FedEx Express is abandoning its pilot base in Hong Kong because of restrictive COVID health and travel rules that make it difficult for the parcel carrier’s airline to operate efficiently.
In late January, FedEx (NYSE: FDX) relocated at significant expense about 180 of its Hong Kong-domiciled pilots and their families to San Francisco so they wouldn’t be subject to lengthy quarantines required by Hong Kong authorities after returning from trips. The express delivery company said at the time that the new arrangement significantly increased operational costs.
“As the global business environment continues to evolve and with continued COVID restrictions in Hong Kong, FedEx has made the decision to close its Hong Kong crew base and relocate its pilots. The decision will not impact any FedEx routings or otherwise alter our service to our customers in this region,” the company said in a statement provided to American Shipper. “FedEx will continue to maintain all of our operations in Hong Kong and the Asia Pacific, which are vital to our global network. We continue to operate and serve our customers in this important market with the safety and well-being of our team members as our top priority.
“We are fully engaged with our crew members in providing support for the relocation process, and we are proud of the way our entire FedEx team has continued to operate through difficult circumstances to keep the global supply chain moving around the world.”
The lack of a timeline for Hong Kong to return to normal was a key factor behind FedEx’s decision, according to the South China Morning Post, which was first to report the story.
Navigating Hong Kong’s onerous zero-tolerance policies toward COVID has been a challenge for FedEx and UPS (NYSE: UPS) since the start of the pandemic. FedEx pilots early this year requested that the company stop layovers in Hong Kong because of burdensome quarantine conditions they said forced crews to be hospitalized against their will in substandard quarters if they tested positive for COVID upon arrival, with asymptomatic pilots kept in large congregate settings with communal bathrooms.
UPS pilots complained that they were detained after arriving in Hong Kong until their COVID test results were available.
Many passenger airlines have avoided Hong Kong or make extra stops in other countries for crew changeovers to avoid the city’s rules.
Cathay Pacific stuck
Hometown carrier Cathay Pacific has been especially harmed by Hong Kong’s COVID policies, which significantly reduce the availability of pilots and airlines’ ability to maintain flight schedules. The quarantine restrictions decimated Cathay’s already low passenger capacity and cut the capacity of its all-cargo fleet by 25% for two months before certain cargo routes received exemptions, forcing the company to dip further into cash reserves.
Before the pandemic, Cathay Pacific was one of the world’s largest cargo airlines by volume.
While international passenger traffic in many countries is likely to recover to 2019 levels within two or three years, “I can see it taking maybe five years-plus for Hong Kong to recovery to previous levels of capacity, and by that time, what is left of Cathay Pacific” and two other low-cost airlines, said John Grant, chief analyst at OAG, during a company webinar about the Southeast Asia travel market.
OAG is an airline data and analytics firm.
Hong Kong authorities this month announced they were moving to align even more with Chinese quarantine and travel requirements, which Grant said threatens the city’s status as an international gateway because people are not going to accept three-week quarantines in a hotel.
Cathay Pacific reported a net loss of nearly $1 billion for the first half of the year.
In October, it carried a total of 76,430 passengers, a 97.2% decrease compared to pre-pandemic levels. During the first 10 months of the year, the number of passengers carried dropped by 88% against a 68.4% decrease in capacity compared to the same period for 2020, which was already low due to COVID.
Cargo volume decreased 25.5% compared with the same period in 2019. Cargo revenues were down 14.9% year-over-two years while other passenger and combination carriers are enjoying revenue spikes from their cargo divisions. Year-to-date tonnage declined 2.9% and capacity dropped 14.7% compared to the same period last year.