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Monday, Mar 27, 2023

Cathay Pacific pledges to pay HK$1.2 billion in deferred share dividends to government

Cathay Pacific pledges to pay HK$1.2 billion in deferred share dividends to government

New CEO Ronald Lam underlines importance of Greater Bay Area to growth of airline’s business.

Hong Kong’s flagship carrier Cathay Pacific remains committed to paying nearly HK$1.2 billion (US$153 million) in deferred share dividends it owes the government and will push forward with rebuilding operations ahead of the launch of the airport’s three-runway system, the airline’s new CEO has said.

Ronald Lam Siu-por also underscored on Monday the importance of tapping growth opportunities in southern mainland China’s vast Greater Bay Area, home to 87 million people, as part of the company’s post-pandemic recovery efforts.

“The challenge we have in the next two years is that on the one hand, we need to rebuild, but on the other hand, we need to invest,” he said. “So we need to be able to generate enough profit and cash to be able to do both.”

Lam, who took over from Augustus Tang Kin-wing earlier this month, said Cathay intended to repay as soon as possible the HK$1.19 billion in deferred dividends owed on HK$19.5 billion in preference shares the government acquired as part of a financial lifeline extended in 2020.

Cathay has warned it expects a net loss of between HK$6.4 billion and HK$7 billion for last year

The HK$39 billion recapitalisation package ensured the carrier could continue operating as the Covid-19 pandemic collapsed the travel market.

On January 20, Cathay warned it expected a net loss of between HK$6.4 billion and HK$7 billion for last year, compared with the HK$5.5 billion recorded in 2021, because of associated companies’ deficits.

The airline was generating positive cash flow in the second half of 2022, Lam said.

Both Cathay Pacific and the group’s budget carrier HK Express were at 40 per cent of pre-pandemic passenger capacity in January, up from the third recorded in December, according to Lam. They were both on track to reach 70 per cent capacity by the end of the year, he said.

Lam also addressed an ongoing dispute between management and the Cathay Pacific Flight Attendants Union, which launched a work-to-rule action on January 19.

The union is calling on management to improve its roster arrangements, claiming staff are given little rest during overseas layovers.

Lam said service during the Christmas and Lunar New Year holiday had been “smooth” and pledged to “directly engage with frontline staff and address their concerns”.

In June last year, Cathay revealed it intended to hire 8,000 frontline staff over the next 18 to 24 months. Lam said the airline hired 2,000 new staff members last year and expected to add another 3,000 this year, although he did not specify how many were cabin crew or pilots.

Last year, Cathay Pacific said it planned to recruit 700 pilots and 2,000 cabin crew by the end of 2023.

Lam admitted the turnover rate had risen sharply during the pandemic, but levels were “trending back to normal”. The airline undertook “regular benchmarking” to ensure its offers were competitive with the rest of the industry, he added.

“We will continue to do that and make adjustments accordingly,” he said.

The Greater Bay Area, Beijing’s plan to link 11 cities along the southern Chinese coast, presented new opportunities for growth, Lam stressed. Cathay hoped to fly to more destinations in the area, capitalising not only on the demand for outbound flights, but also inbound travel from around the world, he said.

Lam pledged that the company would invest more resources into building its network in mainland China, with the airline set to operate more than 100 return flights per week to 14 cities there by the end of next month.

“We will be guided by the customers. So as more cities develop, with enough leisure and business demand and enough cargo demand, we will fly there,” he said, adding HK Express would also seek to increase its presence on the mainland.

But Cathay will face competition from Hong Kong’s Greater Bay Airlines, which plans to increase its aircraft fleet to 22 planes by 2027, with Beijing and Shanghai because of be added as the next destinations.

“With Cathay focusing on the premium end of the customer segments and then HK Express focusing on the low-cost carrier end, so I think that is how we compete,” he said.

While the third runway was officially opened in November, the entire system is only expected to be operational by 2024. The airport authority closed one of the two original runways for an upgrade in July as the new one came into service.

Calling the three-runway system, “a once in a lifetime opportunity”, Lam said investment would go towards expanding Cathay’s fleet with 48 aircraft ordered for delivery between now and 2028.

Regarding the progress of the company’s home city in regaining its status as an aviation hub, Lam said: “The basic fundamentals in Hong Kong have not changed. It is a matter of time. We will come back.”

The company is still in the process of finalising its results for the year ending December and will publish them in March.

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