Bailout keeps Cathay Pacific alive, but restructure now essential - CAPA - Centre for Aviation

Summary

  • Cathay Pacific‘s bailout package was unavoidable in order to stave off more unpalatable alternatives
  • Another important step will be a thorough business review and likely streamlining
  • Cathay’s passenger demand was affected by protests, then took a larger hit from COVID-19
  • The government will monitor its new stake via observers, but vows hands-off approach
  • Strategic overhaul could mean major changes for Cathay’s fleet plan and order book

COVID-19 meant a second major challenge in quick succession

Cathay already faced problems before COVID-19 arrived. The carrier’s demand was weakened due to the protest movement that began in Hong Kong last year, and it was still in a fragile condition when the pandemic delivered an even larger blow.

The chart below shows the steep falloff in the group’s capacity this year, a curve that has become depressingly familiar in the airline industry this year.

Focusing on traffic, the following chart better illustrates how Cathay’s demand had barely recovered from the Hong Kong protest movement when the effects of the coronavirus outbreak began to hit.

Passenger traffic began to lag from about Aug-2019 as the protests dampened demand.

As would be expected, the drop in the second half of 2019 was most severe in Cathay’s key mainland China markets, as the next chart shows. These dynamics illustrate the brutal 12 months Cathay
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