Hong Kong's Cathay Pacific is warning of capacity reductions this year after the Hong Kong Government recently further tightened aircrew quarantine requirements and travel restrictions. The warning comes as the airline releases details of its 2021 full-year performance and its outlook for 2022.
Government crackdown further cuts capacity at Cathay Pacific
In the last month, the Hong Kong Government has cracked down on quarantine requirements for its crews and toughened travel restrictions for everyone else. Cathay Pacific says the measures will significantly impact its passenger and cargo flight capacity.
In January, Cathay Pacific is operating just 20% of its pre-pandemic cargo capacity and 2% of its pre-pandemic passenger capacity.
"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," warns Cathay Pacific's Chief Executive Officer, Augustus Tang.
"We will strive to maintain passenger connectivity with key destinations, although at reduced frequencies, under the confines of the place-specific and flight-specific suspension mechanism."
Passenger numbers down and no relief on the immediate horizon
In December, Cathay Pacific flew a total of 92,219 passengers. Across the 2021 calendar year, the airline flew 717,059 passengers. In 2020, the airline flew 4.6 million passengers. In 2019, that number was 35.2 million passengers. On these figures, the 2021 passenger numbers at Cathay Pacific were down 98% on 2019 passenger numbers.
"Passenger travel remained extremely subdued throughout 2021, as a result of ongoing travel restrictions and strict quarantine requirements," says Mr Tang.
There's no sign of any immediate relief on the horizon. Cathay Pacific is getting a rough ride from authorities in Hong Kong and Beijing after a crew quarantine scandal. Some influential locals called for the airline to be "punished."
The Hong Kong Government is tightening already strict entry and transit rules. Mainland China remains shut off to nearly all non-Chinese. Informed speculation suggests barriers to entry could stay in place for most of the year.
Those restrictions are crippling operations at Cathay Pacific and raising questions about its long-term survival. The airline's CEO is putting the best spin he can on a bad situation. He says Cathay Pacific remains "resolutely committed" to keeping Hong Kong connected.
"We are exploring all options to keep the flow of people and goods moving despite the considerable challenges we continue to face," he says.
Stay informed: Sign up for our daily and weekly aviation news digests.
Cargo and cash burn remain top priorities
But Augustus Tang cannot deflect the glaringly obvious and acknowledged the extremely tough operating environment in his comments on Monday. He says existing passenger flights to the Chinese Mainland remain largely unaffected by the current crackdown on Cathay Pacific. However, Mr Tang admits capacity elsewhere is down in response to the latest Government measures.
Cathay Pacific is pinning its short-term hopes on cargo operations. Despite capacity reductions, cargo is performing well (albeit below 2019 levels). Mr Tang expects mitigation measures to increase crew resources will soon see cargo capacity increase by 5%.
Across the airline, a laser-like focus on operations and the cost base has seen Cathay Pacific's cash burn cut to around US$160 million per month. While that may still seem like a lot, it's roughly half of the monthly cash burn this time last year.
Cathay Pacific expects to record a calendar 2021 loss of between US$720 million and $783 million. This compares favorably to a loss of $2.77 billion in calendar 2020.
In the wake of the fury flung at the airline after recent scandals, Mr Tang took a conciliatory tone on Monday, suggesting Cathay Pacific was looking beyond its own interests.
"We also want to reiterate that the health and wellbeing of our people, customers, and the Hong Kong community remain our top priority,” he said.