Good afternoon. Welcome to the Cathay Pacific 2020 Annual Results Analyst Webcast. Thank you for joining us. Before we begin, please allow us to go over the rundown for the webcast and the house rules. Kindly note that today's briefing will be conducted in English. We'll begin with a presentation by our Chief Financial Officer, followed by a Q&A session. 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 yet received a copy of the presentation, kindly contact ir@cathaypacific.com. You're invited to submit your questions at any time during the briefing by clicking the Q&A box at the bottom of the window and filling out the submission form. Our moderators will then read these out during the Q&A session.
With that in mind, allow us to introduce our speakers, Rebecca Sharpe, Chief Financial Officer of Cathay Pacific, and Ronald Lam, Chief Customer and Commercial Officer. We'd now like to invite our Chief Financial Officer, Rebecca Sharpe, to begin the presentation.
Good afternoon, everyone, I'd like to echo the welcome to this as my first presentation for the analysts as the newly incoming Chief Financial Officer for Cathay Pacific. The format of the session that we'll hold today is broken into three key areas. We'll talk firstly about highlights and just a bit of a refresher on our responses to the impact to our business of COVID-19. We'll then cover the group highlights, some of the key figures, and then we'll move on to talking to you a bit about the outlook going forward. Without further ado, I'll move on to the key highlights. I'm sure it does not come as a surprise for me to say that 2020 was probably the most challenging year in our history.
The impact of COVID-19 pandemic has decimated the aviation industry, the results that you'll see in the following presentation reflect this. At a revenue level, you can see that there was a 56% reduction in our revenue. In absolute terms, it was around HKD 60 billion. A point to highlight here is that while HKD 60 billion came off our top line, you'll note it didn't make its way all the way to the bottom line. Yes, we made a significant attributable loss of HKD 21.6 billion, through measures taken throughout the year, some of this was mitigated.
You'll note on this slide, I've also included what we've referred to as an adjusted profit number, or rather loss number in this case, and that's because there were quite a number of one-off items that were put through the results in 2020, which then theoretically don't get repeated. I want to talk a bit about these later on in the presentation. The other numbers to note on this slide are obviously liquidity, key importance for us this year, and there's been a huge amount of monitoring and management of this, and our gearing number or ratio of 0.75. Moving on to the impact of COVID-19 and the responses we undertook. I understand that these have been presented before. I think you're familiar, these reflect the key areas that we tackle the challenges through using these elements, Survive, Recapitalize, Restructure.
As I mentioned at the start, I'm not going to spend loads of time on this section because we have covered it before. Starting with our operational response actions. We group these into four key areas, namely our capacity management, our employees, our operating costs, and our capital expenditure. Measures were put in place throughout the course of last year to manage and mitigate all of these. We're extremely grateful for the support we received from our employees with respect to special leave schemes or unpaid leave, executive pay cuts that were taken, and also to suppliers and partners who worked with us to help us reduce operating costs and capital expenditure and/or defer operating costs, capital expenditure.
In addition to governments here in Hong Kong and around the world, who worked with us to support the different elements in terms of grants, subsidies, throughout the year. We're extremely grateful for the support we've received from everybody in terms of our stakeholders. Moving on, the second element of our response to the impact of COVID-19 was the recapitalization. I'm sure you all remember in June 2020 how we announced a HKD 39 billion recapitalization. This was support both from the Hong Kong government and from our shareholders. This was very much appreciated at this really critical time, during the course of 2020. The graphs I'm showing at the bottom in terms of total equity, debt, and gearing reflect the difference between June 2020 and December 2020. You can see the impact that the recapitalization had on all these key metrics.
The third element of our response to the impact of COVID-19 was the restructuring exercise undertaken in October. I know this was an extremely difficult set of decisions that the company had to make at the time. However, it was the responsible course of action to be taken in order to set the company up for the future, ensuring we're focused, competitive, and efficient to meet the future challenges. If I move on to the group financial highlights, and these obviously reflect the impact of these COVID-19 responses that we implemented. On this slide, I've laid out a number of different numbers, splitting the loss between the first half and the second half for each of the years 2020 and the comparative year, 2019.
We also show here the group attributable loss. You can see the HKD 21.6 billion, also what we're referring to as an adjusted loss of HKD 13.9 billion lower down on the chart, the comparison between the two halves of the year. Again, as I touched on, the adjustments, the one-offs that go between the HKD 21.6 billion and the HKD 13.9 billion, I'll cover those on a later slide to share with a bit more detail with you. The thing I want to highlight here probably is around the difference between the first half and the second half. Yes, in the second half, at a bottom line level, we lost HKD 11.8 billion in the second half compared to the HKD 9.9 billion that had been lost in the first half.
If I then adjust for these one-offs that were charged to the results throughout the course of last year, we can see that actually in the second half of 2020, the result, the loss that we made was less than in the first half. There are a number of reasons for this. These include matters such as matching our capacity to demand. As the pandemic sort of became more prevalent, came underway effectively, we were able to match passenger demand to capacity from maybe about April onwards, and therefore, the impact of that in the second half was a benefit, a reduction in the loss. We also were implementing cost saving, cost reduction, cash burn reduction measures, and that obviously was all kicked off in the first half, whereas in the second half, we see the full impact of that.
We had benefits from unpaid leave that the staff took and executive pay cuts. That was slightly larger in the second half than the first. The government support that we received globally, here in Hong Kong and overseas, there was more support received from that method in the second half than the first. It did result in a less loss if I take away the one-offs in the second half. Overall, though, of course, HKD 21.6 billion as a loss, definitely, as I said earlier, represents the most challenging year in our history. This slide elaborates a little bit more on the changes, if I compare the loss made in 2020 with the profit we made in 2019.
Again, you can see the major change being the passenger revenue reduction, the HKD 60 billion I've touched on earlier, and the offsetting of the cost reductions, both in fuel and other operating costs. These are both, some of them are variable and driven by the capacity changes, some of them are more fixed, and it was more around how we took measures to reduce those. The bright spot here, I should highlight, although it's only a small green bar, is the cargo revenue. Cargo did do better in 2020 than it had done in 2019. The other piece, probably to emphasize on the other end of the chart, you can see between that HKD 13.9 billion loss figure and the HKD 21.9 billion loss figure, the adjustments that I'm referring to, the one-offs. Moving on to those one-off adjusting items. We can see these on the next slide.
I want to spend a little bit of time on this, because I know this will be of interest to people. Here I'm laying out the key charges that we refer to as one-off, or slightly exceptional, and take us from the HKD 13.9 billion loss that was made to the HKD 21.6 billion. The first of these is restructuring. That is what it says. The sad and extremely difficult decision to make people redundant, of course, comes with associated costs, and that cost the company HKD 2.4 billion. Also related to that, Cathay Dragon had losses, tax losses, which of course tie to having a deferred tax asset that we were carrying in the books. That, with the cessation of the Cathay Dragon operation, it's not possible to utilize those losses, and therefore, we need to write those off as well.
Then the major item that you can see on here is the impairment charges we've taken. Now, when we look at impairment testing under accounting standards, we look at it in two categories. We look at assets, and we look at the businesses or the cash-generating units, as we refer to them. Those of you who are sharp-eyed will notice that the impairment and related charges for the subsidiary businesses has not changed from those that we reported at interim. The assessment we've done looking at value in use, looking at the discounted cash flows, we believe, based on those figures, that there's no need for any further impairment with respect to our subsidiary assets. However, it was a different story with the aircraft. At half year, you'll recall we had impaired 16 aircraft. This has increased to 34 by the end of the year.
The reason for this is we look at, in terms of aircraft asset, whether they are likely to reenter meaningful economic service before they are retired or before the operating or the leases expire. As a result of that assessment, we have concluded that we need to impair a further 18, and this takes the number to a total charge for the full year of HKD 2.8 billion. Overall, that's the HKD 7.8 billion of adjusting items that I'm referring to, which cause the difference between the adjusted attributable result and the attributable result of HKD 21.6 billion. Moving on to our balance sheet and liquidity. Obviously, a key focus for us during the course of last year and continues to be so. Our net borrowing position at the end of the year was HKD 73.8 billion, a reduction versus where we were at the end of 2019.
You can see that the unrestricted liquidity at the end of the year of HKD 28.6 billion was an increase compared to where we were at 2019. This obviously reflects the impact of the recapitalization that was undertaken during the course of last year. On the next slide, I'm showing a little bit more detail to explain some of these movements. Here, I'm comparing the available unrestricted liquidity at the start of the year of HKD 20 billion to that that we ended the year with of HKD 28.6 billion. You can see there are a number of quite significant flows in this chart, so let me just highlight a couple of them. In terms of the cash outflow from operating activities, the major negative variance here was around net working capital, and that predominantly related to customer refunds.
If you'll recall, early in the year, there were a lot of refunds for tickets, and we see that flowing through in this part of the chart. The other half, the right-hand side of this chart, shows the cash inflow from financing activities. Here again, you'll see the proceeds from the rights issue and the preference share issue, which were part of the recapitalization, and the new financing that we've raised, HKD 22 billion, during the course of the year. Obviously, as well, we had loan and lease repayments that we needed to make during the course of the year. We ended the year with a liquidity position of HKD 28.6 billion. You'll also be aware from announcements that subsequent to the year-end, we did issue a convertible bond and raised a further HKD 6.74 billion.
In terms of the next few slides, I'm just going to cover at a high level a bit more about our passenger revenue, our cargo, and our operating costs. I'll go through these a little faster perhaps. Just want to give a little bit more color to the numbers. This slide will be no surprise to anyone. Of course, the COVID-19 pandemic has had a significant impact on the Hong Kong aviation environment, and you can see the dramatic drop-off in passenger travel, not just for Cathay and Cathay Dragon, which is the dark green at the bottom of the chart, but also for other airlines utilizing Hong Kong. This then, of course, is what impacts our passenger revenue numbers, which we can see on the next slide. This is the key passenger statistics that we'd usually comment on.
Obviously, they're all pretty much negative, apart from a slight increase in passenger yield. The demand for passenger travel has been extremely weak. We operated at below 10% for a lot of 2020. There are occasional pockets of increase in demand, but overall, the slide sort of shows it all, and you'll see on the next slide where I show this by quarters, the dramatic drop-off that we saw through the course of 2020. The one thing perhaps also to mention here, the drop-off in the passenger capacity, of course, there's still revenue to be generated by carrying cargo in the passenger bellies. For some flights that we did, even though the passenger demand is extremely low, there was cargo demand which supported those flights continuing on. Moving to cargo. Again, this chart shows our cargo-related statistics.
Our cargo part of the business was by far the better performer. I just mentioned earlier. Although it was affected by the substantial reduction that you see because the passenger planes are not flying, there's no capacity in the belly of those planes, we were able to increase revenue. This is as a result of yield and load factor both improving. We created additional capacity for our cargo business through using the freighters that we have more, through chartering flights from our all-cargo subsidiary, Air Hong Kong, and through operating cargo-only passenger flights, together with carrying cargo in the passenger cabins of a number of 777s, where we've taken out some of the seats in order to do that. The next chart shows this graphically. Here you can see by quarter, the capacity and load. The thing to highlight here is probably the load factor.
You can see that this went over 70%, right up to 79% in the last quarter of 2020. The line on this chart is showing the yield or the revenue, and you can see the dramatic increase in that, even though capacity was lower, showing the impact of that lack of supply. In terms of operating costs, a slightly unsurprising story here in as much as the costs went down as you would expect them to do. HKD 49 billion costs spent here. It can't go down necessarily as rapidly as the capacity changes, because obviously some of your costs are fixed and some are only semi-variable, and therefore, that's why the underlying cost we report here per ATK is higher. It's gone up by 41%. That's reflecting the sort of restriction you have in terms of your fixed costs and your semi-variable costs.
This slide just summarizes the key points that I've mentioned. It's in there more for sort of people who are looking at this deck afterwards, so I won't dwell on this one. The last slide I just want to touch on briefly, in the cost section is obviously fuel. This is a significant cost that we incur as a business, albeit dramatically less in 2020, given a significant reduction in the volume of fuel we used. This was obviously a combination of less flying, but also we were able to skew the aircraft that we used such that we could use proportionally more of the more efficient aircraft, and therefore, also reduce the cost of fuel.
Because the fuel usage reduced, there was an impact in terms of we had ineffective and effective hedging losses in the year, although somewhat mitigated because the crack spread went down from a typical HKD 12-HKD 15 to pretty much nothing. As a result of the hedging that we do have in place, at the end of the year, when we look forward, we had some of our hedges in the first half of 2021 that, in accounting terms, were ineffective as we are more than 100% hedged. Also in the results for 2020, there's a provision of HKD 220 million for ineffective hedged volumes. The last section I just want to cover in terms of our operating performance and the financial highlights is around our subsidiaries and associates. It's a similar story.
The subsidiaries and associates, if they're more passenger revenue focused, they've had a more difficult year. If they're more cargo focused, they've had a better year. Moving on to Hong Kong Express, they made a loss of HKD 1.7 billion in the year. They did suspend flying for a period of time, approximately four months. It goes without saying that they too have been working very hard on mitigation measures for cost and cash burn. Nevertheless, their result reflects the significant drop in passenger flying through the course of 2020. Our other major subsidiaries, in terms of the airline service subsidiaries, those are very much driven by passenger. Therefore, they were all affected during 2020, and their results declined in that year.
You'll recall I touched on earlier around impairments, the Vogue Laundry and Cathay Catering, we made impairments for those two businesses back in June and haven't, based on our assessment, needed to make anything further at this year-end. Air Hong Kong, different story. Obviously, they're in the cargo business. They have flown many more sectors than originally planned, so their financial result improved over the course of the year compared to 2019. Associates are Air China and Air China Cargo, and I'm repeating the same story. Air China's results declined. You'll recall we capture their results to September 2020, and they declined, whereas the Air China Cargo business that we hold an investment in, their results improved. Moving on to the last section of this presentation, I want to talk a little bit about outlook.
The first slide we're showing here is taken from recent IATA publications, and we've taken a slide looking at the medium-term outlook and the shorter-term outlook. The medium-term outlook is still pretty much in line with what's been talked about since the COVID pandemic began. The belief that by 2024, the market will be back to similar levels that we saw in 2019, i.e., pre-COVID. That is believed to be still the case. The short-term outlook, however, is a little bit more uncertain. Probably I should highlight here with respect to Cathay Pacific, whilst these numbers here are talking about a global situation, Cathay here in Hong Kong, our situation a little bit different. Our travel and quarantine constraints here are perhaps almost the toughest in the world. Of course, we have zero domestic travel.
The IATA data is a global picture, ours is perhaps a little bit different, but we do remain extremely confident in the long term for this business. Hong Kong is the aviation hub as part of the Greater Bay Area, and the strong stakeholder support we've seen through the course of 2020, both from the government and from our shareholders, and with the development of the third runway, we genuinely do believe in the long-term strength of this business here in Hong Kong. Shorter term is uncertain. We'll talk on the next couple of slides about some of the things that play into this. Yes, there are many uncertainties around us at the moment as we sit here today. The first one of these that I want to touch on is vaccine development.
We believe encouraging progress has been made worldwide with the vaccine development, and therefore, we see this as a path to a better place and to recovery. Cathay Pacific Cargo is playing a big part of this in terms of carrying vaccines into Hong Kong and also globally, and that's something that we'll be continuing to do through 2021. In terms of our expectation for passenger flight capacity in 2021, as I say, the outlook remains extremely challenging and uncertain. We expect to operate at well below 25% of pre-pandemic capacity in the first half 2021, and see some improvement in the second half. Overall, for the year, we're expecting well below 50% of pre-pandemic passenger capacity. We will remain agile to respond according to the situation as it develops and it is developing daily. I do want to cover our monthly cash burn before we reach the end.
This is something that's been talked about quite a lot previously, but of course, it is extremely critical to our business. Post the restructuring, that did deliver a large benefit to the operation. It took about HKD 500 million per month out of our cash burn, bringing that cash burn down to between HKD 1 billion- HKD 1.5 billion per month. In February, so with effect from the 20th of February, new crew quarantine measures were implemented here in Hong Kong, and that resulted in us having to reduce the capacity we could operate with, and therefore drove an increase in our cash burn of between HKD 300 million-HKD 400 million per month. Cargo, however, remains a bright spot. Capacity is obviously still a serious constraint, but demand overall remains strong and returning to pre-COVID-19 levels.
We continue to maximize the capacity that we have in order so that we can carry as much cargo as possible through this time. My last slide, just to summarize the key messages to leave you with before we open for questions. 2020 was the most challenging year in our history. We've taken decisive steps to reduce our cash burn, to cut costs, to become more efficient, more focused, and competitive, to set us up such that we're well-positioned for the future going forward. We believe our dual brand strategy with the full-service airline of Cathay Pacific and the low-cost carrier of Hong Kong Express is very well positioned to meet various market demand.
We're in a healthy liquidity position, and we will look to remain agile to respond to things as they develop, as we come out of this crisis. On that point, I will stop and open for questions.