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Cathay Pacific braces for omicron headwinds after a 'challenging' November


Movement checks, quarantine requirements hurt passenger traffic

Cathay Pacific operates 71% of its pre-pandemic cargo capacity in November

Airline to operate full freighter schedule for December, as planned

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  • Amy Tan    Surabhi Sahu
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  • Ankit Ajmera
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  • Coronavirus and Commodities

Hong Kong flag carrier Cathay Pacific carried 70,047 passengers in November, up 85.2% year on year, but down 97.3% compared with the pre-pandemic level in November 2019, the airline said Dec. 14, showing that it was still miles away from recouping lost business, with the omicron coronavirus variant threatening to derail the sectors' fragile recovery.

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The airline said it was forced to cap passenger capacity growth in November, as movement restrictions and quarantine requirements in Hong Kong and some other markets amid COVID-19-related hurdles, hurt air travel.

"The operating environment for our travel business continued to be extremely challenging in November," Cathay Pacific Chief Customer and Commercial Officer Ronald Lam said in a statement Dec. 14, adding that the emergence of the omicron variant had affected the travel sentiment over the holiday season.

The slowdown in traffic, particularly student travel, from Hong Kong and the Chinese Mainland to the UK hit the airlines' overall travel volume, Lam said.

"On average, we carried about 5% fewer passengers per day in November than we did in the previous month," he said. "We aim to operate no more than 12% of our pre-pandemic passenger flight capacity for the rest of the month [in December]."

The impact of omicron, if it spreads wildly, will most likely be felt in first-half 2022, as governments in the region tighten measures to contain the spread of the new variant, JY Lim, advisor oil markets at S&P Global Platts Analytics, said Dec. 15.

"For now, we have revised down our Asia-Pacific kerosene/jet fuel demand growth outlook for 2022 by 80,000 b/d to 520,000 b/d, largely on the first half, due to travel restrictions," Lim said.

Cathay Pacific said it increased its flight frequency in November after the reopening of borders in the US and Australia, while capturing pockets of demand within Asia and resuming Madrid and Milan services.

"Overall, we operated slightly more passenger flight capacity in November than we did in October," Lam said. "It represented approximately 12% of our pre-pandemic passenger flight capacity compared to November 2019."

Cargo operations boom

Cathay Pacific's cargo operations were, however, robust in November, as global supply chain disruptions boosted demand.

It operated about 71% of its pre-pandemic cargo capacity during the month, the highest since the onset of the COVID-19 pandemic.

"In addition to underlying air cargo demand remaining strong, we also carried products that would usually be shipped by sea as retailers looked to replenish low inventories to meet customer demand," the company said.

Cathay Pacific recommenced its seasonal cargo service between Hobart and Hong Kong end-November, providing Tasmanian producers direct access to key Asian markets. It said it also launched a new digital cargo-booking platform -- Click & Ship -- enabling customers to view prices and capacity, and book cargo shipments instantly.

"Looking ahead on the cargo side, the strong peak season is expected to last well into December," Lam said. "We expect to operate our full freighter schedule as planned for the rest of the month."

COVID-19 hurdles persist

Coronavirus-led lockdowns were a major concern for jet fuel demand heading into the new year, according to market sources.

"There's still so much uncertainty as to how governments react to the omicron variant," a Singapore-based trader said.

Asian jet fuel prices capped on travel uncertainty after omicron variant emerges

The International Air Transport Association, or IATA, Dec. 8 called for governments to follow World Health Organization's advice and rescind travel bans that were introduced in response to the omicron variant.

"After nearly two years with COVID-19 we know a lot about the virus and the inability of travel restrictions to control its spread," Willie Walsh, IATA's director general, said. "But the discovery of the omicron variant induced instant amnesia on governments which implemented knee-jerk restrictions in complete contravention of advice from the WHO -- the global expert."

The jet fuel market was quiet because most market participants had already closed their books for the year, a second Singapore-based trader said.

"Other than supplying what they have committed, you won't expect to see much third-party trading during this period," the trader said.

The FOB Singapore jet fuel/kerosene cash differential rose to plus 52 cents/b to Mean of Platts Singapore jet fuel/kerosene assessment at the 0830 GMT Asian close Dec. 14, up 20 cents/b on the day, S&P Global Platts data showed.