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Cathay Pacific Takes Over 15 Chinese Routes From Subsidiary
Amid the COVID-19 pandemic, many airlines were forced to downsize their operations. Among them was Hong Kong-based Cathay Pacific decided to cut its regional subsidiary, Cathay Dragon, last October. As a result, the airline will pick up the capacity left by Cathay Dragon, specifically its portfolio of Chinese routes.
Cathay Pacific applied to the Civil Aviation Authority of China (CAAC) for the authority to take over 15 routes from its subsidiary’s former operation throughout China, including Chengdu, Chongqing, Fuzhou, Guangzhou, Hangzhou, Haikou, Nanjing, Ningbo, Qingdao, Sanya, Xiamen, Xi’an, Wenzhou, Wuhan and Zhengzhou. The request was accepted by the CAAC, but it is unknown when flights will commence.
The flights will mostly likely be operated by the airline’s incoming narrowbody fleet of Airbus A321neos and its current widebody fleet of Airbus A330-300s.
According to the South China Morning Post, a senior company source at Cathay Pacific called the move reassuring, due to the past political mistakes by the airline, which fractured the airline’s relationship with Beijing.
A portion of the routes once operated by Cathay Dragon did not make it onto the application, including flights to Changsha, Guilin, Jinan, Kunming and Nanning. This suggests that the routes could be eliminated from Cathay Pacific’s route network entirely.
Cathay Pacific’s route network to China before COVID-19 consisted of flights to Beijing and Shanghai. Meanwhile, Cathay Dragon’s peak network consisted of 48 aircraft flying to 50 destinations, including 42 weekly flights to Beijing and 70 weekly flights to Shanghai, according to the SCMP.
While Cathay’s only current threat is the financially struggling Hong Kong Airlines, a new competitor has arisen in the Hong Kong aviation sector, Greater Bay Airlines. Led by former Cathay Dragon CEO Algernon Yau, the carrier applied for rights to fly 100 routes, with destinations in Mainland China accounting for 48 of the 100 routes. Additionally, the airline filed for rights to fly to 14 destinations in Japan, six destinations in Thailand and five destinations in Vietnam and the Philippines.
Initially, the airline plans to receive three used Boeing 737-800s, bringing that number up to 30 in the next five years. While passenger flights remain unfeasible, Greater Bay will fly cargo flights initially using the three aircraft. Given the airline’s route portfolio and the CEO’s experience, Greater Bay Airlines could prove to be a rival for Cathay’s operations in China and its hub in Hong Kong.
When the Transport and Housing Bureau of Hong Kong asked for objections and representations regarding the news, Cathay Pacific and Hong Kong Airlines issued positions on the move, stating that they weren’t explicitly objecting to it, but encouraged the government to look at the current difficult environment of the industry.
A Struggling Giant
The pains of the Hong Kong protests causing a decrease in travel demand further impacted by COVID-19 travel restrictions have led Cathay Pacific to have to fight for its survival. According to Cathay Pacific, the airline flew 39,989 passengers in 2020, a 98.7% decrease from the previous year. Meanwhile, its passenger load factor dropped from 85.5% to 18.4%.
In addition to abysmal passenger numbers, Cathay Pacific recorded a $1.27 billion loss in the first half of 2020. In response, the Hong Kong-based carrier announced that it intends to issue 6.74 billion Hong Kong dollars ($869.51 million) in bonds to help grow its liquidity, according to Reuters. Last year, Cathay received a $5 billion bailout, which resulted in the government taking a non-controlling stake in the airline.
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