Cathay Pacific hopes to be profitable again in 2023, but returning to its pre-pandemic capacity remains one of the airline’s “biggest risks,” its CEO told CNBC.
The capacity to operate at a profitable level depends on numerous factors, including “how full the flights might be, the yield we can generate on our flights,” Chief Executive Ronald Lam told CNBC’s Emily Tan Tuesday.
“But I’m hopeful that this year we can turn around the business and be back in profit overall.”
Last week, Hong Kong’s flagship carrier reported an annual loss of HK$6.55 billion ($834.9 million) for the year ended December 2022, recording an 18.5% increase in losses from 2021.
However, the airline swung to an annual operating profit of HK$3.5 billion last year — the first since 2019, according to Refinitiv data.
“We are currently supply constrained mainly by the manpower, not just of our company, but the whole ecosystem within the aviation industry,” said Lam, who took the helm as CEO in January.
“We need to have manpower in the air manpower on the ground. We also need the airport workers to be ready to take on flights both in Hong Kong and overseas.”
General view of the headquarters of Cathay Pacific as seen on Febraury 27, 2023 in Hong Kong, China.
Li Zhihua | China News Service | Getty Images
The International Civil Aviation Organization expects a return in global air passenger demand to pre-pandemic levels by the end of March this year, and predicted that demand for global air travel could be 3% stronger than 2019’s figures by year end.
The Hong Kong carrier said in its earnings report last week that due to manpower limits, it will only be able to fully meet pre-pandemic passenger flight capacity by the end of 2024.
As of December, the group was “operating about one-third of pre-pandemic passenger flight capacity,” the report said.
“Our projection is 70% passenger flight capacity by the end of this year,” Lam told CNBC.
“It’s mainly driven by whether we can assemble all the necessary resourcing that we need across the whole system. So far, we are on track … we are already at 50% and we’re working very hard towards 70% by the end of this year.”
Lam, however, pointed out that Cathay’s situation was different from most other airlines.
For one, Hong Kong air crew was subjected to the “most stringent quarantine conditions in the whole world,” he said.
Hong Kong only started lifting its tight Covid regulations late last year, much later than the rest of the world.
“Therefore, for a long time we were operating at very low capacity from the pandemic. So much so that the license of many of our pilots actually have expired,” he said, adding that the carrier had to allocate time and resources to retrain its pilots.
“In terms of our biggest risks, I will say it’s to build our capacity, whether we’re going to get enough resources in the entire aviation ecosystem,” he said. “We’ll be working very hard to address that so that we can we build back to our pre-pandemic capacity as soon as possible.”
Asked if the company will be paying dividends to ordinary shareholders this year, he replied: “Not necessarily.”
“It really depends on business performance,” he said pointing out it’s too early to tell now since it’s only been three months into the year.
Cathay received a lifeline from the government in 2020, and is currently looking at a repayment of HK$1.5 billion in preference share dividends owed to the government in 2023.
“It is our plan actually to pay up all the cumulative preference share dividends within this year. And after that … we can consider dividend for our ordinary shareholders.”