Cathay Pacific 2019 profits plummet, predicts COVID-19 losses
On Wednesday, Cathay Pacific said profits plummeted in 2019 as it reeled from Hong Kong’s political turmoil while advising financial losses lie ahead due to the spread of the coronavirus.
In the second half of last year, the flagship carrier was battered as violent demonstrations erupted for months in Hong Kong, fuelled by widespread public outrage at Beijing’s rule.
The protests, which witnessed fights raging for seven straight months between police and demonstrators, hammered visitor arrivals into the city, historically one of the busiest transport hubs in the world.
The flagship carrier announced an attributable profit of HK$1.7 billion (USD 220 million) for 2019 on Wednesday, a significant drop from the HK$2.3 billion it earned in 2018.
And it cautioned against falling into the red as airlines around the world are experiencing the tremendous travel disruptions caused by the accelerated global spread of the lethal coronavirus.
“In the first half of 2020, we expect to incur a substantial loss” said Chairman Patrick Healy. “We expect our passenger business to be under extreme pressure this year and that our cargo business will continue to face headwinds,” he added.
The last loss that the airline made came in the first half of 2018.
It then embarked on a massive overhaul that took the carrier back to the black, but Cathay has found itself battered by events beyond its influence.
A YEAR OF TURBULENCE
After some of its 27,000 workers in the city showed support for the pro-democracy movement, Hong Kong’s political unrest put Cathay firmly in the crosshairs of Beijing last summer.
Nationalists on the mainland were agitating for a boycott when the Chinese aviation authorities placed on the airline a host of demanding extra checks.
Cathay responded with the resignation of its CEO and chairman as well as moves to discipline employees that supported or expressed support for the demonstrations, leading to an easing of regulations on the mainland.
Protests started to slow down in December and January, but the lethal coronavirus emerged in the Chinese city of Wuhan and has since spread across the world before Cathay could adequately recover.
International flight paths have been hammered with Cathay particularly vulnerable because so much of its business relies on the Chinese mainland and links Asia to the rest of the world.
Since then, it has cut its capacity to mainland China by 90 per cent and is operating 40 per cent fewer routes worldwide.
The airline revealed last month that it required all its 34,000 employees worldwide to take up to three weeks of unpaid leave in an effort to alleviate a significant cash shortage.
Dozens of passenger jets are now sat on the tarmac at Hong Kong’s airport, transportation headquarters for Cathay.
Hong Kong’s economy is currently in recession, ravaged by the trade war between China and the US, caused by the unrest and now the coronavirus.
The city has 120 confirmed cases of the COVID-19 disease and 3 deaths.
Cathay’s shares were trading up 1.93 per cent on Wednesday morning at USD 10.06 before the lunchtime break revealed the profits for 2019.
Given the plunge in earnings and liquidity squeeze, Cathay said it was still planning to take delivery of 70 new and more fuel-efficient aircraft by 2024.
The International Air Transport Association has predicted that this year’s coronavirus epidemic would cost the airline industry between USD 63 billion and USD 113 billion in lost passenger revenue.