Hong Kong (Reuters) – Cathay Pacific Airways Ltd said that Hong Kong’s strict COVID rules for crew were making it harder for the airline to take advantage of rising travel demand, even though the airline’s first-half loss shrank to HK$5 billion ($636.98 million).
The company is falling behind its traditional competitor, Singapore Airlines (OTC:SINGY) Ltd. (SIA), in restoring international capacity. This is because Hong Kong-based crews of passenger planes are required by quarantine to stay in hotels for three nights after each trip.
The financial hub is also one of the few places in the world, along with mainland China and Taiwan, that still requires COVID-19 quarantine for arriving passengers. However, officials said this week that passengers will only have to stay in hotels for three days instead of seven.
Cathay’s first-half revenue went up 17% to HK$18.6 billion. This was due to a rise in ticket sales and a strong demand for air cargo, even though the number of passengers stayed 95.2% lower in June than it was before the pandemic.
Its loss was smaller than the HK$7.57 billion it reported a year earlier. Its cash flow turned positive toward the end of the period, and it expects its financial results to get better in the second half.
In a note, Jefferies analyst Andrew Lee said, “We expect the pent-up passenger demand and cargo peak season to lead to a return to profitability in the second half.”
The company’s shares went up as much as 3.3%, reaching their highest level since June 2020, before giving up some of those gains and trading up 1%.
Cathay said again on Wednesday that it expected the number of passengers to reach up to a quarter of what it was before the pandemic by the end of the year. In June, that number was only 11%.
Chairman Patrick Healy said that the airline’s huge backlog of retraining needs for the crew, many of whom had not flown in more than a year, could not be fixed until quarantine rules were lifted.
“This, along with other operational difficulties, means that capacity can only be slowly increased over a few months after all COVID-related operating restrictions have been lifted,” he told reporters.
In Singapore, where mandatory quarantine has been lifted, SIA said last month that it made a net profit of S$370 million ($268.49 million) in the June quarter when it ran at 61% of its capacity before the pandemic. By the end of December, SIA thinks that number will go up to 81%.
As restrictions loosen, Cathay is getting ready to bring more planes out of storage to make Hong Kong a hub for air travel again. The speed will depend in part on how quickly crew quarantine rules are eased, said Greg Hughes, who is in charge of operations.
After cutting more than 6,000 jobs during the pandemic, the airline said it still wants to hire more than 4,000 people to meet operational needs over the next 18 to 24 months.
Pilots have also left their jobs at a higher rate than usual because of the difficult quarantine rules and permanent pay cuts of up to 58%.
Refinitiv took the average of the estimates of 11 analysts and found that Cathay is likely to lose HK$4.5 billion for the whole year.
(1 Singapore dollar = 1.3781)
$1 equals $7.8495 Hong Kong dollars
