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By Eric Tamang, Valuations analyst, Cirium Ascend Consultancy
In the height of the Covid-19 Pandemic, international travel took a severe impact as governments worldwide initiated national lockdowns. Places such as Hong Kong were hit even harder, as it does not have a domestic market to rely on.
Based on Cirium Tracked Utilization data, the 7-day moving average of daily flights of Cathay Pacific, the de-facto carrier of Hong Kong, fell by 90% in early 2020.
In order to reduce its cash burn, Cathay Pacific axed almost 6,000 jobs in October 2021, including some 600 pilots.
They also closed all of their overseas pilot bases such as the United Kingdom, Germany, Canada, Australia and final one being the United States which closed in late 2022.
Daily tracked Cathay Pacific flights – 7 day moving average
Now that Covid-19 has become an endemic, demand for air travel has returned, and daily tracked flights have recovered close to pre-Covid levels. However, we can observe a decline in daily tracked flights from mid-December 2023 as Cathay Pacific cancelled at least 42 flights due to pilot illness.
This chart below from Cirium’s database also shows that Cathay Pacific still has 21 aircraft in storage, about 10% of its entire fleet.
Cathay Pacific Fleet
There are many reasons why commercial aircraft would be in storage. When we look at Cirium’s Ground Events analytics, we can see that at the time of writing this article (25th January 2024), Cathay Pacific does not have any aircraft going through heavy maintenance. However, it has 21 aircraft in storage – mainly as a result of pilot-shortages.
Cathay Pacific Maintenance Events
In late 2023, Cathay Pacific announced a plan to hire more than 5,000 employees, including 1,500 cabin crew and more than 800 cadet pilots, in 2023 and 2024 combined. However, it is struggling to hire people and as a result has been cancelling flights since Christmas 2023.
The Hong Kong Aircrew Officers Association – a union of Cathay Pacific pilots – said that the current shortage of senior pilots was a result of Cathay Pacific’s decisions in 2020, when Covid-19 hit. At the time, the airline made “deep and permanent reductions to the pay of frontline staff.”
Chinese New Year is just around the corner, falling between 10-24 February 2024.
It is a peak period for travel, and Cathay Pacific has already cut a dozen flights a day on average until the end of February. It appears further flight cancellations are most likely inevitable.
In their 2023 Interim Report, Cathay Pacific reported that they are “confident” to reach 100% capacity levels by the end of 2024. However, this is unlikely to be achieved without a successful recruitment campaign.