Date: Monday, November 22, 2021
Source: The Wall Street Journal
HONG KONG—Air cargo operators are scrambling to square Hong Kong’s tough quarantine rules with the city’s role as a crucial hub for airfreight, as pandemic restrictions collide with an already tight supply chain.
FedEx Corp. FDX +2.16% said this week it would close its crew base in Hong Kong and move pilots outside the city, citing what it said was Hong Kong’s fast-changing quarantine restrictions.
Cathay Pacific Airways Ltd. CPCAY -0.89% , the city’s flagship airline, also said it is considering basing some pilots outside of Hong Kong in temporary stints as other scheduling and health measures aimed at keeping staff from being locked down in quarantines fall short.
The carrier said Thursday it dismissed three airfreight pilots diagnosed with Covid-19 following a layover in Frankfurt after a review found “a serious breach” of protocol by the pilots. The city quarantined more than 150 Cathay Pacific staff following the infections.
“If there are a couple more of these incidents, we will run out of cargo pilots,” Carrie Lam, the city’s chief executive, told reporters this week.
The scramble comes amid a global supply chain crunch that has extended to the airfreight industry. The recovering global economy has boosted global trade, sending airfreight volumes soaring. Meanwhile, passenger planes, which typically carry large volumes of cargo in their holds, are flying less frequently due to a continued downturn in air travel, crimping supply. Some are flying without passengers to bolster the industry’s ability to carry freight. Hong Kong’s quarantine rules, among the world’s tightest, are further complicating the picture.
The city’s Covid-19 restrictions have tightened this year even as much of the West is reopening borders. Earlier this month, the Hong Kong government announced it was rolling back most exemptions to mandatory quarantine for those entering the city. Many visitors are quarantined for as long as three weeks in hotel rooms.
Exemptions remain, including for airfreight crews, government officials and some senior business executives. Some exemptions have sparked a backlash from citizens who say they are unfair. The government has said those exempted from quarantine still have to follow movement restrictions and other controls.
Aircrews arriving in Hong Kong generally have to self-isolate in a hotel room until their next flight or quarantine in a designated hotel depending on whether they plan to enter the community, the countries they visited and their vaccination status.
Hong Kong is home to one of the world’s busiest airports and was for years the world’s largest air cargo hub, sitting at the nexus of trade between China and the West. Last year’s economic downturn in China dented trade, and Hong Kong was overtaken by Memphis, Tenn., home of FedEx.
Airfreight volumes in Hong Kong have rebounded this year through October to pre-pandemic levels after plunging last year, official government figures show.
“Globally the whole airfreight sector is in midst of supply-demand crunch—disequilibrium of too much demand and not enough supply,” said Mark Millar, an independent logistics industry expert in Hong Kong.
Cathay this week said unusually strong air cargo volumes helped bring it close to operating-cash break-even between July and October, even though it would record a “substantial” loss for 2021.
FedEx said it would continue operating from the city as normal despite the move for its pilots. The company was reviewing where to base crew previously in the city.
Hong Kong has gone months with hardly any locally transmitted cases of the disease, a fact praised by city leaders determined to keep cases near zero as part of their goal of reopening the border with mainland China.
Yet the restrictions have prompted a wave of complaints from the business community, which worries the costs are too high and threaten the city’s status as a financial hub. Goldman Sachs Group Inc. Chief Executive Officer David Solomon said this week that the quarantine restrictions were creating staffing challenges, echoing comments earlier in the week by JPMorgan Chase & Co. CEO Jamie Dimon.
The quarantine requirements have created an especially severe headache for the city’s aviation industry.
Achim Czerny, an expert in air transport logistics at Hong Kong Polytechnic University, said basing aircrew outside Hong Kong could help head off bottlenecks caused by quarantine requirements by freeing up pilots who might otherwise become unavailable.
“Relocating is actually something that makes a lot of sense and can actually help make more effective use of the pilots,” he said.