Concerns regarding travel in Asia and restrictions in China have nearly shut some airlines down altogether. Could coronavirus make Cathay Pacific its next victim?
***Update 3/16/2020*** The day following this post, Cathay Pacific announced $257MM USD ($2.3bn HKD) in February losses alone.
The coronavirus has affected more workers around the world than people the disease has infected. Airlines from the US have all but ceased operations to Asian destinations, limiting their focus to Japan and South Korea. Both may soon be on the chopping block as demand falls and infection cases increase.
A substantial amount of Cathay Pacific’s business is to and from China. It’s almost impossible for Cathay to operate reasonably without demand from Mainland China and facing the US travel restrictions in place for parts of the region.
Cathay Pacific Already Having a Bad Couple of Years
I love Cathay Pacific. Service has always been impeccable in my experience, their equipment is excellent, their lounges are some of the best in the world – there’s so much to like about Cathay Pacific. In fact, I was planning on using miles from an Alaska credit card to fly them for Christmas this year as we have done in the past.
But it’s been hard for the carrier as of late. For the last couple of years, Cathay Pacific has fought financial hardships in a variety of forms. New aircraft to replace expensive long-haul equipment like its A340s and less fuel-efficient 747s.
Visitor traffic to Hong Kong is usually 200,000 daily but has shrunk to just 3,000 (and likely much lower now.) Naturally, not all of that is Cathay Pacific traffic, but one can only imagine how much lower that sinks the carrier. The airline had already parked 120 of their 200 aircraft, but that can’t be nearly enough.
The airline was also one of nine that were put on the “stop sale” list by IATA as a means by which they are considered risky enough to no longer receive revenue from payment processors in the same fashion as before and their insurance contract may have been pulled.
As verified by a travel agent I know, the above “stop sale” is not in place.
Will the Government Bail Them Out?
Tourism and business traffic is essential to Hong Kong, not just Cathay Pacific. Unlike other countries, homegrown competition is limited. The second-largest carrier, Hong Kong Airlines, is purely regional at this point making Cathay Pacific the only Hong Konger link to the outside markets.
Hong Kong’s need to ensure the survival of Cathay Pacific goes beyond the function of carrying passengers and cargo. It’s also important to demonstrate the stability of the city-state and show strength to concerned residents and visitors.
I love Cathay Pacific and I love Hong Kong. The thought of this historic brand, that offers such great service and has so much pride about where they are from and what they do, shutting down or selling to a rival fills me with sadness and heartbreak. That said, I am not sure after the protests and now Coronavirus, the airline will be able to survive without tremendous intervention.
What do you think? Will Cathay Pacific be able to weather the storm? Will the HK government come to the rescue? Is it just the way of the world and they should be moved to new management anyway?