Cathay Pacific cutting 2020 capacity; all airlines get to keep prized airport slots till March 2020

Sydney

HONG Kong carrier Cathay Pacific Airways plans to cut passenger flight capacity by 1.4 per cent in 2020, reversing an earlier plan for a boost of 3.1 per cent because of a challenging business outlook, an internal memo showed.

The capacity reduction follows the airline cutting its second-half profit guidance earlier this month, the second cutback in less than a month, because of anti-government protests that began in Hong Kong in June that have discouraged travel to the city.

"Given the immediate commercial challenges and the fact that our position has deteriorated in recent weeks, we must take swift action to adjust our budget operating plan for 2020 downwards again," chief executive Augustus Tang said in the memo.

"Put another way, rather than growing our airlines in 2020, for the first time in a long time, our airlines will reduce in size."

Revenue performance continues to be disappointing and advance bookings into 2020 remain much lower than expected due to weak traffic from some of its key markets, particularly mainland China, the memo said.

A Cathay representative said the carrier had no comment.

Full-service carrier Hong Kong Airlines, backed by indebted Chinese conglomerate HNA, also said on Friday it would further reduce its capacity to mitigate the impact from the political unrest.

Several Asian airlines have also cut flights to Hong Kong, as the protests in the financial hub and an escalating China-US trade war have pushed the Chinese-ruled territory into recession for the first time in a decade.

Hong Kong has enjoyed a week of relative calm since local elections last Sunday delivered an overwhelming victory to pro-democracy candidates.

But protesters stirred support for more rallies over the weekend, as police withdrew on Friday from a university campus where some of the worst clashes with security forces had occurred as part of nearly six months of unrest.

Shares in Cathay rose 0.8 per cent on Friday, outperforming a 2 per cent drop in the broader market.

Meanwhile, the Hong Kong Civil Aviation Department will allow airlines that fly to and from Hong Kong to keep their prized airport slots even if they temporarily cut capacity due to weak travel demand through March 2020. Under more normal conditions, it is tough for airlines to get take-off and landing slots at Hong Kong's airport because it lacks capacity until a third runway will come into operation in 2024.

A "use-it-or-lose-it" rule stipulates an airline normally only keeps slots out of historic precedence if it can demonstrate it used them at least 80 per cent of the time in the previous airline scheduling season. The current winter season, which began on Oct 27, ends on March 28, 2020. REUTERS