Cathay Pacific Airways said there will be enough capacity to move vaccines and other essential goods to and from Hong Kong as authorities are set to impose quarantine rules for aircrew members starting this month.
Tom Owen, director, cargo, at Cathay Pacific Cargo, said that despite the expected reduction in capacity, the flag carrier would still be able to maintain most of its pandemic-level operations.
“If this indeed happens, we will still be able to ensure that important vaccines are carried to Hong Kong and across our network,” Owen told Asia Cargo News.
“Given we estimate an approximate reduction of capacity of 25%, we will be able to maintain a presence in all key markets and on our main trade lanes,” he added, noting that the carrier will fully cooperate if these measures are announced.
Hong Kong Chief Executive Carrie Lam announced early this month that the Fosun Pharma/BioNTech vaccine – one of the Covid-19 vaccines procured by the government – is expected to arrive in Hong Kong by the end of the month from Germany.
21-day aircrew quarantine rules
The Hong Kong government issued a statement on February 5 confirming the stringent 14-day quarantine requirement for aircrew members, plus a week of medical surveillance, for locally-based flight crew starting February 20.
“The government will tighten the testing and isolation arrangements for aircrew members, sea crew members of goods vessels entering Hong Kong for cargo operations and other exempted people,” the statement said.
“If such aircrew members are locally based crew, they must self-isolate at a designated quarantine hotel for 14 days before entering the community and be subject to testing on the 12th day following their arrival. They must also be subject to seven-day medical surveillance afterwards, with testing on the 15th and 19th or 20th day following their arrival, before operating again.”
Pilots and cabin crew stopping in Anchorage, a major cargo transit point for Cathay Pacific, would, however, be exempt from the quarantine rules.
Cathay Pacific is expected to take the brunt of the tighter measures. Prior to this announcement, aircrew was exempted from the mandatory hotel quarantine rules for travellers, although aircrew in Hong Kong are some of the most tested workers in the city, submitting samples for Covid-19 screening after each return flight to the city.
“We understand the HKSARG’s needs to implement these measures in order to fight the pandemic in HKG and will fully cooperate if these are announced.
Again, if this is going to happen, we aim to operate 75% of our cargo network and hopefully more, if we can operate further cargo-only passenger services,” Owen added.
Owen also noted that various supply chains will “likely adapt” with the quarantine crew rules set temporarily as the financial hub looks to contain an increasing number of coronavirus infections.
“Our expectations are that these measures will be of a temporary nature, whilst the government continues to address the Covid-19 issues in Hong Kong. We will be able to operate our full schedule again in due course,” Owen further said.
Hong Kong has seen at least 10,797 coronavirus cases since the onset of the pandemic in the city last year, with 194 recorded deaths, although most patients have already been discharged. The city has seen a spike in cases early this year, however, prompting tighter measures to be implemented.
Capacity reduction; more cash burn
Earlier, the flag carrier already warned that the new rules would slash capacity by around a quarter from the already reduced levels currently.
“The new measure will have a significant impact on our ability to service our passenger and cargo markets. The actual extent of such impact is yet to be confirmed and will be affected by a number of factors, including the success of mitigation measures we are able to adopt, such as agile manpower resources management,” Cathay Pacific Group chief customer and commercial officer Ronald Lam said.
“At this stage, our preliminary assessment is that the new measure may result in a reduction of the current passenger capacity of around 60%, a reduction of the current cargo capacity of around 25%,” he added.
The crew quarantine would also cost Cathay Pacific an estimated HK$300 million (US$39 million) to HK$400 million (US$52 million) per month on top of its current monthly cash burn of between HK$1 billion (US$129 million) to HK$1.5 billion (US$193 million).
Industry cites possible impact
Kerry Logistics’ Simon Yam, executive director-international freight forwarding, Hong Kong, said the tighter quarantine rules would more likely impact the operations of those carriers implementing crew changes in the financial hub.
“The impacts are mainly on carriers that are going to have crew changes in Hong Kong, which means the long-haul flights ending in Hong Kong and our home-based carriers such as Hong Kong Airlines and CX [Cathay Pacific],” Yam told Asia Cargo News.
“This would definitely impact the schedules of our home carriers and especially the long hauls, I would assume carriers would try their best to finish their upload and offload shorter than two hours to avoid falling into such restrictions,” he added.
“Kerry Logistics would monitor the situation closely and would have to place more of our cargoes to carriers that are less affected as well as have the need to diversify our freights to be moved out from other airports in the Greater Bay area such as CAN [Guangzhou], Macau and SZX [Shenzhen].”
Airlines from the US, for example, have avoided any possible quarantine issues in Hong Kong by running long-haul cargo flights from the United States to Guam (United Airlines) or Tokyo Narita (American Airlines), changing crew at those airports, and having the same crew operate the flight into and back from Hong Kong without leaving the airport secure zone.
Steve Fernandez, regional director, Asia Pacific, of global aircraft charter provider Air Charter Service (ACS), said the impact of the new measure would be minimal for carriers with lots of crew members, but for most carriers, it could drive operating cost and prompt flights to resort to other airports.
“I guess if you’re an airline that has lots of crew, and those crews are interchangeable amongst your fleet, then you could probably ride this out albeit incurring additional cost,” Fernandez told Asia Cargo News.
He noted, however, that most airlines are not in a position of having an excess crew and wholly interchangeable crew across their fleet.
"So, if you’re an airline and this ruling means that in flying through Hong Kong you end up with even less pilots because they’re stuck in quarantine, then you lose the ability to operate as many revenue flights, and the amount of money you want to fly ex Hong Kong needs to increase to cover this new opportunity cost,” he added.
“I would say you’ll see in the market fewer operations from Hong Kong and those who still operate from Hong Kong wanting more money to do so. The above will inevitably push a proportion of cargo to fly out of other airports, such as Guangzhou, Shenzhen and Macau.”
Meanwhile, for his air freight outlook this year, Cathay Pacific Cargo’s Owen said: “We remain optimistic for the air freight demand over 2021 as the widebody belly space is likely to continue to be restricted in international trade lanes. But it is still uncertain as to when the passenger capacity will be restored, with a lot riding on the pace of vaccine rollouts and the removal of travel restrictions on passenger services.”
By Charlee C. Delavin
Asia Cargo News | Hong Kong
