Cathay Pacific narrows loss, outlook clouded by crew COVID rules

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(Reuters) -Hong Kong’s Cathay Pacific Airways (OTC:CPCAY) Ltd said strict air crew quarantine rules were crimping its ability to take advantage of rising travel demand, even as it narrowed its first-half loss to HK$5 billion ($636.98 million).

The carrier is falling far behind traditional rival Singapore Airlines (OTC:SINGY) Ltd (SIA) in restoring international capacity because its Hong Kong-based crew on passenger planes must spend three nights in a hotel on return from each trip, complicating rosters.

Hong Kong is also one of the few places in the world, along with mainland China and Taiwan, to still require COVID-19 quarantine for arriving passengers, though such hotel stays are to be cut to three days from seven, officials in the financial hub said this week.

Cathay’s first-half revenue rose 17% to HK$18.6 billion, driven by an increase in ticket sales and persistent strong demand for air cargo, although passenger numbers stayed 95.2% below pre-pandemic levels in June.

Its loss was narrower than the HK$7.57 billion reported a year earlier, with cash flow turning positive toward the end of the half, and it expects its financial results to improve in the second half.

The company’s shares rose more than 3 percent on Wednesday afternoon on the news.

Cathay on Wednesday reiterated that it expected passenger capacity to approach up to 25% of pre-pandemic levels by year-end, up from 11% in June.

“We will only be able to operate more flight capacity when the existing stringent travel restrictions and quarantine requirements applicable to Hong Kong-based aircrew are lifted,” Chairman Patrick Healy said in a statement.

In Singapore, which does not have mandatory quarantine, SIA last month said it had swung to a net profit of S$370 million ($268.49 million) in the June quarter, when it operated 61% of pre-pandemic capacity. SIA expects that to rise to 81% by the end of December.

As restrictions ease, Cathay is preparing to bring back more planes from storage to restore Hong Kong’s status as an air transport hub.

It reaffirmed its goal of hiring more than 4,000 staff to meet its operational needs over the next 18 to 24 months as travel rebounds, having cut more than 6,000 jobs during the pandemic. Pilot attrition has also been higher than normal because of the onerous quarantine requirements.

Cathay is expected to report a full-year loss of HK$4.5 billion, according to the average of 11 analyst estimates compiled by Refinitiv.

($1 = 1.3781 Singapore dollars)

($1=7.8495 Hong Kong dollars)