The protests in Hong Kong show no signs of slowing and the impact on the travel sector continues to grow. Cathay Pacific‘s traffic reports through the end of July were relatively stable year-over-year. Since early August, however, the numbers took a dive. The carrier now warns of double digit drops in forward bookings and a “significant” impact on revenue. The airport authority reports an 11% drop in passenger traffic for the first three weeks of August. As the conflict wears on tourist numbers are especially affected, with as much as a 50% drop YoY for the past week.
And now airlines are responding. In recent days United Airlines and Qantas announced cuts to Hong Kong services as they also see demand weakening in the market.
For Qantas the impact will be handled, at least initially, through aircraft swaps. The carrier will trade the A330-300s that typically serve Hong Kong for A330-200s with 26 fewer economy class seats on board. The ~7% reduction in capacity aims to partially offset a 10% drop in demand the carrier sees for travel to Hong Kong.
Read More: China cracks down on protesting Cathay Pacific crew
Singapore and Manila appear the beneficiaries of the shuffle, with capacity increasing to both markets as a result. Qantas CEO Alan Joyce notes that international air travel demand tends to recover quickly from similar disruptions so the option to swap the aircraft back remains on the table.
The Qantas fleet adjustments will take effect in September 2019.
A Route Suspended
United Airlines currently serves Hong Kong from four of its global hubs. Within two months that number will be reduced by half. The carrier had previously announced plans to halt its Guam service in late October at the IATA schedule season changeover. The associated slot is being reallocated to a second daily flight from the carrier’s San Francisco hub. In light of the weakened demand the Guam route will now be cut two weeks earlier, on October 16th.
United’s nonstop service from Chicago-O’Hare to Hong Kong will be suspended just two weeks hence (ORD-HKG ends on 8 September 2019). Reduced demand overall for service to Hong Kong drives that decision.
Read More: Airport disruptions continue in Hong Kong, airlines add waivers
With a need to trim capacity into the market from the mainland US, United had three hubs to pick from. San Francisco and Newark both deliver much stronger local traffic demand. The scheduled flight departure times also slightly advantage Newark over Chicago for east coast connecting traffic, while San Francisco supports significant connecting flow for the western United States.
Chicago has been the weakest positioned hub for Hong Kong service since the merger and now it will yield that route, at least temporarily. Just how long the route remains suspended could impact the landing slot allocation for United, possibly making it harder to resume service in the future.
The Cuts Not Yet Made
While foreign carriers can be somewhat surgical in their cuts, reducing exposure and protecting operations in the typically slower Fall season, Cathay faces a far more significant challenge. In conjunction with calls by Chinese regulators for more strict controls over crew working Cathay’s flights to and over the Chinese mainland reports suggest that many businesses on the mainland were encouraged to move their travel away from the carrier. The resulting drop in bookings for the significant portion of Cathay’s network and capacity that touches those markets will force the carrier to make tough decisions on what the future of the airline’s operations look like.
Cathay controls more than half the landing slots in Hong Kong, a very valuable portfolio in theory. But that value depends on the value of Hong Kong overall as an economic and tourism powerhouse in the region, supported both from within and from mainland China to fill that role. The current climate calls into question just how much that support will remain, particularly from the mainland side.
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