What's going on?

Cathay Pacific reported a full-year loss on Wednesday, and the Hong Kong airline will need some seriously dedicated passengers if it plans to turn that around.

What does this mean?

All credit to Cathay: the carrier rolled out a successful cost-cutting program last year, and its frequent cargo flights proved a lucrative alternative to passenger services. That helped the company turn a profit in the second half of the year, even as it flew 85% fewer passengers than it did in 2020. But the company still made a $700 million loss, which came as a bitter pill to swallow after a $2.8 billion shortfall the year before.

This one�s not off to a great start either: the Hong Kong government has introduced flight bans now that Covid cases are on the rise again, as well as mandatory post-flight quarantines. That means Cathay is now only flying about 2% of the passengers it flew before the pandemic, and it�s expecting to lose up to $200 million a month until those restrictions are lifted.

Why should I care?

Zooming in: Freight-eningly expensive.
Cathay made about 79% of its revenue from flying cargo last year, so it reckons more of those flights could be the way to balance out those losses. It might be onto something: European airlines have been avoiding Russian airspace since the country�s invasion of Ukraine, pushing up the cost of flying air freight between China and northern Europe by 34%.

The bigger picture: Flights over troubled waters.
As if the pandemic wasn�t enough, now airlines have been hit with spiking oil prices � no small thing considering fuel makes up as much as 35% of their operating costs. But Cathay thought ahead: it�s already locked in all of its fuel costs for this quarter and half of next quarter�s too. It�s also one of the few airlines still flying in Russian airspace, meaning it has shorter flight times and lower fuel bills than its more principled rivals.