Until the Covid-19 virus emerged, Hong Kong’s status as a global aviation hub was never in any doubt, given our perfect location at the heart of Asia, and an airport and flag carrier routinely heralded as the best in the world.
When the pandemic arrived more than two years ago, it devastated the global aviation industry. But now, as Hong Kong maintains travel restrictions while the rest of the world reopens, are we in danger of becoming a second-tier destination?
Tough rules take their toll
Airlines around the world were thrown into unknown territory by the pandemic. For Hong Kong’s flag carrier, it has been “the most challenging period in Cathay Pacific’s 75-year history,” according to Andy Wong, Cathay Pacific General Manager for Corporate Affairs.
“Operational and travel restrictions that have been introduced as part of global efforts to combat the pandemic have greatly constrained our ability as an airline to operate flights,” he said. “As a result, we have been operating at considerably less passenger and cargo flight capacity compared to pre-Covid-19 levels.”
Airlines have been operating on vastly reduced schedules throughout the pandemic, cancelling numerous routes amid changing rules, and new outbreaks and lockdowns.
The private jet and business aviation sector offers an alternative for travellers where commercial flights have not been available. Private flights have also become popular for transporting pets overseas. But overall, this segment is also feeling the chill.
“The volume of business aviation has decreased dramatically due to the pandemic, which is understandable and similar to the situation all over the world,” said Madonna Fung, General Manager at the Hong Kong Business Aviation Centre (HKBAC).
“Hong Kong’s quarantine restrictions towards international inbound travellers are among the most stringent in Asia and the world,” she added. “Understandably, that may cause some travellers to avoid Hong Kong in the pandemic. International pilots and crew may also have shied away because of this.”
Covid has also changed the way businesses operate, and the aviation sector has perhaps the most stringent health and safety processes. Fung explained that HKBAC has rolled out a wide array of measures such as frequent disinfection of all facilities, and a dedicated luggage-disinfecting light.
Besides vaccine requirements and frequent testing, staff must adhere to strict protocols, such as segregation during meal breaks depending on whether they have been working on international or Mainland flights.
Cathay’s Wong noted that flight crews in particular have suffered tremendous disruption due to the quarantine requirements. In 2021 alone, Cathay Pacific staff spent more than 62,000 nights in quarantine hotels, while over 1,000 of them spent more than 11,000 nights in the Penny’s Bay quarantine facility.
“We are extremely grateful to all of our people for the professionalism and can-do spirit they have all shown throughout the pandemic,” Wong said.
Cargo continues despite constraints
On a brighter note for aviation, Hong Kong has remained the world’s busiest international cargo airport. But numbers do not paint the whole picture, and this sector has also undergone considerable disruption.
As Mark Slade, Managing Director, Hong Kong and Macao, DHL Global Forwarding (Hong Kong), explained, passenger planes play a key role in the industry.
“Globally, 40 to 50% of all cargo travels on passenger planes,” he said. “Under normal circumstance, in the belly of the plane it is not just baggage – two-thirds to three-quarters can be purely cargo, depending on the route.”
This is a mutually beneficial system, as this freight also provides a second revenue stream for the passenger planes.
As an aviation hub, Hong Kong’s very high volume of flights meant that goods could be moved very quickly. Before Covid, Slade pointed out, there were around 20 flights per day on the Hong Kong-Taipei route. Another advantage for the cargo sector is the prime arrival and departure times for passenger planes.
“So the passenger planes are very important to the overall market,” Slade said. “Not having sufficient passenger loads in Hong Kong definitely limits the overall options to our customers in terms of flight connections.”
Hub for business meetings
Hong Kong has long been a mecca for business meetings, including large-scale conferences. As Monica Lee-Muller, Managing Director of Hong Kong Convention and Exhibition Centre (Management) Limited (HML), explained, from July 2018 to June 2019 the venue hosted a total of 119 exhibitions, most with overseas participants.
“Some of these trade shows were recurrent, well established in the international calendar, some being recognised as the world’s or Asia’s largest,” she said. “These are all important platforms that facilitated business developments, benefitting not only the exhibition industry with spin-offs to hotels, retail and transport sectors, but even more importantly, thousands of Hong Kong’s SMEs.”
This contributed HK$58 billion to the local economy in 2018, she added, equivalent to 2.1% of Hong Kong’s total GDP, generating the equivalent of 77,000 full-time jobs.
International exhibitors have made it clear that they want to come back to Hong Kong. Some major fairs, such as the beauty trade show Cosmoprof Asia, have sought alternative locations, but on a one-off basis.
“With HML’s flexible rescheduling policies, the vast majority of recurrent exhibitions are still planning to stay with Hong Kong and the HKCEC,” Lee-Muller said. “For example, the prestigious Art Basel Hong Kong 2022 and Art Central will continue in May 2022.”
This continued support is heartening, but Lee-Muller is still concerned about the impact if travel restrictions continue.
“While HML is confident in the advantages of the HKCEC and Hong Kong, and that international shows and conferences do wish to stay in Hong Kong, we must not under-estimate our competitors’ aggressive efforts,” she said.
“Singapore, Thailand, Malaysia, Australia, New Zealand, Canada and many other countries will be making major relaxations or completely removing inbound travel restrictions and social-distancing measures. These countries are launching major marketing campaigns to reboot their travel, exhibition and conference business.”
Steps towards reopening
One ray of hope is that some of Hong Kong’s restrictions have been eased in recent months. From 1 May non-residents can enter the city, for example, while the transit ban was lifted on 1 April.
Wong from Cathay Pacific welcomed these steps towards opening up, which are enabling the company to add more flights to its schedule.
“This is a positive direction for the gradual resumption of travel activities and the strengthening of network connectivity to and from the Hong Kong aviation hub,” he said. “We look forward to further adjustments that help facilitate travel in the near future.”
The flight-ban mechanism has also been eased, and routes will now be banned if five, or 5%, of passengers test positive, rather than three. However, this means that all flights to Hong Kong still run the risk of being cancelled at the last minute.
“There has been some progress,” said Slade from DHL, “but airlines can still run afoul of the rules and that makes it difficult for businesses to plan and to have sufficient capacity.”
Hopes for next steps
Companies in Hong Kong are united in their desire to see a more rapid opening up, as well as further guidance on when this might happen.
“We strongly appeal to the HKSAR Government to present a clear roadmap on relaxation of travel restrictions and quarantine measures to rebuild organizers’ confidence,” Lee-Muller said.
Slade from DHL agreed that a clearer plan on reopening would be welcome. While businesses understand the Government’s decision to prioritize connections with the Mainland, the recent surge in cases there in recent weeks has changed the landscape.
“If reopening with the Mainland is highly unlikely in the near future, should we not look at the second option, which is opening international borders?” he suggested.
Fung said that HKBAC supports the policy to achieve zero cases, but is concerned about the recovery of the Hong Kong economy as well as normal social activity.
“Given the wide adoption of the highly recognized RAT tests in Hong Kong and internationally, the Government could consider a gradual re-opening of borders with a balanced regime to guard against infiltration of the pandemic, without bringing air travel to a complete halt,” she said.
Reason for optimism?
Despite the devastation wrought by the pandemic on the aviation sector, there are some reasons for optimism. Firstly, there is the hope that the easing of restrictions will continue. And perhaps more importantly, the fundamentals underlying our status as a global aviation hub have not changed.
For cargo operators like DHL Global Forwarding, Hong Kong’s location is unrivalled. Within a four-hour flight radius, you can reach virtually every major city in the dynamic Asian market.
“Hong Kong is an entrepot,” Slade said. “That was its original 19th century function and is still valid today, thanks to the free port status and very efficient customs administration. Our strengths are still there.”
HKBAC is bullish about the future of the business aviation sector and Hong Kong’s ability to attract business travellers, particularly due to the growth potential in the Greater Bay Area (GBA). Demonstrating their commitment, the company announced in April last year a major expansion of their facilities.
Cathay Pacific’s Wong agreed that that Hong Kong will remain highly competitive when restrictions are lifted, boosted by the opening of the third runway and the GBA opportunities.
“Our confidence in the long-term future of both Cathay Pacific and the Hong Kong international aviation hub remains as steadfast as ever,” he said.
Hong Kong Travel Restrictions
As of late April 2022, restrictions include:
- mandatory one-week hotel quarantine for all arrivals
- flight routes banned for five days if found to have five or 5% (whichever is higher) infected passengers
Measures that have recently been removed or eased include:
- ban on non-Hong Kong residents
- ban on transit passengers
- flight-ban mechanism activated by three positive cases
- two- and three-week hotel quarantine
Chamber Senior Economist Wilson Chong considers the implications of Hong Kong's travel restrictions
Since the onset of the pandemic, Hong Kong has pursued a so-called "dynamic zero-Covid policy" that includes stringent quarantine and travel restrictions. As a result, the number of visitors to Hong Kong has plummeted along with our hard-earned reputation as an international city.
It was initially thought that air traffic would rebound quickly in a matter of months as had been the case with SARS in 2003. This did not happen. In 2021, the Hong Kong International Airport handled 1.4 million passengers, compared to 71 million in 2019. As with certain sectors in Hong Kong, the aviation industry has been pummelled by Covid, although the cargo side has performed strongly with air cargo throughput rising by 12.5% year on year in 2021 to 5 million tonnes, compared to the 4.8 million tonnes recorded in 2019.
As many places around the world have reopened, Hong Kong's dogged adherence to restrictions risk a severing in connections with the rest of the world. This will have major socio-economic implications on the city. According to a Chamber survey conducted in January, the recent wave of emigration out of Hong Kong has already resulted in a shortage of skilled workers.
Since the fifth wave struck, social restrictions have been tightened further in an attempt to curb the spread of the Omicron variant. This has exacerbated the "brain drain" problem, with companies and personnel fast-tracking plans to relocate out of the city. Given the importance of human capital in Hong Kong's service-driven and knowledge-based economy, there is real cause for concern about the city's attractiveness as a place to live and work if the draconian restrictions were to persist.
The Government's decision to embark on a three-phase approach to rolling back flight bans, quarantine and social distancing measures from 1 April was therefore very much welcomed.