What’s Going On Here?Cathay Pacific reported a full-year loss on Wednesday, and the Hong Kong airline will need some seriously dedicated passengers if it plans to turn that around. What Does This Mean?All credit to Cathay: the carrier rolled out a successful cost-cutting program last year, and its frequent cargo flights proved a lucrative alternative to passenger services. That helped the company turn a profit in the second half of the year, even as it flew 85% fewer passengers than it did in 2020. But the company still made a $700 million loss, which came as a bitter pill to swallow after a $2.8 billion shortfall the year before.
This one’s not off to a great start either: the Hong Kong government has introduced flight bans now that Covid cases are on the rise again, as well as mandatory post-flight quarantines. That means Cathay is now only flying about 2% of the passengers it flew before the pandemic, and it’s expecting to lose up to $200 million a month until those restrictions are lifted. Why Should I Care?Zooming in: Freight-eningly expensive. Cathay made about 79% of its revenue from flying cargo last year, so it reckons more of those flights could be the way to balance out those losses. It might be onto something: European airlines have been avoiding Russian airspace since the country’s invasion of Ukraine, pushing up the cost of flying air freight between China and northern Europe by 34%.
The bigger picture: Flights over troubled waters. As if the pandemic wasn’t enough, now airlines have been hit with spiking oil prices – no small thing considering fuel makes up as much as 35% of their operating costs. But Cathay thought ahead: it’s already locked in all of its fuel costs for this quarter and half of next quarter’s too. It’s also one of the few airlines still flying in Russian airspace, meaning it has shorter flight times and lower fuel bills than its more principled rivals. |