Bleeding Cathay may hock its aircraft: memo
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Bleeding Cathay may hock its aircraft: memo
Fri "The Australian"
Bleeding Cathay may hock its aircraft: memo
By Steve Creedy and Glenda Korporaal
May 16, 2003
CATHAY Pacific chief executive David Turnbull has warned staff the "day is coming" when the Hong Kong airline will run out of money, as it bleeds $5 million a day and passenger numbers fall to a fraction of normal levels.
In the most dramatic warning issued by a regional airline to date, Mr Turnbull wrote in an internal email that the airline's $HK11 billion ($2.18 billion) in cash reserves was being consumed daily. He raised the spectre of having to mortgage or sell aircraft if the SARS (severe acute respiratory syndrome) epidemic did not ease.
Mr Turnbull said Cathay's banks were not easing loan repayments, aircaft manufacturers had offered limited assistance and some suppliers would not help.
"Our cash reserves will not last forever – our job now is to make sure they last until business recovers," Mr Turnbull wrote in the email, obtained by The Australian. "If we run out of cash before that recovery, we will be left with very limited options."
He said the options included borrowing money against new aircraft. But he said this would increase the company's debt-to-equity ratio and it could be forced to borrow beyond shareholders' funds – a dangerous situation that was "what companies do before they go bust".
Cathay could also try to raise money by selling aircraft, but selling assets in a declining market was difficult. "That is what PanAm did – break up the furniture to keep the fire burning – until they had nothing left of the airline at all," he wrote.
"Our financial situation is bad. And although we will not run out of money today or tomorrow, that day is coming and our fortunes will not change soon."
Cathay's woes are a result of the World Health Organisation's April 2 advisory against travel to Hong Kong. Cathay is carrying an average of 7000 passengers a day, compared with the 33,000 a day normally carried at this time of the year.
Meanwhile, JP Morgan sharply downgraded Cathay's earnings outlook, predicting a loss of about $1 billion this year – way above the $220 million loss it previously forecast.
Last week Cathay told its 14,600 staff to take four weeks unpaid leave during the northern summer to save about $70 million over four months.
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Bleeding Cathay may hock its aircraft: memo
By Steve Creedy and Glenda Korporaal
May 16, 2003
CATHAY Pacific chief executive David Turnbull has warned staff the "day is coming" when the Hong Kong airline will run out of money, as it bleeds $5 million a day and passenger numbers fall to a fraction of normal levels.
In the most dramatic warning issued by a regional airline to date, Mr Turnbull wrote in an internal email that the airline's $HK11 billion ($2.18 billion) in cash reserves was being consumed daily. He raised the spectre of having to mortgage or sell aircraft if the SARS (severe acute respiratory syndrome) epidemic did not ease.
Mr Turnbull said Cathay's banks were not easing loan repayments, aircaft manufacturers had offered limited assistance and some suppliers would not help.
"Our cash reserves will not last forever – our job now is to make sure they last until business recovers," Mr Turnbull wrote in the email, obtained by The Australian. "If we run out of cash before that recovery, we will be left with very limited options."
He said the options included borrowing money against new aircraft. But he said this would increase the company's debt-to-equity ratio and it could be forced to borrow beyond shareholders' funds – a dangerous situation that was "what companies do before they go bust".
Cathay could also try to raise money by selling aircraft, but selling assets in a declining market was difficult. "That is what PanAm did – break up the furniture to keep the fire burning – until they had nothing left of the airline at all," he wrote.
"Our financial situation is bad. And although we will not run out of money today or tomorrow, that day is coming and our fortunes will not change soon."
Cathay's woes are a result of the World Health Organisation's April 2 advisory against travel to Hong Kong. Cathay is carrying an average of 7000 passengers a day, compared with the 33,000 a day normally carried at this time of the year.
Meanwhile, JP Morgan sharply downgraded Cathay's earnings outlook, predicting a loss of about $1 billion this year – way above the $220 million loss it previously forecast.
Last week Cathay told its 14,600 staff to take four weeks unpaid leave during the northern summer to save about $70 million over four months.
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Reckless reporting
The memo to which this report refers is the transcipt of the David Turnbull's presentation to staff last week.
The reporters seem to have been very "selective" in their quotes.
I was at that presentation and DT was at pains to point out the company did not favour "hocking" aircraft.
No wonder they say SAR's is a disease between peoples' ears!
The reporters seem to have been very "selective" in their quotes.
I was at that presentation and DT was at pains to point out the company did not favour "hocking" aircraft.
No wonder they say SAR's is a disease between peoples' ears!
