Cathay ‘may sell planes’
By Steve Creedy and Glenda Korporaal
16may03
CATHAY Pacific chief executive David Turnbull has warned staff the “day is coming” when the Hong Kong airline will run out of money, as it bleeds $5 million a day and passenger numbers fall to a fraction of normal levels.
In the most dramatic warning issued by a regional airline to date, Mr Turnbull wrote in an internal email that the airline’s $HK11 billion ($2.18 billion) in cash reserves was being consumed daily.
He raised the spectre of having to mortgage or sell aircraft if the SARS (severe acute respiratory syndrome) epidemic did not ease.
Mr Turnbull said Cathay’s banks were not easing loan repayments, aircaft manufacturers had offered limited assistance and some suppliers would not help.
“Our cash reserves will not last forever – our job now is to make sure they last until business recovers,” Mr Turnbull wrote in the email, obtained by The Australian. “If we run out of cash before that recovery, we will be left with very limited options.”
He said the options included borrowing money against new aircraft. But he said this would increase the company’s debt-to-equity ratio and it could be forced to borrow beyond shareholders’ funds – a dangerous situation that was “what companies do before they go bust”.
Cathay could also try to raise money by selling aircraft, but selling assets in a declining market was difficult. “That is what PanAm did – break up the furniture to keep the fire burning – until they had nothing left of the airline at all,” he wrote.
“Our financial situation is bad. And although we will not run out of money today or tomorrow, that day is coming and our fortunes will not change soon.”
Cathay’s woes are a result of the World Health Organisation’s April 2 advisory against travel to Hong Kong. Cathay is carrying an average of 7000 passengers a day, compared with the 33,000 a day normally carried at this time of the year.
Meanwhile, JP Morgan sharply downgraded Cathay’s earnings outlook, predicting a loss of about $1 billion this year – way above the $220 million loss it previously forecast.
Last week Cathay told its 14,600 staff to take four weeks unpaid leave during the northern summer to save about $70 million over four months.
By: monster500 - 17th May 2003 at 08:13
i have a new computer GD. i dont have broadband at this house as it is not warranted as i am not here for long enough.
i like the pics, just 3 or 4 or more gets hard to open.
By: greekdude1 - 17th May 2003 at 07:43
I think you just need to upgrade your computer, Monster! Either that, or get a broadband connection, or both. Mine opens them up right quick, no matter how many pics.
By: monster500 - 17th May 2003 at 07:31
guys. can we post a few less pics on the threads!
these pages are becoming very hard to open.
cheers!
By: steve rowell - 17th May 2003 at 06:43
It’s affected everybody,I believe Qantas is about to lay off 1700 staff and cut back on it’s routes.
By: monster500 - 17th May 2003 at 01:18
thanks for the info sky.
By: greekdude1 - 17th May 2003 at 00:52
Cathay is definitely affected by this, as they are based in Hong Kong. But so are other airlines that have a strong presence there, and in Asia in general. Both United and Northwest have a strong presence in Asia, and are both hit hard by this SARS thing. UA’s load factors on their Pacific routes used to be 80%+. Their load factor since SARS has dropped by about 25% on their Asian routes. They rely on those routes, being almost automatic in terms of revenue, and now they can’t even do that. As if they weren’t hurting bad enough without all that.
By: mongu - 16th May 2003 at 22:46
The reason for the overreaction was China. Their authourities lied, cheated and concealed and generally understated the SARS cases. They compounded it the other day by talking about executions; I think people over here felt we were in for Tiannanmen Square version 2.
It was therefore prudent to assume it was far worse than officially recongnised. That’s had a bad effect on the tavel industry, particularly in Hong Kong.
But when SARS fears halt (which they will – Singapore for instance, is just about cleared by the WHO) there will be a recovery.
The trouble is – (a) how long will the SARS crisis last (weeks? months?) and (b) will the recovery be instant or drawn out over a year or so.
By: greekdude1 - 16th May 2003 at 20:04
I thought at the very beginning that the media was blowing the whole SARS thing way out of proportion. Relative to the number of people living in China, about a billion or so, a tiny fraction of that have died of a disease, whose symptoms are no more than a common cold gone bad. Who’s overreacting just a bit? Like the airline industry wasn’t in a downword spiral to begin with, after the asian economic crisis 6 years ago, a worldwide recession, 9/11, and then the gulf crisis and fuel hikes. A health care was just the icing on the cake. Why is it that nobody in the U.S. has died of SARS? You’re telling me that nobody living here was in Asia, Toronto for that matter, at the time this thing ‘broke out?’
By: Hand87_5 - 16th May 2003 at 16:34
Jee , I’m jealous 🙂
By: skycruiser - 16th May 2003 at 16:32
and one more
By: skycruiser - 16th May 2003 at 16:31
and another
By: skycruiser - 16th May 2003 at 16:30
Hi Hand,
Yep, done a london and a paris trip so far, off to LA at the end of the month.
Here are a couple of pics of one of the flights.
Sky
By: Hand87_5 - 16th May 2003 at 16:21
Thanks sky.
BTW , did you start flying ? 🙂
By: skycruiser - 16th May 2003 at 15:58
Monster,
Thats a bit of an old email. Not really news for us over here.
Also we were not told to take 4 weeks unpaid leave, it’s a special leave scheme and it’s purely on a voluntary basis. Just to let you know that as of today over 88% of the pilots have signed up in the company s interest.
With the cash reserves and losing $3m a day the company could run well into next year. SARS is on the decline rapidly here so I feel things will start to improve in the coming months.
On the news last night it stated that not one person has contracted SARS in an aircraft worldwide.
Things wouldn’t have been this bad if the media had not attacked this story like a pack of hungry wolves. I have no respect for most of todays media.
Sky
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May 16, 2003 at 11:50 am