Cathay Pacific Struggles With Aftermath of Covid, and China Crackdown

Few major airlines in the world were hit by the Covid pandemic as hard as Cathay Pacific, the flagship carrier of Hong Kong, or have labored so mightily to recover from it. Its business was decimated by some of the industry’s most expansive flight bans and quarantine requirements. And the pandemic wasn’t the start of Cathay’s troubles.

In 2019, when Hong Kong was convulsed by pro-democracy protests, Cathay Pacific was caught in the crossfire with Beijing. Flights were canceled or delayed by airport sit-ins involving thousands of demonstrators, among them employees of the airline, Cathay Pacific. Chinese officials threatened to bar crew members who joined the protests, or even voiced support for them, from flying into China.

Turmoil grew inside Cathay Pacific. The airline’s chief executive and chairman both resigned, and new leaders began cracking down on anything employees said or posted on social media that could anger China.

In 2020, as the pandemic grounded its business, Cathay shuttered its regional division, Cathay Dragon. It parked 70 unused planes in the desert in Alice Springs, Australia, and fired 5,300 employees based in Hong Kong. As the city lengthened the mandatory quarantines, some aircrew had to enter three- to four-week-long “closed loop” work shifts, enduring weeks away from home that were devastating to employee morale.

Today Cathay Pacific is still struggling to hire enough pilots, flight crew and other staffers to compete with other airlines. Its rivals “have emerged leaner, fitter and eager to take customers away from us,” the company’s chief executive, Ronald Lam, said in a video message to employees in January, trying to rally them around a plan “to survive and thrive.” Cathay Pacific climbed back to 50 percent of its prepandemic flight capacity only in March.

The problems continue. Last week, in an internal memo, Mr. Lam informed Cathay Pacific’s staff that three employees had been fired after an audio recording went viral of cabin crew members ridiculing a passenger’s English. Mr. Lam said the employees had caused “significant damage to the image of Hong Kong and Cathay.”

The episode was a reminder of the delicate task Cathay Pacific faces in navigating its relationship with China. China is a vital market for the airline, but its economy is still recovering after being closed off to Hong Kong and the rest of the world for nearly three years. Before the pandemic, Cathay flew from Hong Kong to 119 places in 35 countries, including 26 destinations in China. Its convenient flight times from cities across China allowed passengers to change planes in Hong Kong by night and arrive in the United States or Europe by morning or early afternoon.

At the height of the Omicron outbreak in January 2022, when the Hong Kong government banned inbound flights from countries including the United States, Australia and the United Kingdom, the airline was flying at only 2 percent of its passenger flight capacity.

In a statement, the airline said it aimed to return to 70 percent flight capacity and 80 destinations by the end of 2023, with 160 flights per week to 16 airports in mainland China.

Even after Hong Kong removed its Covid-related rules and quarantine requirements, Beijing’s determined influence over the former British colony still threatens the reputation it has enjoyed for decades as an attractive, freewheeling destination for business.

Just as Hong Kong was the world’s portal to China, Cathay Pacific was a vanguard in connecting emerging economies in Asia to New York, London and Paris. Founded in 1946, it was one of the city’s most important brands, known for its punctuality and premium service. The airport’s third runway opened last year to accommodate Beijing’s plans to integrate Hong Kong with Macau and nine cities in the Guangdong province into a tech hub known as the Greater Bay Area.

Cathay Pacific said it doesn’t expect a full recovery until next year. Its most immediate challenges are restoring its pilot and cabin crew head count, and increasing flight capacity.

To cut costs, Cathay has slashed pilot base salaries by about 40 percent, angering many members of its aircrew. In January, in response to the airline’s use of fewer flight attendants per flight and reduction of recovery time between long flights, the Cathay Pacific Flight Attendants Union introduced a “work to rule” campaign: discouraging flight attendants from performing duties beyond the scope of company guidelines. Officials with Hong Kong’s Airport Authority said in May that they had observed a trend of lower taxiing speeds among Cathay pilots after the airline’s new pay structure in effect gave them a disincentive from completing flights earlier than scheduled.

“They said we’ve got to save cash, but there’s not much point saving cash if you haven’t got an airline at the end of it,” said Paul Weatherilt, chairman of the Hong Kong Aircrew Officers Association, a pilot’s union, and a Cathay Pacific pilot for nearly three decades. “And that’s sort of the position they’re in now. They have half the airline.”

Before 2019, the airline had 3,840 pilots. Since then, 1,900 have resigned, according to the Aircrew Officers Association. The number of captains, the most senior pilots, has been halved. And while Cathay Pacific rehired dozens of pilots from the shuttered Cathay Dragon division in 2021 and 2022, many had to take pay cuts and demotions when accepting their offers. The lack of flights during the pandemic slowed the development of the training that first and second officers need to become captains. Senior pilot trainers and flight simulator instructors quit.

Despite its struggles, some industry analysts are optimistic that Cathay Pacific will recover. The company reported an annual profit last year, its first since 2019. Its flights are about 90 percent full, which is better than before the pandemic, and high ticket prices have helped revenue. During the pandemic, business from cargo flights kept the airline afloat.

But no market is as important now to Cathay Pacific, or as potentially fraught, as China.

The most recent trouble stemmed from the complaint of a passenger who had flown on May 21 from the southwestern Chinese city of Chengdu to Hong Kong and posted a recording of flight attendants overheard in the galley laughing about a passenger who had apparently requested a “carpet” instead of a blanket. “If you cannot say ‘blanket’ in English, you cannot have it,” one flight attendant said in the recording.

The recording dominated discussions on Chinese social media, with people posting about what they saw as a history of snubs by the airline’s flight attendants against mainland passengers. Xinhua, a state media agency criticized the airline for “arrogance,” “bad service” and a lack of sincerity. “If it doesn’t correct its old habits, Cathay Pacific won’t fly far,” read the headline of an editorial article.

Hong Kong’s top government leader, John Lee, joined the rebukes. “The words and deeds of the flight attendants hurt the feelings of compatriots in Hong Kong and the mainland and destroyed Hong Kong’s traditional culture and values of respect and courtesy,” he said in a Facebook post.

Cathay Pacific apologized on Weibo on Tuesday and said that the airline would open an investigation. By Wednesday, three flight attendants had been fired.

“We had to respond and act swiftly, which was necessary to protect the interest of the company and in turn our people overall,” Mr. Lam wrote in the internal memo to employees on Thursday.

He added that the remarks were a blow to the airline’s reputation. “Whilst the incident has caused a setback to our rebuild journey, let’s embrace it as a valuable lesson,” he wrote.

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