This is the bad reality that Hong Kong’s flagship airline is facing as the novel coronavirus pandemic worsens, darkens the prospects for the global travel industry, and “exacerbates” the financial impact for companies like Cathay, CEO Augustus Tang said on Friday.
He announced the bleak passenger numbers in an internal memo communicated to CNN Business and announced that passenger flights would be further reduced compared to a previously announced “baseline flight plan”.
Two weeks ago, Cathay Pacific had already cut 96% of its passenger flight capacity for April and May, reflecting a sharp drop in demand as the virus outbreak further emptied airports. It has also made similar cuts to Cathay Dragon, the company̵
7;s regional airline, and discontinued all flights with its low-cost Hong Kong Express.
“”[But] Since I last communicated, our passenger fleet has been practically grounded, “Tang wrote to the staff on Friday.” The remaining demand has disappeared. “
The 582 passengers flown earlier this week were 99% lower than Cathay’s daily expected average and a occupancy rate of just 18.3%, the CEO said. Passenger load factors are an important metric for airlines because they measure an airline’s ability to fill seats and generate revenue.
According to Cathay, only two flights per week to four long-haul destinations will be operated in April, including London, Los Angeles, Vancouver and Sydney. It also plans to operate three weekly regional flights to eight cities, including Tokyo, Manila and Singapore.
The company has not ruled out the possibility of a further reduction. “A timetable for a recovery in our customer demand is still unpredictable,” said Tang.
The pandemic has forced the aviation industry into one of the worst crises in history. Last week, the International Air Transport Association predicted that airlines could lose up to $ 252 billion in passenger revenue, a decrease of 44% year over year and more than the organization’s previous estimate of a “worst case scenario” doubled.
Companies like Cathay must therefore double their cost-cutting measures. Several industry leaders have already stopped paying salaries, and Tang announced on Friday that he and Cathay Chairman Patrick Healy would also cut their base salaries by 30%. In addition, the airline’s managing directors will cut their salaries by 25% by December.
The airline has also asked its 27,000 employees, most of whom are based in Hong Kong, to give three weeks off without pay. By the last month, 80% of employees had volunteered for unpaid vacation, while vacation “for ground workers who are now no longer active” has started, the company said.
Cathay is currently working to stay afloat by maintaining its freight business, where demand has remained “strong”, Tang said.
“However, reducing the capacity of our large fleet means that our freight revenue is still significantly below that of last year,” he added.
So far, Cathay shares have fallen almost 30% this year. The stock fell 1.2% on Friday after the Hong Kong announcement.
“We’ll get through this,” Tang said to the staff. “We will continue to explore all areas to ensure that the Cathay Group emerges from this unprecedented crisis that is able to compete and help Hong Kong get back on its feet.”
CNN’s Chris Liakos and Eoin McSweeney contributed to this report.