Thursday, 13 August 2020

Cathay Pacific suffered a loss of HK$9,865 million in the first half of 2020

The Hong Kong based Cathay Pacific suffered a loss of  HK$9,865 million in the first half of 2020 the airline reported on Wednesday.  
Photo Cathay Pacific 

The carrier had a promising start to 2020, with encouraging signs that passenger demand was beginning to return following the social unrest which saw mass riots and protests calling for democracy, which impacted the second half of 2019.  However, the first six months of 2020 were the most challenging that the airline has faced in its more than 70-year history. The impact of COVID19 on the Group’s business and the global economy is unprecedented. 

In response, Cathay Pacific announced a HK$39 billion recapitalisation in June, which comprised of a HK$19.5 billion preference share issue, a HK$11.7 billion rights issue and a HK$7.8 billion bridging loan facility. This recapitalisation was completed on 12 August 2020. 

The Cathay Pacific Group’s attributable loss was HK$9,865 million in the first half of 2020 (last year the carrier had a profit of HK$1,347 during the same period). Cathay Pacific and Cathay Dragon reported a loss after tax of HK$7,361 million in the first half of 2020, and the share of losses from subsidiaries and associates was HK$2,504 million (2019 first half: profit of HK$672 million). The loss for the first half of 2020 is net of the receipt of HK$1,060 million of COVID-19 related government grants globally and includes impairment and related charges of HK$2,465 million relating to 16 aircraft that are unlikely to re-enter meaningful economic service again before they retire or are returned to lessors, and to certain airline service subsidiaries’ assets. 

Cargo yield increased by 44.1% to HK$2.71 in the first six months of the year. There was an imbalance between capacity and demand in the cargo market, which led to higher cargo revenues compared to the first half of 2019. Cargo revenue in the first half of 2020 was HK$11,177 million, an increase of 8.8% compared to the same period in 2019.

HK Express reported a significant loss for the first half of 2020. It stopped flying in mid-March because of COVID-19 and associated travel restrictions, and has only recently reintroduced some flights.

Air Hong Kong recorded a profit during the first six months of the year. As noted above, there was an imbalance between capacity and demand in the cargo market. The Air Hong Kong aircraft provided additional cargo capacity for the Group.

The International Air Transport Association (IATA) has released analysis indicating that the COVID-19 crisis will see global airline passenger revenues drop by US$371 billion in 2020, a 61% decline compared to 2019, and estimates airline industry net losses to be US$84 billion. Airlines in Asia Pacific will see the largest share of losses (US$29 billion) and will experience a 54% fall in passenger demand year-on-year.

* The table does not reflect aircraft movements after 30th June 2020.
** Leases previously classified as operating leases are accounted for in a similar manner to finance leases under accounting
standards. The majority of operating leases in the above table are within the scope of HKFRS 16.
*** The nine Airbus A300-600F, one Airbus A330-243F and one A330-300P2F freighters are considered to be operated by Air Hong
Kong, even though the arrangement does not constitute a lease in accordance with HKFRS 16.
(a) The operating lease of one Airbus A330-300 aircraft expired in July 2020. The aircraft was returned to its lessor.
(b) 11 of these aircraft are owned by Cathay Pacific and leased by Cathay Dragon.
(c) One Airbus A330-300 aircraft was deregistered in August 2020.
(d) These aircraft are subject to operating leases.
(e) These aircraft, ordered by Cathay Dragon, will be operated by HK Express.

Full report can be accessed here.

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