Cathay Pacific warned of dire implications to its ability to provide capacity and the additional cash burn it would entail should authorities push ahead with its plan to impose quarantine rules for aircrew members as part of the financial hub's efforts to contain the increasing number of coronavirus infections.
The Hong Kong flag carrier said in terms of cargo, the new rules set to be implemented sometime next month would slash capacity by around a quarter from the already reduced levels currently.
"Effective later within February 2021, the Hong Kong SAR Government will implement a new 14-day hotel quarantine plus 7-day medical surveillance requirement for both our Hong Kong-based pilots and cabin crew," Cathay Pacific Group chief customer and commercial officer Ronald Lam said.
"The new measure will have a significant impact on our ability to service our passenger and cargo markets. The actual extent of such impact is yet to be confirmed and will be affected by a number of factors, including the success of mitigation measures we are able to adopt, such as agile manpower resources management," he added.
Industry organizations warn of adverse impact
While the Hong Kong government has yet to issue formal announcement about the guidelines, it is widely reported that authorities are looking to implement up to 21-days of quarantine for aircrew — 14 days of hotel quarantine plus a week of medical surveillance, for the locally-based flight crew — with Cathay Pacific expected to take the brunt of the tighter measures. Currently, aircrew is exempted from the mandatory hotel quarantine rules for travellers.
"At this stage, our preliminary assessment is that the new measure may result in a reduction of the current passenger capacity of around 60%, a reduction of current cargo capacity of around 25%," Lam said.
The crew quarantine would also cost Cathay Pacific an estimated HK300 million (US$39 million) to HK400 million (US$52 million) per month on top of its current monthly cash burn of between HK$1 billion (US$129 million) to HK$1.5 billion (US$193 million).
The International Air Transport Association (IATA) expressed its wary that the planned quarantine rules would also affect the distribution of essential freight— including vaccine with the reduced flights expected once the new tougher measure targeted at aircrew is implemented.
"We are a bit worried about this potential new measure for the crew in Hong Kong and particularly because the Hong Kong aviation sector is already fragile," said Alexandre de Juniac, the IATA’s CEO and director-general.
The Association also urged the Hong Kong government to designated aircrew as "essential workers" exempted from quarantine and to make vaccine distribution the top priority instead.
On the other hand, the Association of Asia-Pacific Airlines (AAPA) also warned that the proposed measure would render airlines less viable as it is.
“Airline operations are not very viable, this will make it even less viable,” said Subhas Menon, AAPA director-general.
“The government will have to give some consideration to travel and tourism when they come up with policies, otherwise travel and tourism will be collateral damage in their pursuit of eliminating the virus,” he added.
Cathay performance still "substantially down" in 2020
Cathay Pacific's warning of the quarantine rule impact came as it also reported its performance in December which still showed "substantial capacity reductions" in response to significantly reduced demand as well as travel restrictions and quarantine requirements in place in Hong Kong and other markets amid the ongoing global COVID-19 pandemic.
In terms of cargo, Cathay Pacific said it carried 120,218 tonnes of freight and mail last month, a decrease of 32.3% compared to December 2019 as the month’s revenue freight tonne-kilometres (RFTKs) also fell 23.7% year-on-year.
The cargo and mail load factor increased by 13.9 percentage points to 80.3%, while capacity, measured in available freight tonne kilometres (AFTKs), was down by 36.9%.
"Cargo had a relatively good finish to 2020, in line with the overall positive performance seen in the second half of the year. December tonnage was up month-on-month by about 3%, with exports from the Chinese mainland and Hong Kong holding up for longer than is normally expected at the end of the year," Lam said.
He noted that the "imbalance" in the market between demand and available capacity created an ongoing need for cargo-only passenger flights prior to Christmas — resulting in the airline operated 713 pairs of these flights for that month.
“Network traffic feed from Northeast Asia and the Southwest Pacific was also encouraging with good movements of priority cargo and special products ... we have also made all necessary preparations to ensure we are able to contribute to the vital mission of transporting COVID-19 vaccine shipments around the world with the development of our dedicated vaccine solution," he added.
For 2020 as a whole, the tonnage carried by Cathay Pacific and Cathay Dragon fell by 34.1% against a 35.5% drop in capacity and a 26.5% decrease in RFTKs, as compared to 2019.
