Cathay Pacific's chief executive said the airline expected to burn up to HK$1.5 billion (€176 million) a month for as long as Hong Kong upheld severe pandemic restrictions in response to its worst coronavirus outbreak.
The Chinese territory’s de facto flagship airline reported a net loss of HK$5.5 billion (€638 million) for 2021 in its results on Wednesday, an improvement from HK$21.6 billion (€2.5 billion) in 2020 but still significantly down from pre-pandemic levels.
Though Cathay recorded a marginal profit of about HK$2bn (€231 million) in the second half of 2021, the airline’s short-term outlook remains uncertain under Hong Kong’s tough zero-Covid regime. Flight bans and mandatory hotel quarantine for most travellers has in effect sealed off the city from the rest of the world.
Cathay's chief executive Augustus Tang said in an internal memo to staff on Wednesday that the company expected to be "burning cash in the range of HK$1.0-1.5bn per month with effect from February until conditions improve".
The company’s bleak projections come as other countries in the region are beginning to open up. Singapore Airlines last month recorded a net profit of S$85 million (€57 million) in the third quarter, ending December 31, its first since the beginning of the pandemic.
Prominent local businesspeople have warned that Hong Kong’s insistence on strict border controls is leading to a brain drain, while rating agencies have downgraded their growth expectations for the city.
“Losses narrowed, and were potentially below expectations, but it’s still a material loss,” David Blennerhassett, an analyst at Quiddity Advisors who publishes on the SmartKarma platform.
Zero guidance
The recent coronavirus wave of infections in Hong Kong had added more uncertainty to the outlook, he added. “There is still zero guidance from the government as to when this city may open up to the world amid zero or dynamic Covid. It feels like March 2020.”
A Cathay pilot who has worked at the airline for more than 10 years said he was worried about the airline’s future as more pilots and staff resigned. “No airline in the world can budget for these restrictions for such a long period of time,” he said.
In the first two years of the pandemic, Hong Kong’s zero-Covid strategy protected the city’s population. But the government’s failure to motivate the elderly to get vaccinated has now resulted in the city’s death rate per million people surpassing that of other developed nations.
The city’s leader Carrie Lam said that while the government may delay a move to test the entire population, officials were still planning to go ahead with the exercise sometime in the future.
The testing exercise has spooked foreign businesspeople and led to a flight of foreigners out of Hong Kong who feared they could be forcibly isolated in government facilities. Cathay said in an email to customers on Wednesday it was adding extra outgoing flights this month to Australia and the UK.
– Copyright The Financial Times Limited 2022