Shaken by “escalating market challenges”, Hong Kong Airlines is trimming operations by 6% and cutting yet another long-haul route to save on costs.

Financially struggling Hong Kong Airlines announced on November 4, 2019, that it is further consolidating its network as “challenges in the market continue to escalate”. Among the changes, the carrier is trimming operations by 6% and will look at flight frequencies in its network. In particular, the airline has warned about possible frequency changes on Vancouver, Osaka, Okinawa, Sapporo, Tokyo, Seoul, Haikou, Hangzhou, Nanjing, and Bangkok flights. 

From February 2020, it will also cease the Hong Kong-Los Angeles (U.S.) route. Currently operated four times a week, the last flight HX68 is set to take off on February 6, 2020, stopping completely from February 8, 2020. 

The Los Angeles route, operated four times per week, is the last Hong Kong Airlines destination in the United States, data shows. In October 2019, it already axed flights to San Francisco. In June 2019, it reduced frequencies of flights to Vancouver (Canada) and Los Angeles (U.S.). 

“For North American flights, even airlines like Cathay face a lot of pressure so we keep reviewing,” Hong Kong Airlines director of corporate governance and development Ricky Chong Wai-ki told South China Morning Post in June 2019. “Our North American flights will be our short-term focus that we need to consolidate”. At the time, the publication also outlined that the airline was considering completely stopping all its long-haul flights. 

In May 2019, it ended flights to Auckland (New Zealand), following a withdrawal from Australia in 2018. 

Hong Kong Airlines financial problems

The carrier is facing ongoing financial problems and its business viability has been continuously questioned. Media reports suggest that in 2018 it lost $382.54 million (HK$3 billion) and needed HK$2 billion financial infusion in April 2019 to maintain its air operator’s certificate. Previously, in January 2019, the airline publicly denied ceasing operations and applying for liquidation. 

Hong Kong Airlines troubles have caught the attention of Hong Kong Air Transport Licensing Authority (ATLA). The authority has been continuously monitoring the airline’s financial situation “over a long period of time” and has several times requested Hong Kong Airlines to submit financial improvement plans. However, in the latest official communication on the topic, dated October 25, 2019, ALTA describes the carrier’s financial situation as a “matter of concern”. 

“Having considered the information recently submitted by HKA [Hong Kong Airlines - ed. note], ATLA is of the view that HKA's financial situation has shown no sign of improvement, and that the situation is a matter of concern,” is written in the statement. “After its meeting today (October 25), ATLA decided to ask HKA to take immediate and concrete steps with a view to effectively improving the financial situation shortly. Otherwise, ATLA will consider taking appropriate action in accordance with the Regulations in the light of the circumstances”.

Cathay Pacific and headwinds in Hong Kong

Hong Kong Airlines is not the only carrier in the region feeling pressure and rethinking its network. In the most recent traffic results update, the biggest airline in Hong Kong, Cathay Pacific, revealed continuously dropping passenger and cargo numbers in September 2019, describing it as “another challenging month”. 

Cathay Pacific observed that demand for travel into Hong Kong has weakened, which affected even the “traditionally a very strong period” ‒ the National Day. It has also lost a significant portion of demand on its key market, Mainland China, where Revenue per Passenger Kilometers (RPK) dropped by 23.2% compared to the corresponding period the previous year. The carrier has withdrawn capacity on routes to China and added it to regions and continents, including North East Asia, North America and Europe.

Cathay Pacific had named various types of headwinds affecting its business this year, including trade and geopolitical factors and uncertainty of fuel prices. In its half-year results, released in August 2019, it has also named a very specific problem affecting Hong Kong ‒ the protests. “The protests in Hong Kong reduced inbound passenger traffic in July and are adversely impacting forward bookings,” it outlined. Hong Kong protests are ongoing since March 2019. 

Caught in the crossfire between the politics of mainland China and anti-government protests in Hong Kong, Cathay Pacific is suffering the consequences. The Cathay Pacific Group reported a 38% decline year-on-year in inbound traffic to Hong Kong in August 2019, at the height of protest unrest that lead to airport closures and flight disruptions. Following an “incredibly challenging” month, Cathay now states it will implement “short-term tactical measures, such as capacity realignments” as it anticipates September to be just as difficult.