Coronavirus and the subsequent downturn in travel demand continues to cut a devastating swathe through airlines. News from Hong Kong this morning is that local carrier, Cathay Pacific, has parked over half its fleet and that figure is forecast to increase.
Aircraft parked and capacity cut
A report by Danny Lee in the South China Morning Post today says Cathay Pacific has cut 75% of its flights throughout March and has 120 aircraft on the ground in Hong Kong.
There are 152 aircraft in the Cathay Pacific fleet.
By way of comparison, during the 2003 SARS outbreak, the airline parked around 25% of its aircraft and reduced its flight by 45%.
The report quotes Bocom International analyst Luya You who makes a couple of interesting points;
“An outbreak is the kind of macro impact that is really hard for an airline to plan around.
“During an outbreak, all of it collapses because no matter the price point people are no longer willing to fly.”
Cathay Pacific has a lot to lose
Excluding the mainland Chinese carriers, Cathay Pacific is the airline with the most to lose as the current crisis unfolds. Cathay Pacific commanded over 50% of the traffic between mainland China and Hong Kong. Those flights represented a significant portion of Cathay’s overall seat capacity and revenue. Cathay has cut flights into mainland China by 90%.
The situation does not give Cathay Pacific a lot of room to maneuver. Already bleeding cash, the airline can do little but reduce expenses and hope the crisis passes sooner rather than later.
Several weeks ago, Cathay Pacific asked 25,000 of its employees to take three weeks of unpaid leave over the next three months.
As the coronavirus outbreak is showing no signs of abating, travellers are putting the brakes on international travel, particularly to Asian destinations like Hong Kong.
Hong Kong’s MICE industry shut down – Art Basel cancelled
A big industry in Hong Kong and a lucrative customer base for Cathay Pacific is the meetings, incentives, conventions and exhibitions (MICE) industry. It is grinding to a halt in the city.
Stuart Bailey, chairman of Hong Kong Exhibition & Convention Industry Association told CNBC that all current MICE events have been postponed.
While some can be rebooked, the sheer numbers, costs, and logistics involved mean doing so is no easy feat.
Hong Kong’s annual Art Basel was scheduled to be held in mid-March and is now cancelled. The glamorous event attracted 90,000 big-spending visitors in 2019. They were the sort of people who would have filled Cathay Pacific’s premium cabins and the city’s toniest hotels.
It is just one external more shock for Cathay Pacific, something it has no control over. It is part of what one aviation boss calls continuous constant shock syndrome.
Airline asked the airport for financial relief
As Cathay Pacific feels the financial pressure from the downturn, it has reached out to both the Hong Kong Airport for relief.
The airport, under pressure itself from a serious decline in traffic and revenue, has already offered a relief package worth a fifth of its most recent net profit. But Cathay Pacific wants more. At this point, Hong Kong Airport is unwilling to offer much more.
Cathay Pacific has today said it was disappointed but they are not the only business in Hong Kong under financial strain.
With the situation set to get worse before it gets better, we might be seeing even more planes parked on the tarmac at Hong Kong International Airport.