Cathay Pacific Group on the brink of bankruptcy: analyst
Published: May 15, 2020 05:23 PM

The Cathay Pacific Airways Ltd logo is displayed atop a building at Cathay Pacific City, the company's headquarters, in Hong Kong in August, 2018. Photo:VCG

The Cathay Pacific Group appears to be on the brink of collapse, say experts, as its latest fiscal data show that the company lost billions of dollars in just the first four months of this year, amid travel restrictions and quarantine requirements.

The group reported an unaudited loss of HK$ 4.5 billion ($580 million) from January to April, and it said its financial outlook continues to be very bleak for the coming few months.

"We do not anticipate we will see a meaningful recovery for an extended period," the company said, citing Cathay Pacific Group Chief Customer and Commercial Officer Ronald Lam.

The group said the combined Cathay Pacific and Cathay Dragon traffic figures for April show the airlines are operating at 3 percent capacity. 

Cathay Pacific and Cathay Dragon carried a total of 13,729 passengers last month, a decrease of 99.6 percent compared to April 2019. The two airlines carried 84,634 tons of cargo and mail last month, a decrease of 48.3 percent compared to April 2019.

The company said they operated only a skeleton passenger flight schedule serving just 14 destinations in April and they carried fewer than 500 passengers per day. 

"The group's operating pressure is huge, and it is on the brink of bankruptcy," Lin Zhijie, a veteran market watcher told the global Times on Friday. 

He said the epidemic has hurt, but the worse is the company hedged around 20 percent of its fuel contracts last year, locking its fuel price at around $60-65 per barrel into the first half of next year. "If oil prices continue to decline, it will also face greater fuel hedging losses," Lin warned. 

Cathay Pacific's previous record lost was HK$8.56 billion in 2008 also due to fuel hedging contracts, and the global financial tsunami that impactedthe travel business.

The International Air Transport Association said in an analysis in April, that the COVID-19 crisis will see airline passenger revenues drop by $314 billion in 2020, a 55 percent decline year on year. Airlines in Asia Pacific will see the largest revenue drop of $113 billion and a 50 percent fall in passenger demand year-on-year.

Cathay Pacific predicted that international travel expected to pick up more slowly than domestic travel as border restrictions are only gradually eased, and they expect that their average daily passenger numbers will remain at around 500 in May, and that business and leisure travel will remain severely impacted for the foreseeable future.

SCMP reported that Qatar Airways, the third-largest shareholder in Cathay Pacific, said it was willing to provide an equity injection into Hong Kong's financially battered flagship carrier if approached.