Troubled Hong Kong airline Cathay Pacific has slashed its capacity projections for the last quarter of the year as COVID travel restrictions continue to batter its outlook. The downgrade in expectations was submitted via a stock exchange filing this morning, indicating a much slower and longer recovery than was hoped.
Cathay to fly 13% pre-pandemic capacity in Q4
Earlier his year, Cathay Pacific had outlined its expectations for the final quarter of 2021, indicating that it intended to fly as much as 30% of its pre-pandemic capacity. But with travel restrictions and ongoing difficulties in making a robust restart, the carrier has significantly trimmed its outlook.
Cathay’s stock market filing this morning reflects the difficult environment in which it is trying to operate. The airline is now looking at flying around 13% of its pre-pandemic capacity in the fourth quarter, indicating that the recovery will take longer and be trickier than it had hoped. Chief Customer and Commercial Officer Ronald Lam commented,
“We had hoped to operate as much as 30% of pre-pandemic capacity by the fourth quarter of 2021. However, operational and passenger travel restrictions remain in place, continuing to constrain our ability to operate more flights. As such, we now only expect to maintain similar passenger capacity levels to August 2021 for the remainder of the year.”
The filing did contain some good news, however, as the airline intends to keep its cash burn at a low level for the rest of the year. Aiming to maintain a low level of spend alongside continuing to trim costs, Cathay hopes to maintain a cash burn under HK$1 billion ($129 million) per month.
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Passenger traffic has grown
Year on year, the airline’s passenger traffic has seen substantial growth. This August, Cathay flew 135,353 passengers, an increase of 278% over the same period in 2020. However, this really just serves to highlight just how difficult 2020 was, as these numbers are still down more than 95% over its pre-pandemic (2019) figures.
For the year to date, passengers carried has dropped by 92.2% compared to the same period for 2020. Capacity is down 76.2% and revenue passenger kilometers (RPKs) are down 89.7%. On the upside, for the flights it has been operating, Cathay has secured some better-than-expected load factors. Flights were 46.4% full which, given the circumstances, is pretty impressive, and is up 26.5 percentage points. Lam commented,
“August’s passenger performance was driven primarily by student traffic, in particular from the Chinese Mainland to the US. We cautiously increased capacity on these services, with our Shanghai flights notably increasing to three times per day from mid-August, while our New York, San Francisco and Los Angeles flights also saw capacity increases. We also resumed flights to Chicago and Boston, which generated strong demand.”
Cargo continues to be a bright spot on Cathay’s balance sheet, with the airline moving almost 125,000 tonnes of cargo in August. This is up 22% on August 2020. Cargo flights on the transpacific market are now up to 39 flights per week, and the airline has added two additional Boeing 777 ‘preighters’ – converted passenger aircraft – bringing its total temporary freighter count to six.
Looking forward, the airline believes that cargo will continue to be strong, and says it is planning for a busy fourth quarter, particularly amid the backdrop of supply chain disruption due to seaport congestion.