Restructuring now inevitable, says Cathay Pacific

The airline is now burning billions in cash per month.

Cathay Pacific Group warned that a restructuring is now inevitable in order to protect the company, its aviation hub in Hong Kong, and its employees, a group executive said in a press release.

Chief customer and commercial officer Ronald Lam said that it is burning cash at a rate of HK$1.5b to HK$2b per month despite actions to reduce cost.

“We have already taken decisive actions to reduce our costs, but despite these efforts we are burning cash at a rate of HK$1.5 billion to HK$2 billion per month, and will continue to experience significant cash burn until the market recovers,” he said.

“We are weathering the storm for now, but the fact remains that we simply will not survive unless we adapt our airlines for the new travel market. A restructuring will therefore be inevitable to protect the company, the Hong Kong aviation hub, and the livelihoods of as many people as possible,” he later added.

The group continues to see its traffic figures drop dramatically on the back of reduced travel demand as well as restrictions and quarantine requirements in place globally.

In August, Cathay Pacific and Cathay Dragon carried a total of 35,773 passengers, a 98.8% YoY decline compared to the same month in 2019, according to a press release.

The month’s revenue passenger kilometres (RPKs) fell 98.1% YoY. Passenger load factor dropped 60 percentage points (ppt) to 19.9%, whilst capacity—measured in available seat kilometres (ASKs)—decreased by 92.2%.

For the first eight months of 2020, the number of passengers carried dropped by 81.7% against a 72.8% decrease in capacity and a 79.2% decrease in RPKs, compared to the same period last year, Cathay Pacific Group reported.

In the first eight months of 2020, the tonnage fell by 33.5% against a 34.4% drop in capacity and a 26.5% decrease in RFTKs, as compared to the same period for 2019.

The International Air Transport Association (IATA) has forecasted that passenger recovery will take place by 2024. This demonstrates just how slow a return to pre-pandemic travel and demand levels it will be, according to Cathay Pacific Group chief customer and commercial officer Ronald Lam.