New HK quarantine rules to sap 25% of Cathay’s cargo capacity

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Although 2020 closed out with a relatively decent finish for the Cathay Pacific Group, new travel restrictions and Hong Kong quarantine requirements threaten to sap even more cargo capacity from the carrier.

Next month the Hong Kong SAR Government plans to implement a new 14-day hotel quarantine plus a 7-day medical surveillance requirement for both Hong Kong-based pilots and cabin crew. “The new measure will have a significant impact on our ability to service our passenger and cargo markets,” warns Cathay Pacific Group chief customer and commercial officer Ronald Lam.

“At this stage, our preliminary assessment is that the new measure may result in a reduction of current passenger capacity of around 60 per cent, a reduction of current cargo capacity of around 25 per cent and a further increase in our cash burn of approximately HKD 300-400 million (USD 38.7-51.6 million) per month, on top of our current HKD 1-1.5 billion levels.”

The full extent of what the impact will be is unknown at this point, he says. It will, however, be affected by a number of factors, including the success of mitigation measures the carrier is able to adopt, such as agile manpower resources management.

As an indication of just how dismal 2020 was, the December figures of 120,218 tonnes of cargo and mail, representing a decrease of 32.3 per cent compared to December 2019, was actually held up as a reasonable performance.

“Cargo had a relatively good finish to 2020, in line with the overall positive performance seen in the second half of the year,” notes Cathay Pacific Group chief customer and commercial officer Ronald Lam.

December tonnage was up month-on-month by about 3.0 per cent, with exports from the Chinese mainland and Hong Kong holding up for longer than is normally expected at the end of the year, Lam says.

The overall buoyancy of the market ensured that load factors continued to grow, averaging 80.3 per cent in December – the highest monthly average in 2020. The imbalance in the market between demand and available capacity created an ongoing need for cargo-only passenger flights prior to Christmas, Lam says, and overall in December Cathay operated 713 pairs of these flights – only slightly fewer than in its peak month of November.

December’s revenue freight tonne kilometres (RFTKs) fell 23.7 per cent year-on-year. The cargo and mail load factor increased by 13.9 percentage points to 80.3 per cent, while capacity, measured in available freight tonne kilometres (AFTKs), was down by 36.9 per cent.

“Network traffic feed from Northeast Asia and the Southwest Pacific was also encouraging with good movements of priority cargo and special products,” Lam says.

“We launched a seasonal cargo service into Hobart, Australia last month transporting high-quality fresh produce from Tasmania’s capital city to various parts of Asia. We also launched a new scheduled freighter service between Hong Kong and Riyadh in January to meet the strong demand for shipments of e-commerce and other general cargo such as garments.

For 2020 as a whole, the tonnage carried by Cathay Pacific and Cathay Dragon fell by 34.1 per cent against a 35.5 per cent drop in capacity and a 26.5 per cent decrease in RFTKs, as compared to 2019.

“We have also made all necessary preparations to ensure we are able to contribute to the vital mission of transporting COVID-19 vaccine shipments around the world with the development of our dedicated vaccine solution. This solution builds on our many years of experience in transporting pharmaceutical shipments, and we stand ready to assist with our extensive freighter network.”

On the passenger side, for 2020 as a whole, the number of passengers carried by Cathay Pacific and Cathay Dragon dropped by 86.9 per cent against a 78.8 per cent decrease in capacity and an 85.1 per cent decrease in RPKs, as compared to 2019.

“Our passenger business continues to face significant challenges. We increased capacity by about 8.0 per cent in December compared to November as we gradually added capacity on flights serving North America, the South Pacific, and some regional routes,” Lam adds.

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