Restructure or Die, Cathay Warns as it Burns Through Millions a Month

(Bloomberg) --

Cathay Pacific Airways Ltd. is still burning through as much as HK$2 billion ($258 million) a month and will continue to do so until the market recovers from the coronavirus crisis, the company said Monday as it reported dismal August traffic figures and reiterated the need to restructure.

“We are weathering the storm for now, but the fact remains that we simply will not survive unless we adapt our airlines for the new travel market,” Chief Customer and Commercial Officer Ronald Lam said in a statement.

“A restructuring will therefore be inevitable to protect the company, the Hong Kong aviation hub, and the livelihoods of as many people as possible,” Lam said. A HK$39 billion recapitalization plan completed last month brought the company some time, but “it is an investment that we need to repay,” he said.

Cathay, which last month reported a first-half net loss of HK$9.9 billion, is undergoing a strategic review. Recommendations about the future shape and size of the airline, which includes Cathay Dragon and HK Express, are due to be presented to the board in the fourth quarter.

Cathay and Cathay Dragon flew only 35,773 passengers in August, a slump of 98.8% from the same month last year. Revenue passenger kilometers fell 98.1% and passenger load factor dropped 60 percentage points to 19.9%, the company said Monday. The group carried 102,122 tonnes of cargo, down 36.7% from August 2019.

“It is clear that we are facing a long and uncertain road to recovery,” Lam said.

With few signs of improvement, bar a pickup on some services thanks to student traffic to the U.K. and the lifting of a ban on transit flights from mainland China, Cathay has lowered its operating passenger flight capacity down to about 10% in September and October.

“Passenger demand continued to be very weak as new waves of Covid-19 in our key markets dampened overall travel sentiment,” Lam said. “With no new destinations being resumed in August, we saw only minimal increase in passenger flight capacity.”

Cathay’s shares slipped 0.3% in Hong Kong trade Monday. They’ve tumbled 38% this year.

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