Hong Kong-based Cathay Pacific Airways reported HK$21.6 billion ($2.78 billion) in losses in a 2020 annual report released Wednesday, as the airline continues to take a beating from pandemic-related travel restrictions.
"Right now, the main concern remains cash burn, which is even higher than they had anticipated," said BOCOM International aviation analyst Luya You in an interview with Business Times.
In the second half of the year, losses grew to HK$11.73 billion from HK$9.87 billion in the first six months despite a massive restructuring effort that saw 6,000 staff let go and Cathay's Dragon budget line axed.
The losses are pretty much in line with investors' expectations, You said, given the difficult environment the airline is operating in.
"The quarantine requirements for aircrew are really restrictive and we know from Cathay that that has lifted their monthly cash drain back to pre-recapitalization."
Imminent collapse was averted in June 2020 with a HK$39 billion bailout from the Hong Kong government paired with financial restructuring measures.
"They restructured a lot of debt and got rid of non-performing assets," You said. "At the same time, they were able to cut down on a lot of fixed costs which is why we saw their monthly cash drain go down by about HK$500,000 after the recapitalization."
But in the face of intense travel restrictions, the effects of recapitalization seem to have worn out.
The next few months "will be extremely challenging" Cathay's management warned on Wednesday, and pressure will likely continue until vaccination programs in the region are completed.
Until then, "they are looking for either new sources of liquidity or one of the last resorts will be more staff cuts - that's one of the cost segments where there is still room for cuts but that isn't something they want to talk about at present," said the aviation analyst.
Given Hong Kong's size, Cathay has no domestic recourse when its international routes are down, preventing the airline from taking a page from mainland firms which have turned to local flights for sustenance.
