Concerns regarding travel in Asia and restrictions in China have nearly shut some airlines down altogether. Could coronavirus make Cathay Pacific its next victim?
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***Update 3/16/2020*** The day following this post, Cathay Pacific announced $257MM USD ($2.3bn HKD) in February losses alone.
Travel Effect
The coronavirus has affected more workers around the world than people the disease has infected. Airlines from the US have all but ceased operations to Asian destinations, limiting their focus to Japan and South Korea. Both may soon be on the chopping block as demand falls and infection cases increase.
A substantial amount of Cathay Pacific’s business is to and from China. It’s almost impossible for Cathay to operate reasonably without demand from Mainland China and facing the US travel restrictions in place for parts of the region.
Cathay Pacific Already Having a Bad Couple of Years
I love Cathay Pacific. Service has always been impeccable in my experience, their equipment is excellent, their lounges are some of the best in the world – there’s so much to like about Cathay Pacific. In fact, I was planning on using miles from an Alaska credit card to fly them for Christmas this year as we have done in the past.
But it’s been hard for the carrier as of late. For the last couple of years, Cathay Pacific has fought financial hardships in a variety of forms. New aircraft to replace expensive long-haul equipment like its A340s and less fuel-efficient 747s.
Visitor traffic to Hong Kong is usually 200,000 daily but has shrunk to just 3,000 (and likely much lower now.) Naturally, not all of that is Cathay Pacific traffic, but one can only imagine how much lower that sinks the carrier. The airline had already parked 120 of their 200 aircraft, but that can’t be nearly enough.
The airline was also one of nine that were put on the “stop sale” list by IATA as a means by which they are considered risky enough to no longer receive revenue from payment processors in the same fashion as before and their insurance contract may have been pulled.
As verified by a travel agent I know, the above “stop sale” is not in place.
Will the Government Bail Them Out?
Tourism and business traffic is essential to Hong Kong, not just Cathay Pacific. Unlike other countries, homegrown competition is limited. The second-largest carrier, Hong Kong Airlines, is purely regional at this point making Cathay Pacific the only Hong Konger link to the outside markets.
Hong Kong’s need to ensure the survival of Cathay Pacific goes beyond the function of carrying passengers and cargo. It’s also important to demonstrate the stability of the city-state and show strength to concerned residents and visitors.
Conclusion
I love Cathay Pacific and I love Hong Kong. The thought of this historic brand, that offers such great service and has so much pride about where they are from and what they do, shutting down or selling to a rival fills me with sadness and heartbreak. That said, I am not sure after the protests and now Coronavirus, the airline will be able to survive without tremendous intervention.
What do you think? Will Cathay Pacific be able to weather the storm? Will the HK government come to the rescue? Is it just the way of the world and they should be moved to new management anyway?
Beijing could care less about the possible demise of Cathay; they would gleefully hand the routes to mainland carriers. They’ve always seen Cathay as a pesky remnant of the foreign devils ( govt part ownership notwithstanding). How Hong Kongers might respond to that is another matter entirely ( not to mention foreign travelers)
I find the “stop sale” position interesting. It may indeed be true, but someone asked GSTP to reference their source and they declined for the time being and the comment has disappeared.
Meanwhile people claiming to be travel agents are positing on their Facebook page it isnt true. I am not sure it’s useful posting these things points without the ability to reference things at this time.
In any case, I think Cathay will not be alone in needing support to get out of this.
I’ll try to confirm this for you.
Cathay pacific just announces they make profit. I hope this is good news for cathay pacific fans.
https://bloom.bg/2TRQm5O – $257MM USD, $2.3bn HKD in February losses alone. Post updated to reflect this.
Survival only with government help as the Covid-19 pandemic has degenerated into global paranoia.
Cathay is not a badly run airline at all. But based on the sentiment of most Hongkongers they can’t win, because they belong to Swire, i.e. one of the 6 or 8 “evil empire,” rich-as-hell, supposedly repressive conglomerates of HK.
The “way of the world” as you put it – sentiment and opinion – has been mostly against Cathay for years. So I think even with record profit, Cathay would’ve eventually had to find firmer footing, and the most likely of that is coming under Air China’s control, the way Swiss became part of Lufthansa.
I for one will be very sad to lose Cathay. Airlines like ANA and EVA are very, very poor imitations of them who don’t have the same eye for customer experience.
Agree CX has been going through tough times as noted above. However if it’s a victim of anything, it’s EK and QR (and a lesser extent EY and TK) which have siphoned North America and European customers at the high and low ends of the market, plus the emergence of the long haul mainland carriers. Both CX and SQ developed the global hub model with the advent of long range jetliners in the 60s/70s, but have been superseded by the M3 and TK. If any entity saves CX it will be Swire not Beijing. If Swire (and Hutchison) goes, then Hong Kong goes!
What happened to your previous post about you kind of/sort of admitting your mileage run for sh*ts and giggles might not have been the best idea?
It’s rescheduled for 1:39 PM, not AM.
Cathay’s loads have already returned to record highs on its inbound services to Hong Kong. Flights are all sold out the next few days. I think they’ll survive just fine as they ramp service back up.
Ramp ups are temporary repatriation on remaining flights following 90% capacity cuts, see link now put at the top of the post.
This is an extremely poorly written article. If the author understands how to read financial statements and not the fake news on social media, he will understand that CX has a strong balance sheet to support the current crisis.
Cathay’s profits haven’t been that bad if you look at their financials. Not sure where the author comes up with the financial trouble. Again, all fake news and being lazy for not reading the financial reports and analyst commentary.
CX is backed by the Swire’s and assistance required will come from them.
Cathay is here to stay and I suggest the author look at other airlines that will be the next casualty. It’s definitely not Cathay!
https://bloom.bg/2TRQm5O – $257MM USD, $2.3bn HKD in February losses alone. Post updated to reflect this.
@WHS – I would assume loads are good because they are combining flights. Which makes sense. Forward bookings will be the concern, with many of their markets practically offline.
A very very interesting thing might happen.
China may turn out to be more capitalist than the US. And then you would know that capitalism is just an excuse used to control the population, colonial style.
Badly written article with a poor understanding of the Financials.
Perhaps go read other airlines balance sheets.
https://bloom.bg/2TRQm5O – $257MM USD, $2.3bn HKD in February losses alone. Post updated to reflect this.
Just announced CX is ramping up services to the US and UK for the next 2 weeks. One of the few if not only carriers to do so. This is on top of their recently posted 2019 profits. CX will do just fine. Very short sighted article here.
Ramping up solely for repatriation on capacity already reduced by 90%. https://bloom.bg/2TRQm5O – $257MM USD, $2.3bn HKD in February losses alone. Post updated to reflect this.
https://www.ft.com/content/6b1516ae-64ec-11ea-b3f3-fe4680ea68b5
KE is most at risk of the big names in Asia due to their balance sheet.
I absolutely adore CX and will always book them first when schedules allow. But here in Australia, a quick search between airlines flying the HKG-AUS route all still place CX as the most expensive airline to fly. Perhaps loads would increase if a price drop were enacted. QF, another known price gouger could learn the same lesson..
I’ve been waiting nearly 6 weeks for a refund on business class tickets booked with Cathay for travel in June. I believe they are stalling as they are not on a good position financially and I am concerned that they will go broke and I won’t see a cent.
The moron that wrote this is ignorant about Cathay or Hong Kong.
https://bloom.bg/2TRQm5O – $257MM USD, $2.3bn HKD in February losses alone. Post updated to reflect this.
Cathay Pacific are a well managed well structured company under Swires who have been in Hong Kong for ever . They may need some Government help but unlike other regional airlines their finances are still in reasonable shape.
This is a disgusting article written by someone sadly lacking in understanding major company financials management and structure .
https://bloom.bg/2TRQm5O – $257MM USD, $2.3bn HKD in February losses alone.
I suspect that Cathay is not going to be alone in reporting sizeable losses. It’s just the way it is at the moment… Everywhere.
Governments will need to provide financial aid at some point or many airlines will go under.
It will be interesting to see how that happens. Some airlines are probably considered excess for their countries needs, but others are key for their economies.
Thank you for updating that you cant confirm the stop sale. Unfortunately GSTP won’t provide sources and deletes comments. Correct information is important at this time.
CX just sold six aircraft to BOC Aviation and then leased them back. That’s the business equivalent of going to the pawnshop. They obviously have major cash flow problems. That Beijing considers CX a hotbed of political dissent doesn’t help the company.