Cathay Pacific cutting capacity as Hong Kong unrest takes a toll

Nov 29, 2019

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

The fallout from the political unrest in Hong Kong continues to spread.

Reuters Nov. 29 is reporting Cathay Pacific Airways is cutting capacity as travel to and from Hong Kong International Airport (HKG) deteriorates. Reuters cited internal company documents that show the airline will now cut flights in 2020 by 1.4% instead of a planned increase of 3.1% in capacity. Earlier this month, the Hong Kong-based company said it was cutting its second half profit forecast for the second time in less than a month.

For more TPG news delivered each morning to your inbox, sign up for our daily newsletter.

Political turmoil has been flaring in Hong Kong since late spring of 2019, as protesters have taken to the streets over what they consider the government’s failure to protect citizens’ civil liberties. Hong Kong is a part of China, but is supposed to remain politically independent until the late 2040s.

Last week, elections were held for district councils, and pro-democracy candidates took 87% of the seats. The city has been relatively quiet since then.

But thousands have been arrested during sometimes violent protests that began in June. At least two deaths have been attributed to the protests, and many have been injured.

Protest in the Tsim She Tsui section of Hong Kong on October 27, 2019
Police respond to a protest in the Tsim Sha Tsui section of Hong Kong on October 27, 2019 photo by Clint Henderson/The Points Guy

Ongoing trade troubles between China and the United States have further strained the economy. Hong Kong officially entered a recession in October with the economy shrinking by more than 3% in the third quarter.

In a memo obtained by Reuters, Cathay Pacific Chief Executive Augustus Tang said, “Given the immediate commercial challenges and the fact that our position has deteriorated in recent weeks, we must take swift action to adjust our budget operating plan for 2020 downwards again. Put another way, rather than growing our airlines in 2020, for the first time in a long time, our airlines will reduce in size.

The airline said advance bookings are weaker than hoped especially to key markets like Hong Kong and mainland China.

A representative from Cathay Pacific refused a request from Reuters for comment.

Meantime, Hong Kong Airlines, owned by Chinese conglomerate HNA Group, also said Nov. 29 it was further cutting capacity. It also said it was delaying salaries for almost half its employees. The company says business has been “severely affected,” by the turmoil in Hong Kong, and announced in a press release it was cutting flights to Vancouver, Ho Chi Minh City and Tianjin, China, by February 2020. The airline had previously announced it is cutting its flights to Los Angeles and San Francisco.

Several airlines also have cut capacity to Hong Kong, including South African Airways, Malaysia’s AirAsia Group, and United Airlines. Hong Kong’s Civil Aviation Department said in a statement last night its “use-it-or-lose-it” rule had been temporarily suspended for the winter season as demand has fallen. Normally, if an airline isn’t using its takeoff and landing slots more than 80% of its allowed time, those slots would be lost.

Airport Authority Hong Kong reported a 13% drop in passengers in October, and a drop of more than 6% in the number of inbound and outbound flights.

But it’s not all bad news on Hong Kong. Most travel experts say it’s still safe to visit.

Featured photo courtesy of Cathay Pacific

 

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.