Hong Kong’s zero-Covid strategy ‘killing’ Cathay Pacific, CEO of major shareholder warns

Hong Kong’s zero-Covid strategy has almost shut down the local aviation industry and its infection-control policies are “killing” Cathay Pacific, the CEO of Qatar Airways, the flag carrier’s third-largest shareholder, has warned.

Akbar Al Baker expressed frustration at the stringent border-control rules at Hong Kong International Airport, which ban airlines that have brought in passengers infected with Covid-19. The measures have been stepped up further recently to prevent the import of the more transmissible Omicron variant.

“You can’t just shut the aviation industry [down] because somebody got infected coming in [on] someone’s aeroplane,” the outspoken airline chief said in an exclusive interview with the Post in which he also discussed the immediate fallout from the new variant’s spread and looked to the year ahead.

Al Baker’s angst stems from his company’s key investment in flagging Cathay Pacific. The airline took an initial 9.61 per cent stake from Kingboard Chemical in November 2017 for HK$5.16 billion (US$661 million), or HK$13.65 a share.

On Friday, one Cathay share was worth HK$6.30.

“I’m a little bit disappointed that Hong Kong has remained closed until now,” said Al Baker. “I would have expected at least, not fully, but a major part of Cathay’s fleet in the skies again.”

Under the current policy, an airline is banned from flying a route for two weeks if it had carried at least three infected passengers on the same flight or two or more cases on two separate flights from the same destination over a seven-day period.

Qatar Airways has been banned five times since November 2020.

Qatar’s stake in Cathay has since grown to 9.99 per cent. The carrier was also involved in the HK$39 billion government-led bailout of Cathay last year, jointly participating in a rights issue.

Defending his investment, Al Baker said Cathay was not to be blamed in spite of racking up HK$29.2 billion (US$3.72 billion) in pandemic losses.

He said Cathay would remain a key investment for the Qatari national carrier as Hong Kong was an “important” aviation hub, adding he was confident the former would bounce back to its former size and scope.

Hong Kong’s biggest airline was one of the first and hardest hit during the pandemic, seeing its daily passenger numbers plunge by 99 per cent. Cathay currently operates at just 12 per cent of its pre-Covid passenger capacity.

Since the emergence of the Omicron variant, the city has further toughened rules by introducing quarantine of up to 21 days for residents returning from a large number of destinations now deemed high risk.

Non-residents from 92 countries, including Britain, the United States and major Asian neighbouring countries, are not allowed to visit the city at all.

Yet despite those stringent rules, the city is still recording imported cases at the airport due to the rapid spread of Omicron across Europe.

Qatar Airways had taken a hit from Omicron, Al Baker said, without quantifying the impact, but he added the airline remained cautiously optimistic.

“[We] see that a lot of people are cancelling holidays because of the strain,” the Qatar Airways chief said. “I’m glad to hear that the [World Health Organization] has now made the declaration that the effect of the virus is mild. However, there will always be a reaction from people when things like this come out.”

Airlines face tougher Hong Kong Covid-19 ban, with KLM first to be sidelined

Cathay similarly said this week the emergence of Omicron had “an impact on sentiment for travel” over the holiday season.

Al Baker said Qatar Airways’ advanced bookings were holding up in line with the airline’s predictions. Looking ahead to 2022, he added his airline’s fortunes would depend on the deliveries of new Airbus A350s and Boeing 787s.

“These two widebody aircraft are extremely important to Qatar Airways,” he said.

While Qatar Airways is embroiled in disputes with Airbus over the condition of its aircraft – with 21 grounded A350s and 23 new A350-1000s to be delivered – it also faces issues with the 787 Dreamliner, seven of which Boeing failed to deliver this year alone.

Chicago-headquartered Boeing faces additional scrutiny from aviation regulators in the US over manufacturing snags with its next-generation aircraft. Corrective actions being taken mean new planes have yet to be delivered to frustrated customers.

Despite the short-term bump in the airline’s recovery, Qatar is looking to add 600 new pilots to its team of 3,000, and has 2,500 applications for those jobs.

Cathay is similarly aiming to hire several hundred pilots next year as it looks to refill its depleted ranks.

But it is battling an increase in resignations among pilots amid stringent quarantine rules for aircrew. Many foreign crew members have not seen their families for two years, some even more.

Cathay’s 2,800 pilots saw their pay and conditions unilaterally rewritten last year as the airline struggled amid the pandemic, and many are considering moving to Middle East carriers or closer to home as a way out of Hong Kong.