Cathay Pacific is burning about half as much cash, HK$1.5 billion (US$194 million) a month, as it did when the Covid-19 pandemic first hit the industry, the airline said on Wednesday, pointing to a deal with Airbus to delay aircraft deliveries and talks with Boeing to do the same.
The recently bailed-out airline also said it was now servicing far fewer customer refunds, and expected its new cash burn rate to remain stable while providing a skeleton flight schedule.
Hong Kong’s flag carrier last week projected it would lose HK$9.9 billion in the first six months of the year as a direct result of the pandemic crippling air travel worldwide.
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In the latest cost-saving measure, Cathay said it would stagger the remaining 12 deliveries of the long-haul A350 aircraft between now and 2023. The planes were originally to have been delivered before the end of 2021.
Similarly, the airline will stretch its order of 32 new single-aisle A321neo for Cathay Dragon and HK Express until 2025. Both adjustments give it an extra two years to take the aircraft ordered.
Meanwhile, talks continue with Boeing over an order of 21 777-9 aircraft, currently due to arrive in 2022.
“This deferral of deliveries is expected to produce cash savings to the Cathay Pacific Group in the short to medium term,” the airline said in the prospectus for its HK$11.7 billion rights issue at the Hong Kong stock exchange, which was released on Wednesday.
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Airbus said it did not comment on delivery schedules for individual airlines, while Boeing said it did not comment on discussions with customers.
Hammered by the pandemic, Cathay has been losing up to HK$3 billion a month since February. It has carried less than 1 per cent of its normal daily passenger volume and its flight schedule has been reduced to single-digits for at least three months. The company has responded with pay cuts for frontline staff and executives.
The Hong Kong government stepped in with a HK$27.3 billion rescue package in June to prevent the airline from collapsing. The move gave the government two boardroom observers, with no voting rights, to oversee its investment in the carrier.
The airline has also pocketed HK$680 million from the local Covid-19 employment subsidy scheme.
“While such passenger capacity cuts and cost management measures have helped to reduce expenditures, many costs are unavoidable regardless of the number of flights mounted. Accordingly, such measures will not fully offset the contraction in passenger revenue,” the airline said.
CEO Augustus Tang said last week that the airline’s expected record half-year loss underlined “the extent of the damage being inflicted on our operations since Covid-19 started spreading across our markets, decimating the demand for air travel as customers were unable or unwilling to fly”.
Hong Kong carrier Cathay Pacific and subsidiaries draw HK$680 million from government’s coronavirus relief fund
Cathay is conducting a wide-ranging review of its business, which will involve “rationalisation of future planned capacity compared to the pre-crisis plans”, something that could impact jobs. The airline will unveil the scale of changes planned in the fourth quarter of 2020.
In its prospectus, Cathay provided more details about its losses in the first half. Revenue was estimated to have fallen by 48 per cent, to HK$27.7 billion. Operating losses, meanwhile, reached HK$8.7 billion compared with a HK$2.5 billion operating profit over the comparable year-ago period. The airline carried 76 per cent fewer passengers in the first six months of this year.
Shares in Cathay have fallen 42 per cent year to date.
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This article Hong Kong’s Cathay Pacific delays aircraft deliveries, slowing cash burn amid Covid-19 travails first appeared on South China Morning Post