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Pain continues for Hong Kong’s aviation industry

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November 1st 2019

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The latest monthly statistics for Hong Kong airlines, to September, show Cathay Pacific Airways passenger numbers declined by 7.1% for the 30 days reported with inbound passenger numbers plummeting 38%. Read More » The worsening situation, as anti-government protests continue into a sixth month, has put the full-service carrier on course to a full-year loss, for the third time in four years.

The dramatic drop-off in passenger and cargo traffic in the Special Administrative Region of Hong Kong has prompted the International Air Transport Association (IATA) to ask the Hong Kong government to offer financial support to the industry because of the “significant impact” the protests have had on passenger traffic.

“Maintaining aviation connectivity is critical to Hong Kong,” IATA said. “The government should consider financial relief measures to support the 330,000 jobs and 10.2% cent of GDP (Gross Domestic Product) dependent on the aviation and tourism sector.” IATA’s call followed a similar plea from the Hong Kong Board of Airline Representatives which asked that fees and services be reduced to help airlines make it to the other side of the downturn.

All carriers operating to Hong Kong are suffering from reduced demand into Hong Kong. They have reacted to the long months of protests, and often riots, by reducing frequencies or cancelling routes. Airport Authority Hong Kong said the decline in passenger numbers is worsening. In September the airport handled 12.8% fewer passengers, or 4.9 million travelers, 710,000 fewer passengers than a year earlier. In August, the decline was 12.4%, or 851,000 fewer passengers than in the same month in 2018.

Swire Pacific, which holds majority equity in Cathay Pacific, issued a profit warning early this month and said underlying profit was expected to be lower in 2019 compared with 2018, primarily because of a worse-than-expected performance from the full-service airline group.

Cathay Pacific’s interim profit this year was HK$1.35 billion against a loss of HK$263 million for the same months a year ago. The airline is in the final year of a 36-month transformation.

In October, the carrier said it was experiencing a significant drop in inbound bookings for the rest of the year, especially from China and other Asian markets. The fall-off will have a serious impact on the financial performance of its 100%-owned regional subsidiary, Cathay Dragon.

Rival Hong Kong Airlines has cancelled 6% of its schedule and is planning to terminate Hong Kong-Los Angeles next February. It confirmed it was adjusting its schedules to Vancouver, Bangkok, Osaka, Tokyo, Okinawa, Sapporo, Seoul, Haikou and Nanjing.

IATA said the trend is “almost unprecedented” for major markets. “While passenger numbers were impacted directly by the temporary closures of the airport [on August 12 and 13], more broadly, demand for travel to Hong Kong as a final tourism and business destination and a connection point has softened,” it said.

Singapore Airlines CEO, Goh Choon Phong, told Hong Kong’s South China Morning Post early this month that the SAR’s civil unrest had left “only a relatively minor dent’ in SIA’s financial performance. “Of course, there was a decline in demand and it has stabilized,” he said. In contrast, the Qantas Group said it had recorded a US$17.1 million drop in earnings because of the long-running unrest.

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