Cathay says it is ‘close’ to breaking even, apologises to quarantined staff, as FedEx reveals it will not reopen Hong Kong pilot base
- Rare piece of positive financial news for Cathay comes as airline acknowledges ‘unprecedented’ impact of mass quarantine order for staff
- FedEx, meanwhile, has given up any hope of reopening its local pilot base, citing Hong Kong’s unrelentingly tough quarantine requirements
Cathay Pacific announced on Wednesday that it had finally begun to staunch its massive monthly operating losses, but Hong Kong’s flagship airline warned of further bleeding under the city’s tough Covid-19 rules and apologised to staff for the unprecedented impact on large numbers of aircrew and their families forced to undergo quarantine.
The beleaguered carrier said it came “close” to breaking even between July and October, and that its financial performance would see a “considerable improvement” in the second half of the year, though it would still record a “substantial” loss for 2021 as a whole.
However, Wednesday’s rare spot of positive financial news for Cathay was offset by renewed concerns over Hong Kong’s continued status as an air cargo hub after the global package delivery giant FedEx announced it had given up any hope of reopening its pilot base in the city.
The company blamed harsh anti-pandemic policies that left “no clear timeline” for when the city would return to normal.
Cathay imposes stricter self-isolation rules for aircrew returning to Hong Kong
In Cathay’s October business report, chief customer and commercial officer Ronald Lam Siu-por acknowledged that the “operating environment continues to be one of considerable uncertainty”.
He added: “Travel and operational restrictions continue to greatly impact our ability to mount flights and we are still facing many challenges to both our passenger and our cargo business as the Covid-19 situation in different parts of the world continues to evolve.”
That uncertainty was on display this week when Hong Kong tightened its virus testing rules for aircrew after three quarantine-exempt Cathay cargo pilots tested positive for Covid-19 days after re-entering the city. All three had stopovers in Frankfurt, prompting Hong Kong to require any Cathay aircrew who had recently passed through the German city to undergo 21 days’ quarantine in a government facility.
In a memo on Wednesday, Cathay said 104 flight crew, 46 cabin crew, one safety training employee and two ground workers were now in the government’s quarantine facility at Penny’s Bay.
A “large number” of employees’ household members and community contacts had also been quarantined, it added.
Greg Hughes, the airline’s chief operations and service delivery officer, apologised to staff for the large number of people affected by the quarantine order, and insisted Cathay was “continuing to enhance the manner in which we can support our people in Penny’s Bay”.
“The impact on the Cathay Pacific team and their extended families and the wider community is without precedent,” he said in the same memo, acknowledging Hong Kong’s tough rules had been particularly hard on staff.
“I wish I could say that the operating environment was about to get easier.”
However, he added, Cathay’s new, stricter self-isolation requirements for returning cargo crews – imposed in response to the Frankfurt cases – were critical to maintaining the airline’s broader quarantine exemptions.
In the first half of this year, Cathay reported a HK$7.6 billion loss, an improvement on the same period in 2020. Last year, the airline notched up a record HK$21.6 billion in losses.
The airline was pulled back from the brink by a HK$39 billion government-led bailout, but the funding was not enough to prevent it from axing 5,900 jobs – many coming from the closure of regional carrier Cathay Dragon.
Elsa Yuen May-yee, president of the Hong Kong Logistics Association, warned the quarantine order would take a toll on the sector, particularly given the higher demand of the Christmas and New Year seasons.
The unrelentingly tough quarantine rules were at the heart of FedEx’s decision to make permanent a previously temporary relocation of pilots out of the city.
Tougher quarantine regime for Cathay Pacific aircrew puts Hong Kong flights at risk
In a memo on Wednesday, Robin Sebasco, FedEx’s system chief pilot, said the company needed to “adjust” to the economic, regulatory and business environment worldwide.
“The decision to close the Hong Kong base reflects this constant evolution and is designed to provide a measure of stability to these team members, as there is no clear timeline when life may return to normal in Hong Kong,” Sebasco said.
“Following this closure of the Hong Kong crew base, this flying will be primarily staffed by our Oakland-based pilots.”
Industry stakeholders said the move reflected the increasingly tough operating environment for businesses under the government’s strict quarantine policy, though the decision was not expected to affect FedEx flights in and out of the city.
FedEx confirmed as much in a statement, with a spokeswoman saying the company would “continue to maintain its operations in Hong Kong, which are vital to our Asia-Pacific and global network”.
The closure of the local pilot base, she added, would “allow us to continue to staff our Hong Kong and Asia flights without being subject to Hong Kong entry restrictions”.
Hong Kong has seen almost no local infections in months under its zero-Covid strategy. The city confirmed just three new cases on Wednesday, all of them imported.
Meanwhile, its mandatory 21 days’ hotel quarantine requirement for those returning from many destinations means the city is effectively shut off from the outside, even as the rest of the world has begun reopening.
The quarantine policy, which affects both travellers and aircrew, is one of the strictest in the world, and is aimed at preventing imported cases from slipping into the community and jeopardising chances of fully reopening the border with mainland China – Hong Kong’s largest economic partner.
However, it has also had the effect of stamping out almost all travel in and out of the city, and has been a major drag on the operations of the likes of Cathay and FedEx, among others.
The Transport and Housing Bureau on Wednesday said it was “closely communicating with the aviation industry to ensure that the essential air cargo services into and out of Hong Kong would not be disrupted”.
“We will continue to closely monitor the situation and will review the quarantine arrangements for aircrew as and when appropriate,” a government spokeswoman added.
Cathay cargo pilot tests positive for Covid-19 in Hong Kong, lockdown ordered
Rob Chipman, CEO of Asian Tigers Group, one of Hong Kong’s largest logistics service providers, said he hoped the action by FedEx, a US multinational with a local presence for many years, would send a signal to decision-makers.
“I hope the shutdown of the pilot base will send a signal to the Hong Kong government over its zero-Covid policy, which should be adjusted according to the pandemic development even though it is a complicated issue that involves Beijing,” he said.
Cathay is also considering relocating pilots for up to four months at a time in a bid to work around the city’s tough quarantine restrictions.
Asked about FedEx’s decision, Gary Lau, chairman of the Hong Kong Association of Freight Forwarding And Logistics, said he did not believe the move would harm the city’s image as a logistics centre, as it was based on concerns about pandemic control issues rather than commercial policy.
