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Cathay Pacific warned of a substantial loss in the first half of the year and flagged more cuts in flights due to the “unprecedented challenge” from the coronavirus outbreak that has forced it to ground more than half its fleet.
The carrier has been at the forefront of a global slump in travel demand due to the epidemic, compounding a hit it took in the second half of 2019 from widespread, sometimes violent anti-government protests in Chinese-ruled Hong Kong.
“Cathay Pacific has been through challenging times before, but the scale that we are facing in the current situation really is an unprecedented challenge,” Chairman Patrick Healy told reporters of the virus outbreak.
“We have no idea when a recovery will take place and we don’t know exactly what it would look like,” he said. “All we know is we remain in a very dynamic situation.”
Cathay, which said 80% of employees had agreed to take three weeks of unpaid leave to cut costs, added it does not rule out job cuts as the virus situation unfolds and it is seeking delays in aircraft deliveries.
It has already grounded more than 140 planes and slashed capacity by two thirds across its network for March and April, versus plans for a 40% cut.
Earlier this month, Cathay carried 82% fewer passengers than usual on Cathay Pacific and regional arm Cathay Dragon, Chief Financial Officer (CFO) Martin Murray told analysts.
The company flagged that substantial passenger capacity and frequency reductions were likely for May as well, adding it was “difficult to predict when these conditions will improve”.
The flu-like coronavirus, which can be transmitted from person to person, originated in China late last year and spread to more than 60 countries since then. It has infected over 100,000 people and killed more than 4,000 globally.
The accelerating outbreak is dashing hopes of a sharp rebound in demand, BOCOM International analyst Luya You said.
Cathay is flying empty passenger planes filled with cargo to help make up for the one-third of its cargo capacity that has been lost through flight cuts across its network, Chief Customer and Commercial Officer Ronald Lam said.
Cathay said it was cautiously optimistic about the air cargo market, where rates have risen sharply in recent weeks.
However, given overall weakness in the sector, Cathay said it was talking to both Airbus SE and Boeing Co about potentially delaying aircraft deliveries.
But for now, Cathay said it was still receiving new aircraft and that it hoped to add capacity once demand returns.
Cathay was due to take delivery of 17 A350 and A320neo family planes from Airbus and lessors this year.
An Airbus spokesman said the company does not comment on delivery schedules for individual airlines. A Boeing spokeswoman said it would not comment on specific customer discussions but it was closely monitoring the dynamic situation and in daily conversations with all customers.
Cathay said it had unrestricted liquidity of HK$20 billion ($2.6 billion) and it expected to remain a going concern. CFO Murray said there was no need to ask investors for cash, but could not rule that out if the situation deteriorated.
For 2019, the airline reported a 28% plunge in earnings to HK$1.69 billion, in line with market estimates.
Cathay’s major shareholders include Swire Pacific Ltd , Air China Ltd and Qatar Airways.
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