Hong Kong airlines, hotels devastated by coronavirus

The coronavirus outbreak is cutting into Hong Kong tourism

Hong Kong-based airlines and hotels are being hurt by the deadly coronavirus outbreak, which has taken over 2,700 lives at the time of publication, according to the Johns Hopkins research team’s live tracker. A total of 89 confirmed cases are in Hong Kong, two of which have resulted in deaths that are concerning the residents of the administrative region of China.

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Cathay Pacific, Hong Kong’s flagship airline warned its business conditions are “acute” as of Wednesday with 25,000 employees choosing to take unpaid leave regarding the disease, according to a recent report from the South China Morning Post.

TickerSecurityLastChangeChange %
CPCAYCATHAY PACIFIC AIRWAYS LTD5.3015+0.19+3.75%

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The company’s CEO, Augustus Tang Kin Wing, reportedly said frontline and head office employees, overseas operators and subsidiaries have responded to Cathay Pacific’s appeal to conserve cash. Insiders told the South China Morning Post that around 75 percent of the airlines 33,300 employees volunteered to help. Two-thirds of Cathay Pacific’s aircrew are said to have opted for unpaid leave.

A separate memo from Cathay Pacific noted that “most” employees in the company’s subsidiary units such as the Asia Miles loyalty program, the Air Hong Kong cargo carrier, the recently acquired HK Express budget airline and its catering and cargo terminal businesses elected for unpaid leave as well, according to the report.

Hong Kong, Hong Kong - August 6, 2016: Cathay Pacific Airbus A350-900 on final approach at low altitude landing at Hong Kong International Airport with landing gear down. This aircraft is painted with the new corporate livery. (Getty Images)

Previous to employee elections to not work amid the outbreak, Cathay Pacific asked its airline staff to take up to three weeks of unpaid leave.

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Additionally, Cathay Pacific and its subsidiaries Cathay Dragon and HK Express are said to have cut their capacity by 40 percent. Another 60 percent of scheduled flights have been canceled, most of which have been from mainland China.

“Our business challenges remain acute, but to those of you who have agreed to this Special Leave Scheme, thank you for selflessly making your own contribution in helping us to try and weather this storm,” Tang Kin Wing said regarding the coronavirus’ impact.

Cathay Pacific warned that the coronavirus has been “extremely challenging financially” with the company having lower profits for 2020 so far compared to the $1.69 billion ($1.32 billion in Hong Kong dollars) it made this time in 2019.

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To try and remedy the situation for its frequent fliers, the company said it would offer extra loyalty points between February and April.

It’s not just air travel that has been suffering in Hong Kong. The hospitality industry has also taken a hit as fear of the virus and subsequent travel restrictions have grown over time. Hotels in Hong Kong reached record single-digit occupancy numbers in mid-February, according to a separate report from the South China Morning Post.

A woman walks past a bank electronic board showing the Hong Kong share index at Hong Kong Stock Exchange Wednesday, Feb. 26, 2020. (AP Photo/Vincent Yu)

On average, there have been around 3,000 daily tourists, which is a far cry from the average 200,000 tourists Hong Kong welcomed the same time last year.

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“Now, many full-time hotel staff are taking no-pay leave. I would not be surprised to see businesses closing down next. February and March will be the critical period for their life and death,” Michael Li Hon Shing, an executive director of the Federation of Hong Kong Hotel Owners told the South China Morning Post.

Li has urged Hong Kong’s financial secretary to ease the burden of hotel owners who have been hit hardest from the outbreak with tax concessions, subsidies, rent assistance and other exemptions, however, it is not clear if the government will honor these requests.

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The Hong Kong government is giving a cash handout of $1,200 to its seven million adult permanent residents to stimulate the recession-hit economy.