Earnings Call: H1 2021

Aug 11, 2021

Good afternoon. Welcome to the Cathay Pacific Airways Limited 2021 Interim 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, is Rebecca Sharp, after which we will hold a Q and 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 e mail. If you have not received a copy of the presentation, kindly contact ircafepacific.com. You are invited to submit 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 and A session. With that in mind, allow us to introduce our speakers. Chief Financial Officer is Rebecca Sharp Chief Customer and Commercial Officer, Mr. Ronald Lamb. I'd I'd now like to invite Ms. Sharp to begin the presentation. Thank you, and good afternoon, everyone, or maybe it's good morning or even good evening, depending on where you're joining us for this briefing. The briefing will be structured in 3 parts. Firstly, I'll start with an overview of the key numbers and a summary of our responses to the COVID-nineteen challenges that we continue to face. And secondly, I'll walk through some of the key figures. My third section will be on outlook. And then of course, we're happy to take questions. So moving to the first slide. I'm sure it doesn't come as any surprise to anyone If I say that the COVID-nineteen pandemic continued to pose significant challenges for us as an organization in the first half of twenty twenty one. And this continues to be our toughest period in our history. And our financial result for the first half of twenty 21 is a reflection of that. You can see on this table where I've got some of the key numbers. Revenue reduced compared to the first half of twenty twenty by about 43%. We did make a significant attributable loss in the amount of HKD7.6 billion. It's somewhat smaller than the loss that was made last year for the same period, but still sizable. And also, it is smaller than the loss that we made in the second half of twenty twenty. You'll note on this slide, we've included an adjusted attributable loss. This is where we've adjusted for a couple of 1 off items, and I'll talk through the detail of those a bit later. Turning to liquidity. This has obviously been and remains to be a key focus for us. At the end of June This year, the balance was €32,800,000,000 which you can see is significantly more than we had at the end of June 2020. And as a result, our gearing, if I have adjusted for Hong Kong IFRS 16, sat at 0.8 2 at the end of June compared to 1.5, again all numbers as of 30 June 2020. In terms of our responses to COVID-nineteen, I've presented this at the last few briefings. So for easy reference, I've tried to summarize here the key areas of focus that we talk to, namely our liquidity management, Our operating cost management, our capacity management and our fleet management. And I'll cover the majority of these through the course of the presentation. The one I just wanted to touch on here was the fleet. So we currently have 89 aircraft parked. That's of our 238 aircraft fleet. We have taken delivery in the 1st 6 months of this year of 7 new aircraft, And we've completed 8 lease returns. If I move on to the numbers, so this is the 2021 6 months results in some more detail. You can see here this schedule summarizes the key elements of the significant first half loss of €7,600,000,000 and compares them with the figures for the first half of twenty twenty. A few points that I want to highlight here. On the positive side from a results perspective, while still very significant, the smaller loss is definitely partially a reflection of the very difficult decisions taken last year to restructure the organization. We've seen revenue come down further, But the loss has reduced. On the negative side though, the challenge that's impacted the group most significantly in the first half Has been the crew quarantine measures due to the restrictions this places on our capacity to operate flights, particularly cargo and the resultant closed loop operations or duty cycles that we've been working with our crews on. As these restrictions were partially eased in May of this year, we have started to be able to increase The capacity on the cargo side and we have started to see the benefit of this filter through in June. Also I note here the adjusted Last figure, again, of £7,600,000,000 compared to last year's sorry, £6,700,000,000 compared to last year's £7,400,000,000 And I'll touch on the adjustments to come to that figure in a bit more detail later. This slide Tries to show an analysis of the major changes in the numbers between the adjusted loss for the first half of twenty twenty through to the adjusted loss for this year 2021. You can see the significant reduction in passenger revenue versus 2020. And you'll recall that actually in 2020, the month of January was a strong month for our group. And therefore, the large proportion of that passenger revenue variance is the January month variance. February was Higher in 2020 than in 2021, but the bulk of this variance is driven by January. The bright spot here is cargo revenue, which you might not think that From just seeing a flat line and a number of HK65 million dollars But actually, the revenue for cargo was at more or less the same level this half versus 2020. And that's despite the capacity reduction that we So as a result of the crew quarantine restrictions. You can see also here the cost reductions. Again, I won't talk them. We've got a few slides later that set them out in a bit more detail. So suffice to say, our adjusted loss for the first half of twenty twenty one was HKD6.7 billion. So moving to the one off adjustments that we've made in this first half, to talk them in a little bit more detail. This slide is mapping that CHF 6,700,000,000 adjusted result that I mentioned down to the attributable loss of CHF 7,600,000,000 So to explain these in a little bit more detail, as part of the preparation for the interim results, We undertake impairment assessments in accordance with accounting standards. So this assessment is necessary for our businesses and our aircraft. And unfortunately, as a result of the assessment done, we've reached the conclusion that we need to impair a further 11 aircraft. This is on the basis that we don't believe they will reenter meaningful economic Service before the end of their life or before they are lease returned. And therefore, we've made an adjustment totaling HKD0.5 billion Hong Kong dollars. Now that split, you'll see two numbers on this chart, €460,000,000 €40,000,000 And that's between Cathay Pacific Aircraft, the €460,000,000 and Hong Kong Express Aircraft of €40,000,000 The other one off adjustment we've got here restructuring costs. You'll recall we had a large amount in our results for the second half of twenty twenty. For the first half of this year, we've very unfortunately had to take the decision to close a number of our Base is overseas, so we've had redundancy costs to pay for that. And also, we've had to offer voluntary severance schemes. Again, the cost of that are reflected in this number of €403,000,000 And that brings the attributable results bottom line to the €1,000,000,000 that I referred to earlier. Turning to our balance sheet And liquidity. This slide sets out our net debt and liquidity position as at 30th June and compares it to where we were 6 months or so ago at end of December 2020. Our net debt after deducting the liquid funds increased by 1 8% to the number you see there of €75,000,000,000 75,100,000,000 And this is somewhat reflective of the impact of the various bond issues that we've done this year. The available Unrestricted liquidity sat at €32,800,000,000 which is an increase versus the December number of €28,600,000,000 And I'll show the movements in these in a bit more detail on the next couple of slides. So this chart maps the movement in that HKD28.6 billion number that I referred to that we started the year with Through to the €32,800,000,000 number at 30th June. You can see in the movement that the operating activities cash Flows and the investing outflows are relatively small changes as we tightly control these in our spend. The financing activities reflected on the right hand side of the chart are primarily The convertible bonds issue that we did in February and the proceeds from the MTN or straight bond issue of USD 6 US50 million dollars that we did in May. The remainder, obviously, is our loan and lease repayments and some small amounts of Different financing that we raised in the first half. Suffice to say, we ended up at an unrestricted liquidity balance of €32,800,000,000 We've added a slide this time just to summarize the liquidity position since December 2019 for your easy reference and as a reminder of the key fundraising activities that we've done across this period. So the raising of finance this year, as I mentioned, the MTN issuance and the convertible bond, building on the successful rights issuance And the raising of preference shares funding from the government last year. So that's just sort of a summary picture for you to Sort of see the progression over the period. Moving on to the business operations. The next slide you'll be familiar with. I presented it at the June briefing and also at the March briefing. I've included it again more than anything just to highlight what we all know that there has been no significant change in the last 6 months So the dramatic impact that we've seen by COVID-nineteen. Just a reminder, the chart the dark green color is the Cathay passengers. The lighter green colors are the other airlines' Hong Kong passengers. And the right hand side with the sort of pinkish colored box, There is a small green line running along the bottom of there, but it shows the dramatic impact and reduction in passenger throughput in Hong Kong. This, of course, is then reflected in our numbers. So starting with passenger statistics. Suffice to say, passenger revenue was severely affected by COVID-nineteen related travel restrictions and quarantine requirements. It decreased by 92.8% versus the 6 months of 2020. As I Did note earlier, you'll remember January was quite a strong month in 2020. So the comparison is not so like for like in terms of the The travel restrictions and the quarantine requirements are effectively the main disruptor for us in the time being. Moving on to the next Slide. This is just showing the ASK and load factor graphically by quarter. So again, Similar to the graph on a previous chart, you can see the dramatic reduction. And of course, Whilst it does reflect that significant reduction in our capacity and also the poor load factors, We do note that the cargo is supporting the destinations that we're flying to. And if I move on to the cargo operations, this is the bright spot, arguably, for the first half. Our strong cargo performance that we saw in 2020 continued through into 2021. Our available freight Ton kilometer capacity, however, decreased compared to last year. And that's primarily due to the reduction Was at record levels. 81.4 percent for the first half is a record level. And the strong yield means that our cargo revenue was at a similar level to the first half of twenty twenty. So you can see that on the first line. The difference between the revenue for the two periods is very, very small. We've had huge amount of focus on how to maximize our cargo capacity. We're using freighters very extensively. We're operating quite a number of cargo only passenger flights. We charter flights from our all cargo subsidiary, Air Hong Kong. And we're still operating the 4 converted 7 77-300ER freighters, as we're calling them, passenger freighters. So As I say, cargo performance has been strong, driven by the imbalance between supply and demand. Again, similar to the passenger chart, we reflect this in a graphic form. So you can see the dark Bars reflect the load factor with the percentages stated above them, so that 81.4% 81.3% For the first half of this year. And the line is reflecting the cargo revenue per Freight time kilometer. And as you can see, that has been on a trajectory up since the end of 2019. Moving on to operating costs. I touched on this very briefly earlier. So coming back to this dimension of our operation, which, of course, remains a key focus. It is, of course, the second aspect of our liquidity management. So when I talk about liquidity management, it's 1 on the one hand, it's the ability to raise Funds, which we have successfully done this year so far. On the other hand, it's how we control that cash burn. And that's all about our cost management. So this slide summarizes our costs for the 1st 6 months of 2021 against the 1st 6 months of 2020. Of course, there is a significant reduction that's due to capacity reduction. But The hard work that's been done on cost optimization and cash preservation initiatives are definitely coming through in these figures. The figures are very distorted on a per 80 ks basis, of course, because some of our costs remain fixed or semi fixed and therefore can't be reduced in line with capacity. Fuel, Of course, remains a very large spend category for our business. Our gross fuel cost in the first half of this year is nearly A 50% reduction on the first half of last year. Though a significant reduction of that is volume consumed, It is partly offset by the increased fuel price. We have benefited in the first half of twenty twenty one with a hedging gain of HK6.25 HK5 million dollars And the other point perhaps to note on this slide is the fuel consumption per 1,000,000 Okay, which has reduced by 11.5%. So one of the things we're able to do as we've got a smaller fleet flying is, of course, Focus on flying our more efficient aircraft and we can see that in the reduction in fuel consumption. A A question I'm often asked about our fuel is around our fuel hedging policy. So just to say that remains unchanged. And the table on the top right of this graph shows the hedging position that we have in place at the end of June 2021. Just to reflect our cost reductions graphically, this chart compares The total operating costs in the first half of twenty twenty is €32,300,000,000 with the total operating costs for the first half of twenty twenty one. Now you can see all these numbers coming down. Of course, they are distorted somewhat by the capacity reductions. But suffice to say, we do have reductions across all categories of our operating costs in the first half of twenty twenty one compared to the first half of twenty twenty. Having talked through the Cathay Pacific Airline operations figures, I'll now provide a brief commentary on our subsidiaries and associates, starting with Hong Kong Express or HK Express, Sohu made a loss of HK1 $1,000,000,000 in the first half, which is approximately 20% deterioration on the same period in 2020. Now you can see from the statistics here, the available seat kilometers dramatically reduced from the same period in 2020. And of course, as I've alluded or mentioned for Cathay Pacific, for HK Express, the first half of twenty twenty was a better period for the organization. Now it goes without saying that Hong Kong Express team have also been working hard continuously And their focus on cash preservation and cost optimization in order to retain or keep these numbers as tightly controlled as they possibly can. In terms of our other major subsidiaries' operations, they're of the passenger and cargo story. So for Air Hong Kong, their results, as the all freighter cargo operator, benefiting from the continued strong cargo market performance with that supply and demand imbalance, whereas our airline service subsidiaries continue to be negatively affected by the low numbers of passengers that we've got flying at the moment. In terms of our associates, Namely Air China and Air China Cargo. For Air China, it's a similar story. Just as a reminder, we capture To their results, 3 months in arrears. So the period we're looking at here is the 6 month period to 31st March 2021 Compared to the 6 month period to 31 March 2020. So those two periods compared one to the other, The 2021 March 6 month period end declined versus the same period a year prior. And Air China also had lower results than their 2020 figures, primarily due to higher fuel prices and a reduce in yield. My final section before we open up for questions is on outlook. So this slide is the same as the one I presented at the June briefing, But I include it here for reference mainly and to acknowledge that we do generally ascribe to the IATA projections for the medium term outlook. And I do believe that we are well placed in the Hong Kong Aviation Hub. As part of the Greater Bay Area, we've got the 3rd runway on the horizon. And the combination of these factors, we believe, will enable us to successfully emerge from this crisis. But if I take it a bit more Nearer term than this, to talk firstly about vaccinations, We believe that the resumption of regular cross border air travel is dependent on the reopening of borders and the ability to remove the travel restrictions that are currently in place. And as governments around the world have commented, this will only be possible when we reach Sufficiently high vaccination rates. This is why we at Cathay are determined to play a part In encouraging our employees and our partners through our internally, we did it through our Arm Up, Let's Fly Again campaign. And in the wider Hong Kong community, we've offered incentives in the range of Lucky to Royal prizes in order to encourage people to get vaccinated. We are I have to say, the figures that we quote on this slide are extremely high, and we're really grateful to all our staff who I've participated in this. So currently, we have 88% of our people based in Hong Kong who have been vaccinated or booked to have their vaccine, Of which 99% of the pilots, the flight crew are vaccinated and 91% of the cabin crew. So it is a great achievement so far, and we are very much appreciative of everybody participating in this initiative. In terms of outlook on the passenger side, I think it goes without saying that the pace and timing of recovery remains highly uncertain. As noted earlier, we do ascribe to the IATA projections for the longer term outlook, but nearer term, it's much more difficult to assess. There will be a need for us all to adapt to a new travel normal, which will include, As I think I mentioned last time, the digital health passes and of course our CathayCare protocols. It is our hope Now we can operate 30% of our pre pandemic capacity in the last quarter of this year, but this is highly dependent on travel restrictions and quarantine requirements being lifted in Hong Kong and globally. In terms of the cargo outlook, we anticipate the imbalance between supply and demand will continue and the lack of passenger valley space and constraints in the ocean freight supply chain will drive strong performance. With the relaxation that we have seen for cargo crew in terms of crew quarantine requirements Our returning to full freighter capacity and operating as many cargo only passenger flights as possible will support our strong performance. And we're seeing indications continuing to be positive on the demand side in terms of e commerce, Etcetera. So overall, for the second half of twenty twenty one, we are planning for the strong cargo performance to continue. Now in addition to commenting on our passenger and cargo operations outlook, I also wanted to briefly touch on a number of other aspects of our business that are important to our recovery trajectory. Firstly, to touch on Cathay. So on 5th July, we launched Cathay as our new premium travel lifestyle brand, bringing together everything we love about travel with everyday lifestyle. We've already launched a new series of standard chartered Mastercard credit Cards and over the coming months, Cathay will be rolling out a range of new offers in the realms of Spending, dining, shopping, hotels and wellness. And another dimension of our Recovery trajectory is around aircraft. So I mentioned earlier, we'd had 7 new aircraft delivered in the first half of this year. Of these, 4 aircraft were the A321neo aircraft. This is a state of the art Aircraft, which has been launched this month, I think 4th August, was our inaugural flight. And as we Start to see the ability to resume flights to the Chinese mainland and the region. We've taken the opportunity to launch this aircraft. It's more efficient than older aircraft. It delivers reduction in CO2 emissions, which Helps us on our journey to net 0, has less noise, and we believe it offers the most enjoyable short haul experience in the world. The other aspect, just mentioning in connection with the A321neo plane, But I wanted to touch on our 2,050 target for net 0 carbon emissions. It's a topic I'm starting to receive More questions about from our investors wanting to understand our plans as they, too, have targets for Sustainable development in their businesses. Climate change has the potential to be an even more disruptive than the pandemic, Although in some ways, it's hard to believe at the moment. But we do believe in increasing our efforts and That everybody globally will need to increase their efforts in order to make a difference in this space. So we announced earlier this year our commitment to achieving net 0 carbon emissions. We recognize this is an extremely challenging goal, but we will believe it's Essentially, it's part of our ongoing efforts towards sustainable development. We have a number of initiatives ongoing in this area, including a small investment in Sustainable Aviation Fuel. We have our carbon offset program. And as I've touched on with the A321neo, we'll continue to upgrade our Finally, before I summarize the slide that perhaps quite a number of you have been waiting for, we want to ask about the question about the Cash burn. So our operating cash burn here is set out on this slide. We I've We mentioned the pre restructuring operating cash burn and post restructuring operating cash burn guidance previously. You can see that pre restructure, we were in the range of anything from CHF 1,500,000,000 to CHF 3,000,000,000 in terms of what we spent in a month. Post restructuring, which is obviously October last year, the guidance came down to between CHF 1,000,000,000 to CHF 1,500,000,000. We had the impact of the crew quarantine that came into being in February. But for the first half of twenty twenty one, we did progressively manage to reduce our monthly operating cash burn down from the higher levels in January down to much lower levels in May June. And in terms of outlook for the second half, We are targeting to keep this below $1,000,000,000 per month, but that is dependent on the Quarantine restrictions for crew and passengers changing both in Hong Kong and globally in order to achieve this number. Finally, my summary. I've tried to capture sort of all the key points here to conclude. So The final sort of statement, I guess, is COVID-nineteen continues to pose significant challenges for the Cathay Group. It definitely does remain the toughest period in our history and this is reflected in the attributable loss that we're reporting of HKD7.6 billion. However, whilst significant, it is less than the loss we saw in first half and second half of twenty twenty. The decisive steps taken both last year and into this year, whilst extremely difficult in some cases, have resulted as planned in the group becoming more focused, efficient and competitive. And this can be seen in our progressively reducing operating cash burn and are in our increasing liquidity balance. We do see high vaccination levels as the key to recovery, which is why we at Cathay have been determined to play a leadership role in encouraging our people and the wider Hong Kong public to get vaccinated. So my final comment is actually a polite request, and it's a repeat of the one I made in the June briefing. So for those of you who didn't Act then, maybe you can act now. And it's politely to ask you if you're listening or watching and you haven't had your vaccination yet, Please do seriously consider going and getting vaccinated so we can all move into the next phase of recovery. Thank you. We'll now hand over to our moderator, General Manager of Corporate Affairs, Andy Wong, to begin the Q and A session. Thank you. So the first question we have is from Kelvin Lau of Daiwa Capital Markets. He has a few parts, so let me go through them all first. Our operating cash flow turned positive for the first half of twenty twenty one. Should we expect the operating cash flow to continue to be positive For the second half? Now secondly, do we have further plans to raise capital from the bond markets? Is there any ceiling to that? And then finally, as Cathay aims to return to 30% of normal capacity by the last quarter, Is this assuming the COVID-nineteen Delta outbreak to maintain the current situation? And what are the countries or destinations that we could see to have more upside on increasing flights. Okay. Thank you very much for your question. Just to correct, the first half, We've the monthly cash burn has come down significantly towards The second part, sort of Q2, the end of Q2 for want of a better phrase, we've had a number of one offs and timing issues. So I couldn't say that it's Positive on an ongoing basis. Going into the second half, it's not positive. We're targeting for it to be less than HKD1 1,000,000,000 Hong Kong dollars a month, but it's not in positive territory yet. In terms of your question on raising capital, We don't have any specific plans as I sit here today. But as I've said before, we believe we've got a healthy balance, but We are conservative in terms of our management of cash and liquidity. And therefore, as opportunities arise for Reasonable at reasonable cost, we will consider increasing the funding we have available to ourselves. In terms of your question on 30%, it's based on and Ronald can possibly allude or add to this comment. It is based on our projection as of what we know today. And it is With some expectation of quarantine restrictions lifting both here and globally. So in terms of Delta specifically, not really incorporated, but I'll let Ronald add to that. Well, maybe I can supplement a little bit. But the next few months is Still full of uncertainty to begin with, so we really don't know whether we can achieve the 30% or not. But we know That as vaccination rate go higher in various places, including Hong Kong and other countries that we fly to, There's a better prospect for those countries to open up and relax the travel requirements. For example, starting this Monday, Hong Kong has got a new country grouping, which has started to allow Hong Kong residents from high risk countries to at least return to Hong Kong. So compared to before, like people from the U. K, Hong Kong residents, they cannot come back. Starting Monday, at least they can come back. And for the medium risk countries, The current regulation allows foreigners, nor Hong Kong residents to come in as long as they are vaccinated. So these are positive developments from a demand angle. Another factor we need to consider in terms of whether we're going to reach 30% by end of this year is Also on the supply side constraint that we've been facing, for some of our operation, in particular, our passenger operation, We are still faced with some crew quarantine requirements, and this has been consuming quite a lot of our crew resources and therefore restricting the amount of capacity we can add back to those countries. So both on the demand side and supply side, we've been Working with the government to find ways to allow us to add more capacity. So subject to those development, We are aiming to go back up to 30% of our passenger fuel capacity by the end of this year. Thank you. Next question is from Andrew Lee of Jefferies. What is the outlook for cargo yield in the second half? Could it be higher than the first? Let me take this question. Well, usually, for a normal cargo market, The second half will be stronger than the first half in terms of both demand and yield, etcetera. So this year, we expect this will be the case. Although first half, as mentioned by Rebecca, we already achieved pretty high yield. So second half, we expect the demand continue to be strong and we are going to the traditional cargo peak season In a couple of months' time, so we expect that you can further improve compared to first half. That will be our expectation for now. Okay. Thank you. Next, we have actually a few questions on impairment. Perhaps we can address that in one go. So what is the are there further impairments for this year? And what's the plan in the future? Thank you. Yes, you'll recall that when we announced the full year results, We did include in our annual report a statement around the fact that if the recovery was delayed by a further 6 months, That we had an expectation that there may be up to HKD 0.8 billion dollars of impairment of aircraft assets necessary. So as you saw, the number ended up being €500,000,000 Now we've done the similar assessment in terms of looking forward. If recovery was delayed further, would we have further impairment? And we concluded that If we if it is delayed further, the impact of aircraft needing to be impaired would not be material. So we're not expecting anything significant. Okay. Thank you. Next, we have a question from Lachman Chan of Credit Suisse. It's about slots. So basically, it says, do we need to fly more flights to secure slots? And how many of them is actually related to capacity? I'll let Ronald answer that one. Well, let me explain a little bit on the context first. In many regions and markets, actually the domestic traffic, the air traffic domestically within Europe, within U. S, within Chinese mainland, etcetera, actually have been recovering quite well. So many of the airlines, they have already recovered close to the pre pandemic level of domestic travel. So in many of the airport, which serve both domestic and international travel, The slot actually is in high demand. So but so far, I think we have been able to secure a slot And getting the exception, even though we are not fully flying, we managed to retain our slot. But increasingly, moving forward, We expect there will be more and more competition for the scarce resources in slots overseas. So if Hong Kong is lagging behind in terms of our recovery, there's a certain risk that we might lose some precious slot that we have obtained over the years in overseas market, and that could harm the Hong Kong aviation hub status. So therefore, it is important for Hong Kong from that perspective to keep a good pace with the recovery with the rest of the world. Okay. Thank you. So next question is from Evan Loy of DBS Bank. New COVID cases rebounded in highly vaccinated countries Due to Delta variant recently, are there any updates on the outlook for the aviation field recovery? Yes. I mean, I can take that question again. Well, despite the Delta variant being more transmissive, but among the what we understand is that among the vaccinated population, At least the vaccines serve to control the severity and impact to those people. So we still believe that as the Express sets or the government sets, high vaccination rate is still the key driver for opening up. And many governments are still pushing for high vaccinations. And as long as their population is protected from high severity cases, And there's a tendency to open up. So we are still hopeful that vaccination will lead us to the path of recovery moving forward despite the Delta variant situation. Thank you. So there's a follow-up question from Evan. What is the projected cash flow and profit and loss of the recent launch Of the Cathay brand, what are the economic benefits associated with it? I'll maybe start that and let Juan will illuminate. It's not something in terms of the financial figures connecting to that, that we would disclose at This stage, but there are definite benefits and rationale for us to be doing this or treading this path, taking us forward into slightly different areas. But I'll perhaps let Ronald talk a little bit more to elaborate on the subject. Sure. Thank you, Rebecca. Well, as Rebecca said, we are not in a position to review the concrete numbers and projections, But we are confident that our new premium travel lifestyle business proposition will bring us good financial return in the medium to long run. The concept is that we have already established a very strong brand On the travel side, we have built many relationships through our premium travel with our customers already. And we also built a very strong currency, Asia Miles, in our ecosystem. So leveraging on this, we believe we have a very strong platform to go into the lifestyle, To go into the lifestyle arena to engage our customers and We tell to them various propositions, riding on our strength on the travel arena. So we believe this will be a very strong proposition moving forward, And he will contribute positively to our financials. Thank you. Next, we have Ajith Khan of UOB. Could we expect a similar quantum of CapEx for the second half of twenty twenty one compared to the first half of twenty twenty one? Am I allowed to say a simple answer? Yes, roughly speaking. And just as a reminder, the CapEx that we spend is primarily on aircraft, And each of those are financed. So it's not a sort of outflow as such, but we raise financing at the same time. But yes, similar levels to the first half. Okay. Thank you. Next, we have Nathan Gee from BOFA. So the first half of twenty twenty one, the cash burn was less than 1,500,000,000 yen per month in Slide 35, referring back to your presentation. Or was it 900,000,000 per month in Slide 37? Thank you for the question. The logic of the two different numbers is in the earlier slide, the less than €1,500,000,000 was reflecting the range. So we started the year at a much larger operating cash burn on a monthly basis, But that reduced over the course of the 6 months. So the difference between the two slides is on the final slide, I was trying to reflect An absolute average calculation, but of course, that 0.9% number is not reflective of sort of what was happening month to month. So the slide the earlier slide was more to reflect the range that the operating cash burn was operating within in the 1st 6 months. The last number, the 0.9 is the absolute average, but there wasn't a particular month that was absolutely that number. Okay. Thank you. Okay. So I think we have time for 2 more questions. So here they are. So first one from Ivan Loy of DBS Bank. Have CX entered into new fuel hedging contracts in the past 7 months of 2021? Yes, we have. We I think you're aware, and as I mentioned, we haven't changed our fuel hedging policy. So we do continue to hedge based on Projected consumption in accordance with the matrix that we follow. So the answer, yes, we have. Okay. Thank you. And next from Andrew Lee of Jefferies. If the Q4 PAX capacity is 30% of the pre COVID levels, how much could PAX yield decline compared to the first half of twenty twenty one. So I think the question is about when we're increasing more flights, do we expect use to decline? I'll let Ronald answer that question. Well, I would say it's too early to say, because we are still focusing on the next 2 months in terms of capturing demand. It's a bit too early to project the actual traffic mix, which will contribute to the yield and the ticket price At the moment, so it's hard to say at the moment. Thank you to all our hosts and thank you for your questions. Currently 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 ircathapacific.com, and We will endeavor to respond to you as soon as possible. This concludes the Capa Pacific Airways Limited 2021 Interim Results Analyst Webcast. Thank you for joining us.