Cathay Pacific shares rise as Hong Kong’s flagship carrier expects 2021 losses to narrow on cargo demand and belt-tightening measures
- Cathay’s net loss is likely to be between HK$5.6 billion (US$719 million) and HK$6.1 billion last year, significantly lower than the HK$21.6 billion loss in 2020
- Outlook for 2022 looks bleak because of Hong Kong’s decision to reimpose tighter travel restrictions to contain the spread of Omicron, the company statement says
Cathay Pacific shares climbed by as much as 1.2 per cent in Monday trading to HK$6.67, hovering near their highest level since November 26. The stock closed unchanged at HK$6.59, while the benchmark Hang Seng Index slumped 1.2 per cent.
“The improvement was primarily driven by strong cargo demand, high cargo yield and load factors, together with continued focus on effective cash and cost management,” chief executive Augustus Tang said in the statement. “Throughout 2021, we deployed all available capacity to meet the consistently high demand, achieving strong yield and high load factors and transporting a wide range of goods including daily necessities, fresh produce, electrical items and pharmaceutical products.”
Cathay Pacific carried about 1.3 million tonnes of cargo in 2021, almost unchanged from 2020 but lower than the 2 million tonnes in 2019, the statement said. It flew 717,059 passengers last year, contracting from 4.6 million in 2020 and 35.2 million in 2019.
The company is still in the process of putting the final work on the annual result that is due in March, it said.
Cathay Pacific’s woes mirror those of the global aviation industry, which is one of the hardest-hit industries since Covid-19 broke out in 2020. While Hong Kong’s government spent HK$39 billion bailing out the carrier in 2020, its stock posted annual losses for two consecutive years, sliding 11 per cent in 2021 and 29 per cent in 2020.
Any chance of an improvement in the airline’s fortunes this year have been seriously dented by the rapid spread of the Omicron coronavirus strain, as Hong Kong has reimposed stringent rules to fight the fifth wave of the pandemic in the city.
So far in January, Cathay’s cargo volume was at 20 per cent of its pre-pandemic capacity and passenger flights were reduced to about 2 per cent of the level before the outbreak of Covid-19, the statement said.
04:19
Hong Kong reimposes tough Covid-19 restrictions in bid to ward off fifth pandemic wave
“Regrettably, the capacity reduction will have an impact on Cathay Pacific’s business and we have been evaluating the potential impact of these measures on our operations and cost base,” Tang said.
Such a capacity will cost the carrier a cash burn of as much as HK$1.5 billion each month from February, he added.
However, the possible lifting of the travel ban to Hong Kong and Macau by the Chinese central government could arrest a decline on the stock and bolster the wider aviation industry, according to Sinolink Securities.
“With the increasing vaccination rate and possible loosening border entry, the Hong Kong and Macau flights will take the lead in the recovery of international flights by the end of 2022,” said Zheng Shuming, an analyst at the brokerage. “The aviation sector will ride on the recovery theme.”
