On August 10, 2019, Cathay Pacific Airways (OTCMKTS: CPCAY) confirmed that it has suspended a pilot arrested at a recent protest in Hong Kong and terminated two ground employees for misconduct according to the South China Morning Post.
Previously, the Civil Aviation Administration of China (CAAC) issued orders to the airline barring its employees that supported the protests in Hong Kong from service on flights to and through the mainland. Additionally, the CAAC implemented a requirement for Cathay Pacific requiring the carrier to present prospective crew member information for approval prior to flights to China’s mainland or in its airspace.
In a memo to employees obtained by Channel News Asia, Cathay Pacific’s Chief Executive Officer Rupert Hogg said, “Cathay Pacific Group’s operations in mainland China are key to our business. In addition to flying in and out of mainland China, a large number of our routes both to Europe and to the USA also fly through mainland China airspace. We are therefore legally required to follow CAAC regulations and, as is the case with any notices issued by any regulatory authority having jurisdiction over us, we must and will comply.”
According to the South China Morning Post, the pilot was arrested and charged with rioting at a protest in Hong Kong and the ground employees were released for leaking travel information about the Hong Kong police soccer team.
Cathay Pacific cited rising tensions in Hong Kong in its August 7 earnings report. “The protests in Hong Kong reduced inbound passenger traffic in July and are adversely impacting forward bookings,” the release stated.
In the report, Cathay Pacific announced significantly better earnings in the first half of 2019 compared to the 2018 period. However, cargo revenue declined 9 percent year-over-year as a 1 percent increase in volume was more than offset by a 10 percent decline in revenue per freight tonne kilometer. Cathay’s management team said that they have rationalized freighter capacity in response to a weaker airfreight market.
While passenger transport accounts for the bulk of the company’s revenue, further weakness in both segments is expected given soft airfreight fundamentals, protests in Hong Kong and global trade headwinds.
“Passenger business will continue to be affected by intense competition and cargo volume and yield is expected to remain difficult.”
