The recovery of the aviation market is still a long way to go. In contrast, the expectations of domestic airlines in China are generally more optimistic than those of IATA, and the most optimistic believe that their profits are expected to return to the pre epidemic level within the year.
According to Cathay Pacifics restructuring plan, Dragonair, a wholly-owned subsidiary of the company, will stop operation and take effect on the same day. The company intends to seek regulatory approval to operate most of Dragonairs routes by the company and its wholly-owned subsidiary, Hong Kong Express.
Cathay Pacific (including Cathay Dragonair) will cut about 8500 jobs as a whole, accounting for 24% of Cathay Pacifics 35000 jobs. In recent months, the implementation of measures such as freezing recruitment and closing some overseas bases, together with the natural loss of staff, has reduced the actual reduction of staff to about 5900 (about 17% of the total number of positions in the group). Some 5300 resident staff will be cut in the next few weeks, and another 600 non resident staff may be affected, subject to regulatory requirements in the region concerned.
Cathay Pacific will require cabin attendants and pilots in Hong Kong to agree to change their conditions of service in order to achieve the objectives including making remuneration closer to productivity and enhancing market competitiveness.
In addition, the company will continue to implement the current senior management salary reduction arrangement throughout 2021, and launch the third round of voluntary special leave plan to non crew members in the first half of next year. All employees will not receive any salary increase in 2021 and no discretionary year-end bonus in 2020.
Cathay Pacific said that the restructuring will ensure the future development of the company, try to retain the largest number of jobs, while fulfilling its responsibilities to the Hong Kong aviation hub and customers. The restructuring is expected to reduce the groups cash expenditure by about HK $500 million per month in 2021.
The cost of the restructuring is about HK $2.2 billion, which will be appropriated from the companys internal resources. Meanwhile, a HK $1.3 billion impairment of deferred tax assets will be made. In addition, despite the suspension of Dragonair, the company will ensure that Dragonair has sufficient funds to meet its commitments and responsibilities.
Deng Jianrong, chief executive of Cathay Pacific, said: the epidemic has swept across the world and continues to bring a heavy blow to the aviation industry. We must carry out a fundamental restructuring, otherwise the group will not be able to continue to operate in the end.
There are still four challenges ahead
However, Mr Deng pointed out that despite the efforts, the company still lost HK $1.5 billion to HK $2 billion in cash every month.
In the first half of this year, Cathay Pacific Groups revenue was HK $27.769 billion, a year-on-year decrease of 48.3%; a loss of HK $9.865 billion, and a profit of HK $1.347 billion in the same period of the previous year.
Cathay Pacifics reorganization announcement should be inevitable. The impact of the epidemic on the international aviation market is far greater than that on the domestic market. Now the domestic markets of all countries have begun to gradually recover, but the international civil aviation transportation is still at a low level, and there is no dawn of rapid recovery. Cathay Pacific and other airlines have no deep hinterland of the domestic market, so they will be more affected by the epidemic Impact. Civil aviation industry insiders Lin Zhijie pointed out to reporters that according to previous estimates, Cathay Pacific should have basically spent the money injected by the government last time in recent months. Therefore, it is necessary to take a further restructuring plan to survive.
Lin Zhijie further pointed out that Cathay Pacific still faces four challenges in the future: first, with more and more mainland airlines flying directly to Europe and the United States, Hong Kongs hub competitiveness is declining; second, the impact of the epidemic on the civil aviation industry may last for 2-3 years. How to digest the excess capacity in the post epidemic era? In recent years, it is not easy to make money; thirdly, Cathay Pacifics own operation and management are under pressure. After a huge loss of several billion Hong Kong dollars in the last round of fuel oil hedging, Cathay Pacific again made bets last year, and in the first half of the year, it will face a huge loss of hedging. Fourthly, of the 39 billion Hong Kong dollars raised last time, 19.5 billion yuan of the governments capital injection and 7.8 billion yuan of the loans were to be paid back, and the interest of the governments capital injection would be returned three years later With the increase year by year, there will be no small repayment pressure.
Global airlines in dire straits
Novel coronavirus pneumonia has been introduced to support the development of the aviation industry in the first half of this year, including governments in the United States and Europe. However, the recovery of the international aviation market is still limited because of the slow development of new crown pneumonia in many countries.
This has seriously hit the performance of airlines that rely on the flow of personnel to make cash, especially in countries with severe epidemic situation and airlines with large international passenger traffic volume.
In the United States, in the second quarter alone, the losses of United Airlines, American Airlines and Delta Airlines were close to US $10 billion, which was a figure not seen in any previous year.
Although the number of novel coronavirus pneumonia in Europe is less than that of the US 2/3, the three largest European carriers, Lufthansa, British Airways and France KLM, also have to avoid huge losses and massive layoffs.
Layoffs are the most direct measures for the global aviation industry to deal with the epidemic. Novel coronavirus pneumonia survey results show that 45% of respondents said that the cost reduction measures adopted by the new crown pneumonia epidemic led to a decrease in staffing in the second quarter of 2020, and 55% of respondents expected to reduce their staff in the next 12 months.
Compared with the life and death faced by European and American Airlines, airlines in Asia are trying to generate revenue.
Cathay Pacific Groups Hong Kong Express Airlines has announced that it will launch a no purpose sightseeing flight uofflation, which will carry out three round the port flights from November, with a total flight time of 1.5 hours.
Prior to this, many domestic and foreign airlines, such as JAL, All Nippon Airways, EVA and China Airlines, have launched similar sightseeing or experience flights.
Thai International Airlines is selling fried dough sticks with purple potato soup, which can generate 10 million baht (about 2.13 million yuan) a month. At present, the sales of fried dough sticks in five branches of Thai Airways in Bangkok are 400000-500000 baht / day. The company also plans to speed up the production of fried dough sticks and increase production capacity, formulate a franchise plan and expand business.
When will the aviation market recover
Compared with Europe and the United States, although most of the listed airlines in China still made losses in the first half of the year, most of the airlines losses in the second quarter were significantly smaller than those in the first quarter.
How will the aviation market go in the second half of the year? The reporter consulted many domestic listed airlines and found that their expectations were generally more optimistic than those predicted by IATA. This is closely related to the stage of the domestic epidemic and the income sources of domestic airlines.
For domestic airlines, the revenue from the domestic aviation market still accounts for a large proportion, which is one of the important reasons why the loss of China Southern Airlines (600029. SH) is relatively small among the three state-owned airlines in the first half of the year. Among the three major airlines, Air China (601111. SH) accounts for the largest proportion of international routes, with the largest loss in the first half of the year, followed by China Eastern Airlines (600115. SH), and then China Southern Airlines (600029. SH).
At present, most domestic airlines are still in the first or second stage. China Southern Airlines believes that if the domestic epidemic does not recur on a large scale, it may be able to recover to the third stage within this year. China Eastern Airlines believes that with the launch of xinxinfei products and the opening up of team tourism policy, China Eastern Airlines has confidence in the later stage of the tourism market, and the number of business tourists has gradually increased since June. After the summer vacation, the business passenger chain ratio is still increasing, so it is more confident in the recovery of the later business market. Air Chinas forecast is more conservative, saying that if there is no major recurrence of the epidemic and the vaccine is normally developed, it will return to the normal level before the epidemic in February after the Spring Festival next year. IATA predicts that global air passenger traffic will not return to the level of 2019 until 2024. To this end, IATA calls on governments to extend their expired salary support plans, otherwise more airlines will declare bankruptcy. Source of this article: Guo Chenqi, editor in charge of first finance and Economics_ NBJ9931
At present, most domestic airlines are still in the first or second stage. China Southern Airlines believes that if the domestic epidemic does not recur on a large scale, it may be able to recover to the third stage within this year.
China Eastern Airlines believes that with the launch of xinxinfei products and the opening up of team tourism policy, China Eastern Airlines has confidence in the later stage of the tourism market, and the number of business tourists has gradually increased since June. After the summer vacation, the business passenger chain ratio is still increasing, so it is more confident in the recovery of the later business market.
IATA predicts that global air passenger traffic will not return to the level of 2019 until 2024. To this end, IATA calls on governments to extend their expired salary support plans, otherwise more airlines will declare bankruptcy.