Reports from Hong Kong suggest that the very existence of the city's third largest carrier, Hong Kong Airlines, is under threat, while flag carrier Cathay Pacific has announced capacity cutbacks to cope with declining demand as a result of the citywide anti-government protests, which have paralysed the city for almost sixth months.
The South China Morning Post (SCMP) reported on Friday that the airline did not have enough money to pay all its 3,500 staff on time in November, and the Air Transport Licensing Authority (ALTA) said the city’s third biggest airline had been in deep financial trouble “for a long period of time.”
Ahead of a meeting on Friday between the airline and the airline licensing body, the struggling carrier announced it was cutting its final long-haul route, to Vancouver, and also axed flights to Ho Chi Minh City and Tianjin.
Commenting on the meeting, ATLA said in a statement on Thursday that it would “evaluate the information and explanation to be provided by HKA, and will consider whether there is a need to take appropriate action(s).” The licensing body also said it was “extremely concerned about the inability” of HKA to make salary payments on time to a large portion of its employees.
The network cutbacks announced on Friday are expected to come into effect by February and follow on from changes to 11 routes it made earlier this month, reducing services to popular destinations such as Tokyo, Osaka, and Seoul.
“Hong Kong Airlines has been reviewing its network strategy and will continue to focus on operating priority routes under the challenging business environment caused by the ongoing social unrest in Hong Kong,” the airline said in a statement.
The SCMP report quoted a person familiar with the situation as saying that the government has four specific measures it can impose on Hong Kong Airlines, including revoking the airline’s license entirely, or replacing its license with a temporary one to allow a restructuring of the company’s finances. Alternatively, the authorities could restrict the way the carrier does business by adding or changing conditions to its license or requesting more financial information on a regular basis.
The SCMP report added that the fresh warning signs renew fears that Hong Kong Airlines could become the first airline to fail in the city since the demise of Oasis Hong Kong in 2008.
Cathay scales back capacity
Coinciding with the crisis meeting between ALTA and Hong Kong Airlines, the city's flagship airline Cathay Pacific announced it will scale back its capacity by 1.4% in 2020, reversing an earlier plan to grow by 3.1%, as the city is suffering from a recession and a months-long social unrest.
A separate SCMP report said that in an internal memo to employees, the airline’s CEO Augustus Tang Kin-wing said Cathay would not cut routes outright, but cost control measures will be unveiled which will be “proportionate to the challenges we face.”
Tang added that the airline’s “position had deteriorated in recent weeks,” which justified swift action to address how much it spent into the next year. Traffic from key markets, such as mainland China, and advance bookings into 2020 were “weaker than we would hope for,” he said.
Explaining why cutbacks on flights was necessary, he said: “We don’t believe we can continue to operate a full schedule profitably in the current market environment.”
Earlier this month, Cathay said that a prolonged impact from the protests would force it to ground planes, cut unprofitable routes, and put staff on unpaid leave. However, the internal memo on Friday stressed that no routes would be cut, and it would still take in new aircraft, while remaining flexible to make changes should the downturn worsen.
Nol van Fenema
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