(Reuters) -Hong Kong’s Cathay Pacific Airways (OTC:CPCAY) Ltd is trying to boost cargo capacity as much as possible despite tough quarantine rules for crew, it said on Wednesday, after posting a narrower annual loss of HK$5.5 billion ($703.45 million).
Cathay Pacific managed a profit of about HK$2 billion in the second half, thanks to cost cuts and strong cargo demand and pricing, even though it flew 85% fewer passengers than in 2020, when it was also affected by the coronavirus pandemic.
The loss was slightly less steep than Cathay’s January forecast of HK$5.6 billion to HK$6.1 billion and a big improvement from a loss of HK$21.65 billion the prior year.
However, Chairman Patrick Healy said in a statement that the airline, which relied on cargo for 79% of its revenue in 2021, has had an “extremely challenging” start to 2022.
Hong Kong has tightened crew quarantine requirements and banned passenger flights from major markets like the United States, Britain and Australia as part of an effort to contain COVID-19 cases.
Since January, the airline has been operating just 2% of its pre-pandemic passenger capacity and less than a third of its pre-pandemic cargo capacity due to those constraints.
“We are trying our best to maintain our passenger and cargo networks as far as possible and will try to increase our cargo capacity as much as practicable,” Healy said.
The airline could benefit from rising freight prices as a result of disruptions to the Europe-Asia market as European and Japanese carriers avoid Russian airspace.
The Hong Kong carrier, like rivals in mainland China and South Korea, is continuing to use Russian airspace on flights to Europe, according to flight tracking website FlightRadar24, keeping flight times shorter at a time of high fuel prices.
However, crew quarantine rules make it difficult for Cathay to add freight flights to take advantage of rising demand.
Cathay is reliant on pilots volunteering to fly tough rosters that involve at least four weeks locked in hotel rooms when they are not working.
Cathay said it had HK$30.3 billion of liquidity as of Dec. 31. The airline previously forecast it would burn through HK$1 billion to HK$1.5 billion of cash a month starting in February due to capacity cuts related to crew quarantine rules.
Rival Singapore Airlines (OTC:SINGY) Ltd which also lacks a domestic market but has less-strict travel rules, reported a profit in the December quarter and has forecast it will reach around 51% of pre-pandemic passenger capacity this month.