Cathay Pacific Loses HK$2 Billion in February Due to Virus

(Bloomberg) --

Cathay Pacific Airways Ltd. said it made a “significant” unaudited loss of more than HK$2 billion ($257 million) in February alone because of widespread disruption from the coronavirus, which has left the global aviation industry reeling.

The monthly loss is for Cathay and full-service unit Cathay Dragon, Chief Customer and Commercial Officer Ronald Lam said in a statement Monday. Last week, Cathay reported a 28% drop in 2019 net income to HK$1.69 billion as protests in Hong Kong hurt demand. Now the coronavirus is proving to be even more damaging to the Hong Kong carrier’s business.

Lam said Cathay will only operate a “bare skeleton passenger flight schedule” for April, representing a capacity reduction of up to 90%. That could continue into May if there’s no relaxation of travel and immigration restrictions that have been imposed by nations worldwide.

Cathay and Cathay Dragon carried 1.01 million passengers in February and passenger load factor fell by 28.6 percentage points to 53.1%, according to the statement. Capacity in available seat kilometers slid 29.3%. Regional routes to mainland China, Taiwan, Korea and the Philippines saw the most significant drops in passenger volume. Cargo carried by the two airlines fell 9.6% from a year earlier to 118,711 tonnes.

Cathay also owns the carrier Hong Kong Express, which it acquired last year. Lam said overall passenger numbers fell 64% in February from the same month last year. “On a typical day following the Chinese New Year peak we would normally carry around 90,000 passengers; towards the end of February, that figure dropped to below 20,000.”

Hong Kong’s tourism board on Monday reported a 96% plunge in visitor arrivals in February based on preliminary data, and said declines are expected to persist in March. Lam also said the situation has deteriorated since February.

“We have already announced around 65% passenger flight capacity reduction for March,” he said. “Governments around the world have since introduced more travel restrictions, with the most recent ones starting to affect our major long-haul markets including Europe, the United States and Southwest Pacific.”

In a separate statement Monday evening, Cathay said it had entered an aircraft sale and leaseback agreement in which it will sell six Boeing Co. 777-300ER jets to BOC Aviation Ltd. for $703.8 million and lease them back. The move will free up cash that can be used for general working capital requirements, Cathay said.

Cathay last week predicted a substantial loss for the first half of this year as the virus presents another challenge on top of anti-government protests in Hong Kong. The airline, which has asked staff to take unpaid leave, is reinstating a few flights from U.S. cities and London this week, citing demand from people wanting to return home to Hong Kong in time for the Easter break.

“The scale of the challenge we are currently facing is unprecedented and no one can predict when conditions will improve,” Lam said in the statement. “Our advance passenger bookings show no clear signs of recovery at this stage, and the gap in bookings compared to 2019 continues to widen.”

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