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Cathay Pacific has followed Chinese regulator demands through the saga. Why? It's a business decision.

U.S. and European consumers now expect trusted brands to question home governments when employees and customers demand it, as when several U.S. carriers told the Trump Administration to stop using their planes to separate immigrant families.

But Hong Kong is no ordinary market, and Cathay Pacific is not like a typical North American or European travel company so don’t expect it to take a stand in favor of Hong Kong autonomy, even as violence erupts at its home airport.

This is about Mainland China, and Cathay Pacific needs to coexist with its Chinese regulator to remain a viable entity. It requires Chinese support not only to access markets — the carrier flies to 22 mainland cities, and flies 19 times per day to Shanghai — but also to fly over its airspace. Most logical air routes from the United States to Hong Kong overfly Mainland China, and the airline would be crippled if it lost overflight rights.

“You can’t simply tell your regulator that ‘no, sorry, We don’t really like what you’re asking us to do, but we’re going to fly anyway,”‘ Philippe Lacamp, the airline’s senior vice president for the Americas, told Skift in an interview. “We would be banned from Chinese airspace if we didn’t comply, as we would be banned from U.S. airspace if we didn’t comply with the regulatory requirements there.”

The comments come as Cathay continues to deal with fallout from what is now a five-day protest at its home airport. On Tuesday, for the second consecutive day, regulators for a period suspended check-in at what’s usually among the world’s busiest airports, as police in riot gear clashed with protesters.

The Associated Press reported police entered the terminal swinging batons, as protestors tried to take cover behind luggage carts. Pictures from other media showed protestors beating a man they suspected of supporting the government. Late into the night, as Tuesday became Wednesday, the clashes became increasingly violent, news reports showed.

Cathay on Tuesday told passengers scheduled to fly on Wednesday that they should postpone non-essential travel and not come to the airport. It is not clear how long the protests will last, though Lacamp, who is based in San Francisco, said he expects authorities eventually will quash it, one way or another.

“I find it hard to believe we are going to have many more unexpected ad hoc protests being able to close down the airport in that way,” he said. “Just because of the nature of Hong Kong. It is such an important intermodal hub. I imagine they will continue to do what they can to make sure it operates as normally as possible.”

Demands from Regulator

Cathay has been forced to weigh in on these protests, and has repeatedly shown a willingness to endorse the positions of Chinese regulators. In a statement Tuesday, it said it was “deeply concerned” by the violence and disruption.

Last week, one of its regulators, the Civil Aviation Administration of China, issued new guidelines to the airline, forcing it to crack down on employees who had participated in protests.

Effective Saturday, the airline was told it cannot send crew who “support” or “participate” in illegal protests on any flights to the Mainland, according to a memo from Cathay CEO Rupert Hogg to employees. The airline was also told it must share the names of all crew members who were fly to Mainland China or over its airspace. Flights can only take off when the names are approved, the government said.

By complying, Cathay may have angered some of its employees who supported the protests, either overtly or tacitly. But not following the directive was not an option, Lacamp said.

“I want to be clear, this is legal requirement,” Lacamp said. “You are not able to access airspace – let alone land — in a country if you don’t comply with what the regulator stipulates. It’s not one of those cases where you can ask, ‘Is Cathay going to stand up to the regulator?’ That’s not an option.”

Effect on Demand

So far, Lacamp said, this saga has had a “quite minimal” effect on Cathay’s bookings, though that seems likely to change, given pictures and video from the airport this week.

ForwardKeys, a company that tracks analyzes hotel and air bookings, reported Tuesday that demand for long-haul bookings to Hong Kong decreased 4.7 percent from June 16 to August 9, year-over-year. In a statement, a company spokesman said ForwardKeys expects demand will fall further because of the fallout from this week’s airport protests.

“ForwardKeys is not optimistic about reporting a recovery in the immediate future,” the spokesman said.

Lacamp said so far Cathay’s corporate customers have stuck with the airline and generally not altered travel plans. He said he expects that will continue, so long as the world is not subject to any more of what he called “sensationalist” media coverage of the Hong Kong protests.

“I have seen no reason to expect anything other than business as usual going forward,” he said. “I would hope that absent any other major changes, the corporations will continue their travel plans.”

That may be an overly rosy view, but if business travelers avoid Hong Kong for a period, Cathay probably will compensate by raising its share of connecting passengers headed from Europe and the United States to markets in Vietnam, Malaysia, and Thailand. Adding transfer passengers helped Turkish Airlines recover from a wave of terrorist attacks in 2016 that depressed demand for travel to Istanbul.

Lacamp said passengers who plan to connect in Hong Kong have been much less likely to call the airline and ask to switch their travel plans than passengers who only planned to visit Hong Kong.

“So far, we have haven’t had many requests from transit passengers,” he said.

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Tags: asia, cathay pacific, china, hong kong, hong kong protests

Photo credit: Travelers walk through Hong Kong's airport Tuesday before it was closed, again. Protestors have been clashing with police. 354491 / 354491

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