Cathay Pacific warns of 'substantial loss' as coronavirus slashes air travel

Hong Kong(CNN Business) Cathay Pacific (CPCAY) had a brutal second half of last year — and its troubles are getting worse as the coronavirus pandemic slashes demand for flights.

On Wednesday, Hong Kong's flagship airline posted a 28% plunge in profit in 2019 compared to the previous year. The last six months of 2019 wiped away what the company described as a strong start to the year as the airline was hit by fallout from the Hong Kong protests, which scared away tourists, damaged the city's economy and prompted an internal and external crisis of confidence.

Cathay Pacific became a casualty of Hong Kong's political crisis last summer, as it threatened staff with termination if they took part in illegal pro-democracy protests and later also lost its CEO and chief commercial officer.

"2019 was very much a year of two halves," Cathay chairman Patrick Healy told reporters on Wednesday.

The carrier is now dealing with another blow as global travel slumps due to the coronavirus pandemic. Cathay has already significantly shrunk capacity in recent months, cutting flights by 30% in February and 65% in March and April.

The company now says that more reductions are expected in May as it continues to monitor demand.

"We expect to incur a substantial loss for the first half of 2020," Healy said. "The scale of the challenge we currently face is unprecedented."

The airline is now asking all vendors and business partners "for relief in the form of deferrals and discounts, to help us preserve cash," the chairman added.

Cathay is talking to Airbus (EADSF) about deferring aircraft deliveries scheduled for later this year, said Ronald Lam, Cathay's chief customer and commercial officer. It is also talking to aircraft leasing providers, he added.

The airline has already asked its 27,000 staff members to consider taking three weeks off without pay. So far, 80% of staff have already volunteered for unpaid leave, according to the company.

For now, however, slashing flights is the best way to save money, executives said.

"The single most cash preserving action we can take is to cut capacity to match the demand we're seeing in the market," said Healy. "Beyond that, of course we are constantly reviewing all discretionary spend and cutting back or deferring wherever possible."

Cathay stock closed up 3% in Hong Kong. The airline's shares have dropped nearly 12% so far this year.