Cathay Pacific shuts Cathay Dragon airline

Hong Kong-based airline group Cathay Pacific is closing its regional subsidiary Cathay Dragon with immediate effect, as part of a corporate restructuring in response to the Covid-19 pandemic's continuing impact on the aviation sector.

Regulatory approval will likely be sought for a majority of Cathay Dragon's routes to be operated by Cathay Pacific and low-cost carrier and wholly-owned subsidiary HK Express.

Cathay Pacific will also be cutting about 5,900 jobs or around 17pc of its staff. The company has been burning through HK$1.5bn-2bn ($193.5mn-258mn) of cash each month, despite scaling back capacity, deferring new aircraft deliveries, pay cuts and a recruitment freeze. The latest restructuring plans aim to cut its cash costs by about HK$500mn/month, said chief executive Augustus Tang.

Cathay group airlines are expected to operate at approximately 10pc of pre-pandemic passenger flight capacity for the rest of 2020. They will also likely operate well below 25pc of this capacity in first-half 2021 and below 50pc for the entire year, assuming that Covid-19 vaccines currently under development prove to be effective and are widely adopted in key markets by the summer of 2021, the company said.

Cathay Pacific and Cathay Dragon carried 47,061 passengers in September, 31.55pc higher than in August but still 98.1pc less than a year earlier. Passenger demand was mostly supported by student traffic to the UK. Demand from mainland China also gradually rose since the ban on transit flights departing China via Hong Kong was lifted in mid-August, with transit passengers accounting for about 33pc of total traffic. The airlines carried 109,453t of cargo and mail in September, 7.18pc higher than August but still 36.6pc less than a year earlier.

Asia-Pacific jet fuel refining margins, or fob Singapore jet fuel swaps against Dubai crude values, fell to record lows of -$4.58/bl in early May as the Covid-19 pandemic slashed travel demand. While they have recovered to an average -$0.94/bl in September, this is still far removed from the $12.12/bl premium average back in January prior to the pandemic.

By Sarah Giam