Cathay Pacific Airways Ltd. has projected a net loss of between HK$6.40 billion (US$817.18 million) and HK$7.00 billion for the fiscal year 2022, according to a company announcement on Friday. The forecast, which translates to a potential maximum loss of approximately US$893.77 million, underscores the financial toll of pandemic-era travel restrictions on Hong Kong’s flagship carrier, even as it signals optimism tied to the recent relaxation of quarantine rules in Hong Kong and mainland China.
Market Reaction and Analyst Expectations
The airline’s guidance comes after analysts polled by Refinitiv had anticipated a loss of HK$4.17 billion for the twelve months ended Dec. 31. However, Cathay reported a loss of HK$5.53 billion for the fiscal year that concluded on that date, exceeding market expectations. The company’s pessimistic view follows a prior statement in November predicting a “substantial” annual loss, though the carrier noted at that time that its second-half results were expected to improve sequentially. The gloomy outlook aligns with trends seen across the industry, as Air China Ltd. posted underwhelming numbers in December, with many Chinese carriers struggling with capacity issues.
Operational Recovery and Cargo Market Weakness
Despite the financial headwinds, Cathay Chief Executive Ronald Lam acknowledged a trend of continuing improvement in operations and financial performance for the airline and its subsidiaries in the second half of 2022. Following the lifting of pandemic-related travel restrictions, short-haul leisure travel has seen a recent surge in demand. Lam stated that the company expects this trend to continue in January and over the Chinese New Year season. While the passenger market improved as passenger and crew quarantine rules were eased, the air cargo market was weaker in the fourth quarter of 2022 compared with a year earlier. Cathay, which aims to operate at 70% of pre-pandemic passenger capacity by the end of 2023, reported that capacity decreased by 67.8% last month when compared with December 2019 levels. The airline said in October it planned to hire 4,000 staff over the next 18 to 24 months to rebuild staffing levels cut during the pandemic.
Looking ahead, investors will watch for Cathay’s ability to sustain the passenger recovery momentum through the Chinese New Year period and into the first quarter of 2023, while monitoring whether the weaker cargo market stabilizes as global trade patterns adjust. The carrier’s hiring push and capacity restoration plans will be key indicators of its return to pre-pandemic operational levels.
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