Cathay Pacific Asia Miles - TVB News: CX TO CONSIDER GROUNDING ALL FLIGHTS

According to the latest TVB newscast, CX has issued an internal memo stating that it might be necessary to halt its entire operation later. It's currently losing $3 million USD a day.


I don't have the exact transcript of the report, but I just saw the news 15 mins ago.


[This message has been edited by rogerli (edited 04-12-2003).]

Incredible if true!

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by rogerli:
It's currently losing $3 million USD</font>

i'm not in hk but i heard this from my friend too...to make it exact, i heard it's USD 3 million A DAY...but i'm not 100% sure...

That is absolute nonsense!

Lossing US$3 million/day is bad enough, but would CX save costs by halting the entire operation? I do not see how this is possible.

Besides, if that really happens, it would really cripple the economy of HK. I don't think the government will allow this to happen.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by fakecd:
That is absolute nonsense!

Lossing US$3 million/day is bad enough, but would CX save costs by halting the entire operation? I do not see how this is possible.

Besides, if that really happens, it would really cripple the economy of HK. I don't think the government will allow this to happen.</font>

I agree totally with this - their fixed costs are SUBSTANTIALLY over 3M per day - just look at their financials for a feel on this.

They might be, but here is a link to the story.

http://biz.yahoo.com/rb/030412/airlines_hongkong_cathay_2.html

http://reuters.com/financeNewsArticle.jhtml?type=businessNews&storyID=2553901
Cathay May Halt Passenger Flights in May
Sat April 12, 2003 09:46 AM ET

By Rico Ngai
HONG KONG (Reuters) - Hong Kong's Cathay Pacific Airways 0293.HK is considering stopping all passenger flights in May due to a sharp fall in the number of travelers amid fears over SARS, the pneumonia-like epidemic that is sweeping through the former British colony.

"We forecast that the number of passengers could fall to less than 6,000 per day in May in which case we will have to consider grounding the entire passenger fleet," a Cathay Pacific's internal Internet posting sighted by Reuters said.

Cathay is currently carrying less than 10,000 passengers per day compared to the usual passenger levels of more than 30,000, the memo said.

The firm's executives were not immediately available to comment.

"We are literally hemorrhaging cash -- approximately US$3 million per day. The current strategy is simply to stem the bleeding and buy time," Nick Rhodes, Cathay Director of Flight Operations said in the grave memo.

Rhodes was citing a briefing given by the airline's chief executive officer David Turnbull on Friday.

Rhodes said the airline currently has canceled about 42 percent of its flights and the remaining flights are operating at a load factor of 30-35 percent. Load factor indicates the number of paying customers as a proportion of seats available.

Hong Kong's Airport Authority said on Saturday about 33 percent of the total number of scheduled flights for April has been canceled.

Cathay, Asia's fourth largest airline with a turnover of more than HK$33 billion (US$4.23 billion) in 2002, issued its first-ever profit warning on Friday citing adverse impacts by the Severe Acute Respiratory Syndrome (SARS) virus and the war on Iraq.

The warning hammered Cathay's shares to their 16-month low, closing at HK$8.95 on Friday. They had lost nearly a quarter of their value in the last three weeks when SARS first reared its head in Hong Kong in March.

Uncertainties ahead of the airline increased when the World Health Organization issued an advisory on April 2 urging travelers to postpone visits to Hong Kong in light of the city's failure to contain the spread of the pneumonia-like disease.

Cathay has already stopped all "non-essential" expenditure and it is offering voluntary unpaid leave.

"If there is not a miracle cure for SARS soon and a sudden withdrawal of the WHO advisory against travel to Hong Kong, the cuts are going to have to be deeper," the memo said.

The measures include involuntary unpaid leave and job sharing, it said.

"Whatever scheme is agreed, the company is determined that every employee will share the pain equally. We are all in this together," it said.

"Even if all employees worked for nothing at present, we would still be losing nearly US$2 million per day. Any savings will only buy time," it added.

The WHO's Friday briefing is not that promising, isn't it? They were saying SARS is being contained but as to its cause, it seems to take more than a month to determine.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">These are currently being analysed in various laboratories around the world to try and standardize these, so that in the coming weeks and months we will make available, and have made available, definitive diagnostic tests that which help us rapidly to assess individuals who are presenting with symptoms of SARS and place them into appropriate categories so that they can receive the appropriate treatment, as and when that is developed. We have had the opportunity to use this agent that has recently been isolated and placed into animal models, and these are proving useful experiments. We are now learning a lot more about the virus. We hope that in the coming days and weeks we will have more information to confirm that the coronavirus in indeed the causative agent.</font>

http://www.who.int/csr/sars/Press_2003_04_11/en/

This brief is very informative.

Alan Wong, PR Manager of CX just was on the TV news denying that CX intends to shut down in May if there is no improvement in the situation.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Marco Polo:
Alan Wong, PR Manager of CX just was on the TV news denying that CX intends to shut down in May if there is no improvement in the situation.</font>

Of course CX would deny such a report. The company's competitors would ramp up HKG service in a heartbeat if the company announced its intentions to suspend service far in advance.

[This message has been edited by avek00 (edited 04-12-2003).]

Is there a way that CX can sue the World Health Organization?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by SHADO:
Is there a way that CX can sue the World Health Organization?</font>

They can't sue WHO. But if they have a legitimate concern that WHO was bias or purposely erroneous in their advice which is very, very unlikely - then they could complaint aginst WHO. But even if they do complaint, chances are nothing concrete will ever happen.

Why should they? If they want, they should sue HK and Chinese Government who hides the truth of SARS in the early stage (even now).


<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by SHADO:
Is there a way that CX can sue the World Health Organization?</font>

There is a press release:
Cathay Pacific has no plans to stop operation - http://www.cathaypacific.com/intl/aboutus/press/0,3845,31342-92380,00.html

I agree with SHADO. I'm not a legal expert, but HK government should file complaint against WHO and other nations who impose exaggerated travel restriction to HK.

Back to original topic, if CX DOES ground all operation, wouldn't it be far worse because all pax will cancel all bookings for June and onwards?

In reality, this kind of rumor itself is compromising the consumer confidence. We need assurance from CX so that we can feel confident to make travel plan for May.

(Edited to modify link)

[This message has been edited by fakecd (edited 04-12-2003).]

according to Apple Daily, CX has about HK$13b in cash which should last it for about 560 days based on its US$3m daily cash loss.

That travel advisory against HKG and Guangdong was issued after WHO consulted with the HKG and Chinese governments. All the parties were aware of the potentially serious consequences of such move.

After reading a TIME magazine article comparing SIN and HKG's responses to SARS, I really got an impression HKG was acting slow to contain it.

Just a side note that I thought was interesting. Was talking to a friend who is in med school, and when she first learned about SARS the doctor told what it was and that she would never see an instance of it. Talk about being red-faced...

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by jakob:
CX has about HK$13b in cash </font>

http://www.flyertalk.com/forum/eek.gif http://www.flyertalk.com/forum/eek.gif!!!
What's CX doing with so much cash in hand?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by fakecd:
What's CX doing with so much cash in hand?</font>

Wisely waiting for situations just like the current one. What else would they do with it? There aren't too many other investments out there these days paying hurdle rates.

HK$13b equivalent to about US$1.67b

I only fly CX a few times per year. The WHO has nothing to do with this. This type of "news" true or not as a rumor will cause many such as me to re-consider my reserved and tickted flights in May 2003.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by RTWSTARALLIANCE:
This type of "news" true or not as a rumor will cause many such as me to re-consider my reserved and tickted flights in May 2003. </font>

My exact position - I am scheduled to fly CX from SYD to HKG - one night in HK and then continue to LHR the next day. I am currently thinking of moving this to SQ -

The point is that CX is at the risk of loosing my paid F ticket NOT because of SARS but do to the rumor and their TERRIBLE management of the dissemination of this rumor.

I just looked at my tickets and I would be foolish if I did not protect myself on another carrier like maybe- SQ. I have F from SFO to HKG to BKK, SYD to HKG to LHR.