Earnings Call: H2 2020

Mar 10, 2021

Thank you, Rebecca. 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 first question is from Sean Ng of JPMorgan. There are 2 parts to the question, so let's address First part first. Are there any new updates pertaining to the Hong Kong Singapore travel bubble? What are the expectations in terms of new measures taken And the demand uptick compared to what was expected in November 2020? Let me take that. On the Hong KongSingapore travel bubble, it really depends on the pandemic situation in Hong Kong. And with the recent reduction on the confirmed cases within Hong Kong, Our understanding is that both governments from Singapore and Hong Kong, they've been in active discussion. We don't know the time line yet. As I mentioned, it depends on the pandemic situation in Hong Kong and in Singapore. So we'll be watching very closely working with the government To be able to activate that as soon as we can. Thank you. Next part, Any color on when the Hong Kong crew quantity measures will last? How fast can CX redeploy the crew and aircraft upon the lifting of the restrictions? Well, first of all, I would like to emphasize that we will support the government in whatever way we To fight the pandemic in Hong Kong. So the coup quarantine situation, we are closely working with the government. At the end of the day, it's the government decision to make. How long this will last? And it will depend on the pandemic In Hong Kong, but within Cathay, we are actively encouraging our crew To take up vaccination as soon as they can. And so far up to date, we got pretty encouraging from our crew community, and we will continue to encourage them to take our vaccination. Once they are vaccinated, we believe, they are better protected As well as the family and the risk of them bringing in any imported cases into Hong Kong will be further mitigated. And it will be a very good time for us to discuss with the government whether there's any opportunity to adjust the crew quarantine arrangement. Thank you. Next question is from Chang Loke Tan of Credit Suisse. Part 1, Given the new aircrew quarantine, what other measures can we take to reduce the additional RMB300 1,000,000 to RMB400 1,000,000 loss per month? Okay. I can take that. Yes. Well, since last year, we've been looking at Every other ways we can find to reduce our cash burn while preserving our long term capability To support the Hong Kong Aviation Hub. So we continue to look at all aspects of our cash burn, including working with suppliers, And we would continue to look at every aspect of our business to make sure that we can find saving in terms of cash, Both in terms of cost reduction as well as deferral as much as we can. Thanks. Next part. How many more aircraft will unlikely be back into service before the retirement this year? I'll take that. So as I mentioned, we have impaired 34 aircraft in For 2020. And that is based on the aircraft that will not be back into service in 2021. Okay. Next question is from Paris Jain of HSBC. On your guidance, given the Q1 of 2021 is almost washed out, Are we eyeing for some sort of V shaped recovery in the second half to achieve capacity to just under 50%? Do we have any visibility as to when Can Hong Kong government may relax the quarantine rules given the faster than expected adaptation of the vaccine? I would say the current situation is still very, very dynamic. It's hard to predict how the Quarantine situation and the travel opening will evolve for the rest of this year. So I think Our emphasis is that we will remain agile, and then we will capitalize on any opportunity available to us. Okay. Thank you. Next question is from Geoffrey Keung of CLSA. Given the collapsing demand, Have you considered adjusting your fuel hedging strategy going forward? We have a standard fuel hedging policy That has been operating appropriately for the last few years, and we don't have any plans to change it. Operates quite mechanically. It's managed through sort of a committee. So no, no plans to change our hedging policy at the moment. Okay. Thank you. Next, we have Ian Wong of UBS. How much savings can the deferral of Airbus And potentially, what Boeing can generate in terms of CapEx spend in 2021 to 2023? To be honest off the top of my head, I can't recall that number. So we can get back to the gentlemen. Yes. Okay. So moving on to the next part. Of the DKK28.6 billion unrestricted liquidity as of December 20, Does that include the ZAR7.8 billion bridging loan facility to be unpaid? Yes, it does include it. Okay. Next, we have Liu Yaw Yu of EOCOM International. Can we get a sense of potential impairment For 2021, given the number of old generation widebody aircraft remaining in the fleet, should we expect similar levels of impairment for this year as well? That's an interesting question. So this the assessment that we've done now, based on what we know today, Is, as I say, what we've reported in the results for 2020. But the situation is extremely uncertain. So what we've also Done on disclosed in our annual report is if the recovery were to slip by 6 months, we've included What aircraft or the value of the aircraft as at 31 December 2020 that would then potentially be need to be impaired? So the The figure we've disclosed there is €800,000,000 of aircraft for a 6 month slippage. But we are confident The moment in the numbers that we've presented in our results, we're just doing that for sort of transparency and awareness in these very uncertain times. Thank you. Again, we have a question from Jeffrey Kang of CLSA. Is there any sort of dialogue with the government about waiving This is for any flight crew in terms of when they get vaccinated. Well, as usual, we are in very close contact With the government on various issues, and we would continue to have dialogue with them. And as I mentioned just now, Our priority is to get our crew vaccinated so that they can protect themselves and protect their families and Also reduce the risk of any imported cases because of the aircrew, and we will continue such dialogue with the government. Thank you. Next, we have Kelvin Lau from Taiwan Capital Markets. How significant would be the vaccine logistics I would say so far, right, we have transported Free shipments into Hong Kong in terms of vaccines. But I must say the volume compared to our overall cargo volume It's not significant at the moment. Also, we've been transporting vaccines via Hong Kong to different parts The world like into Mexico, into Malaysia. So we'll continue to get as much business as we can get From the vaccine shipment. But in the overall scheme of things, it's not a very significant proportion of our cargo business at the moment. Thank you. Coming on to the last question. We have a question from a Jeff Com of UOB. Are you still receiving grants or rebates from the Hong Kong Airport Authority? If so, when will that expire? Well, as of today, we are still getting discounts from the airport authority on various fronts Like, lending and parking rights, rental charges. And the airport authority, they've been extending it Every 2 months so far. So I think we would observe the situation, and we believe that as long as the airline industry is in a difficult situation, They will continue to assist us. Okay. Thank you. One more question just came in. Anne Julie of Jefferies. How many more Kathy Dragon routes have Zix applied for? Are these only 2 are from China? How many of them are successful? Well, as we mentioned during our restructuring announcement last year, we have intention Do we assume most of the Kafei Dragon route using Kafei Pacific or HK Express? And resumption of KAE routes Involve a number of factors. Most important factor is the passenger travel demand, which is yet to recover. And it will involve approval for slots at various airports in Hong Kong and outside as well as some traffic rights For Sutton Root. So far, as of today, we have managed to resume 5 Cafe Dragon Root using Cafe Pacific Aste, Brand? Thank you, Andy, and thank you all for your questions. Kindly note that the slides from today's presentation will also be made available to download at our Investor Relations website later this afternoon. If you have any further questions, please write to us at ircathepacific.com, and we will endeavor to respond to them as soon as possible. This concludes the Cathay Pacific 2020 Annual Results Analyst Webcast. Thank you for joining us. Thank you.