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A Cathay Pacific 777 lifts off from Dusseldorf, Germany. (Photo: AirlineGeeks | Fabian Behr)

Cathay Pacific Struggles Amid Government Travel Restrictions

Cathay Pacific revealed that it is not out of the woods, while the global aviation industry is experiencing a gradual recovery.

Hong Kong’s flag carrier has unveiled the traffic figures for December, carrying 92,916 passengers — an increase of 130.6 %, compared to the same time last year. However, it was nearly a 97% decrease to the pre-Covid levels in 2019. The passenger load factor was 36.6%.

In addition, the carrier has reported that it only carried 717,059 passengers in 2021 — as a result of the travel restrictions and strict quarantine measures. The carrier carried 4.6 million passengers in 2020 and 35.2 million in 2019 respectively.

The airline announced that it carried 1.3 million tonnes of cargo in 2021, similar to last year’s figure. The airline has carried 2 million tonnes in 2019.

According to the struggling airline, it has reduced operating cash burn from an amount within the range of HK$2.5 – 3 billion ($321 million – $385 million) in the first half of 2020 down to marginally cash generative in the second half of 2021.

In the meantime, Hong Kong is facing the fifth wave of the Coronavirus — recording over a hundred cases every day recently. Earlier, the Hong Kong government tightened its quarantine requirements and travel restrictions.

The restrictions will make a significant impact on the airline. In January, Cathay Pacific Cargo only provided 20% of its pre-Covid capacity, and passenger flights have reduced to around 2% of their pre-Covid levels. The airline expected that it results in an operating cash burn of HK$ one billion – to 1.5 billion per month from February.

Cathay Pacific expected that the flights to China will remain largely unaffected, but the capacity to the rest of the network will be reduced in response to the measures. However, Hong Kong Express — its low-cost carrier — maintains connectivity with some regional destinations.

The carrier will operate cargo services to China and a daily freighter operation to North America. Meanwhile, the airline operates passenger aircraft to carry cargo to Europe and Southwest Pacific. Cathay Pacific is trying to maximize its capacity to operate an additional 5% more cargo flights.

Hong Kong has no sign of lifting the travel restrictions, most travelers coming from overseas need to take 21-day quarantine. The government is implementing a zero-Covid policy, insisting “living with Covid” is not an option.

Domestic Policy

Hong Kong is implementing the “place-specific and flight suspension mechanism”. Under the restriction, if a total of five or more passengers among all flights from the same place, regardless of airlines were confirmed positive through testing or relevant virus mutation within one week, then the airline will be banned from entering Hong Kong for two weeks.

Earlier, Akbar Al Baker, CEO of Qatar Airways, believed the policy is “killing” Cathay Pacific. Qatar Airways owns almost 10% of Cathay Pacific.

“You can’t just shut the aviation industry because somebody got infected coming on someone’s airplane,” Baker said, in regards to the policy.

In the meantime, despite the aviation industry in Hong Kong is still facing severe turbulence, the stakeholders never stop developing its business and infrastructure. Earlier, Hong Kong International Airport has revealed that the construction of third runway is underway and expected to be completed in 2024. Also, Greater Bay Airlines — the brand-new airline in Hong Kong — is expecting an Air Transport License to be granted by the government in early 2022.

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