Good afternoon. Welcome to the Cathay Pacific Airways Limited 2021 annual results analyst webcast. Thank you for joining us. Before we begin, we'd like to go over the rundown for the webcast. We will begin with a presentation by Chief Financial Officer, Ms. Rebecca Sharpe, after which we will hold a Q&A session with our speakers.
Slides from the presentation will be displayed alongside the live video for your convenience. A copy of the slides has also been sent to you by email. If you have not received a copy of the presentation, kindly contact ir@cathaypacific.com. You are invited to submit your questions at any time during the webcast via the submission box in the bottom right of the window. Our Moderator will then read these out during the Q&A session. With that in mind, allow us to introduce our speakers: Chief Financial Officer is Rebecca Sharpe, Chief Customer and Commercial Officer is Sir Ronald Lam. Now I'd like to invite Ms. Rebecca Sharpe to begin the presentation.
Thank you and good afternoon, or indeed, good morning or good evening, depending on where you're watching this briefing. I'd like my welcome to this briefing. We marked the 75th anniversary in September of last year, and I think it is still fair to say that we continue to experience one of the most challenging periods in our history. However, I do have a much-improved set of financial figures to talk you through today compared to my first analyst briefing one year ago. Today's presentation will follow our normal three sections. Firstly, a reminder of our responses to the COVID-19 pandemic and some brief highlights of the numbers. Secondly, I'll talk through the financial and operating results for 2021, and I'll wrap up with some commentary on outlook. Of course, we're happy to take questions. Starting with this slide.
I'd like to start with some of the key figures. This slide, I'm comparing the 2021 key numbers versus the 2020 key numbers. If I begin with revenue, you'll see here that we generated HKD 45.6 billion in the full year 2021. This is, of course, significantly reduced compared to pre-pandemic years, but actually not so very different from 2020. Although, as I'll talk a bit later in the presentation, the mix of this revenue between the years 2021 and 2020 is a little bit different. The reason for that difference is around Cargo. In 2020, Cargo made up just around 60% of the revenue number, whereas in 2021, it was nearer 80% of that revenue number. A dramatic change in what has generated our revenue in terms of the parts of our business.
The group's attributable loss for the year was HKD 5.5 billion. Whilst this is obviously substantial, it's a significant step change from where we were a year ago in 2020 with our 21.6 billion loss. You'll recall, those of you who follow us regularly, that the loss in the first half of this year was HKD 7.6 billion. In other words, in the second half of 2021, the group made an attributable profit of HKD 2.1 billion. This excellent second half result was essentially driven by two key elements. Firstly, the team's agility in maximizing all revenue opportunities possible in an exceptionally strong cargo market. Secondly, the highly effective cost management over a prolonged two-year period, including, of course, the very substantial savings that were realized during the restructuring in October 2020.
If I turn to liquidity, which obviously has been a key focus for us over the past couple of years and continues to be so, we closed 2021 with a balance of HKD 30.3 billion, which was a slight increase on where we ended 2020 at HKD 28.6 billion. Our gearing ratio has remained pretty flat between the two years.
Moving on to our responses to the COVID-19 challenges. I've presented this slide before, trying to capture for you easily in one place, some of the key elements of what we've been doing. It's obviously been updated for the full year, 2021. There are a few points I'd like to highlight, perhaps starting on the right with the fleet. Compared to the end of 2020, we saw a net reduction of five aircraft in our fleet.
On the other side, we saw an increase in the aircraft that we had operating at the end of 2021. At the end of 2020, we had 92 aircraft in storage, whereas at the end of 2021, that had reduced to 74. Now, within that, those nine aircraft deliveries, I can comment that we had or received the newest addition to our fleet, the Airbus A321neo. We've got a number of those in operation. That, of course, is part of our journey towards net zero in terms of our carbon emissions, because these are far more fuel-efficient aircraft.
Also, on fleet-related matters, we concluded our discussions with Boeing on the 777-9X aircraft. You'll be aware probably that the entry into service of this aircraft type has been delayed till late in 2023, and there's been a subsequent impact on our deliveries, which will now be delivered in late 2025. In terms of capacity and operating costs, which are the other two boxes on this slide, and also liquidity, I'll cover those in more detail through the presentation. The one thing perhaps to mention here is about our monthly operating cash burn. Again, I will have a little bit more information, but you may recall in the first half of 2020 that our monthly operating cash burn was in the range of HKD 2.5 billion-HKD 3 billion.
I'm pleased to report that in the second half of 2021; we brought that down to be actually marginally cash generative. Rather than burning cash, we were generating a small amount of cash. That's, of course, quite a remarkable turnaround, given that we're still operating with various restrictions in place during the second half of 2021.
If I move on to the 2021 results in a little more detail. This slide sets out the key elements of that attributable profit and loss number, split by the half year period and compared with the same half year period and full year period for 2020. We also added a chart to the right-hand side depicting this graphically for easy reference. The standout figure, I think here, has to be the second half group attributable profit, which can be seen on the right-hand side, obviously in the chart as well. That, as I say, was primarily due to the maximization of revenue opportunities in an exceptionally strong cargo market, and also the continued and resultant impact of the effective cost management initiatives that have been put in place over the past two years.
However, the full year loss of HKD 5.5 billion is of course still substantial, but it is a considerable improvement year-on-year. There's no getting away from the fact that 2021 was another challenging year for the group. We saw different variants of the COVID virus. We saw continually changing travel restrictions and quarantine requirements, both here in Hong Kong and overseas. All of which have impacted our results for the year. We've also included on here an adjusted profit or result line. Now, that's not perhaps quite so pertinent this year as it was last year, 'cause I'm pleased to report the one-off adjustments were much smaller in 2021, and we'll explain those in a little bit more detail on a later slide.
We included an additional slide here, just looking back five years to try and put the 2021 result in the context of some history, and we split the half years across this time period. Each of those bars represents a six-month period in the first half and second half of each year. You can see that actually the second half result was the second highest half year result in the past five years. Typically, the second half result for our business is the stronger result of the two, albeit in 2019, the second half was affected by social unrest, and of course, 2020 was affected by significant one-off adjustments and impairment restructuring, et cetera. Suffice to say, this does demonstrate the strength of the achievement that we've made in 2021.
This slide shows an analysis of the major changes between the adjusted loss in 2021 and 2020. You can see here the change in the revenue mix that I mentioned earlier, the first red bar here showing the reduction in the passenger revenue that we saw. If you recall, in early 2020, before the pandemic really took hold, actually the months of January and into early February were pretty strong for our business. Of course, the 2020 year did have that portion of revenue generation in the result for the year. Whereas for 2021, all months were affected, and we do see that coming through in this reduction in passenger revenue. On the positive side, we see a big increase in the cargo revenue here.
The other major variances between the 2020 result and the 2021 result are on the cost side of things. Our net fuel cost has been lower during 2021. That's a combination of the reduced consumption, 'cause obviously we weren't flying as much on the passenger side, but also a benefit of fuel hedging gains. The other operating costs, significant reduction, almost the largest bar in here, is partially due to capacity reductions. Again, less capacity on the passenger side of things, and partially due to all the work done to manage the cost and optimize the operation over the past couple of years.
This slide sets out a reconciliation of the adjusted attributable result, as I mentioned earlier, to the attributable result. You can see we quote an adjusted result of HKD four and a half billion loss, and takes us down with the one-offs to the attributable result of HKD 5.5 billion. Maybe if I can spend a little bit of time explaining these one-off items for 2021. As I say, they're significantly less in value than they were in 2020. Actually, if for those of you who remember the presentation on the interim results for 2021, they haven't changed dramatically from those reported at that time.
Some of you will be familiar that as part of the preparation of the financial results, we undertake impairment assessments of our businesses and our assets, our aircraft, our equipment. You may recall that in the first half, unfortunately, we concluded that we needed to make impairment adjustments for 11 of our aircraft. That's because it was projected that they wouldn't re-enter meaningful economic service again before they either retired or were returned to lessors. We have, of course, part of our year-end procedure, done the assessment again, and we've identified one further aircraft that we need to impair, so that has been included here, together with a small amount of equipment.
The restructuring costs listed here of HKD 0.4 billion include the cost of voluntary severance schemes that we offered during 2021, and the cost of redundancies that we unfortunately had to make at some of our overseas bases. Obviously, a very difficult decision to conclude. There's also a gain mentioned here, which is following a mixed ownership reform of Air China Cargo, which meant that our shareholding was reduced, from 34.78% down to 24%-25%, and that gave us a small gain in the year. That's just a sort of brief summary of some of the one-offs that have been incorporated in the full year results for 2021.
If I turn now to our balance sheet and liquidity, this slide sets out our adjusted net debt balance and our debt/equity ratio over the past three years. The adjusted net debt and gearing or debt /e quity ratio were very similar at the end of 2020 and at the end of 2021. Explaining that liquidity in a little bit more detail perhaps, this slide sets out the liquidity balance journey that we've been on over the past two years. You can see in the 2020 period the impact of the cash inflow from the recapitalization that was undertaken, and you can see the liquidity balance of HKD 30.3 billion at the end of 2021, and that the fact that it was a little bit higher than we had at the end of 2020.
Just as a reminder, the liquidity balance includes both the liquid funds that we have, cash on hand, et cetera, and the undrawn facilities. That portion, the undrawn amount, was HKD 11.1 billion. Now, something that I've been asked before, so perhaps I should take the opportunity to clarify. You'll recall that we have a HKD 7.8 billion bridging loan from the government. In addition to the preference shares that the government invested or purchased in the amount of HKD 19.5 billion back in 2020, they also provided us with a bridging loan in the amount of HKD 7.8 billion. We have not yet drawn down on that loan, and that's why it's included in that HKD 11.1 billion number that you see on this schedule.
We very much welcome the extension of the drawdown period, so that expired in June 2021. The government agreed to extend or granted an extension to that, such that we didn't have to draw it down immediately, and that's why you can see it there in the HKD 11.1 billion at the end of 2021. That provides us with more flexibility to manage our liquidity as and when we need it. This chart sets out the movement, taking the closing balance at the end of 2020 of the HKD 28.6 billion of liquidity, so undrawn and cash in bank, as it were, and maps it across to the HKD 30.3 billion that we closed 2021 with.
You can see here the strong operating cash inflow and a large proportion of that was generated in the second half of 2021. You may remember on a similar chart for 2020; we had a large outflow in working capital as we repaid large amount on customer refunds. That's not the case in this year, in fact, we've got cash generation. On the financing side, you can see the green bars being proceeds from the convertible bonds issue and the straight bonds issue that we did in the first half of 2021.
A question I'm often asked is whether we'll be looking to raise more financing. Just maybe to comment on that as we talk about liquidity. We believe a liquidity balance in excess of HKD 30 billion, which is the equivalent of $3.9 billion approximately, is an elevated level for our business. We have consciously looked to keep it elevated through these very uncertain times, and just given the nature of the current operating environment. In terms of whether we would look to raise more finance, we continue to review opportunities available to us if they're at a reasonable cost in order to manage this elevated level for the time being while the uncertainty levels are so high.
Moving on to some of the more operational aspects of our business. Starting specifically with travel and cargo. The next slide, you've seen many times, presented it previously and included it again, more than anything, just for your easy reference and a reminder of what we already know in terms of the aviation environment here in Hong Kong and the passenger numbers. Just as a reminder, the dark green that you can see on that chart in 2019 are Cathay Group customers, passengers, and the lighter green is non-Cathay Group passengers coming through the Hong Kong airport. The sort of empty part of the screen or chart you can see is the 2020 and 2021 passengers coming through the airport. We've blown up on the graph within the graph, the figures for 2021.
You can see here, of course, the numbers are significantly smaller, but there was a slight peak in August and September for both our group and other airlines in Hong Kong as we saw student traffic going through to the U.K. and the U.S. during that period.
Now, of course, I don't need to say, we all know, COVID-19 continues to disrupt passenger traffic globally. This slide sets out the passenger-related metrics, including for reference the 2019 figures. Suffice to say, the travel restrictions and quarantine requirements have significantly impacted our figures, and the passenger revenue for the year was HKD 4.3 billion. As I mentioned earlier, this is less than 2020, and of course, dramatically different from where we were in 2019. As I said, probably just to say again, we must remember that the early part of 2020, the first couple of months was more normal pre- pandemic kicking in, and having a big impact on us.
The next slide looks at charting the capacity load factor and yield figures that underpin those revenue numbers. We're looking here at three-year period and splitting the numbers by the different halves of the year. You can see the dramatic reductions in capacity if we look at the 2019 bars versus the 2020 and 2021, and the same story on load factor, albeit we saw a slight increase in load factor in the second half of 2021. Whereas in terms of yield, that's been on an upward trajectory and was elevated in both halves of 2021.
Our Cargo business performed exceptionally well last year. Cathay Pacific Cargo revenues saw an increase of 31.8% year-over-year, and this was against a backdrop of nearly 11% reduction in capacity. Cargo demand grew ahead of the traditional peak season in the second half. In the months leading up to the end of 2021, we operated our freighter fleet at full capacity. We created additional capacity by operating cargo-only passenger flights together with our six freighters. Just to remind you what we mean when we say a freighter, these are the 777-300ER aircraft where we've taken out some of the passenger seats such that we can carry cargo in the cabins. We also chartered flights from our all-cargo subsidiary, Air Hong Kong.
In October 2021, we carried 136,000 tons of cargo, which is the most we've carried in a single month since the start of the pandemic. Included a similar chart to the one for the passenger business. Here, setting out the capacity load factor and yield in six-month periods for the last three years. You can see here that the reduction in capacity versus 2019, when of course there were passenger plane belly space available to us. In terms of load factor, we've seen unprecedented levels at over 81% during the course of 2021, and indeed exceptional yields, particularly in the second half of 2021. As I mentioned in my earlier slide, the second half profitable result was driven by two elements, being the maximization of the cargo opportunities in the exceptionally strong market being one of them. I think you can see that coming through on these charts here.
If I, then turn to operating costs. Effective cost management, of course, it's always a focus for any business, but particularly key focus for us, as we continue to work our way through this pandemic. You can see the figures reflect a significant reduction across all categories. While this is positive, it is affected, of course, by the reduction in capacity. Some of our costs are fixed and semi-fixed, and therefore, not so easily changed, but some are obviously variable, and therefore, can be affected and reduced from a reducing capacity. We can also see coming through here the impact from the cost optimization measures that we've been undertaking.
Fuel, of course, very hot topic as we sit here today with Brent going above $130 a barrel in the last week. This slide sets out the jet fuel price over the past three years, our fuel hedging position at the end of 2021, and the financial figures for the 2021 and 2020 years as they pertain to fuel costs. Overall, our fuel costs reduced, and that's due to a combination of factors. We consumed less fuel because we flew less overall. We had fuel hedging gains that we benefited from. You can see the figure there of HKD 2.3 billion of a gain in 2021. Some of this, of course, was offset by the increase in the fuel price that you also see on the chart there.
Now another question I'm often asked is regarding our fuel hedging policy. I can confirm that we do have a prudent fuel hedging policy in place. It has a clear pricing matrix that governs the hedges we take based on the price of the fuel at the time and also the forecast consumption. We continue to execute in accordance with that matrix and policy. If I then pull the last two slides together to try and give an overview, you see that the total operating costs for our business at HKD 60.6 billion in 2020 mapped through to HKD 44.1 billion in 2021. These are reductions across the board, bar one small item.
It's also worth perhaps remarking here that if we remember the revenue number for our business stayed pretty much flat. The costs that have gone through our business in 2021 have reduced quite dramatically. That, again, is the impact of both capacity changes, but also from the hard work and effort that's gone in to driving costs out of our business, making us more competitively focused and efficient as a result.
Having talked through Cathay Pacific Airways figures, my next couple of slides provide a brief commentary on our subsidiaries and associates. Hong Kong Express made a loss of HKD 2 billion in 2021 on revenue of just HKD 20 million. Both figures a deterioration in 2020. You'll recall, similar to the Cathay story, they also had positive months back in early 2020 before the pandemic kicked in. I don't really need to say why these numbers are what they are. It reflects the impact of the pandemic. The work that they, too, are doing on cost efficiencies, cost optimization, various initiatives across the board have continued throughout the course of 2021.
Our other major subsidiaries operations are a reflection of either the passenger story or the cargo story. Air Hong Kong, as our all-cargo operator, have benefited from the exceptionally strong cargo market, whereas our airline service subsidiaries continue to be negatively affected by the total number of passengers that are flying. The passenger story is also reflected in the Air China figures. I should just remind you here that we capture the period from first of October 2020 through to thirtieth of September 2021 in our results for the full year 2021. They are reported three months in arrears. As I touched on earlier, with respect to Air China Cargo, as part of a mixed ownership reform, our share reduced from 34.78% to 24% in September 2021.
Following this reduction in shareholding, we have aligned the results period captured to three months in arrears, so it's aligning it with Air China period that we capture. Because 2021 is the transition year, we've only got nine months of the Air China Cargo results in the period for 2021. The final section of the presentation covers the outlook. As mentioned previously, we do tend to ascribe to the IATA longer term projections. However, for the nearer term, there is a higher level of uncertainty for us here in Hong Kong.
In terms of outlook on the passenger side of our business, of course, the situation in the here and now is extremely challenging with the current nine-country ban, transit ban, and crew quarantine restrictions. Hong Kong is facing a particularly challenging phase of this pandemic, and our thoughts are with all those families that have been affected at this time. We expect to continue operating about 2% of our pre-COVID-19 flight capacity until at least the end of this month. On a brighter note, we do recognize, and I'm sure all of you can empathize with this, that there is a significant amount of pent-up demand, and in parallel in managing the current challenges, we are also preparing for the recovery when it comes.
We remain fully committed to keeping Hong Kong safely connected to the world and to keeping the flow of people and cargo going to the rest of the world. To date, our airlines have shipped over 190 million doses of COVID vaccines, and we have delivered over 13 million rapid antigen tests to Hong Kong. In terms of the cargo outlook, we do anticipate the imbalance between the supply and demand continuing with the lack of passenger belly space as passenger flights still remain low. With also continuing the restraints in the ocean freight supply chain, and therefore, we anticipate the demand outlook will remain strong. We continue to try and maximize our cargo capacity, but unfortunately, with the current restrictions, it does remain around 1/3 of our pre-pandemic capacity.
In July 2021, we launched Cathay, our new premium travel lifestyle brand, which opens an exciting new chapter in our story. This new brand brings all that we love about travel together with everyday lifestyle. It also brings Cathay Pacific, Marco Polo Club, and Asia Miles together in one place, simplifying the way that our customers then can interact with us, including how they earn status and can use miles. This new brand provides us with huge opportunities, and we're already making progress, and that's what we've laid out on this chart, some of the milestones through the course of 2021. We've rolled out a range of new offers in spending, dining, shopping, hotels and wellness, and a refreshed customer relationship program will be launched in July of this year.
Initially, Cathay will only be available in Hong Kong, while Cathay Pacific will continue to be our brand around the rest of the world. Over time, we will aim to expand the Cathay premium travel lifestyle brand to other markets. Another aspect that I wanted to touch on as part of our outlook section, again, is something that a number of you have asked me about, and indeed our financiers ask about, is around our sustainable development or our sustainability leadership strategy. Climate change has the potential to be an even more disruptive force than the pandemic has been seen, and calls for increased efforts by all stakeholders. As a leading airline, our responsibility to the aviation industry to be a leader in the journey towards making that sustainable and to help future generations enjoy the experience of travel, we want to play our part.
Now, in terms of our operation, our air operations are the vast majority of our emissions, and we do have a five-pillar strategy to decarbonize these. That's what we've set out on this chart, a few of the key initiatives within those five pillars. Perhaps if I just highlight one or two here. On the first column, under the aircraft related initiatives, the upgrading of our fleet. These newer aircraft, some of which have been delivered already, as I mentioned earlier, and some which are yet to be delivered, will each provide more than 20% of a reduction in the emissions generated compared to their predecessors.
In September of last year, we announced our commitment to using sustainable aviation fuel for 10% of our fuel consumption by 2030. Now, this is a challenging goal, particularly as supply in this part of the world is very limited. We do believe it's essential as part of our journey towards net zero carbon emissions by 2050. We also, in 2021, became a founding member of the Aviation Climate Taskforce, together with other leading airlines and the Boston Consulting Group. This new nonprofit organization has been founded to tackle the challenge of eliminating carbon emissions through innovation and collaboration. That's just to give you a bit of a flavor of our sustainable leadership journey.
My penultimate slide covers another topic in which I know there's much interest, our operating cash burn. Indeed, our cash generation, as it was in the second half of 2021. This slide sets out the declining trend we have achieved over the past two years to the point where, as I say, in the second half of 2021, we were cash generative. Unfortunately, the crew quarantine restrictions introduced in late December and the resultant impact on our capacity mean that we will be burning cash once again. This is estimated to be in the range of HKD 1 billion-HKD 1.5 billion per month until the conditions improve.
My final slide summarizes our key metrics, our attributable results, our monthly cash burn, and our liquidity, together with a comment on outlook for each one of them. To conclude, COVID-19 continues to pose significant challenges for the Cathay Group. As we marked our 75th anniversary last September, it definitely remains the toughest period in our history.
The decisive steps taken during 2020 and 2021, while very difficult in some cases, have resulted, as we planned, in the group becoming more focused, efficient, and competitive. This can be seen in the reduction in our cash burn. The achievement of a profitable second half in 2021 gives me huge confidence in what the group can now deliver, whether it has been through the maximization of revenue opportunities or the continued focus on effective and efficient cost management. The continued hard work and commitment of all our people in support of achieving these outcomes, whether it be the air crew handling the tight travel restrictions or our ground employees in offices, their focus on delivering service excellence in these most challenging of times is, has been unwavering and so very much appreciated by all stakeholders.
I know as I make this presentation today, Hong Kong is facing a particularly challenging phase of this pandemic, and our hearts go out to all the families affected. As Cathay Pacific, we are facing very difficult operating conditions today. However, I am very confident in the future of our airline. We have a healthy liquidity balance, which, through prudent liquidity management, we have retained at elevated levels for exactly these type of circumstances. Our second half 2021 profitable result demonstrates what our group can deliver, being a more focused, efficient, and competitive operation with our two clear brands being Cathay Pacific and HK Express. I believe this positions us extremely well to emerge successfully from this crisis.
My final point, as I've said a number of times previously, but I will repeat myself, to those of you watching or listening who have yet to have your vaccination or your booster, please do seriously consider doing so in order to help protect yourself and your families. Thank you.
We'll now hand over to our Moderator, General Manager of Corporate Affairs, Andy Wong, to begin the Q&A session.
Thank you. The first question from Bloomberg. Does the company intend to draw down on the government loan or request for an extension?
Oh, sorry. We, as you have seen from the figures, we have the HKD 30.3 billion as a total amount of liquidity, of which HKD 11.1 billion, which includes the HKD 7.8 billion government loan, remains part of. We'll continue to manage our liquidity prudently, and depending on the situation, we may draw down, or we may not. It's really something that we manage on a day-to-day, month-to-month basis. At this point in time, given the uncertainty, it's really hard for me to comment. At this juncture, I can't comment whether we will or we won't.
Thank you. Next question from Standard Chartered. Could you provide more guidance on the CapEx for 2022 and 2023? Thank you.
From memory, there is further information on this in the announcement, we have got a number of aircraft, which of course in our sort of capital expenditure, the biggest part of that is, the aircraft. We have got 11, I think it is, delivering in 2022, of which three are wide body, so they're more expensive, and eight are narrow body. We have 12 delivering in 2023, two of which are wide body and 10 narrow body. We have some others on order for delivery post-2024 and beyond. One thing perhaps just to remind people, typically when we purchase aircraft, we secure financing against them, so it's not an immediate drain on the cash flow. Indeed, because of the pre-delivery payments we make, in some instances actually it's cash positive to us once the aircraft are delivered.
Thank you. Next question from Jefferies. It's something that's very close to our heart. What is the current crew quarantine situation, and how does that affect the strategy in terms of planning on our closed loop?
I think that's probably a question that Ronald is better placed to answer than me. Maybe if I can ask Ronald to answer that one.
Sure, Rebecca. Well, currently we are subject to a very tight crew quarantine for both our passenger and cargo operation. On the passenger operation front, whether it's for turnaround or layover the flight, our crew, when they come back to Hong Kong, they are subject to 14 days quarantine at the hotel. Whereas on the cargo front or any crew that has layover overseas, they are also subject to seven days of hotel quarantine when they are back in Hong Kong. These constraints has limited our ability to provide capacity both on the passenger flight and on the cargo flight. At the moment, on the passenger side, because of the crew constraint, we can only operate around 2% of our pre-pandemic capacity. Whereas on the Cargo side, we started with around 20% of pre-pandemic capacity when the crew quarantine was firstly introduced late December.
Later on, I think we managed to improve to around 30% in February and in March as well. We don't foresee, unless the crew quarantine arrangement changes, we don't foresee we will be able to provide more than 1/3 of pre-pandemic cargo capacity at the moment. It is our number one priority, right, to look forward to the relaxation of the crew quarantine. Otherwise, our capacity will be seriously constrained. Thank you.
Oh, no. Thank you. Next question, we are from DBS. It's a few parts, so we can handle them one by one. Can we expect solid financial support from Swire Pacific to CX in case of further business downfall? And, maybe just on a related note, any further cost-cutting initiative, given the highly unfavorable operating environment in Hong Kong. Do we expect more restructuring?
Okay. Thank you for the question. I can't comment on behalf of Swire Pacific or our other shareholders, but I can say that there is no change to the current shareholding structure. We would, of course, like to express our deep appreciation both to the Hong Kong SAR government and to our shareholders for their continued support through the recapitalization in 2020, and on an ongoing basis to us as we work our way through this crisis. Thank you. Second question, around restructuring.
Cost cutting.
Cost cutting. I have to say, through everything that's happened, what our people have endured, and we as a team will emerge even better, I believe, even stronger as we come out of this crisis. We have reassured our people that there are no plans for pay cuts or special leave schemes this year. Our restructuring in October 2020 created a more efficient, more competitive, and focused airline. We think for the time being that that is sufficient enough to make us, or rather enable us to emerge from this crisis once the recovery begins.
Of course, you can never say never, but with the dual brand approach and benefiting from, as I say, this efficient and competitive restructuring that has already been done, we think there is no need for redundancies or special leave schemes at this point in time.
Rebecca, thank you. A quick follow-up question also from DBS. In light of the interest rate hike expectations, are there any changes to the interest rate hedging plans, for example, at the IRS?
I should highlight there's more information on this in our annual report. Typically, we do have some funding that is fixed rate and some that is floating, and we monitor this on an ongoing basis within certain parameters under our company policy. At the end of December 2021, I believe it was slightly more than 50% was fixed, and we'll continue to monitor this. Thank you.
Rebecca, thank you. Coming up, there are actually a number of questions surrounding fuel hedging. Perhaps we can address them one by one, and then so that we can get a clear message to market. Maybe the first one. Did CX enter into any new fuel hedging contract before February? If yes, what's the notional amount, and the average tenor, and any guide, percentage guidance on the overall hedging strategy?
Okay. That's a lot of detail. We have a prudent fuel hedging policy in place. I think I touched on this during the course of the presentation. I don't know whether it'd be helpful to go back to that. I'm not sure whether I can at the moment. In the slides, you saw that chart that sets out our projection going forward. The hedges we had in place at December 2021 and the percentage cover effectively through the quarters for the next two years. You can see that percentage information that you're asking there. The fuel hedging policy remains in place. We hedge based on the forecast consumption and the price at the time. Yes, we have continued to hedge in line with that policy and on an ongoing basis. There's no change to that for the time being.
Thank you. Can you please comment on the rising fuel costs and how would that affect your cost structure?
Yes. Again, you can look at that page, because I guess it would give you an indication of this there too, because you can see there in terms of the proportion that's hedged, I think for the first quarter from memory or at least 100%. You can see the proportion that's hedged and therefore the impact on our business will be less. There's also, of course, fuel surcharges that are driven by the price of fuel, which will be generated through the business. Of course, there will be an impact, but based on having the prudent fuel hedging policy in place, which is to manage the short term and medium-term volatility of the fuel price, we believe that that is the prudent approach going forward.
Perhaps one more question just on oil price. If the oil price retreats from the current high, at what level would we consider entering into new hedging contracts? Do you have some existing hedging contracts that go into 2024?
This is a similar question, I guess. We are continuing to hedge in accordance with our policy that sets out how much we should hedge at a certain price and dependent on the projection we have for volume to be consumed. That runs from a two-year period. As we continue to do it, the two-year period extends. Yes, we do have some into the early part of 2024.
Okay. Rebecca, thank you. Let's move on to a different topic. We also get a number of questions on Cargo. Here it is from HSBC. On Cargo, can we expect the capacity in 2022 to be similar to the second half of 2021? And what's our assumption in terms of the fuel consumption? Is it gonna be higher or lower than 2021? Thank you.
I think that's probably a question that Ronald is better placed to answer than me.
Sure. Well, firstly, on the cargo front, our constraint currently is on the capacity side, not so much on the demand side. We still expect the demand to be strong for the rest of 2022. As I mentioned in the earlier question, is that we are now constrained by the crew quarantine arrangement. The maximum cargo capacity we expect to be able to achieve under the current crew quarantine arrangement is no more than one-third of our pre-pandemic capacity. As I mentioned, unless the crew quarantine arrangement changes for the rest of 2022, we will be constrained by that. We are hopeful that it will change at some point in 2022, although we don't know exactly when. I think we'll be prepared to ramp up back to capacity we had in the second half of 2021 once the crew quarantine arrangement is changed by the government.
Ronald, thank you. Okay. Next question from DBS. How much of Cathay's total air passenger traffic in 2021 was actually transit traffic?
I think that's a question for Ronald.
I don't have the exact number on top of my head, but I believe it's more than 60% is around transit in 2021. I think we can get back to you offline.
Okay. Thank you. One follow-up question on Cargo. It's actually on staff costs. Staff cost was down in the second half of 2021, despite an increase in passenger and cargo capacity. However, given the potential wage inflation and the rising competitive labor market, especially for pilots, how would we view this component going forward?
I can make a start at that, and maybe Ronald might want to supplement. I think we operate in a competitive environment, and we aim to pay market salaries and packages for all our employees. The restructuring that we undertook in October 2020 was to do that in terms of enabling our operation to be driven through optimization of the more we fly, the more people can earn effectively. On a continual basis, we're looking at ways to drive efficiency and effectiveness through the use of technology and through making our processes more efficient. It's on an ongoing basis that we'll continue to try and improve our cost efficiency.
We've made huge strides over the past two years, and you can see that coming through in the numbers. We'll continue to do that in terms of our internal processes and driving our digital strategy going forward. I don't know whether, Ronald, there's anything you'd want to supplement.
Sure. Well, I think we have to remind our friends here that in the 2020 restructuring we have decided at that point to shrink the scale of our airline operation to around 70% of the pre-pandemic level. If you compare the staff costs of 2021, I think that is a reflection of such reduction of the full workforce to around 70%. Per staff, I think we are fully committed, as Rebecca mentioned, that we will pay all our staff group according to what is competitive in the market. Thank you.
Thank you. Maybe still on Cargo. Would it be possible to give us some idea on where we are in terms of cargo yield, year to date, and also maybe second half of 2022? Forward looking in terms of cargo yield.
I don't think we've published anything in the public domain in terms of yield for 2022. There will have been some information in the January traffic report about our operation. It was published in February. I can't remember the data that was included off the top of my head. I don't know whether, Ronald, you recall the specifics of the January traffic figures to elaborate.
Well, as Rebecca mentioned, I think we have not published any solid information about cargo yield. I think in general, it's fair to say that because of the capacity constraint, different route mixes changes. I would say, I think, the cargo yield in general will still remain at a higher level than normal compared to the pre-pandemic level. The market is very dynamic. We are changing our work structure all the time in order to cope with the operational constraint and chasing the right demand. I think the yield will continue to fluctuate. Given the market imbalance, in general, I would expect it will still be higher than the pre-pandemic level for the rest of this year.
Thank you. Plus, we have time for two more questions. The next one is on slot. In view of the slower recovery than expected in Hong Kong, how would that affect the overseas slots? I think we're referring to the overseas airports.
I'll ask Ronald to answer that one, if I may.
Yeah. Yeah, sure, Rebecca. So far, we haven't lost any overseas slots, and we've managed to secure all the slots we need for the summer season, which starts end of this month until end of October. But moving forward, we're closely monitoring the risk of any chance of us losing slots in overseas market, which depends on how quickly we can recover our passenger and cargo capacity. This is a key risk we are closely watching and tackling right now.
Okay. Ronald, thank you. Final question from HSBC. Can you please comment on your borrowing position? Have you encountered any major difficulty on refinancing with banks? Thank you.
Thank you for the question. As I mentioned, we have HKD 30.3 billion of liquidity at the end of 2021, of which 11.1 billion is undrawn. We continue to renew financing on an ongoing basis as different financing comes up at different points in the year. To this point, no, we haven't had any serious issues with renewing that financing.
Thank you, Rebecca.
Thank you to all our hosts, and thank you for your questions. Finally, note that the slides from today's presentation will be available to download on our investor relations website later. If you have any further questions, please write to us at ir@cathaypacific.com, and we will endeavor to respond to them as soon as possible. This concludes the Cathay Pacific Airways Limited 2021 annual results analyst webcast. Thank you for joining us.