The protests have had major repercussions for the air industry in Hong Kong. Photo: AP
Source:
https://scmp.com/news/hong-kong/transport/article/3045118/united-airlines-plans-us90-million-write-down-against-its Transport
United Airlines plans US$90 million write-down against its ‘fully impaired’ Hong Kong routes
- Low passenger demand during Hong Kong protests forces move by industry giant
- Carriers operating in city struggling to cope, with nearly all slashing flights or reducing aircraft size
Dire ticket sales for Hong Kong has forced United Airlines to take a non-cash impairment charge against city routes for the fourth quarter of 2019. Photo: Bloomberg
United Airlines says it will take a US$90 million write-down against its Hong Kong routes in the wake of falling ticket sales from the anti-government protests.
One of the world’s largest carriers, the company operates 21 flights to Hong Kong International Airport every week.
But along with other airlines serving Hong Kong, it is reeling from the sharp drop in visitors to the city, with arrivals more than halving in November on the same month in 2018.
The Chicago-based firm said it was expecting to take the non-cash impairment charge, an accounting expense, against the value of its Hong Kong routes in its financial results for the fourth quarter of 2019.
“Due to a decrease in demand for the Hong Kong market and the resulting decrease in unit revenue, the company determined that the value of its Hong Kong routes had been fully impaired,” United Airlines said in a stock exchange filing.
The write-down does not directly impact on the company’s full-year earnings but the valuation cut reflects the cost of United Airlines losing business in Hong Kong, based on the shortfall in passenger demand.
Hong Kong has suffered seven months of often-violent street protests, sparked in June by the now-withdrawn extradition bill before morphing into a broader anti-government movement.
The United States carrier, which flies to 358 destinations and served 158 million passengers in 2018, has cut back its flights and routes to Hong Kong from America.
Chicago and Guam routes to Hong Kong were axed last year. The carrier also switched to smaller planes for services between San Francisco and New York Newark to Hong Kong in response to falling demand.
More recently, its Newark flights were scaled back to three times a week, from a daily service.
The airline added a second daily San Francisco service to make up for the lost Chicago route, as it attempted to lure more connecting passengers through another of its large transit hubs in the US.
United took a similar impairment charge of US$206 million on Hong Kong in the fourth quarter of 2018, citing a shortfall in revenue versus the higher costs it was experiencing at the time.
Australia’s national airline Qantas announced in October last year a HK$134.1 million (US$17.1 million) hit to half-year profits as a result of Hong Kong’s ongoing unrest.
Almost every airline flying out of HKIA has cut flights or the size of its planes, including Emirates, Singapore Airlines, AirAsia and mainland Chinese carriers.
Between August and November, the airport handled 3.3 million fewer passengers than in the same period a year earlier.
From January to November, the airport processed 65.8 million travellers. At the same point up to November 2018, the figure stood at 68.1 million.
HKIA’s December performance, which is due to be released in the coming weeks, is likely to show the airport has suffered its worst drop in passenger traffic in a decade.
Tourism arrivals into Hong Kong in November dropped 55.9 per cent on the same month the previous year, according to official figures, a collapse driven by mainland Chinese travellers staying away.