Hong Kong tightens Covid grip on struggling Cathay Pacific

Globally, airlines have had a very tough two years, but what Hong Kong's Cathay Pacific - once a major global airline player connecting the world via its flagship Hong Kong hub - has endured (and continues to endure) is nothing short of unbelievable.Cathay Pacific has been operating with passenger capacity at 93% below pre-pandemic levels as a result of Hong Kong’s strict zero-Covid-19 policy. Routes have been cut, pilots face weeks in state quarantine, and the airline is regularly slammed for “importing a positive case of the virus” when an arriving passenger goes on to test positive in state quarantine. If an arriving passenger tests positive in state quarantine having flown in on a foreign airline, the Hong Kong authorities slap a temporary ban on the airline, prohibiting operations to Hong Kong citing the “imported case.” These airline specific bans are currently affecting Finnair, Turkish Airlines, Cebu Pacific, among others. Other airlines, including Emirates, KLM, Qatar Airways, British Airways and Nepal Airlines have been on the receiving end of Hong Kong’s bans multiple times throughout the pandemic. Multiple airlines have begun avoiding Hong Kong and pulling out pilots and crew from the city. British Airways has had to suspend all flights to Hong Kong until March after BA crew members were forced to stay in state quarantine facilities. FedEx - a giant in the region - will shut down its crew base in Hong Kong, citing the extremely strict policies. While the crew base will close, FedEx will continue to operate in Hong Kong because the city is a vital part of its Asia Pacific and global network, the US company said in a statement. Elsewhere, Singapore Airlines - a competitor in the region - have seen passenger capacity pick up to 32% compared with pre-pandemic levels as of November 2021. Hong Kong's strict adherence to a zero-Covid-19 strategy is damaging the hub's aviation industry and "killing" Cathay Pacific, Qatar Airways Group CEO HE Akbar al-Baker told the South China Morning Post. Al-Baker took issue with a border-control rule that temporarily bans airlines that have brought in infected passengers."You can't just shut the aviation industry (down) because somebody got infected coming in (on) someone's aeroplane", he told the South China Morning Post.Al-Baker added that he was "a little disappointed" that Hong Kong has remained closed, and he had expected a major part of Cathay's fleet to be flying again.Qatar Airways is Cathay's third-largest shareholder, with a 9.6% stake purchased for HK$5.16bn ($661mn) back in 2017.As we approached the new year, Cathay Pacific had announced that it would halt all long-haul freight flights until at least January 6 after authorities extended quarantine restrictions for air crew because of the new Omicron cases. The government’s postal service said airmail delivery to the US, Canada, Australia and Mexico would be suspended from Saturday until further notice “owing to the substantial reduction in flight frequencies”.This week, the Asian financial hub has gone further. The authorities will ban all passenger flights from the UK, US, Australia, Canada, France, India, Pakistan and the Philippines for at least two weeks from January 8.Non-residents from these countries were already prohibited from entering Hong Kong but residents were previously allowed entry with a three-week quarantine.“We are facing a very dire situation of a major community outbreak anytime. And that’s why we have to take very decisive measures,” Lam told a press conference. The measures came after a handful of diners who visited a restaurant on December 27 tested positive for the Omicron variant, marking the city’s first community-spread cases of the strain.The city had recorded 114 Omicron cases as of Tuesday, most of them imported and detected during isolation.Hong Kong's ability to reopen has also been hampered by poor vaccine take-up. 70% of Hong Kongers have chosen to have two doses but the rate among the elderly, the demographic most at risk, is far lower.Elsewhere, US Covid cases in a single day were 1.08mn, according to Johns Hopkins University, while the UK recorded almost 219,000 cases, France hit close to 300,000 and Italy registered 170,000.But with the Omicron strain causing fewer hospitalisations than previous waves, investors are positive on the outlook for airlines. Low-cost airline Wizz Air, on the London Stock Exchange, gained 12%, while British Airways owner IAG rose 11% and easyJet added 9% by the close. German tour operator Tui rose 10%, while Ryanair gained 8% and other European airlines including Lufthansa and Air France added to gains made in the previous session on Monday.Pre-departure testing will no longer be required for travellers returning to the UK. It comes after trade body Airlines UK and Manchester Airports Group called for the removal of all Covid testing restrictions, saying it would have no real impact on Omicron numbers in the UK. Airlines UK said at the time that costly testing and isolation measures imposed on travellers ought to be removed too for the same reason and has now reiterated that plea.The trade body and MAG - which operates Manchester, London Stanstead and East Midlands airports - cited research they had commissioned from consultancy Oxera and analytics firm Edge Health to make the latest call. They said the research showed the removal of all testing requirements on international travel this month would not impact the spread of Omicron in the UK.It also found that the introduction of pre-departure and day two PCR testing in late November and early December respectively had little impact on the spread of Omicron in the UK, compared to a scenario where the policy of a single day two antigen test remained the same.The author is an aviation analyst. Twitter handle: @AlexInAir