Cathay Pacific and Singapore Airlines will ‘inevitably’ take longer to recover, analyst says

Aircraft operated by Cathay Pacific Airways Ltd. stand on the tarmac at Hong Kong International Airport in Hong Kong, China, on Friday, Aug. 7, 2020.

Paul Yeung | Bloomberg | Getty Images

Singapore Airlines and Hong Kong’s Cathay Pacific Airways will “inevitably” take a longer time to recover from the coronavirus crisis, an aviation consultant told CNBC.

That’s because these carriers are based in markets with no domestic demand for flights, in a time where international travel is still very limited, said Joanna Lu, Asia’s head of consultancy at Cirium.

Airlines have suffered massive losses since air travel was virtually halted when most countries shut their borders earlier this year, in a bid to stem the spread of the coronavirus pandemic.

Both carriers saw profits turn to loss in their latest earnings report card.

Cathay Pacific reported a loss of 9.87 billion Hong Kong dollars ($1.27 billion) for the first half of 2020, after registering a profit of 1.35 billion Hong Kong dollars a year ago. For the quarter ended June 30, Singapore Airlines reported a net loss of 1.12 billion Singapore dollars ($817.5 million), down from a net profit of 111 million Singapore dollars the previous year.

Some countries have since reopened to tourists, with Covid-19 testing and health screenings in place at airports, but many are still closed to international visitors as confirmed cases top 20.5 million globally.

Lu told CNBC’s “Capital Connection” on Wednesday that travel within a domestic or regional market is likely to resume more quickly, compared to long-haul flights to international destinations.

“Those airlines that are serving a great scale of domestic market would probably gain more benefit from it, including carriers in China, Japan and maybe Indonesia,” she said.

However, the opposite is true for Hong Kong and Singapore, where locals do not travel domestically by air due to the small land area.

Lu also weighed in on reasons why the International Air Transport Association in June said Asia Pacific is expected to post “the largest absolute losses” in 2020.

She said the disruption to international travel has been the “major cause” of “negative progress” in the industry in Asia Pacific. Additionally, she said the region has many countries and markets, while Europe and the U.S. have “pretty much been operating as a single, united domestic market.”

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