China Retaliates Against Cathay Pacific Staff

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On Friday, the Civil Aviation Administration of China (CAAC) announced that it would require Cathay Pacific to ban staff that have take part in the demonstration from its flights to/from China or they will become unable to use the Chinese airspace. The airline is required to clear staff working on these flights with the regulator.

Hong Kong Airport

Hong Kong has been rattled with demonstrations over an extradition bill that would have allowed China to extradite people from Hong Kong or those transiting via the airport without proper judicial oversight.

Here’s an excerpt from the South China Morning Post (access their piece here):

Beijing has fired its first shot at the Hong Kong business sector since extradition bill protests roiled the city, with mainland civil aviation authorities ordering airline Cathay Pacific to suspend staff who took part in “radical activities” from mainland flights.

In a statement on Friday night, the Civil Aviation Administration of China (CAAC) told the Hong Kong-based carrier that from Saturday staff who had taken part in “illegal protests”, “violent actions” and “overly radical activities” in the city would not be allowed on services to or from the mainland.

The CAAC also said that from midnight Sunday the airline had to submit identification details of all crews on all services using mainland airspace.

Flights that did not have CAAC-approved crew lists would not be allowed to use Chinese airspace, it said.

And here’s from the WSJ (access their piece here):

Cathay has been diversifying its routes and moving away from Chinese group bookings in recent years to reduce its reliance on China; even so, China-Hong Kong routes account for a fifth of its seat capacity, according to the CAPA—Center for Aviation, making it vulnerable to a boycott from mainland customers.

State-run Air China owns 30% of Cathay, which is controlled by the U.K.’s Swire Group .

While an unofficial boycott might cause some short-term pain for the airline, the intervention of the civil aviation authority could pose Cathay a much bigger headache. “Any passenger downturn would probably be short-term. Potentially more impactful is any regulatory action or informal practice that curtails, delays or make Cathay’s operations harder,” said Will Horton, the Asia editor at Orient Aviation.

Conclusion

One country, two systems was supposed to be in place for fifty years after the British handover of Hong Kong to China back in 1997. The mainland, however, has tightened its grip and effectively controls most of Hong Kong’s legislature.

Not being able to use China’s airspace would be catastrophic for Cathay Pacific. As the WSJ points out, Mainland China accounts for roughly one fifth of the airline’s seat capacity and likely a smaller portion of its revenue.

It is surprising, or perhaps not, that these CAAC issued requirements only apply for Cathay Pacific and not to the other airline based in the city, such as Hong Kong Airlines. The former is roughly 30% owned by Air China while the latter is owned by the troubled mainland company HNA (who used to be a major player in the hotel field too).

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