations for our customers in the coming months.

“The one certainty facing the global aviation industry is that the landscape will be significantly changed when international air travel recovers. The Group is moving decisively to best position the business to be competitive and to secure its financial health over the long term in a new normal. What will not change is our resolute commitment to safety, to serving our customers and our dedication to contributing to the success of the Hong Kong international aviation hub. We remain absolutely confident in the long-term prospects of both the Cathay Pacific Group and our home hub.”

 

CATHAY PACIFIC /

CATHAY DRAGON COMBINED TRAFFIC

JUN % Change Cumulative %

Change

2020 VS JUN 2019

 

JUN 2020 YTD

 

RPK (000)
 – Chinese mainland 3,350 -99.5% 757,639 -83.4%
 – North East Asia 5,791 -99.6% 2,007,121 -76.1%
 – South East Asia 17,796 -98.8% 2,308,206 -74.1%
– South Asia, Middle East  & Africa -100.0% 1,449,874 -72.6%
 – South West Pacific 21,713 -98.2% 3,102,322 -61.3%
 – North America 71,010 -97.9% 5,276,304 -71.4%
 – Europe 26,053 -99.1% 3,766,593 -74.0%
RPK Total (000) 145,713 -98.8% 18,668,059 -72.6%
Passengers carried 27,106 -99.1% 4,389,092 -76.0%
Cargo and mail revenue tonne km (000) 596,037 -35.8% 4,129,114 -24.6%
Cargo and mail carried (000kg) 93,228 -43.1% 666,525 -31.9%
Number of flights 1,110 -83.7% 15,713 -61.7%

 

CATHAY PACIFIC /

CATHAY DRAGON COMBINED CAPACITY

JUN % Change Cumulative %

Change

2020 VS JUN 2019

 

JUN 2020 YTD

 

ASK (000)
 – Chinese mainland 22,811 -97.6% 1,244,583 -78.7%
 – North East Asia 26,101 -98.4% 2,970,028 -71.1%
 – South East Asia 74,624 -95.9% 3,667,936 -65.7%
– South Asia, Middle East  & Africa -100.0% 2,278,996 -64.1%
 – South West Pacific 67,500 -95.2% 4,385,990 -53.3%
 – North America 234,994 -93.7% 7,639,514 -64.5%
 – Europe 107,117 -96.5% 5,544,914 -66.9%
ASK Total (000) 533,147 -96.1% 27,731,961 -65.7%
Passenger load factor 27.3% -59.3pt 67.3% -16.9pt
Available cargo/mail tonne km (000) 799,987 -45.9% 5,958,145 -31.0%
Cargo and mail load factor 74.5% 11.7pt 69.3% 5.9pt
ATK (000) 850,713 -69.4% 8,594,749 -47.3%
Cathay Pacific Airways aircraft photo gallery:
Cathay Pacific Airways aircraft slide show:

Cathay Pacific to reduce passenger capacity by 96% in April and May

Cathay Pacific Airways and Cathay Dragon will reduce capacity by 96% across our passenger network in April and May in light of the severe drop in demand due to the ongoing coronavirus pandemic and multiple government travel restrictions that form part of the global health response plan.

As previously announced, Cathay Pacific and Cathay Dragon intend to operate a bare skeleton passenger flight schedule in April and May, though our freighter capacity remains intact.

Our ability to maintain even this skeleton schedule will depend on whether more travel restrictions are imposed by governments around the world which will further dampen passenger demand.

Cathay Pacific will operate three flights per week to 12 destinations: London (Heathrow), Los Angeles, Vancouver, Tokyo (Narita), Taipei, New Delhi, Bangkok, Jakarta, Manila, Ho Chi Minh City, Singapore and Sydney.

Cathay Dragon will operate three flights per week to 3 destinations: Beijing, Shanghai (Pudong), and Kuala Lumpur.

Cathay Pacific Chief Customer and Commercial Officer Ronald Lam said: “As Hong Kong’s home airlines, it is important that we continue to provide important passenger and cargo connections to and from the Hong Kong hub. We will therefore endeavour to maintain a minimal number of flights to and from key destinations in our network to ensure these vital arteries remain open.

“While our freighter network remains intact, we are also ramping up our cargo capacity by mounting charter services and operating certain suspended passenger services purely for airfreight to meet cargo customer demand.

“We need to take difficult but decisive measures as the scale of the challenge facing the global aviation industry is unprecedented. We have no choice but to significantly reduce our passenger capacity as travel restrictions are making it increasingly difficult for our customers to travel and demand has dropped drastically.

“Cathay Pacific is a resilient company. While we shall have much more to deal with given the challenges ahead, we remain confident in the long-term future of the company, the Hong Kong hub and our ability to thrive in Asia Pacific.”

Cathay Pacific and Cathay Dragon are waiving rebooking, rerouting and cancellation fees.

Cathay Pacific aircraft photo gallery:

 

Cathay Pacific announces 2019 annual results

Chairman’s Statement Overview

2019 was a turbulent year for the Cathay Pacific Group. With our three-year transformation program starting to bear fruit we delivered a positive performance in the first half of 2019 notwithstanding a difficult environment brought about by geopolitical and trade tensions. However, with social unrest in Hong Kong intensifying over the second half of the year and mounting US-China trade tensions, we experienced a sharp drop in both inbound and outbound passenger traffic. We were faced with an incredibly challenging environment to operate as the Hong Kong economy slipped into recession. As a result, our second-half results – traditionally stronger compared to first-half results – fell well below what we would have hoped for.

The Cathay Pacific Group reported an attributable profit of HK$1,691 million for 2019. This compares with a HK$2,345 million profit for 2018. The earnings per share was HK43.0 cents in 2019 compared to an earnings per share of HK59.6 cents in 2018. The Cathay Pacific Group reported an attributable profit of HK$344 million in the second half of 2019, compared to an attributable profit of HK$1,347 million in the first half of 2019 and an attributable profit of HK$2,608 million in the second half of 2018. Cathay Pacific and Cathay Dragon reported an attributable loss of HK$434 million in the second half of 2019, compared to an attributable profit of HK$675 million in the first half of 2019 and an attributable profit of HK$1,253 million in the second half of 2018.

Overall, passenger and cargo yields were under intense pressure in 2019 and both were below those seen in 2018. Events in Hong Kong in the second half of the year significantly reduced load factors, forward bookings and the number of passengers we carried. Inbound traffic was hit hard, particularly on short-haul and Mainland China routes, while outbound traffic also decreased. Demand for premium travel was weak and we became increasingly reliant on lower-yielding transit traffic. We carried 0.7% fewer passengers in 2019 than in 2018.

Cargo demand was depressed all year as a result of US-China trade tensions and was noticeably below that of 2018. However, it did pick up later in 2019 during the traditional high season, reflecting new consumer product, specialist airfreight shipments and restocking ahead of holiday periods. Exports from Mainland China and Hong Kong to trans-Pacific and European markets were more encouraging later in the year. Nevertheless, the cargo business performed significantly below expectations in 2019.

To boost the competitiveness of Hong Kong International Airport as a global cargo hub, the Group together with the Airport Authority of Hong Kong announced in December it would introduce a new Terminal Charge concession effective 1st April 2020. The reduction ranges from 18% to more than 20% compared with the current charge levels and is applicable to shipments from Hong Kong on all four of the Group’s airlines.

We benefited from lower fuel prices for most of the year, but were adversely affected by a strong US dollar. There was a 2.7% decrease in non-fuel costs per available tonne kilometre (ATK), reflecting our focus on productivity and efficiency as part of our successful transformation programme.

In July 2019, we completed the acquisition of low-cost carrier HK Express, now a wholly owned subsidiary of Cathay Pacific. In November, we announced that the airline would begin taking delivery of half of our new narrow-body Airbus A321-200neo fleet (16 of 32 new aircraft) from 2022 as part of the Group’s efforts to optimise the deployment of the passenger fleets of its airlines.

In May 2019 we built on our commitment to our customers with the launch of our new brand direction, ‘Move Beyond’, expressing our drive to always exceed their expectations. Despite the challenges of the second half of the year, this period saw some of our most extensive enhancements to the customer experience proposition in recent years. These included a major expansion to our inflight entertainment content library; new bedding, amenities and culinary options in our First and Business Class cabins; an elevated Economy Class dining experience on our long-haul services departing Hong Kong; and the reopening of our newly renovated Shanghai Pudong lounge. All are designed to give our customers more reasons to fly with us.

Business performance of Cathay Pacific and Cathay Dragon

Passenger revenue in 2019 was HK$72,168 million, a decrease of 1.3% compared to 2018. RPK traffic increased by 2.9%, while ASK capacity increased by 5.1%, albeit this was less than originally expected. Consequently the load factor decreased by 1.8 percentage points, to 82.3%. Yield decreased by 3.9% to HK53.6 cents, reflecting a strong US dollar, intense competition and reduced travel in the second half of 2019 as a result of the social unrest in Hong Kong. Inbound and outbound traffic, particularly on short-haul Mainland China routes, substantially reduced from August to December. We became increasingly reliant on low-yielding transit traffic, which was relatively less affected. Premium class travel was also weak during this period.

To mitigate these challenges, in October we introduced a number of short-term tactical measures, including frequency cuts on more than a dozen routes during the winter season and suspending our service to Medan indefinitely. We examined expenditure to focus on increased productivity and cost saving, along with implementing a hiring freeze, prioritising projects and deferring or cancelling non-critical expenditure.

Cargo revenue in 2019 was HK$21,154 million, a decrease of 14.2% compared to 2018. RFTK traffic decreased by 6.7%, whilst AFTK capacity decreased by 0.3%. Consequently the load factor decreased by 4.4 percentage points, to 64.4%. Yield decreased by 7.9% to HK$1.87, reflecting a strong US dollar and weakened cargo demand resulting from intensified US-China trade tensions.

Total fuel costs (before the effect of fuel hedging) decreased by HK$3,110 million (or 9.8%) compared with 2018. Prices decreased but we flew more. After taking hedging losses into account, fuel costs decreased by HK$4,454 million or 13.4% compared to 2018. The net cost of fuel is the Airlines’ most significant cost, accounting for 28.4% of operating costs in 2019 (compared to 31.4% in 2018).

Non-fuel costs per available tonne kilometre decreased slightly, reflecting our focus on productivity and efficiency.

We continued to take delivery of new and more fuel-efficient aircraft, including six Airbus A350 aircraft. We now have 24 Airbus A350-900 and 12 Airbus A350-1000 aircraft in our fleet. We also took delivery of three used Boeing 777-300 aircraft during the year. At the same time we retired three Boeing 777-200 aircraft, and returned four Airbus A330-300 and one Boeing 777-300ER leased aircraft to their lessors.

Business performance of other subsidiaries and associates

HK Express reported a post-acquisition loss for 2019, against expectations of a small profit. The airline suffered from reduced demand to and from Asia as a result of the Hong Kong social unrest.

Air Hong Kong’s results attributable to the shareholders of Cathay Pacific improved year on year. In 2019 we owned 100% of the airline compared with 60% in 2018. On a 100% like-for-like basis there was a decrease in profit. This was in part due to gains on disposal of certain aircraft in 2018, and in part due to a new block space agreement and an underlying decrease in capacity and cargo uplift in 2019.

Our airline services subsidiaries generally performed worse than 2018 due to reduced activity and rising cost pressures.

Whilst our share of Air China’s results (accounted for three months in arrears) marginally improved, Air China Cargo suffered a significant decline in results as trade tensions escalated, negatively impacting air traffic and yield, and reducing throughput tonnage for its cargo terminals.

Prospects

Following the impact of social unrest in Hong Kong in the latter half of 2019, the first half of 2020 was expected to be extremely challenging financially, with an already reduced winter season capacity. This has been exacerbated by the significant negative impact of COVID-19 (see note 16 below). It is difficult to predict when these conditions will improve. Travel demand has dropped substantially and we have taken a series of short- term measures in response. These have included a sharp reduction of capacity in our passenger network. Despite these measures we expect to incur a substantial loss for the first half of 2020.

We expect our passenger business to be under severe pressure this year and that our cargo business will continue to face headwinds. However, we are cautiously optimistic about cargo following the recent reduction in US-China trade tensions and we have maintained our cargo capacity intact. The US dollar is expected to remain strong in 2020, and intense competition, especially in long-haul economy class, will continue to place significant pressure on yields.

Although there is much uncertainty, we have an incredible brand with a reputation and track record of premium service and commitment to our customers that differentiates us from our competitors. These qualities and values remain at the heart of everything we do and are what will help us through the current challenges.

Our three-year transformation programme has left the business leaner and more resilient, and we move forward with a culture of continuous improvement. Investment in our products, customers and fleet is ongoing. We will continue to take delivery of new aircraft in 2020 and, with the hope that the environment will improve, we will retain the flexibility to add capacity back to the market as soon as we are able to. Our plan to take delivery of 70 new and more fuel-efficient aircraft by 2024 remains unchanged.

The hard work and determination of our teams of professionals over the past year, and in the current COVID- 19 crisis, has been outstanding. I would like to thank them for the dedication they have shown during these exceptionally challenging times in ensuring our ability to maintain our operations as smoothly and efficiently as possible. As a Group, we remain unwavering in our commitment to our customers, our people and our home hub, which we have proudly served for more than seven decades. We will continue to invest significantly in delivering an industry-leading experience for our customers and in strengthening Hong Kong’s position as a world-class global aviation hub.

Patrick Healy

Chairman
Hong Kong, March 11, 2020

Cathay Pacific aircraft photo gallery:


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Cathay Pacific Group has over half of its fleet grounded

Cathay Pacific Group has 120 aircraft sitting on the tarmac at any given time according to the South China Morning Post due to route cuts which is a response to the coronavirus outbreak and protests in Hong Kong.

Read the full report.

Cathay Pacific also made this announcement:

The wellbeing of our passengers is, as it always has been, our top priority. In light of the coronavirus outbreak, we have implemented a number of precautionary measures to reassure our passengers, staff and crew.

We understand that travelling during this period can be stressful. As the situation develops, we will communicate any changes to your booking as clearly and quickly as possible.

Our global contact centres are extremely busy at the moment, so please accept our apologies if waiting times are longer than usual. For self-service options, please visit Manage Booking, where you can view your latest flight arrangement and rebook if necessary.

In light of the Government Response Plan to combat the novel coronavirus (COVID-19), we will be reducing the capacity of our flights to and from mainland China by 50% or more, from  January 30 to the end of March, 2020.

Effective immediately, Cathay Dragon has cancelled flights to and from Hangzhou, Ningbo, Wenzhou, Sanya and Haikou in Mainland China to March 28, 2020. For flights to and from Guangzhou and Chongqing will be cancelled to March 28, 2020. We will be assisting the affected passengers regarding alternative arrangements.

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Cathay Pacific Group traffic declines by 3.8% in January, will drop capacity by 40%

Cathay Pacific Group issued this statement:

The Cathay Pacific Group has released combined Cathay Pacific and Cathay Dragon traffic figures for January 2020 that show decreases in the number of passengers carried and the amount of cargo and mail uplifted compared to the same month in 2019. 

Cathay Pacific and Cathay Dragon carried a total of 3,010,012 passengers last month – a decrease of 3.8% compared to January 2019. Passenger load factor decreased by 1.3 percentage points to 84.7%, while capacity, measured in available seat kilometres (ASKs), decreased by 0.3%.

The two airlines carried 151,964 tons of cargo and mail last month, a decrease of 8.9% compared to the same month last year. The cargo and mail load factor declined by 1.4 percentage points to 60.2%. Capacity, measured in available freight tonne kilometres (AFTKs), was down by 3.2% while cargo and mail revenue freight tonne kilometres (RFTKs) decreased by 5.4%.

Cathay Pacific Group Chief Customer and Commercial Officer Ronald Lam said:  “This was the most challenging Chinese New Year period we have experienced. As the novel coronavirus outbreak in mainland China intensified towards the end of the holiday period, travel demand dropped substantially. With more governments worldwide having imposed travel restrictions on passengers from mainland China and in some cases Hong Kong, we are seeing continued cancellations of bookings.

“We have since taken a series of short-term measures in response. These notably include the sharp reduction of capacity across our global network. For February and March, we have now reduced our overall passenger flight capacity by approximately 40%, representing further reduction since our recent announcement. Passenger capacity reduction is also likely for April as we continue to monitor and match market demand. Meanwhile, we have kept our freighter capacity intact.

Passenger

“Our overall passenger performance in January was slightly behind that of 2019. Inbound passenger traffic to Hong Kong was down 40% year-on-year, a slight improvement over the 46% declines seen in November and December. For the first time in the past few months we saw growth in our outbound traffic – 1% – though this was largely due to the Chinese New Year holiday starting earlier this year. We remain heavily reliant on lower-yield transit traffic through Hong Kong, which grew by 7% versus the same period last year.

“We started off 2020 fairly positively, seeing satisfactory passenger traffic volume through the first three weeks of the year. This was particularly evident with our long-haul routes, which showed improved load factors and yield over 2019. However, our performance deteriorated rapidly in the last week of January as the novel coronavirus situation became more severe, and it continues to weaken significantly. We saw significant cancellation of bookings within a short period of time.

Cargo

“We saw reasonably solid demand across our network for the first three weeks of January. Our mainland China point of sales particularly stood out, recording year-on-year tonnage growth. By the last week of January, however, overall demand plummeted as manufacturing came to a halt in mainland China during the Chinese New Year holiday.

“The delay of the post-Chinese New Year resumption of manufacturing across mainland China has significantly affected both our Hong Kong and mainland China markets. However, demand elsewhere across our network remains buoyant, especially on trade lanes that have seen significant reductions in passenger capacity.

Outlook

“The first half of 2020 was already expected to be extremely challenging financially. As a result of this additional significant drop in demand for flights and consequential capacity reduction caused by the novel coronavirus outbreak, the financial results for the first half of 2020 will be significantly down on the same period last year.

“We have an incredible brand with a reputation and track record of premium service and commitment to our customers that differentiates us from our competitors. These qualities and values remain at the heart of everything we do and are what will help us come back stronger when we emerge from this current crisis.”

 

CATHAY PACIFIC / CATHAY DRAGON COMBINED TRAFFIC

JAN % change Cumulative %

change

  2020 v JAN19

 

JAN 2020

 

v YTD19

 

RPK (000)        
 – Mainland China 623,620 -18.9% 623,620 -18.9%
 – North East Asia 1,379,130 -3.2% 1,379,130 -3.2%
 – South East Asia 1,537,014 1.1% 1,537,014 1.1%
– South Asia, Middle East  & Africa 1,006,997 -0.8% 1,006,997 -0.8%
 – South West Pacific 1,765,853 9.6% 1,765,853 9.6%
 – North America 3,222,357 -3.2% 3,222,357 -3.2%
 – Europe 2,295,604 -3.8% 2,295,604 -3.8%
RPK Total (000) 11,830,575 -1.8% 11,830,575 -1.8%
Passengers carried 3,010,012 -3.8% 3,010,012 -3.8%
RFTK Total (000) 855,433 -5.4% 855,433 -5.4%
Cargo and mail carried (000Kg) 151,964 -8.9% 151,964 -8.9%
Number of flights 6,649 -5.3% 6,649 -5.3%

 

CATHAY PACIFIC / CATHAY DRAGON COMBINED CAPACITY JAN % change Cumulative %

change

  2020 v JAN19

 

JAN 2020 v YTD19

 

ASK (000)        
 – Mainland China 896,694 -11.7% 896,694 -11.7%
 – North East Asia 1,749,611 2.5% 1,749,611 2.5%
 – South East Asia 1,866,848 3.7% 1,866,848 3.7%
– South Asia, Middle East  & Africa 1,198,208 -0.5% 1,198,208 -0.5%
 – South West Pacific 2,016,481 6.8% 2,016,481 6.8%
 – North America 3,571,618 -2.2% 3,571,618 -2.2%
 – Europe 2,663,279 -2.6% 2,663,279 -2.6%
ASK Total (000) 13,962,739 -0.3% 13,962,739 -0.3%
Passenger load factor 84.7% -1.3pt 84.7% -1.3pt
AFTK Total (000) 1,422,019 -3.2% 1,422,019 -3.2%
Cargo and mail load factor 60.2% -1.4pt 60.2% -1.4pt
ATK (000) 2,749,499 -1.8% 2,749,499 -1.8%
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Cathay Pacific asks its employees to take three weeks of unpaid leave to cope with the impact of coronavirus

Chinese airlines are taking a bit hit with traffic due to the expanding novel coronavirus centered around Wuhan, China. The virus also impacted demand to and from China.

Cathay Pacific Airways has beed hit hard, twice. The first impact was the on-going anti-Beijing protests in its Hong Kong hometown that severely dampened demand. Next, it was the virus.

The airline has already announced it will suspend around 30% of its flights over the next two months. It will also invoke drastic cuts to mainland China.

Now management is asking its 27,000 employees to take three weeks of unpaid leave through June 30, 2020 in order to preserve cash. Retaining cash could be the key to survival for some airlines.

Will any airlines become the airline victim of the novel coronavirus?

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